The World Economic Forum Meeting at Davos, Switzerland this year is all about navigating a path through the “Fourth Industrial Revolution”. Preceding industrial revolutions were centred on machinery, electrified mass production, and computers. The fourth is premised on emerging breakthrough technologies based on artificial intelligence, nanotechnology, brain research, robots, the internet of things, and much else.
Beneath the branding and the hype, major technological changes are happening that will have enormous implications for the organization of business, the pattern of work, daily life, and the future of capitalism. The rapid pace of change is set to continue, and the world will be very different in 30 years from now.
The publicity for the Davos meeting portends a world of joblessness, low productivity and inequality. But are these inevitable, and haven’t we heard such warnings before? It would be a mistake for delegates to assume that technological changes lead automatically to one set of possible socio-economic outcomes.
Getting it wrong
There is not a one-way causal relationship between technology and socio-economic arrangements. Causality works in both directions.
Financial, corporate, research and other institutions are necessary to finance, facilitate and nurture technological innovation. Furthermore, the diverse institutional arrangements that exist in modern global capitalism – compare the US, Japan, Germany, the UK and China, for example – show that similar technologies can be hosted by quite different financial, legal and business institutions. Consequently, technology alone is not the predictor of the kinds of socio-economic arrangements that may emerge in the next 30 years.
When considering the future impact of technology, two great economists got it very wrong in the past. In Capital, Karl Marx argued that new technology under capitalism would lead inevitably to the deskilling of the workforce. But as Alfred Marshall pointed out, machines first replace the most monotonous and muscular labour. Other forms of work, involving adaptive skills and judgement, are less-readily replaced by machines.
Marx’s prediction of widespread deskilling has failed to materialise. Historical evidence shows that machines can enhance skills rather than reduce them. But this does not mean that extensive deskilling is ruled out: it is a possible scenario for the future.
In another prediction, John Maynard Keynes predicted in 1930 a dramatic shortening of the average working day. He argued that his hypothetical grandchildren might have to work only 15 hours a week to satisfy their material needs. It is true that the average number of working hours has decreased in developed countries, but to nowhere near the levels envisaged by Keynes. Another prediction that has failed to materialise.
Both Marx and Keynes over-stressed the material aspects of production and underestimated the way in which economies entail the processing of information as well as the making of things. Any technology has to be organised, with effective communication between those involved. Specialist organisational, administrative and communication skills are required.A Health Blog, CC BY-SA
With the growing complexity of capitalism, this facet and type of work has increased relentlessly over the last 200 years. It has now reached the point that the majority of work in developed economies involves the processing of information, rather than the production of material things.
But we are told that the Fourth Industrial Revolution may change all this, and that is why the Davos delegates are being asked to gravely consider the implications.
One of its key features is that artificial intelligence will develop to the point that it can replace humans in making judgements and in the administration of complex systems. It is also suggested that artificially intelligent systems will soon be able to learn and innovate.
Given this, then, both Marx’s and Keynes’s scenarios become more feasible. We can now, just about, imagine a world run by robots and computers. Humans would be consigned to a life of enforced leisure, a world where humans have no need to learn productive skills.
But this is not necessarily the outcome of the new technology. While artificial intelligence may become capable of sophisticated judgements, it is likely that a number of intuitive human skills will be irreplaceable for a long time to come. Furthermore, it would be both difficult and dangerous to program decisions concerning moral judgement into a machine. These factors leave an important and potentially large space for human intervention.
But within that debate over the future of our information economy lies a genuine, and palpable risk. There are large inequalities in the distribution of wealth, and these will remain unless the high concentration of ownership of capitalizable assets is reduced. Crucially, much capitalizable wealth owned by corporations now consists of immaterial, information-based assets. There is a concomitant danger that monopoly control of key information will also stifle the innovation that allows us to manage this transition.
The outcome of the Fourth Industrial Revolution will depend as much on political and other developments as on technology itself. What is certain, as both Paul Mason and I have discussed in recent books, is that the 21st century will bring massive changes to economic systems and our patterns of work.
Geoffrey M. Hodgson is Research Professor in Business Studies at the University of Hertfordshire
He is author of over 15 books, over 130 articles in academic journals, and over 80 articles in academic books. Editor-in-Chief of the Journal of Institutional Economics, published by Cambridge University Press
Principal fields of academic interest: institutional economics, evolutionary economics, the methodology of economics, the history of economic thought, the nature of the firm, social theory.
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