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Social Europe

How Europe can deal with technological globalisation

15 Jun 2017 - 15:48

Globalisation has been a buzzword in politics and social sciences for more than two decades. But beyond the different dimensions of globalisation already known we may be at the beginning of another crucial watershed: technological globalisation.

So far the Internet and related new technologies have been an enabler of economic globalisation. More somber predictions about the impact of new technologies on labour markets, however, foresee  the emergence of a global wave of technological development that may fundamentally transform our economies rather than enable or accelerate specific features of it. The driving force of this development is accelerating innovation and its near instantaneous global dispersion that is possible today.

While nobody knows exactly how many jobs might be affected by new technologies and how quickly fundamental changes in labour markets will come about, there will likely be significant differences in the way economies are impacted by technology. Most importantly, one thing is clear: policy makers should prepare for disruption.

Preparing for disruption

So far, there has been a lack of policy thinking about how the upsides of the technological revolution can be harnessed and the downsides be managed. Beyond calls for a universal basic income, which in my view is incompatible with Europe's social welfare model, there has been too little innovative political thought. Urgently required is a framework for dealing with the potential disruption on labour markets.

There has been a lack of policy thinking about how the upsides of the technological revolution can be harnessed and the downsides be managed

Rather than trying to quantify exactly how many jobs are threatened, policy makers should start thinking qualitatively about the disruption potential. There are three trends that need to be balanced in the analysis of each economy: substitution, augmentation and creation.

Substitution refers to the replacement of existing jobs with new technologies or the slicing up and outsourcing of specific tasks that used to constitute a job. The latter is often referred to as the 'gig economy' where the job tasks themselves are not disappearing but the way in which they are delivered changes. The fundamental question here is: how many jobs will disappear as a result of different forms of substitution?

Augmentation refers to changes in the way humans work with technology. As an illustration we refer to the installation of automated self-checkout desks in supermarkets. As a consequence, the supermarket will need fewer staff and their skill profile is changed; they will need to be able to deal with potential issues in relation to the self-checkout desks. The effects of augmentation are thus first in terms of work quantity (fewer staff needed) and second in terms of skills (the remaining jobs are likely to require higher skills).

Creation refers to new jobs that have always been – and will always be – created in dynamic economies. The job of a social media manager, for instance, was unknown until most recently. Core questions here are: how quickly can new jobs be created and what do they mean for social mobility (i.e. whether or not people who lose their job may benefit from new jobs elsewhere)? How many new jobs will be created?; where are they created and of what quality are they? In the US we see a dualisation of labour markets, i.e. jobs are being created at the top and bottom end of the labour market. Will this also be the experience in Europe? If not, what are the factors that make European middle-class jobs more resilient than those in the US?

These three trends have to be balanced in order to arrive at a comprehensive assessment of how the technological revolution is likely to impact labour markets. But what if the worst predictions of large-scale disruption and unemployment are correct, and what tools policy makers can use?

First of all, education systems should prepare young people better for the economy of the future. While technical skills might become obsolete very quickly, transferable skills such as creative and analytical capabilities and social competence will remain useful. An additional option would be incentives to reallocate the remaining work amongst more people.

Supporting the creation of social value

But beyond this it is important to note the following. At risk are the jobs created in traditional labour markets, i.e. jobs that are created because of economic utility. Yet, as societies we will never run out of activities with a potential social utility. What could therefore be done is establishing a publicly-financed activity guarantee scheme that creates and incentivises socially beneficial activities, foremost in the health care and cultural sectors. Symphony orchestras, for instance, are usually not economically viable but few would doubt their cultural value. Losses of traditional jobs could hence be turned into an opportunity to upgrade the social fabric of our societies by supporting the creation of social value.

How can this be financed? First, by reforming tax systems: whereas discussions about robot taxes are not particularly useful (what exactly is a robot for tax purposes?), there is a need to adequately tax all sources of income in a more progressive way. However, if robots really do take over the traditional world of work tax policy will not be enough, and the ownership of these robots comes into play. The relevant question would be: who reaps the financial benefits of the technological revolution?

The democratisation of capital ownership

Hence we should seriously consider the democratisation of capital ownership. This can be done on a personal level in companies, for instance through systems that create more worker ownership of their own companies, but also on a macro level through publicly-owned investment funds. Such funds would work similar to sovereign wealth funds or university endowments and could in effect resocialise capital returns that could then be used to fund the activity guarantee. In addition, these funds would provide a financial link between the benefits of the technological revolution and the social value driven activity that could replace traditional jobs if they are lost.

We have only started to conceptualise the technological revolution and what it means in policy terms, but we in Europe in particular need to come up with ideas that could harness the benefits of new technologies, deal with their downsides and simultaneously strengthen the social dimension of our market economies: in other words, more serious thinking is called for.

Dr Henning Meyer is a Research Associate of the Public Policy Group at the London School of Economics and Political Science (LSE) and a Visiting Fellow at the Centre for Business Research at the University of Cambridge.

This opinion is published with the support of the Adessium Foundation.

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