The 4th Industrial revolution and economic growth
The first Industrial Revolution brought a fundamental change to economic growth as for many centuries economic growth was practically zero. The growth that happened was on a vastly different scale than anything that had happened before.
We may be at the start of a similar growth pattern with the “Fourth Industrial Revolution,” where all that has happened in the past may appear minor compared to the productivity and profitability potential of the future
Unlike in the 19th century, though, the effects of globalization and automation are spreading across the developing world. While the income of the very poor was stagnant, rising incomes in emerging economies lifted hundreds of millions of people out of poverty.
But the income of working- and middle-class people in the developed world has stagnated.
Today’s technological progress is poised to create enormous efficiency gains and huge shifts in the working world whereby jobs require new skills. As automation and artificial intelligence technologies improve, many people worry about the future of work.
If millions of human workers no longer have jobs, what will people do, how will they provide for themselves and their families, how inequal will societies become and how can economic growth be sustainable?
How the Digital Economy exacerbates inequality
Income inequality has increased in most developed countries over the past three decades. The phenomenon has been felt much more in some countries than others, but the general trend is unmistakable. In the United States, the income share of the top one percent has soared from an average of 27 times more than the bottom one percent in the 1980s to 81 times more in 2014. The top one percent income share (of GDP) is now almost twice that of the bottom 50 percent.
A World Bank report (March 2017) on the European Union, Growing United: Upgrading Europe’s Convergence Machine, argues that in disrupting labour and product markets, technological change is driving a wedge through the EU, providing ever more opportunities for well-skilled workers and frontier firms, while leaving low-skilled workers and lagging firms behind
Innovation often goes hand in hand with temporary exclusivity based on first-mover advantage, intellectual property rights protection, brand reputation, network externalities and entry barriers. This exclusivity allows innovators to set prices well above costs and benefit disproportionally the top income groups.
This digital non rivalry gives rise to the winner take it all market structures which allows for massive economies of scale and reduces costs of innovation. Incumbents’ privileged access to data allows them to maintain the lead in innovation
Technology-intensive markets may actually prove more fragile and volatile because more players can disrupt the market, bringing ‘creative destruction’ that unseats dominant firms.
Inclusive Innovation could be a tool creating solutions to this challenge today.
Innovation and Inclusive Growth
Inclusive Growth focuses on the social aspects of creating value, by reducing poverty through
access to tools for living in a globalized digital environment and
offering equal and affordable access to services.
Innovation can be an engine of growth but also a cause to the largest health and wealth disparities among citizens.
Human capital is a key mechanism for creating jobs but new jobs are created in the old way, without reflection on the changing definition of work and different needs of skills
A list of topics should be addressed in order to stimulate job growth:
insufficient estimation of future skills needed,
unnecessary regulatory burdens,
poor innovation capacity and access to new technologies
To stimulate investments that create decent jobs, including for women and youth, nations should develop and implement labour market policies to achieve a sustainable highly skilled workforce.
Access to tools for living in a globalized digital environment
Those who stand to benefit most from new services disproportionately find themselves on the wrong side of the digital divide. Recent advances in communications technology could enable millions of people to live healthier, longer lives and contribute significantly to better education. The delivery of health care services using communications technology however can be a critical tool for making more people healthier. The most crucial step in seizing the opportunities of digital medicine and education is making sure that every community has high-speed Internet access.
To drive economic growth and avert projected workforce shortfalls, a massive expansion and transformation of quality professional, technical vocational education and training programs is needed. Nations must invest in quality education and continued learning opportunities to ensure all health and social workers have the skills to fully meet local demand today and in the future.
Equal and affordable access to services
Citizen have basic needs such as housing, transportation, uninterrupted power, clean water and affordable financial services. Ensuring this access is critical so that more people can participate in inclusive growth and that small businesses can flourish.
Two billion adults around the world still don’t have a bank account and too many people – including in so-called developed countries – are stuck in the less productive informal economy.
Advancing financial inclusion means lifting people out of poverty and up the economic ladder.
Digital transformation and other new technologies unlock a huge potential in an individual, in organizations and at the country level.
Implementing both technology advancements and cultural changes will result in new business models or industry disruptions.
We need to create an ecosystem where affordable access to technology becomes a reality and is all inclusive. Partnerships alone isn’t enough .
How do we build capacities and right skills as well as enabling environment for the youth, startups and entrepreneurs to thrive and become globally competitive
Inclusive innovation is made possible by companies that have sustainable business models that widen social impact by growing the economy and have a positive impact on the above factors affecting Inclusive Growth.
These companies typically :
tap profitably into the pool of usable science and technologies to create business and work thereby avoiding technological unemployment
focus their business model on skills development and/or
match skilled people with work opportunities and/or
match human skills with machines and/or
have operational practices and business models revolutionizing the labor market, and/or
allow access to technology and science to a wide community