Nobel Laureate Stiglitz explores the social challenges posed by the digital revolution
The digital revolution has social consequences that must be understood and managed. Nobel Laureate in Economics Joseph Stiglitz says the key is to ensure that inequality does not increase.
In 1992, just three years after the fall of the Berlin Wall, political scientist Francis Fukuyama wrote the essay, “The End of History” in which he advocated for the absolute triumph of liberal democracies around the world. “In 2018 that prediction seems laughable,” says the Nobel Laureate in Economics Joseph Stiglitz early in the conference recently held in Madrid, at the opening session of the Mastercard Innovation Forum.
Stiglitz, a committed intellectual who teaches at Columbia University in New York, shared his vision of the global macroeconomic and political situation. He focused on the relationship between populism and problems of wealth distribution, which he believes have increased dramatically over the past 40 years in the West, especially in the U.S.
Given the unstoppable progress underway in the digital revolution and its social and economic impacts, he recommended learning from the past in order to achieve a healthier, better balanced development. “We have to understand these new technologies better in order to get a clearer picture of where we’re headed,” said Stigliz. He feels that the digital revolution is an opportunity to reduce the inequality that has afflicted Western societies for the past forty years.
His view of the present is not optimistic. Instead of the supposed global triumph of liberal democracies, “Many things that we took for granted are now in question - even globalization. Authoritarian-like positions are triumphing in countries like the U.S. and Brazil, and populism is calling into question our democratic values,” says Stiglitz.
Nobel Laureate in Economics Joseph Stiglitz says the key is to ensure that inequality does not increase.
What exactly is going on? In his opinion, this phenomenon has its roots in basic economics, and began about 40 years ago. Until then, Stiglitz maintains, the assumption was that if the economy improved, all of society would benefit and that’s what occurred. But starting in the late 1970s, that rule was no longer foolproof. “There started to be a disconnect between higher productivity and salaries, which have practically remained stable,” he explained, supported by historical data.
At first, Stiglitz said, politics allowed this situation to exist, and subsequently an attempt was made to apply policies that “do not work” such as putting faith in market mechanisms alone or turning to protectionism.
The Nobel Laureate indicated that throughout these decades, the middle class has grown in China, the rest of Asia, and even in Africa. Meanwhile, the working class in Europe and the U.S. has suffered the consequences of deindustrialization. “It’s understandable for them to be angry and look for something to blame, such as trade agreements.” In his opinion, the key lies in what solution can be found through politics.
The digital revolution makes this challenge even more urgent. “The size of the economic pie is growing, but we have seen that the problem is how that pie is divided up,” he explained. “They are technologies that could offer major benefits, but also major problems.” He specifically pointed to the risk of created semi-monopolies of tech giants, the possibility of large-scale manipulation of politics through social networks and the loss of privacy.