Technology and the Invisible Hand

Commentary, Disruption, Frontier Centre

According to the Retail Council of Canada, we Canucks outshopped even our avaricious American cousins in 2002. For the year, Canadian retail sales increased an impressive 6.5%, compared with only 3.4% in the U.S. Oddly, the American media are spinning the latter figure as a negative. While it obviously falls on the plus side, it came in “below expectations.” Rapid increases in North America’s standard of living are now considered automatic. Perhaps they are.

Technology drives the attitude. Over 30 years, the cost of sending 1 trillion bits of information between places has dropped from $150,000 to 17 cents. More dramatically, a run-of-the-mill Ford Taurus today contains more computing power than all the mainframe computers used in the Apollo Space Program. Nor is the progress restricted to computer chips and gadgets. In 1900, more than 200 of every 100,000 people died every year from the flu, but now just over 30 do. The number who perish in workplace accidents is a small fraction of the total just a few decades ago.

But a new policy study published early in January maintains that this manic rate of human improvement is far from inevitable. Written by James K. Glassman, a fellow at the American Enterprise Institute, Technology and Freedom: The Virtuous Circle offers an intriguing explanation for the speed at which technical change is reshaping the world.

“Technology and freedom are symbiotic,” Glassman writes. “Undirected by the state or any other central authority, technology emerges from a process that encourages variety, spontaneity and discovery through trial and error.” Many other cultures throughout history became “hotbeds of scientific discovery, but without market forces to encourage the actual production of these innovations, technology falters.” Political interference can throw a gigantic monkey wrench into the machinery of applying and distributing knowledge.

One of Glassman’s best examples deals with the issue of genetically modified food. North America’s farms are much more productive than they were just a few years ago, thanks to altered genes that make plants more resistant to disease and pests and produce higher yields with less time, money, fertilizer, pesticides and topsoil. No evidence of harm to humans from eating GM food exists, but the European Union banned it four years ago to assuage politically powerful environmentalists.

Shift the scene to Africa, where food shortages still claim countless lives. During last summer’s famine, an estimated 13 million people were at risk. One-third of the massive food aid sent by Americans consisted of genetically modified corn. The government of Zambia, one of the countries most devastated by the disaster, locked the corn up. Continental bureaucrats convinced its President that the grain would “contaminate” his country’s crops and make them ineligible for export to Europe, Zambia’s primary market. People starved to death right next to warehouses piled with forbidden food. The same sad story is playing out this year.

Zambia’s starving masses would gladly have eaten the high-tech food, if that had been allowed. Technology produced the goods, but political interference with their distribution made the achievement meaningless. State power brokers can and often have defeated the fruits of progress, by careless regulation of science to protect special interests or confiscation of the wealth generated by innovation. As Glassman puts it, “They decide what can be made, how it is made, who can make it and where it is sold.”

But technology is quickly breaking down these political barriers. In just five years, the number of global Internet users has increased from 96 million to 650 million and within a year will reach one billion. Between 1990 and 2002, the number of wireless phones in use worldwide grew sixty-fold from 23 million to 1.4 billion. The combination of technology with wide open, profit-driven markets makes for rapid, wide distribution and application. The process of testing and ultimate social approval does not rely on the limited comprehension of a few experts but is dispersed and made more rigorous by the meticulous testing of millions of consumers. It’s the purest democratic forum imaginable. All parties who engage in voluntary exchanges do so because they perceive the transactions as beneficial to themselves, and thereby accelerate a spontaneous order that maximizes the pursuit of value.

Glassman’s analysis could be usefully applied to unreformed Medicare. The ability of individuals to shift resources to meet their own needs has been compromised by political fiat. Governments spend almost $12,000 per family of four annually within our struggling health care system, but the consumer’s power to decide the details about how that money will be spent is almost non-existent. Why are there chronic shortages of high-tech items like Magnetic Resonance Imagers, CAT scanners and dialysis machines? Because the people who would benefit most have little, usually nothing, to say about their acquisition and use.

James Glassman’s work helps explain why some economic arrangements are clearly superior to others. It remains to be seen how long Canadians will tolerate a health care framework that stands between them and the benefits of high-tech medicine.