Technological change and social disruption

HUMANITY is witnessing another great disruption. The creative destruction is linked to the fourth industrial revolution. We are told that the fourth revolution is fundamentally different from the previous three because it is essentially a combination of cyber-physical systems, the internet of things, and the internet of systems.

It has also been pointed out that the fourth industrial revolution or Industry 4.0 will change the way we live, and that change we must.

Technological progress such as steam and water power, and later on computerisation is referred to by economic historians as a general purpose technology – a state whereby advances in the technique of doing things can be used to do things more effectively.

The first three industrial revolutions had shaped how our modern job evolved, shaped by the rise of manufacturing. The second industrial revolution, for example, handed to us a template for modern life that continues to support our consumption economy. While the first three revolutions had ushered in an era of unprecedented growth and wealth, it came at a tremendous social cost.

The shift from an agrarian economy to an industrial one was wrenching, breaking up communities and making hard-learned trades redundant. In Western Europe and its offshoots, the industrial revolution increased social mobility but it also widened the social divide.

In Europe, whose lower social orders had never had it as good as the American colonists, the industrial revolution was so socially wrenching that it inspired the first coherent political ideology of class warfare, Marxism, which culminated in violent revolutionary movements that would eventually install communist regimes in Russia, Eastern Europe, and China.

The communists had shattered the Western bourgeoisie's confidence, and many proxy wars were fought between the West and the Soviet Union to advance their ideologies. Nevertheless, the fall of the Soviet Union had placed capitalism firmly as the engine of technological and economic advancement. That too came at a high social cost.

Today, the two powerful and unstoppable forces shaping our economies are globalisation and technological revolution. Together, they constitute a transformative capacity that dwarfs the power and scale of the first three industrial revolutions. The fourth industrial revolution, however, has yet to create a surge in economic growth for the West that is comparable to that of the first. What the fourth revolution has done is to enable an industrial revolution in much of the rest of the world.

Countries such as China, India and some parts of the developing world are going through their own economic and technological transformation. Economic growth in China has increased twelvefold. The global economic and technological change is unprecedented in its scale and impact. What is less discussed is the negative externalities of the growth-centred economy that does not pay close attention to an increased social divide.

The twin forces of economic shift, globalisation and technological revolution, have severely impacted social, economic, and political relations. It has created a great economic chasm between the 1% of the super class and 99% of the rest. While the economy and corporate earnings are growing, wages for the middle and lower classes have stagnated.

The technological revolution, globalisation, and the Washington Consensus have contributed to the re-emergence of social and economic inequality. Among students of income inequality, there is a fierce debate about which of the three is the most important driver of the rise of the super class. Whatever the starting point of the debate, the economic and political implications of the rise of the 1% are very clear.

Globalisation and the technological revolutions have allowed the 1% to prosper but as they have been getting richer and more powerful, the tax laws in many rich and developing countries have taxed and regulated them less.

We are essentially returning to the robber barons era not only because of the twin revolution but also due to the fact that the rules of the game are written in favour of the 1%. We tend to forget that the fourth industrialisation will not be able to transform society until society has learned how to live with its many disruptions.

To deal with the great disruptions that were often associated with the first and second industrial revolutions, Western countries set up a generous social welfare system. A winner takes all approach in dealing with the fourth revolution will create a lot of losers but to make good use of technological advancement would require policies that can ensure a more equitable distribution of wealth, and the development of robust primary schooling systems, and universities that are in sync with the latest technological change.

Remaking societies is not easy, and if not done right, the fourth industrial revolution can also be an impetus for revolutionary movements of the 21st century.

Associate Professor Dr Azeem Fazwan Ahmad Farouk is director of the Centre for Policy Research and International Studies at Universiti Sains Malaysia. Comments: