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Globalisation has helped lift millions of people in the developing world out of poverty and showered cheap goods on western consumers. Yet at the ballot box it is also blamed by those very same people for increasing inequality and squeezing living standards.
Pro-globalisation politicians are facing a noisy backlash in Europe and the US as populists demand greater protection for those who feel the system has been rigged. In their view, globalisation is an ‘innocent fraud’, to use John Kenneth Galbraith’s phrase.
The US economist argued in his 2004 book of that name that societies were often sustained by handy fictions, such as the idea that companies were run for the benefit of shareholders rather than managers. Politics, money and intellectual fashion create their own version of the truth, irrespective of reality. “No one is especially at fault; what is convenient to believe is greatly preferred,” Galbraith wrote.
There is a risk that technological disruption may come to be seen as the second great ‘innocent fraud’ of our times. It is hard to dispute that promising new technologies — like globalisation — can bring enormous benefits. Energy, transport and healthcare are just three sectors that are likely to be transformed for the better in the next few years.
In a conversation in Wired magazine, President Barack Obama argued that the adoption of new technologies was too important to be left to private companies
But these new technologies will also threaten many established industries, markets and jobs. As with globalisation, the digital revolution will bring generalised gain but cause localised pain.
Many new technologies have unintended, and often adverse, consequences — or ‘bite back’. For example, the combustion engine revolutionised transport. But it also did terrible damage to the environment. Asbestos was once hailed as a miracle material.
But in the past 20 years we have spent billions stripping it from buildings. The potential ‘bite back’ from the latest crop of new technologies, such as gene editing and artificial intelligence, is terrifying. As Stephen Hawking, the British scientist, said last week, the creation of powerful artificial intelligence will be “either the best, or the worst, thing ever to happen to humanity”.
How can we ensure good outcomes? Here are three ideas. First, the private sector has to embrace the public sector, appreciating that they have common aims. As Galbraith wrote, the interdependence of the two sectors is often so great as to render distinctions between them almost meaningless.
Insurgent West Coast tech firms have a near messianic belief that they are bettering the lot of humanity and do not need adult supervision. Their chief demand to government is: clear out of the way. They are increasingly vocal in pushing such views, having become one of the biggest lobbying forces in Washington.
In a conversation in Wired magazine, President Barack Obama argued that the adoption of new technologies was too important to be left to private companies. But he warned confidence in collective action had been chipped away, partly because of ideology and rhetoric. “If we want the values of a diverse community represented in these breakthrough technologies, then government funding has to be a part of it,” he said.
Second, the public sector needs to retool itself to understand and meet the challenges posed by new technologies. Many of the regulatory functions of government, introduced in the US in the early 20th century, were designed to protect the consumer from predatory monopolists and financial cartels.
But government institutions today need to protect us as citizens as much as consumers. The frontline of regulation concerns issues of privacy, security, data use, employment rights and freedom of expression. We need reinvigorated public institutions to help guarantee that new technologies are used in benign ways. We also need enforced legal protections to ensure that government itself does not abuse these technologies.
Third, we may need to rewrite the implicit social contracts that govern our democracies, redefining what goods and services our governments provide. Economic historian Joel Mokyr argues that the present wave of technological change could create so much social turmoil that we may need to fundamentally rethink our political systems. He suggests the necessary transformation could be on a par with the creation of the German welfare state in the 19th century or the New Deal of the 1930s.
Change on that scale could do with input from the brilliant minds of the tech sector. As Wired -guest-edited by Mr Obama — put it: “Ask not what government can do for Silicon Valley; ask what Silicon Valley can do for the government.”
Published in Dawn, Business & Finance weekly, October 31st, 2016
