Larry Elliott tells us that it was only the mill owners who benefited from King Cotton:
There is nothing surprising about the hollowing-out characteristics of markets because, left to their own devices, they work in uncompromising ways. Nor is there anything new at work because just as the rewards from the cotton mills in the early 19th century went to the factory owners, so the fruits from the platform technologies go to those running the mega-businesses of Silicon Valley.
Larry Elliott is wrong on this. As Brad Delong points out:
Moreover, there is another very important group who benefited mightily from North American slavery: consumers of machine-made cotton textiles, from peasants in Belgium able for the first time to buy a rug to London carters to Midwestern pioneers who found basic clothing the only cheap part of equipping a covered wagon. Slave-grown cotton could be produced cheaply, yes, but the cotton-growers did not collude and so sold their cotton at prices that incorporated only a normal rate of profit. Cotton could be spun and woven by machines at amazingly low prices, yes, but British factories did not collude and sold their garments at prices that incorporated only a normal rate of profit.
As has been pointed out, capitalism didn’t gain QE I her pair of stockings but those Satanic mills did gain the factory girl her choice of pairs.
So too the analysis of who gains from Big Tech these days.
As in previous industrial revolutions, the automation process substitutes capital for labour and that means greater efficiency and faster growth. But the gains from higher productivity will go to the owners of capital unless workers are strong enough to resist. In recent years that has not been the case, which is why average earnings have decoupled from per capita growth rates.
It’s entirely nothing to do with the workers resisting. It’s about competition and the consumer surplus, as William Nordhaus has pointed out. Near all of the benefit, well above 90%, flows to consumers. The only reason that we say average earnings have decoupled is because we’re not measuring that benefit.
As we’ve pointed out before, for several years - between the dropping of the $1 a year charge and before it carried advertising - WhatsApp was recorded in our economic statistics as being a fall in productivity and a net loss in GDP. This from something which gained some 1 billion people some or all of their telecoms needs for free.
Getting this basic analysis right is important. Even if the essential point - the capitalists taking all the gains - is true understanding the above also tells us the solution - more competition, more free trade to provide it. So that, as last time around, it is consumers who benefit.