Augmented reality turning the environment into a digital interface, autonomous self-driving cars multiplying our free time, reliable data-based tools enhancing all human decisions, or Smart Cities relying on an interconnected technological network – these astounding visions inextricably accompany the topic of the Fourth Industrial Revolution.
Unfortunately, this trailblazing phenomenon, aimed at expanding human experience far beyond all former borders, is not all rosy. Obviously, that does not mean we shall halt the progress and swiftly hide inside stone caves at this exact moment.
Yet, it should open our eyes to several distressing drawbacks of the Fourth Industrial Revolution, amongst which exacerbating inequality eagerly takes the lead. To grasp this topic even better, let's start by summarizing essential concepts inherently connected with it.
The Fourth Industrial Revolution and Economic Inequality
As I have described in one of my previous posts ("So, What's the Deal with The Fourth Industrial Revolution?"), this ongoing phenomenon - hailed by Deloitte as the marriage of physical assets and advanced digital technologies - can be defined as rapid technological development fruitful in innovations like Artificial Intelligence (AI), robotics, Internet of Things (IoT), cloud computing, genetic engineering, and 3D printing.
Economic inequality can be best described as the unequal distribution of income, wealth, and opportunity between different social groups. It tends to be measured using the Gini coefficient (a measure of income dispersion among members of the population) and the Inequality-Adjusted Human Development Index (representing a national average of human development achievements in health, income, and education). Commonly mentioned reasons for economic inequality are the labor market failures, faulty construction of taxation system, unequal access to education, rapidly-spreading globalization, and various social or individual factors.
How unequal our world is these days?
According to the World Inequality Lab 2020 Update, regions battling the highest inequality rates are Latin America and the Middle East, where the top 10% of income distribution captures respectively, 54% and 56% of the national income. In Africa, the top 10% captures 50% of national income; meanwhile, "in Asia, within-country inequality has been rising significantly since the 1990s". In the United States, income concentration grew from 34% to 45% since 1980, while Europe can be characterized by the highest equality of all regions with the most extensive public investments in education and healthcare systems. Collected data shows rising inequality not as the result of uncontrolled fate but rather as a political choice since countries with mighty investments in public services, and welfare policies can boast lower inequality levels.
We shall not forget about COVID-19's impact, increasing the inequality of all kinds, as lower-paid workers are often unable to limit their exposure to potential infection, frequently working in essential services or sectors, which had to suspend their activities, resulting in a lack of stable income. Moreover, the pandemic rapidly increases inequality between richer countries, capable of creating social safety nets, in contrast to poorer nations unable to do so. A recent survey by Save the Children International has indicated that out "of 37 countries, 3 in 4 households suffered declining income since the start of the pandemic, with 82% of poorer households affected."
Social impacts of the 4IR
Let's return to the topic of the Fourth Industrial Revolution. One of the most flagship purposes of this mighty transformation is the increase in human productivity, which comes from people learning to fulfill their tasks better and quicker due to automation and help from AI. It is also supposed to upgrade our general welfare, living standards, and quality of education significantly.
However, technological development raises frequent concerns revolving around the labor market. Here, we should consciously avoid stepping into a Hollywood-produced dystopian scenario of machines taking over our world and destroying it into pieces. Nonetheless, as AI and robotics mature, many routine-intensive occupations (f. ex.: secretarial or call center work) are immensely likely to be the spheres in which computers will eventually replace humans. Machines are also prepared to fulfill care-workers' duties, making it pretty clear that a vast fraction of society will have to change their jobs as the automation goes on.
Moreover, women are at a higher risk of job loss since their concentration in lower and middle-skilled jobs, particularly in emerging economies. According to the discussion paper of the International Monetary Fund staff ('Gender, Technology and the Future of Work'), "in the next two decades, automation will replace 11 percent of the female workforce, compared to 9 percent of the male workforce". This puts approximately 180 million female jobs are at high risk of displacement globally. Moreover, the brightest future stands in front of the technological sector, meaning that STEM education for women needs to be cultivated and promoted since their representation in this field is significantly lower than men's.
One of the most critical issues related to the 4IR is the endangerment of social mobility. Social mobility describes the extent to which a person's life chances are determined by their starting point in life. High intergenerational mobility means that an individual's family background does not significantly impact where they will end up later in life. Therefore, social mobility can be described as the indicator of equal opportunities. Low social mobility is harmful both for economic efficiency as well as individual satisfaction and wellbeing. Despite all of the flexibility offered by the gig economy developing in the 4IR era, it can pose particular threats, as these jobs, on average, have lower wages and offer relatively fewer opportunities for upward progression than classic jobs. It can directly affect social mobility, leading to increased inequality.
