A New Social Contract for the Fourth Industrial Revolution

by Stewart Wallis

The Fourth Industrial Revolution(4IR) has the potential to provide massive benefits through improving human wellbeing and through the regeneration of planetary ecosystems.

 

However, it is occurring at a time of unprecedented challenges: There is widespread agreement in the richer countries of the world that the Social Contract is broken-especially the link between hard work and reward and security; global inequality in wealth is at record levels; only 15% of those surveyed in the Edelman 2017 Trust Barometer believe their economic and political systems are working anymore; and we are currently living beyond the capacity of our planet to provide the resources we need and to process our wastes with consequences including climate change, destruction of ecosystems and massive biodiversity loss. As Dennis Snower of the Kiel Institute says, “Economic progress has become decoupled from social progress”.

 

Furthermore, without major corrective action, the 4IR is likely to worsen some of the above in the following ways:

  • Automation placing downward pressure on wage growth and job creation.  With the advent of increasingly intelligent computer technology this trend is anticipated to speed up and a growing percentage of existing jobs will be replaced.
  • Unemployment, underemployment and growing job insecurity are forecasts to continue until at least 2050. The creation of new jobs is expected to fall well behind the demand for work.   
  • Inequalities in income, wealth, and power are widening and will continue to do so as the ownership of capital becomes even more concentrated and a ‘winner takes all’ approach is taken to technological breakthroughs.
  • New technologies themselves will worsen inequality: For example, much greater personal information about poorer people will lead to them facing higher health insurance premiums and more expensive credit.
  • Similarly, asymmetries in access to public goods such as education will mean that poorer and less educated people will have more difficulty in reskilling and retraining, thus worsening inequality.
  • Lack of purpose and meaning in many people’s lives will exacerbate as wage-paying jobs diminish.

 

The Global Future Council on Technology, Values and Policy therefore believes that two major systemic changes are urgently required if the benefits of the Fourth Industrial Revolution are to be realised and the potential worsening of inequality and human wellbeing avoided. These are:

 

  1. The creation of a new Licence to Operate for companies which establishes new social and environmental duties to Society and enables their employees and others to share in new wealth creation.
  2. The establishment of Citizens Wealth Funds at both national and global levels to address the major social and environmental challenges we face.

 

These would form the heart of a New Social Contract. Without steps like these which allow everybody to benefit from the 4IR, not only will the global challenges we face worsen but increasingly a growing minority or even a majority of people in many countries will refuse to play by societal rules with dire consequences for all of us.

 

A New Licence to Operate

 

Companies were granted limited liability in exchange for the benefits they provide to society and in particular the taxes they pay. However increasingly this concept is being challenged in the context of the bailout of “too big to fail” organisations and widespread use of tax avoidance mechanisms. In addition, the pace of technological advances is such that regulation struggles to keep up and much environmental regulation is inadequate. Furthermore, when technological windfalls occur, the benefits are rarely shared either with a company’s workforce or with wider society. When workers are made redundant however the cost of retraining these workers is borne not by the company but by society.

A new licence to operate needs not only to internalise externalities but to make social and environmental objectives part of company DNA. There are a variety of ways this can be achieved. Any company over a certain size might be expected to have a clearly defined societal purpose, be monitored on this, and in extremis have its licence to operate revoked. Other measures might include extending profit sharing schemes to include all employees, mandating of employee ownership schemes giving all employees a stake in companies over a certain size, encouragement of new company forms including cooperatives and trusts, using the tax system to reward companies which retrain workers even if they are to be made redundant, and a radical redesign of tax systems away from taxing employment and value added to taxing use of non- renewable resources and creation of wastes.

 

Citizen Wealth Funds

 

The Fourth Industrial Revolution will create major new wealth while addressing our global problems will require major new expenditure. We have to find a way of matching the two. This is not only a necessity but is morally justified because through their funding of education, theoretical research and much applied research, many States have been a major contributor to this new wealth creation.

 

Many sovereign wealth funds are already in existence and the Norwegian sovereign wealth fund is probably the best example of the type of fund we are proposing. National level Citizen Wealth Funds could fund universal basic income schemes, universal basic services and infrastructure. A global Citizen’s Fund could address climate change and other environmental issues as well as a new ‘Marshall Fund” supporting the development of those States unable to develop their own big enough wealth funds. Citizen Wealth Funds could be funded by States taking a small equity stake in all new companies (possibly in lieu of tax and reporting requirements until a company reached a certain size), though a modest annual tax on all companies payable by the issuance of new equity, though windfall taxes on technological breakthroughs, from the taxing of natural resource exploitation, from taxing merger and acquisition and other financial transactions that concentrate ownership, and from wealth taxes (To name just a few options).

 

We are not arguing that the above two proposals are a panacea for all our global problems. Many other reforms are clearly needed. However, implementation of these two proposals would form the core of a New Social Contact and would help ensure that the Fourth Industrial Revolution benefits all of humanity.

 

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