Grasping the future – why progressives must champion the human potential of the digital economy - RSA

Blog: Grasping the future – why progressives must champion the human potential of the digital economy

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  • Economics and Finance
  • Digital

The clue’s in the name, the narrative of progressive politics needs to evince insight and optimism about the future. At the heart of that future will be a radically different economy which, as well as undermining social democratic assumptions, provides major opportunities for human development and liberation.

Start with the fundamentals: the scale of UK debt, our weakness in key areas of economic performance and the impact of population ageing present a simple reality - unless we can be a leading participant in a major wave of innovation there is little chance of significant improvement in the living standards of most Britons. The good news lies in the number of candidates for that leap forward; not just the on-line economy but advanced automation, clean energy, life science and smart materials.

Under David Willetts and Vince Cable the Coalition Government quietly pursued an active industrial policy strategy but the new Government seems less keen. There is a growing body of research which demonstrates the importance of intelligent industrial strategy. As Mariana Mazzucato has shown, public sector investment, procurement and regulation have been behind many of today’s most successful commercial innovations. It is time to get over the failures of seventies corporatism. Instead of business bashing, progressives need to advocate modern forms of partnership between Government, business and employees.

Economic activity too is changing radically. As Labour leadership candidate Liz Kendall has pointed out, there are currently more self-employed workers in the UK than employees on the minimum wage (although that may change when the living wage is implemented). Of course, some self-employment is involuntary and much is low quality and low income but, as RSA research has demonstrated, the desire for autonomy, flexibility and fulfilment is also a major part of the growth of microbusinesses. Yet whether it’s the education system or the welfare state we still treat self-employment as marginal and implicitly undesirable.

The rise of self-employment is connected to the evolution of the digital economy; a sole trader can, for example, be a global exporter within days of setting up. The on-line economy is radically changing the economic policy landscape but as yet there is little sign progressives understand the scale of the change, let alone know how to respond.

Through lowering the barriers to entry and innovation, on the one hand, and powerful network dynamics, on the other, the digital economy continues to disintermediate. The GAFA economy (Google, Amazon, Facebook, Apple) provides unprecedented and worrying amounts of power to a small number of Californian based corporations. As Martha Lane Fox has argued, this new economy needs new institutions holding the corporations to account and helping the little gal and guy organise and grow.

The ‘sharing economy’ has become a term which covers many virtues and many vices. The potential for new platforms to develop models of mutualism, ‘prosumption’ and ethical practice is enormous but this is a long way from the driving logic and business model of an aggressively disruptive outfit like Uber. By identifying the positive externalities that come from platforms which are equitable, transparent and community-building, progressives can craft strategies for corporate engagement and light touch regulation to maximise the scope for sharing platforms to grow economic and social participation. The potential for disruption in public services and worker representation is live and well. Progressives will find opportunities to rebalance power here if they are confident and brave. New networks of worker support and representation could resuscitate a struggling private sector trade unionism.

The sharing economy is also starting to define an alternative model of financial capitalism. With Government support, crowdfunding and peer-to-peer finance is a rapidly growing industry in which Britain has taken a lead and now UK platforms are eyeing overseas expansion. This financial revolution has the potential to spur innovation and democratise finance in a way that echoes the emergence of mutual insurance companies and building societies in the early 19th Century. This is not just a game for the young, with over 7% of the over-65s saying they will consider P2P lending with their newly liberated pension pots. The transparency and control offered to both savers and borrowers stand in stark contrast to an old economy financial industry grotesque in its complexity, scale and remoteness from the real economy. Government needs to encourage the existing financial sector to respond creatively and responsibly to this appetite for new models.

In defining a compelling vision of a progressive digital economy, progressives need vision as well as new policy. That vision can be the striving for equality of economic power. If new digital platforms genuinely empower more citizens as economic actors, rather than merely repeat existing patterns of privilege and injustice in a new domain, they will be a powerful force for good. This means achieving open and universal access to markets, free of prejudice or barriers to socially or economically disadvantaged groups. It also entails a role for the state to keep the playing field level in these new markets.

On this, the progressive agenda aligns well with the classical economist’s understanding of how markets generate the greatest public benefit. If we sit by and allow a new industrial elite to create and then exploit huge imbalances of market power within the new economy, we will not only undermine social progress, but fall far short of realising its potential to generate shared economic prosperity.

It is not just progressives who need a voice on these issues. Society as a whole would benefit from a debate which grasps the opportunity for a digital economy better aligned with human welfare and fulfilment.

(This is a fuller version of my recent piece in the FT)


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