Why is inequality that hazardous?
In addition to what I have already mentioned, unequal distribution of income, wealth, and opportunity, impacts all possible spheres of human experience. Its knock-on effects include a wide range of social dangers, from the rising level of crime to perilous reactionary nationalism. Inequality has the power to effectively detract countries from democracy and freedom, as people concerned about their next meal will not specifically have time to focus on analyzing election candidates or participating in various political groups.
Moreover, looking from a strictly economic point of view, inequality is entirely inefficient, being defined as a severe market failure, well-explained by the Marginalism Theory – a person earning $7,000 annually would benefit incomparably much more from an additional $1 million than Bill Gates would. Additionally, economic inequality is a virtuoso in undermining trust in public institutions and devastating the physical and mental health of people.
The shift in customer expectations during the 4IR should not surprise anyone. People quickly get used to instant answers anytime, everything delivered right to their door, and instant personalized service anywhere they go. Adding fast-paced globalization, spreading those innovative services with a speed of light, makes diversity and inclusion assets of utmost importance, needed to understand such a varied consumer base. Therefore, unequal treatment endangers mighty industry tycoons much more than they would like to admit.
So, where exactly does this problem lay?
The economic benefits yielded by advancements of the Fourth Industrial Revolution tend to become significantly more concentrated among a small group of people and companies. Inequality emerging this way can quickly lead humanity towards much more severe political polarization and fragmentation of our society, with both of these accompanied by the lack of individual trust in public institutions.
Let's consider Britain's example during the industrialization process, which commenced in the mid-1700s, making it relatively easy to understand the sources of global inequality in times of significant technological progress. Industrialized countries needed to obtain two crucial elements to succeed – inexpensive resources and a customer base unable to provide itself with particular products or services at a demanded scale. These factors are the easiest to find in less-developed countries, which led to imperialism and colonization back in the 18th century.
The Fourth Industrial Revolution obviously differs from what I mentioned; nonetheless, the incentives tend to be quite similar. It is crucial to note that the assets of one country are simply the liabilities of the other.
As the pandemic continues, incomes have substantially decreased, while debts stayed approximately the same. To fill income gaps, countries decided to inject more money into the economy, which is known as quantitative easing. Yet, only a few countries or regions can print enough money to fill these deficits, which already sounds like an introduction to international inequality.
Only reciprocal obligations on the global scale have to power to rebuild society, innovate the economy, and avoid mistakes of the past.
If we depict global welfare as a tasty pie, the fourth industrial revolution and its outcomes are the ingredients that make the cake bigger. Yet, it is our duty to ensure all of the slices of opportunities are virtually equal.
How can we make sure that our development-pie, boosted by the progress of the 4IR, is justly sliced?
Just as Marc Benioff, Chair and Chief Executive Officer at Salesforce, wrote in an article for the World Economic Forum: particular emphasis must be put on the topics of trust, growth, innovation, and equality to make the Fourth Industrial Revolution genuinely beneficial for humanity. Especially the transparency will be crucial in rebuilding individual trust in public institutions.
Pressing global questions, like "Who will help who? How will nations and individuals cooperate? What will be the meaning of these new relations?" need to be answered since one country's downfall tends to be another's opportunity. As I have already mentioned in one of my previous posts, today's progress is a race almost impossible to win by undeveloped nations as newer and newer technologies emerge in high-tech clusters daily, enlarging the - already wide - prosperity gap.
Moreover, with all-time emerging technological advancements flattening organizations, reducing coordination and logistics burdens, and handling more decisions to AI, we need to remember that human inventiveness, productivity, and creativity are factors that truly raise our living standards. It is vital that countries immediately begin to plan labor market reforms to prepare their societies for the inevitable reality of automation in the best way possible.
To actively work against inequality, societies worldwide need to focus on eliminating unethical values and discrimination so that the power of innovation, education, renewable energies, and self-sustaining communities can thrive all across the globe. It requires making sure that hatred does not circulate between politicians and civilians disguised as the 'freedom of speech.'
Conclusion
The 'utopian world,' previously considered a fiction originating in humanity's craziest minds, is within reach in the times of the Fourth Industrial Revolution. Yet, without solving the most urgent social issues, including prevailing economic and social inequality, we cannot arrive at humanity's dream destination. Eventually the words of the Reverend Dr. Martin Luther King Jr., "injustice anywhere is a threat to justice everywhere," can be applied to the economy as well.
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