This is the question I was debating this week with Erik Brynjolfsson (appearing via robot) and Michael Osborne at the Financial Times’ great Camp Alphaville.
In a recent paper with Carl Frey, Michael Osborne concluded that nearly half of all existing jobs are at high risk of being automated over the next decade or so. Erik’s work on this topic was highlighted in a great TED talk where he argued that whilst there are naturally growing pains as we radically reorganize our economies, big innovations are ahead of us.
His view is in direct contrast to the view of influential macroeconomist, Robert Gordon, who maintains that various factors today (changes in demographics, education, debt, and inequality) mean that the west has little chance of achieving the levels of growth it has in the past, which will inevitably increase inequality even more (see his opposing TED talk here). On the technological side, he claims that today’s innovations simply don’t match the productivity enhancing effect of electrification had or the outdoor toilet.
Gordon’s thesis is complementary to that of Larry Summers’ view of ‘secular stagnation‘. Erik, on the other hand, claims that there is nothing inevitable about low growth and inequality: we shape our own destiny. Learning to race with the machine, rather than against the machine is key to overcoming the inequality problem as well as the innovation problem. The challenge today is to allow IT to transform innovation and productivity in all sectors, and to make sure we retrain those workers ‘left behind’. Through his examples (e.g. machine learning), he echoes some key insights from Carlota Perez’ work on the importance of technological revolutions being fully deployed/diffused throughout the economy, affecting production and distribution in all sectors.
As I outlined at the Alphaville Camp, I agree with Erik’s positive stance, against the ‘doomsday’ scenarios being advocated by others. Yet I believe his work ignores two fundamental problems:
(1) the highly financialised private sector, that is today hoarding at record level rates, and spending more on financialized areas like share buybacks—aimed at boosting stock prices, stock options, and executive pay—than on R&D, and
(2) the lack of courageous and strategic public investments, with governments no longer willing and able to spend on mission oriented areas as they did in the past.
Technological revolutions have never been ‘nudged’. Strategic spending has been pushed through in the high risk capital intensive areas that the private sector continues to fear, indeed increasingly so. Only through a return to challenge-driven government spending, and a de-financialised private sector will we be able to allow growth to be driven by innovation, and to beat the secular stagnation prophecies.
This is a key issue which will be discussed by Vince Cable, Andy Haldane, Adair Turner and other leading thinkers at the upcoming ‘Mission-Orientated Finance for Innovation’ conference later this month. As I argue in my book The Entrepreneurial State: debunking private vs. public sector myths, markets driven by technology must be actively shaped and created, not only ‘fixed’. And to make sure that growth is not only ‘smart’ innovation-led, but also ‘inclusive’ in order to reverse rising inequality, we must make sure that the collective risk taking in the innovation eco-systems we build, are matched by collective reward sharing.
Is it right that the tax payer only picks up the bill of the Solyndra loss, rather than sharing in the rewards from the Tesla success? Are tax systems devised in such a way to bring back rewards to the public that finances the most high risk investments? These are key questions that we need to address.
© Mariana Mazzucato
Want to know more?
Click here to see my paper with Bill Lazonick on Risks and Rewards
Click here to listen to an interview with the BBC World Service’s In the Balance Programme at the event.
See the full panel debate at Camp Alphaville:
World Economic Forum interview about how to achieve smart inclusive growth: