Shortly before Christmas this commentary highlighted an article from the Massachusetts Institute of Technology on the impact of technology on employment and the polarisation of wealth. These are massive changes taking place all around us, in every sphere of life, and we cannot roll the clock back. Even the Telegraph’s Alex cartoon is poking fun at the issues it raises.
But we can - and should - reshape democratic capitalism to accommodate these changes, in order to ensure that these technological advances continue to command the support of the general public.
Before exploring what this means, it’s worth re-visiting the economic effects of the current innovations in technology and associated new business models which they are driving. These are:
- Continued suppression of average wages, which has already been responsible for 15-20 years of ultra-low inflation and interest rates;
- Concentration of profits among a narrow group of dominant global technology businesses: for example, the individual market capitalisation of Apple exceeds the total GDP of the world’s 96 smallest countries, and would be the world 17th largest country by that measure;
- Further increases in income and wealth inequality, driven not only by the concentration of wealth in such few businesses but also by low yields/interest rates which drive an escalation of asset values, for the minority who own assets.
These effects have major implications in terms of both political and social change as social discontent rises among the wider population. In democracies, this is likely to result in rejection of the ‘establishment’, if it is not seen to come up with ways to tackle the unfair distribution of economic value-added.
And it may also put the tech giants themselves at risk of a potential regulatory backlash - to quote Michael Arone, chief investment strategist at State Street Global Advisers: “If the regulatory framework shifts from financial to technology companies, that could be a risk, whether from the European Union or the US Government”.
The best solution to this challenge is for that narrow group of dominant technology businesses to accept responsibility for adopting a socially acceptable way of distributing their economic value-added, and there is an easy solution to this challenge. This is because the customer bases of these same businesses encompass so much of the population, including the majority of those most impacted by these changes.
The solution is simple: to slice off part of their equity and give it to their customers, so that individual people can share directly in the benefits of the fabulous wealth that the companies are accumulating.
How is this done?
Easily - indeed Share plc, the parent company of The Share Centre, has already done it in 2000 and 2001, slicing off c. 7% of its equity and giving it to over 90,000 customers as free shares. A free share prospectus was issued in each of these years to govern the process and set the allocation mechanism.
So I look forward to taking this proposal to the senior levels of those great businesses and putting to them the case for taking responsibility for sharing their wealth with their customers, thereby avoiding a growing level of social unrest, governmental instability and regulatory backlash.
I have no doubt that they will agree that ‘we are all in this together’, and look forward to them putting forward resolutions for a revolution in popular share ownership - by giving free shares to their customers.