Technology and Inequality. The Concentration of Wealth in the Digital Economy

The digital economy is not reducing the inequality gap, and may be increasing it. Governments and citizens must prioritize social impact.

Amelita Galli-Curci seated at desk using typewritter, c. 1920

Amelita Galli-Curci seated at desk using typewritter, c. 1920. Library of Congress. Public Domain.

Optimism regarding the idea that technology can be an engine for well-being is at a low ebb. World Bank data shows that the digital economy is not reducing the inequality gap, and may even be increasing it. Although the short-term benefits of digital technology are beyond doubt – more information available at low cost and on a global scale –, they are failing to bring about the expected collective returns at the aggregate level. Measures such as increased access and more training can improve the situation, but only if governments and citizens make the social impact of technology a priority.

“The future is already here — it's just not very evenly distributed.”
William Gibson

The idea of technology as a transformative force and an engine for social change has been a dominant belief in West, at least since the Industrial Revolution. From the optimistic point of view, technology allows drones to carry humanitarian aid to areas that have been cut-off by natural disasters, and digital fabrication centres like FabLabs to create wi-fi networking systems in Afghanistan and Kenya. But the pessimistic view is that this same technological revolution is threatening entire labour sectors, concentrating profits in a small number of corporations, and giving enormous power to businesses that trade with citizen data.

Last January, the World Bank – an organisation that has traditionally been aligned with liberal economic ideas, although sensitive to some of the challenges of globalisation – released a report that unexpectedly warned of the impact of technology on social inequality. Although it recognises that the digital revolution has generated short-term benefits, its annual World Development Report draws attention to the fact that most of these benefits are in the private sphere and concentrated in the hands of a few. Profits are consolidating the wellbeing of an elite made up of companies and professionals who are highly trained for this new environment, but they are not increasing the wellbeing of society as a whole.

The causes of this link between technology and inequality are:

  1. The persistence of the digital divide. Sixty percent of the world’s population is still offline and, as such, excluded from the digital economy; and
  2. The market concentration of well-established companies, creating monopolies that are often strengthened by public grants.

To correct this situation, the World Bank report proposes a series of broad strategies that go beyond the technology sector, which can be surmised as follows: increasing access (particularly in developing countries), lifelong training in skills and flexibility, and guaranteeing competition through government regulation and accountability. The fact that an organisation such as the World Bank – which has even been accused of worsening rather than reducing poverty – has issued a diagnosis of this kind indicates a significant shift in the perception of the digital economy. Nonetheless, it is worth analysing the measures proposed as a solution to the problem.

Greater access, more inclusion?

In the latest edition of the Mobile World Congress, Mark Zuckerberg criticised telecommunications companies for prioritising 5G technology instead of guaranteeing affordable Internet access all over the world. For years, Facebook has been promoting a free internet connection service that has already been tested in remote areas of Africa, Latin America, and Asia. However, some companies in India have withdrawn their support for the project on the grounds that it goes against net neutrality, given that it favours access to certain websites and applications to the detriment of their competitors and of the availability of information in general.

One Laptop per Child, Nigeria.

One Laptop per Child, Nigeria. CC-BY.

In a world in which only one in three people have internet access, the need to deal with the digital device is beyond question. But initiatives like Facebook’s show that greater connection does not necessarily mean more inclusion in the market, or even equal opportunities. On the other hand, given that almost 20% of the world’s population has not been able to learn to read and write, it is unlikely that the expansion of technology alone will close the digital gap. Internet access needs to go hand in hand with measures that allow people to make the best of it, at the level of education and of basic social services. We should not forget that there are now more households in developing countries with a mobile phone than access to electricity or drinking water.

Training people to be qualified for the digital economy – another of the recommendations of the World Bank – is a measure that is difficult to object to. But in developed countries, the crisis has shown that even the most highly trained people are not guaranteed inclusion in the economy. And those who do become part of it find that their educational level does not necessarily lead to the corresponding remuneration. Meanwhile, labour automation is destroying jobs that require mid-level qualifications, polarising the labour market between highly educated professionals on one hand, and those who carry out routine jobs that machines are unable to do on the other. In short, a divide in which activities with a high level of added value are controlled by a specialised elite, while an increasing part of the labour force is relegated to activities with low productivity and limited value.

Technology monopolies and the Welfare State

In addition to improving access and education, the World Bank proposes regulating competition among companies, and ensuring that public institutions are accountable. In spite of liberal theories regarding the self-regulation of the free market, cases like Microsoft, Google, and Amazon show that there is a tendency towards the creation of natural monopolies on the Internet. This concentration of power often goes hand in hand with antitrust practices and political influence through lobbying. Meanwhile, many governments and institutions are pinning their hopes for technological adaptation and growth in the hands of the big corporations, rather than investing in local initiatives.

While technology is certainly a tool that also makes it possible to change the status quo, commons theorist Yochai Benkler has pointed out that the flexibility inherent to the digital revolution also brings about the dispersion of power. On one hand, the internet has made it possible for individuals, companies, and small organisations to compete with more powerful rivals, and to defeat them. But that same flexibility has led to labour instability on a mass scale, weakened the welfare state, and endangered some entire economic sectors. Paradoxically, this sometimes happens under the umbrella of the “collaborative economy”.

Measures against technological determinism

The trend described above will not inevitably become dominant in the future. Contrary to the determinist way of thinking that sees technology as a kind of force of nature that cannot be fought against, we have to bear in mind that different social actors and interest groups shape innovation, in a process of mutual influence.

The negative impact of technology on inequality can only be stemmed through analogue measures such as regulating the tax system to prevent the outflow of technology company taxes, or taxing profits from capital at a higher rate than those from labour. It is also possible to create obligatory public registers of the activities of lobbies, so that citizens can be aware of the influence that technology companies exert on institutions. At the same time, the increasing flexibility of the economy requires stronger social protection systems that do not just guarantee education in digital skills, but also provide a safety net in a volatile environment.

Citizens can demand that big online platforms open their data, or choose to use platforms designed on open principles, so that user information remains in the hands of users, even if companies can use them with their permission. Interesting projects along these lines include ‘platform cooperativism’, in which users own the services so that the profits that they generate will feed into society, not private interests. All of this contributes to new ways of understanding our relationship with technology that involve rethinking the overall architecture of the system, not just dealing with the consequences. Addressing the negative effects of technology on inequality requires designing technologies and institutions that do not just prioritise macroeconomic growth, but focus on the social impact.

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  • Gabriel | 19 November 2020

  • alfonso carlon | 25 January 2021

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Technology and Inequality. The Concentration of Wealth in the Digital Economy