Technology and Inequality. The concentration of wealth in the digital economy | CCCB LAB
The interrelationship of technology, economic advance, and social and With consumer technologies it takes some time to establish which. relationship between technology and inequality. What is it about the infor- mation technology sector that makes it such a wealth-generating machine? And does. The disparity between the rich and everyone else is larger than ever in the United States and increasing in much of Europe. Why?.
Hyperbole associated with the adopt of new technologies is familiar to economic historians. It greeted the railways, electricity, automobiles, radio and television. Prophets proclaim the arrival of a new technologically driven era of peace and harmony. Bankers and business gurus anticipate the demise of traditional businesses and business models. These claims are always hugely exaggerated, although never entirely wrong.
In the course of the resulting hysteria, gullible investors lose large amounts of money, promoters and some fortunate individuals make smaller amounts of money.
There is a reckoning after which most people pick themselves up and start again: Simply to keep up the pace of economic growth which advanced countries have enjoyed over the last century, there needs to be a new technology of significance comparable to electricity or computers every twenty years or so. Since we are well through the process of applying information technology if the normal cycle of development and implementation is fifty years, we are approaching the end of that cycle it is time to ask what the next technology is going to be.
There is one overwhelmingly strong candidate, and that is biotechnology. Modern life sciences have the potential to transform medicine, nutrition and agriculture in ways as radical as electricity or telecommunications transformed other areas of economic life.
I started to write that biotechnology raises more political problems in its application and implementation than any previous technological shift. But looking at what was written and felt about the arrival of the railways, I am not so sure.
Technology and Inequality
There was resistance to the introduction of steam power, as there was to the railways, and as there still is to the automobile: It is a moot question whether politics would have blocked the expansion of nuclear power if the technology had proved economically successful. Experience shows that prediction of the specific commercial applications of new technologies is usually ludicrously bad.
This is true at very general levels: With hindsight we will laud geniuses like Henry Ford and Bill Gates who saw the future correctly: Biology is the exciting intellectual frontier today, and this has intriguing implications not just for the environment of economics and politics but for the way we think about economics and politics themselves.
It is entirely credible that within a few years we will have psychology which is firmly based in biology and neurosciences, and that such psychology will then form the basis for a more rigorous economics and sociology.
These would be fundamental changes in the nature of knowledge as applied to political issues. I used to believe that the structure of economic reasoning which I learnt as a student was essentially set for all time.
Today I am less sure. If biotechnology is indeed the great new frontier, it seems likely to be a creator of new products — and the associated demand for new products — rather than a general enabling technology which enhances the productivity of all business. Moreover, government may well prove to be the main buyer, or at least financier of these products, as underwriter of the health care system. The pace of change in information technology has rather overshadowed the disappointing progress of innovation in other areas of the economy.
In the previous two decades, commercial aviation had displaced sea transport for all long distance passenger traffic and much freight: America was putting a man on the moon.
A modern pharmaceutical industry had been established almost from scratch. Drugs had eliminated mortality from infectious diseases among otherwise healthy adults and could induce controllable changes in moods. Other new compounds could interfere with the progress of other life-threatening conditions, such as hypertension and cancer. New materials synthesised from oil had greatly reduced the cost of manufacturing many household objects and made previously impossible construction, from buildings to aircraft, feasible The commercial application of nuclear power seemed likely to displace fossil fuels as a primary energy source and transform large scale construction, to be followed by fusion and fuel cells.
It was reasonable to project all these advances forward, and those who predicted technological futures at the time did: Few of the more recent advanced materials have found commercial application. Nuclear power has failed to be commercially useful. We make electricity today by burning coal and gas and power our cars by burning oil, much as we did a century ago.
Thus there is a serious argument that rather than technological progress being unmanageably fast, it risks becoming worryingly slow. To find new enabling technologies for the next fifty years, we probably need to look at activities like transport, fuel or to further advances in communications. Or maybe future technological changes will be much more piecemeal, without discontinuities of the size produced by electricity, aviation or computers.
Wealth creation in firms The most successful large firms of the twentieth century based their success on the management of large integrated processes. Oil companies exemplify this: By the end of the century, the list of leading companies looks different: Almost all of it is value that they add.
Technology and wealth creation: where we are, where we’re going
This exemplifies what we mean by the knowledge economy, and illustrates how the sources of competitive advantage in it have changed. For some of these businesses — Intel, Merck — knowledge is technical knowledge, the product of advanced science. But more often it is not — Disney, Coca-Cola, Wal-mart. The competitive advantage of these latter firms is indeed found in knowledge management. But the knowledge they manage is not at the frontiers of human endeavour, and the distinctive mechanisms by which they manage it are not based on high technology.
