Economic growth: inclusive, green, no-cost.

About legal frameworks for new technologies

Capitalism has always needed facilities it can’t itself provide. Legal frameworks are sometimes needed to turn new technologies into universal infrastructure for growth.

 

 

Water story

In  1820’s Britain, pumping was a cutting edge invention. Ambitious start-ups built competing pipe systems sending water from urban rivers to well-off homes. Their product was dirty and only available at high tide. But in-home water was more convenient than taking a bucket to the riverbank. Profits soared. Meanwhile, cholera killed thousands.

A different vision for pumping was popularized by civil servant Edwin Chadwick. He envisaged universal supply of clean water. That was only viable if local governments instigated co-ordinated reservoirs, controls on sewage dumping, and installation of trunk pipe networks. A case for official action was clear:  No start-up could evict homeowners to flood valleys, jail citizens emptying their waste into upstream water sources, or impose unified pipes.

The statist nature of Chadwick’s concept kept it marginal for decades. He persisted, until the 1848 Public Health Act made city authorities responsible for public health. Universal clean water, available 24/7, then eradicated cholera in the UK. Every country copied the model.

 

Net an exception

When a genuinely potent technology emerges, it often goes through a pioneering phase when inventors target wealthy customers. Then, more ambitious possibilities become clear, but require government to enable them.

Once a first jurisdiction broadly gets the necessary legal framework right, the rest of the world scrabbles to catch-up. Our table below shows some landmark frameworks in the UK and US.

In each case, the framework brought facilities only government can provide to the emerging technology. So, for example, unfettered capitalism couldn’t deliver an organized road network for cars; only a patchwork of incompatible pathways set up by competing, toll-charging, landowners. It took compulsory land purchase and legal enforcement of consistent rules to create highways as we know them.

The Internet does not appear on the list above. Government in the US and elsewhere, funded its development directly (because of the implications for defense). US authorities then simply gave Verisign Inc. an astonishing uncontested monopoly on the core infrastructure. So, the most impactful new technology of our lifetimes did not get a legal framework. It’s an outlier. Older technologies reached ubiquity in more cost effective, accountable, ways.

 

Five themes

Some of these frameworks covered one specific technology (electricity), others initiated possibilities stemming from a confluence of new technologies (universal postage required railways and roads). But there are five broad themes legal frameworks for a new technology share:

  1. Ambition: Pioneers of public infrastructure thought far beyond existing assumptions about what was possible. No-one had moved liquid in the quantities Edwin Chadwick envisaged. Laying rails all over Britain’s rugged terrain created engineering challenges that in some cases weren’t solved until lines converged on a gorge, with inventions like box girder bridges coming at the last minute.
  2. Opposition: Political intervention raises hackles. When officialdom claimed the right to legislate rules for skyways it was widely seen as overreach. Why shouldn’t the early airlines run air traffic control rather than be forced into an official system equally open to newcomers? Opponents of “government roads” made their point with pickaxed potholes. Water companies bought control of newspapers to attack the public option, even after it was law.
  3. Standardization kick-starts innovation: Cheap, universal, electricity demanded consistent voltage. Europe eventually settled on 230 volts, the US opted for 120. Each is a compromise; American power was safer. European cables transmitted more efficiently. But the certainty in each case spawned appliances and services unthinkable when everyone had to buy their own generator.
  4. Bipartisan progress: “Penny Postage” proposed by school teacher Rowland Hill, started its legislative journey in a Tory government. After an election, rivals The Whigs continued it to fruition. Standardized delivery of letters isn’t ideological.
  5. Failure risks: A public option can be superior, so alternatives fade. That’s disastrous when something goes wrong. Ask anyone who survived the 2014-on water crisis in Flint, Michigan. This vulnerability explains heavy regulation of public options.

 

A very British solution

There’s no single funding model for infrastructure emerging from a legal framework. Water supply started in the heyday of municipal socialism, so local ratepayers funded many reservoirs. At the other end of the spectrum; private operators granted a place in the mobile telephony infrastructure typically paid government billions.

But the key takeaway about legal frameworks for a new technology is: regional advantage. Little Britain was first with coherent railways, water supply, and postage. We were transiting resources, and urbanizing with a literate workforce, while larger nations wondered if industrialization was yet a thing. Insensitively, Brits used that lead to build the world’s biggest empire.

 

Passing the test

New technologies come along all the time. Only a handful have merited their own legal framework. What’s the criteria?

  • Government has a problem: The technology could tackle a pressing issue facing policymakers but hasn’t. An underperforming economy, diseases among people who can’t pay for a cure, social upheaval, or danger to the public aren’t a neat route to profits for tech. start-ups. They are challenges for policymakers.

Nearly all today’s technology challenges fail this test. Take the battle between competing protocols for audio downloads. Incompatibilities annoy music consumers while hindering the entertainment industry and appliance makers. But that’s not a problem for politicians in any one country or region. Even if it was, governments are peripheral as a buyer, seller, or regulator of recorded music. They have no leverage.

But markets are pivotal in economic recovery, social stability, individuals’ ability to support themselves, and limiting illegal activity; all key issues for policymakers. At the base of the economy, government is typically the biggest buyer of labor (directly or indirectly), it controls crucial registries, marketing channels, regulatory powers, and facilities that underpin activity. Private sector bodies can’t unlock the technologies’ potential to solve economic problems. Modern Markets meet the historical criteria for a legal framework.

 

→ A legal framework for Modern Markets