In the Budget last week and in ensuing media comment we heard a great deal about productivity and the OBR’s lacklustre GDP projections, and we heard much in the speech about technology. But not many commentators have linked the two together. In my view there’s definitely a link between the technological revolution and persistently low inflation/interest rates as a result of simultaneously up-scaling supply and de-monetising demand. However in the MIT Technology Review David Rotman goes much further in his June 2013 article ‘How Technology Is Destroying Jobs’ to describe how it can also impact the standard of living across society.
He recounts in the article how Erik Brynjolfsson, a professor at the MIT Sloan School of Management, and his collaborator and co-author Andrew McAfee have argued that impressive advances in computer technology—from improved industrial robotics to automated translation services—are largely behind the sluggish employment growth of the last 10 to 15 years. On the right hand panel there’s one of their key charts.
Their argument is that median income and job growth have lagged behind as economic growth has advanced, drawing the conclusion that technology and new business practices have commoditised what were previously skilled jobs, while replacing some low-skilled jobs altogether.
Of course we all see this in everyday life, when local shops are eclipsed by Amazon or newspapers overtaken by instant news on the mobile phone or tablet. However at least the United States has held its mastery in gathering the returns from the new technology, albeit in very concentrated hands: while we have great ideas in the United Kingdom, we have no Microsoft, Google or Apple – and Philip Hammond knows it, that’s why he laid out such an ambitious programme to encourage technological innovation.
But these charts are relevant to us. They show that most of the population sees an erosion of living standards because the new technological economy is not being shaped for the benefit of society as a whole.
There are indeed centuries of evidence to show that the impact of innovation and technology is not entirely benign. John MacDonald’s proposal to tax robots takes us right back to the Luddites, a group of textile workers and weavers in the 19th century who destroyed weaving machinery because it took people’s jobs away.
Our newsletter of 6th November drew attention to one of the less attractive aspects of modern technology, the way it concentrates wealth and power in the hands of a very small number of tech giants. It also showed how Private Equity accentuates that process, by denying ordinary people the opportunity to invest in entrepreneurial companies, thereby delivering a continual feedstock of these businesses lock, stock and barrel to assuage the tech giants’ gargantuan appetites for talent.
However it also cannot be denied that technology and globalisation has given hope and access to billions of people across the world through their services, thereby improving the standard of living in what were previously third world countries. If you looked at the median household wealth of people in India and China, you would see a huge improvement over the very same years that Brynjolfsson and McAfee charted such low returns for Americans.
It is not a reversal of technology that we need, but a re-shaping of the capitalist system to address the concentration of wealth and power which is emerging in so few hands. Philip Hammond put much emphasis on education, and he’s right to do so: but while education can help us build new skills in technology and opportunities for business, it cannot in itself democratise wealth creation.
That’s why we need a new drive for individual share ownership and a re-balancing in favour of public markets in contrast to private equity. One such opportunity to build a new level of individual share ownership could be as a result of the tech giants and other large retail companies granting free shares to customers.
In 2000 and again in 2001, Share plc - the parent company of The Share Centre - split off c. 7% of its equity and issued it free of charge to its account customers. As a result of those two issues the Group soon had over 90,000 personal share owners, and this has contributed to strong customer relationships.
Can you imagine how it would be for Apple, Microsoft, Alphabet (the parent company of Google) and Facebook to do likewise? In no time there would be billions of new share owners across the world. Add in a new programme of investor relations and appropriate adjustments to corporate governance, and a sense of participation would soon develop.
We have to be prepared to find such radical answers to the challenge, because it is unlike any that we have dealt with before. If the alternative is a disheartened and disenfranchised majority who revert to socialism or turn their backs on technology, the future will be bleak indeed.
Another reason why we need to introduce a more egalitarian form of capitalism.
27th November 2017