Will the digital economy pulverise states and governments?

Opinion

Our western societies are going through a massive shake-up. The globalisation of the economy is leading to a multipolar, complex world. After the first two industrial revolutions, one in the 1780s involving the sciences, textile-making techniques, metalworking and rail transport, and the other from the 1880s onwards, with the advent of the internal combustion engine, electricity, cars and aircraft, we are now embarking on a third economic revolution, which is all about the mobility of capital and information. This is the digital revolution.

This third revolution is changing the typology of progress. The spread of scientific and technological development is now governed by the transmission speed of information and the fluidity of capital. This economic globalisation is altering space-time. Being worldwide, it dissociates the geography of knowledge formation from the places in which knowledge is marketed.

The synchronisation of social time is encompassing the whole planet. These days, most people can, individually or collectively, contact each other in real time. In itself, the revolution in information transmission engenders an instantaneous sense of history – in other words, a different relationship with time. It creates temporary, fleeting communities that are ready to stimulate exchange, creativity and trade. This new relationship between people and information engenders human associations that are elastic, mobile and therefore multilocular.

At the same time, for almost five years now, the world economy has been cooling down. After a period of growth linked to the enormous development of the digital economy and the accompanying productivity gains, growth is slowing. We are going through a demand crisis. There are many reasons for this economic weakening – an ageing population, the digitalisation of the service economy, the shifting of growth centres to other continents, a lack of vision in industrial policy, our inability to modernise our European economies through non-confrontational social dialogue, the maintenance of a partially ineffective Welfare State, an insufficiently entrepreneurial mindset, etc.

But perhaps things are even more serious. Maybe we are experiencing a structurally deflationary trend, i.e. economic stagnation. This cold current might be linked to the structural replacement of many human tasks by digital processes, stemming from this third industrial revolution. The quantity of work, at least in the intermediate (or rather, repetitive) occupations, may be undergoing profound contraction. Concretely, many service enterprises are going to simplify their internal procedures and their customer relations by means of IT applications, robotisation and connections that will replace the role played by workers. The internet has become a substitute for the geographical allocation of the factors of production, by enabling the delocalisation and desynchronisation of the production channels.

A number of studies, conducted transversally in different Europe countries, show that almost 40% of occupations may be sucked into this technological maelstrom. Of course, other occupations will emerge, but the nature of their intellectual or manual content is still vague. A technological world will require greater emphasis on the exact sciences, but it will also enable a fragmentation of human activities, within a decentralised logic of deconstructing the de facto monopolies (the “Uber-isation” of our economies). In this respect, it would be wrong to think that digitalisation will affect only manual tasks. More and more intellectual jobs (including education) are going to be destructured by digitalisation. Of course, it is conceivable that entry into the digital economy will induce such productivity gains that the quantity of work needed will be reduced. Nonetheless, there is a risk that this “industrial” revolution will pulverise social relationships. All the more so as the digital economy is, by its nature, spontaneous, decentralised and individual, whereas our modes of socio-economic organisation are plan-based, centralised and collective.

The protagonists of this revolution are known. They are the major telecommunications and IT firms. Apart from a quasi-monopolistic position underpinned by their financial resources and innovation capacities, the GAFA (Google, Amazon, Facebook and Apple) are companies characterised by a strong capitalist content and weak employment creation. These businesses will soak up the productivity gains that normally correspond to the growth rate of the economy.

Already, enterprises are dominating States, which are torn between their populations of citizen consumers and the firms whose services those citizen consumers use. So digitalisation threatens to destabilise social aggregates through the decay of the middle class and increased socio-economic inequality.

In particular, the European States are torn between the need to ensure social order in a context of unpayable public debts and geographically mobile foreign firms that are grabbing a large part of the productivity gains. If this (simplistic and pessimistic) impression is confirmed, then the State will no doubt take over the domestic management of the European economies, while a market sector will be dominated by a few international actors for whom State controls will be a dead letter. It is even conceivable that these international businesses would make or break the middle classes of countries targeted according to the firms’ commercial interests, while States would be reduced to negotiating tax deals in order to preserve enough local jobs and activities.

In sum, we have embarked upon an unprecedented industrial revolution, at the frontiers of artificial intelligence, of infallible processes that will transcend human fatigue and weakness, of processes that will replace repetitive tasks. This is a world stood on its head, where IT firms lord it over States whose only role is to ensure social order and avoid confrontation with promises that they will not be able to keep. We are on the verge of a new world in which innovation and inventiveness will prevail.

That world is far removed from the era of industry and, dare I say it, of nation states, those distant heirs of the 19th century industrial revolutions. It is a mouldable, versatile world whose whole basis, i.e. the dialogue between the State and the markets, is ill-defined. Europe must develop its model in two opposite but nonetheless reconcilable directions: labour flexibilisation and social solidarity.

This could all turn out as if Adam Smith were running digital globalisation while Karl Marx (or Hegel) was put in charge of social solidarity. That would, of course, be an “Orwellian” version of our societies and it is unlikely that the future will look like this sordid piece of science fiction. But sometimes we have to scare ourselves in order to escape later nightmares.