Like the revolutions that preceded it, the Fourth Industrial Revolution (4IR) has the potential to raise global income levels and improve the quality of life for populations around the globe.
To date, those who have gained the most from it have been consumers able to afford and access the digital world; technology has made possible new products and services that increase the efficiency and pleasure of our personal lives.
Transportation and communication costs will drop, logistics and global supply chains will become more effective, and the cost of trade will diminish, all of which will open new markets and drive economic growth. At the same time, as automation substitutes for labour across the entire world economy, the net displacement of workers by machines might exacerbate the gap between returns to capital and returns to labour, in aggregate, resulting in a net increase in safe and rewarding jobs.
We cannot foresee at this point which scenario is likely to emerge, and history suggests that the outcome is likely to be some combination of the two.
However, I am convinced of one thing - that in the future, talent, more than capital, will represent the critical factor of production. This will give rise to a job market increasingly segregated into “low-skill/low-pay” and “high-skill/high-pay” segments, which in turn will lead to an increase in social tensions.
In addition to being a key economic concern, inequality represents the greatest societal issue associated with the 4IR. The largest beneficiaries of innovation tend to be the providers of intellectual and physical capital - the innovators, shareholders, and investors - which explains the rising gap in wealth between those dependent on capital versus labour.
Given the 4IR’s rapid pace of change and broad impacts, legislators and regulators are being challenged to an unprecedented degree and for the most part are proving unable to cope. If they prove capable of embracing a world of disruptive change, subjecting their structures to the levels of transparency and efficiency that will enable them to maintain their competitive edge, they will endure. The ability of government systems and public authorities to adapt will determine their survival.
Written by Klaus Schwab, the executive chairman of the World Economic Forum
