Luddites and the internet

When I was young, Yellow Pages was ubiquitous. Businesses paid a modest fee to appear in the directory (or a less modest one if they wanted a bigger notice). The big yellow books of listings were delivered free to almost every household. The company brought together Balham’s plumbers with its inhabitants’ leaking taps; and summoned minicab drivers wheresoever they were needed at 2am on a Sunday morning. So Yellow Pages made a healthy profit by providing a valuable service. They also produced some outstanding television advertisements. No more. The internet has seen to that. Hibu, as the company is now called, is now effectively owned by its lenders and doesn’t publish directories anymore.

Has the internet destroyed the value in this once profitable company? It has certainly destroyed many viable businesses.  And not just Yellow Pages. It has done the same to bookshops and it is beginning to eat into other retailers as well. So where has the value gone? The answer is that it has moved to you and me. We find it more convenient to do things online. It frees up time and saves us money. But our extra free time isn’t immediately monetised and we might not spend the cash we save. Eventually, we’ll reassign our time and resources to more profitable activities, but that isn’t much comfort if you publish a telephone directory.

It was the same in the late eighteenth century. New machinery like the spinning Jenny and the mule meant that fewer workers were needed to produce the same amount of cotton fabric. People saw the machines as a threat to their livelihoods. And they were right. A few went so far as to try to hold back progress by force. My old friend Jenny Jones, a Green Party member of the House of Lords, described the luddites as fiery and reasonable. You can see her point, even if the Luddites turned out to be on the wrong side of history (although when household appliances made domestic service obsolete, no one seemed so worried).

Productivity is a good word. Businesses and governments strive for it. But basically, it means fewer people doing the same amount of work. An increase in productivity removes money from the pockets of workers and deposits it in the pockets of consumers (as well as companies’ coffers). The service sector used to be immune to this effect (which is why the number of jobs in the manufacturing sector always seems to be shrinking relative to the services sector). No one ever managed to automate salespeople or waiters. But the internet has begun to increase productivity (or destroy jobs, depending on your point of view) in the service sector as well. For instance, I’ve stopped using my firm’s helpline when I have an IT problem. Just logging into a chat room is so much easier while the worker at the other end can manage multiple queries at the same time.

But of course, this is only part of the story. Markets reassign resources, including workers, to where they are needed. We can enjoy our extra free time or work even harder if we want to. We can write blogs, play computer games and read to our children. The hole in GDP left by the loss of telephone directories is filled by App designers and delivery drivers. Companies invent things like iPads that we never knew we wanted or needed. Making things more efficient is ultimately good for all of us. Doing away with Yellow Pages increases the demand for other things. But we should not forget that, even though capitalism’s destruction is creative, the destruction is still real.