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Technology • Inequality • Progressivism

Techno optimism

Will Hutton - 23 April 2014

The task everywhere for the left should be the same– to navigate its capitalism on to new economic frontiers through proactive intervention and design by government. This will require a thought through role for the state as risk taker, innovator-in-chief, institution builder and strategist

To date the centre-right has got the better of the political and economic argument after the crash. The attack outlines  are familiar. The proper response to the crisis is to shrink the state, limit welfare and incentivise ‘wealth generation’. However, their position in reality is more nuanced, acknowledging a creative role for government that the ideology does not choose to put centre stage. In Britain, for example, both Cameron  and Osborne are enthusiasts for industrial policy, as are most European centre-right leaders.

The state and private sector are co-creators of wealth given the need to underwrite, mitigate and collectivise the frontier risks of transformative innovation.  In our times, this reality – in practice and in theory – presents the centre-left with its intellectual and political opportunity.

1. Techno optimism and the sharing revolution
Digitalisation is but the latest so-called General Purpose Technology  to transform the economic base; a range of nano, bio and cogno technologies  are following in its wake. The next big thing is likely to be the hooking up of real time data collection globally. Knowledge, especially intangible knowledge in computer software, brands, human capital and intellectual property, is now much more important in all economies than tangible investment in factories and machines. This is creating unprecedented risk to business models and traditional market boundaries.
 
Confronted by this degree of risk, corporate strategies are highly risk averse. Individual companies hoard cash and limit investment and innovation spending for fear of making a calamitous mistake. This also tends to support the share price and remuneration of directors’ teams.  Instead, like Google,  they try and buy young companies who have successfully  taken risks and developed new business models.

However a minority are experimenting with ‘open innovation’ as the best way to minimise risk in the brave new world of intangible investment and multiplying disruptive technologies. Essentially companies pre-agree to work with each other on research and business model development and co-develop  new products and services rather than go it alone.  This requires  enormous trust, a strong sense of business purpose, committed owners who believe in innovation and a willingness to share.

This sharing revolution along with the emphasis on trust, commitment,  long term ownership and openness is highly congruent with left of centre values and beliefs.  It also entails reward packages for directors  that are commensurately lower, where maintaining a high share price in the short term is downgraded as a business objective. A whole new soft and hard infrastructure informed by centre- left values is needed. Yet very few European left politicians have chosen to make this territory their own.

2. But what if the techno pessimists are right?
This approach may seem premised on a big bet that the techno optimists are right. Pessimists argue that robotisation is about to eliminate  many jobs; for example 47 per cent of all current US jobs are at high risk from automation according to Carl Frey and Michael Osborne. Others, notably MIT Professors Erik Brynjolfsson and Andrew McAfee are more optimistic. They predict that ICT and robotisation are going to reinvent our economic base creating new industries and boundless new economic possibilities. They are advocates of the revolution of the ‘micro makers’, using the internet of things and 3D printers to enfranchise a new generation of entrepreneurs.  Don’t  get trapped into fearfulness about technology consigning societies to a workless  future:  human ingenuity  and tastes are boundless.
 
Nobody knows  who is right (I  lean to the optimists)  –  but even pessimists predicting the end of work and a harsh new world of a few high paid ‘hi touch’ and ‘hi tech jobs’ amid a myriad of transient insecure  work offer possibilities for the left. If this is the future, then our societies will need new and smarter systems of redistribution and welfare support just to hold them together. The ball is in the left’s court.

3. What to do economically
The left must put the social obligations of ownership and shared property rights back at its heart – but in a 21st century guise. The contemporary company is seen as the creature of its owners who have complete control of the assets that they own. Executives are paid extravagantly to the extent they advance the interest of the  owners.  Research is advanced to  the  extent inventors unassailably own intellectual  property  rights. Inheritance tax is to be lowered so that entrepreneurs can pass on their property untouched by social claims to their progeny.

But the successful 21st century economy, exploiting the multiplicity of innovative possibilities, will require high trust, open companies who have strong values and a strong sense of business mission. Economies will want a plurality of firm types – PLCs, employee owned, mutuals, co-operatives – and wave after wave of new start-ups embodying new ideas.

This vibrant, diverse matrix of entrepreneurial companies  open to each other and the wider society will not develop spontaneously from the market. The body of company law, the structure of finance,  the conduits  for risk capital  and the necessary intermediate institutions that will help catalyse innovation and broker open innovation  networks  will vary from  country to country depending on varying starting points. But the task everywhere  for the left should be the same– to navigate its capitalism into this space by proactive intervention and design by government. This will require a thought through role for the state as risk taker, innovator-in-chief, institution builder and strategist.

In particular there needs to be a paradigm shift in the intellectual  property regime to foster sharing, licensing, open science and open innovation. Westernsocieties cannot allow innovative  ideas and breakthrough  scientific  advances to be imprisoned  behind the wall of watertight  copyrights  and patents and whose exploitation will depend on the particular capabilities,  financial muscle and technical competence  of the copyright and patent holder. This is an acute problem in the US. The European social democratic left should strike out in a different direction.

4. What to do socially
The over-riding economic and social issue of the twenty-first century is going to be income and wealth inequality – intensified by the trends outlined above. The returns from work are going to become much more dispersed around the average, with large numbers in all our societies living at the margins. Yet if we want our societies to embrace change and experiment with the innovative and the new, we need everyone to feel confident and future facing – and life at the margins to offer possibilities of joining the mainstream. Similarly we want churn and change even while the trend is for the stock of wealth to become concentrated in ever fewer hands – the argument of Thomas Piketty.

Western societies, unless they are watchful, will witness the return of family dynasties whose grip  on the top positions  –  along with the accompanying ideology that somehow they deserved privilege – will become unchallengeable.

We need a new mutuality to span our societies, lower inequality and accommodate innovation and change. It will be a mutuality that supports income support and the transition from old jobs to new (variations of flexisecurity).  It will extend to housing, health and education. In all these areas we have to offer a mutual bargain to underwrite risk and the uncertainties of 21st century life. We need constantly to break down incumbent centres of power – hence the case for vigilance on monopoly and abuse of market power, but also for inheritance, property and capital gains taxes to limit concentrations of wealth.


Will Hutton is the principal of Hertford College, Oxford University. He is also the chair of the Big Innovation Centre at The Work Foundation

This is a contribution to the “Making Progressive Politics Work” publication which will inform the Progressive Governance Conference taking place in Amsterdam on 24/25 April, 2014

This is a contribution to Policy Network's work on Progressive Capitalism.

Tags: Will Hutton , Opinion , Progressive Governance Conference , Progressive Governance , Growth , Social stability , Living standards , Policy Network , Global Progress , Competitiveness , Growth , Solidarity , Globalisation , Centre-left , Centre-left , Europe , EU , European Union , Eurozone , Southern Europe , Northern Europe , Production , Productivity , Growth , Wages , Investment , Jobs , Globalisation , Equality , Pre-distribution

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