We usually associate technological progress with a better life for everyone. Most of us agree that life is better now than 2000 years ago. Yet, many of you reading this blog are likely in a privileged position and personal opinions are generally not a good way to assess the quality of life of an entire species.
Let’s look at an example. The invention of mobile phones has allowed for a more interconnected world. With economies of scale and improved production processes the prices of these devices have dropped enormously over the years. This has allowed less wealthy individuals, such as many African farmers, to purchase them. This lead to them being able to check market prices, accept payments in mobile money and communicate with middlemen more effectively (The Economist, 2016).
It sounds then like this is technological progress does indeed increase the prosperity of humanity. Jaumotte et al. (2013) came slightly more nuanced conclusion when they conducted their research for the International Monetary Fund. Although it is widely accepted that economic growth is related to technological development, their research focused on how this wealth is distributed. Their research concluded that “the observed rise in inequality across both developed and developing countries over the past two decades could be largely attributable to the impact of technological change.” They do note that these results are not definitive as their conclusions were based on a short unbalanced panel data set and with estimations that suffer from endogeneity issues.
This does lead to the question: does technological progress encourage income inequality? Usually it is the upper-class that profits from the latest technological innovations, with the lower class struggling to keep up. As mentioned before, the lower classes do receive benefits, but these are usually delayed to when a technology has been refined to the point where it becomes affordable. This leads us to reason that technological change has, so far, increased the quality of life of most people, but it increases that of the upper-class the most.
Bibliography
Economist.com. (2017). Cite a Website – Cite This For Me. [online] Available at: https://www.economist.com/news/middle-east-and-africa/21711511-mobile-phones-are-transforming-africa-where-they-can-get-signal-mobile-phones [Accessed 16 Oct. 2017].
Jaumotte, F., Lall, S. and Papageorgiou, C. (2013). Rising Income Inequality: Technology, or Trade and Financial Globalization?. IMF Economic Review, 61(2), pp.271-309.
An article in the MIT Technology Review considered the same question – and states that the gap between the wealthy and everyone else is largest in the United States, where in 2010 the richest 1% (0.1%) of the population had 34% (15%) of the accumulated wealth. In contrast, incomes have stagnated or even shrunk for much of the population, and the article mentions technology as one of the largest culprits: “Simply put, as we getter better at automating routine tasks, the people who benefit most are those with the expertise and creativity to use these advances. And that drives income inequality: demand for highly skilled workers rises, while workers with less education and expertise fall behind.” So, differences in level of and access to education account for a good share of the inequality. That’s why the Rotman (2014) states that asking whether technology causes inequality is the wrong question. Instead, it should be “how advancing technologies have changed the relative demand for high-skill and low-skill workers, and how well we are adapting to such changes”. It makes no sense to blame the rapidly advancing technology, which has only exacerbated the problem that was already there. Institutions, schools need to change, to more adequately meet the new demand, and the focus should not only be on spreading access to technology, but also the skills needed to effectively make use of it.
Rotman, D. (2017, October 21). What Role Does Technology Play in Record Levels of Income Inequality? Retrieved October 20, 2017, from https://www.technologyreview.com/s/531726/technology-and-inequality/
Hi Loic,
Thank you for your interesting blog post and the important question you are raising. I do think technological progress is not fair in the sense that it leads to equal chances and benefits. One of the reasons is like you pointed out, the fact that lower classes or disadvantaged people receive benefits only when they become affordable and are therefore lagging. The World development report 2016 published by the World Bank found that traditional development challenges prevent the digital revolution from fulfilling its potential. Many are still left out because of lacking access to digital technologies. Unless countries improve business climate, promote good governance as well as invest in education and skill development the benefits of digitalization will not be realized. Education and skills-development is essential to prepare people for future job requirements (World Development Report, 2016 World Bank).
Therefore, I argue that in order to reduce (income) inequality we need to take active measures to support every group of society. Proposed steps include the introduction of an unconditional basic income which is already being tested in several regions such as some cities in Finland and Sweden.
Reference: Worldbank. The World Development Report 2016.http://www.worldbank.org/en/publication/wdr2016