Some kinds of knowledge become obsolete and are superseded old physics and law textbooksothers do not. In the case of Coca-Cola, corporate success is based on branding, and the emotional and informational associations that go with it.
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- Technology and Inequality. The concentration of wealth in the digital economy
And Wal-mart is the modern successor to the large integrated manufacturing corporations, its success based on superior knowledge management along an extended chain from customer needs to supplier capabilities. The claim that information and knowledge management are central to competitive success in the twenty-first century is entirely true, but many of the implications of that claim are misunderstood.
The knowledge management which is the key skill of each firm I listed above is not based on information technology. The collection and transmission of data — which is what technology has transformed — is not the principal problem, or its solution. Information technology is changing the structure of some of these industries, but in indirect ways.
For example, the hit and miss process of trying compounds to see if they work is no longer central to pharmaceutical research. Once underlying therapeutic principles are established, libraries of compounds can be searched mechanically. But it is not in that process that competitive advantage lies.
Rather its mechanisation focuses attention on skills in fundamental chemistry and in marketing and distribution. In retailing, the ability to gather and analyse large quantities of data easily and quickly transfers power from the shop floor to the corporate centre. The store manager is deskilled and disempowered and retailing skills are found in organisations rather than in individuals. But in neither case is the competitive advantage of the business based on its information technology.
It is the ability to manage information in a much broader sense that is key. This secondary relevance of technology to the competitive advantage of firms is quite general. I sometimes tease business audiences by asking them to identify what Gablinger, Ampex, Berkey and Chux make. They were the first firms to engage in commercial marketing of low-alcohol beers, video recorders, handheld calculators and disposable nappies, respectively. The point is not just that none of these firms are there any more.
It is that the market leaders in these businesses are now Philip Morris, Matsushita, Casio and Procter and Gamble — powerful, established firms with strong capabilities in related markets.
They moved in and took over after others had pioneered the technology and the definition of customer needs. Leading edge technology is rarely the source of competitive advantage at the level of the individual firm. To correct this situation, the World Bank report proposes a series of broad strategies that go beyond the technology sector, which can be surmised as follows: The fact that an organisation such as the World Bank — which has even been accused of worsening rather than reducing poverty — has issued a diagnosis of this kind indicates a significant shift in the perception of the digital economy.
Nonetheless, it is worth analysing the measures proposed as a solution to the problem. Greater access, more inclusion? In the latest edition of the Mobile World Congress, Mark Zuckerberg criticised telecommunications companies for prioritising 5G technology instead of guaranteeing affordable Internet access all over the world.
For years, Facebook has been promoting a free internet connection service that has already been tested in remote areas of Africa, Latin America, and Asia. However, some companies in India have withdrawn their support for the project on the grounds that it goes against net neutralitygiven that it favours access to certain websites and applications to the detriment of their competitors and of the availability of information in general.
One Laptop per ChildNigeria. In a world in which only one in three people have internet access, the need to deal with the digital device is beyond question.
Internet access needs to go hand in hand with measures that allow people to make the best of it, at the level of education and of basic social services. We should not forget that there are now more households in developing countries with a mobile phone than access to electricity or drinking water.
Training people to be qualified for the digital economy — another of the recommendations of the World Bank — is a measure that is difficult to object to. But in developed countries, the crisis has shown that even the most highly trained people are not guaranteed inclusion in the economy.
And those who do become part of it find that their educational level does not necessarily lead to the corresponding remuneration. Meanwhile, labour automation is destroying jobs that require mid-level qualifications, polarising the labour market between highly educated professionals on one hand, and those who carry out routine jobs that machines are unable to do on the other.
In short, a divide in which activities with a high level of added value are controlled by a specialised elite, while an increasing part of the labour force is relegated to activities with low productivity and limited value.
Technology and Inequality - MIT Technology Review
Technology monopolies and the Welfare State In addition to improving access and education, the World Bank proposes regulating competition among companies, and ensuring that public institutions are accountable. In spite of liberal theories regarding the self-regulation of the free market, cases like Microsoft, Google, and Amazon show that there is a tendency towards the creation of natural monopolies on the Internet. This concentration of power often goes hand in hand with antitrust practices and political influence through lobbying.
Meanwhile, many governments and institutions are pinning their hopes for technological adaptation and growth in the hands of the big corporations, rather than investing in local initiatives. While technology is certainly a tool that also makes it possible to change the status quo, commons theorist Yochai Benkler has pointed out that the flexibility inherent to the digital revolution also brings about the dispersion of power.
On one hand, the internet has made it possible for individuals, companies, and small organisations to compete with more powerful rivals, and to defeat them.