The digital economy needs defending from the hard left and the far right

Stuart Lauchlan Profile picture for user slauchlan June 9, 2016
Summary:
Champions of the digital economy need to resist reactionaries on the political right and left, says UK government minister Matt Hancock.

Matt Hancock
Matt Hancock, Minister for the Cabinet Office

Automate work, humanize jobs. That needs to be the mantra of the digital economy, according to Matt Hancock, who as Minister for the Cabinet Office in the UK government, has responsibility in part for fostering the digital revolution.

Hancock set out his stall at the 2016 Keith Joseph Memorial Lecture. For the benefit of non-UK readers, Sir Keith Joseph was a British politician, whose long career saw him serve as a minister under four Conservative Party Prime Ministers - Harold McMillan and Alec Douglas-Home in the 1960s, Edward Heath in the 1970s and Margaret Thatcher in the 1980s.

An eloquent and life-long proponent of the free market economy, he was one of the architects of the political philosophy that came to be known as Thatcherism in the 1980s. He also set up the Centre for Policy Studies (CPS) think-tank in order to "convert the Tory party" to economic liberalism.  

The CPS commemorates his life with an annual lecture, which this year took as its theme the need to balance technological disruption in society. Hancock set out to pose two questions - is disruption a good thing and what, if any, is the role of government in a disruptive age?  He began by making the point that the underlying story of disruption doesn’t change:

An entrepreneur uses new technology to disrupt an established business model, offering consumers a better, faster, cheaper, or more convenient service. The disruptor rakes in billions, consumers benefit, but the disrupted lose their livelihoods. And those old jobs are often gone forever.

This is nothing new, he pointed out. In 1933, John Maynard Keynes was talking about the “new disease” of “technological unemployment, while in the 1960s, British Prime Minister Harold Wilson was issuing dire warnings that technology innovation would lead to  “a high rate of employment for a few, and to mass redundancies for the many”.

Plus ca change etc. In a age when Uber cars are set on fire in European capital cities, the Luddites live on. Hancock addressed the societal impact of disruption:

Today’s received wisdom seems to be that, despite all this technology, we live in an age of stagnation, that our children will not be as prosperous as our parents, and that technology is somehow making everything worse. This belief is popular in academic circles, it’s espoused by Nobel-Prize winning economists and by politicians of the Left and the Right.

He added:

In recent times, two political tendencies have grown strong by feeding on the anger and anxiety of the disrupted. There is the populist right - Trump, Le Pen, Farage - angry nativists who want to wall off the world.

Then there is the populist left - Corbyn, McDonnell,  Sanders - unreconstructed Socialists who’ve learnt nothing from the mistakes of history.

Both sides reject open markets, both are obsessed with recreating a better yesterday. Their political program amounts to a demand that things go back to the way they were: to the spirit of ’45, or Les Trentes Glorieuses, or the glory days of the American past. Both seek false certainties.

All about a slimmer phone

What Hancock espoused was not being afraid of disruption and impact of digital technologies, but to keep an open mind and adapt. Some of Hancock’s examples to make his point bordered on the digital cliche. While he (thankfully) didn’t use the term ‘uberization’, he did trot out the one about Blockbuster video rental not seeing the danger coming from Netflix.

Others were more amusing, such as the case of William Preece, chief engineer at the British Post Office in the 1890s, who couldn’t see  the point of the telephone as, “We have plenty of messenger boys”. Or the UK government committee set up to investigate Edison’s light bulb which concluded it was “unworthy of the attention of practical and scientific men”.

US economist Professor Robert James Gordon has argued that the pace of innovation has slowed and this is now a world of diminishing technological returns to production. He posits that in contrast to the transformational innovation that occurred from 1870 through to the post World War II boom, such as the internal combustion engine and electric light, innovation today is incremental. Instead of a leap from telegraph to telephone, today it’s all about making a slimmer phone.

Hancock took exception to this thesis, which he argued is aligned to the non-digital economy:

Digital is breaking down the binary distinction between consumption and production that much of economics has been built on since the days of Adam Smith.

While much progress in the last two centuries was based on separating consumption and production in pursuit of efficiency, much of what gets produced in digital form today is done so at zero marginal cost to the producer and at zero cost to the consumer. And in the act of consuming a digital service we are also producing, because much of the digital economy runs on the user data we provide. In an information age, these zero marginal costs fundamentally change the economics.

Keith_josephsmall
Sir Keith Joseph

This really matters, he added, because traditional measurements of Gross Domestic Product (GDP) don’t pick up many of the benefits of digital. He cited an interesting example of the UK government’s release of travel data from Transport for London as open data for use by third parties. Using that data, CityMapper built an app that tells commuters whether it’s quicker to walk or take the Tube home - and throws in how many calories you’ll burn off either way:

Surely that represents an improvement in peoples’ wellbeing and quality of life? Not according to GDP as measured…the only way that decision troubles the scorers is that the cost of your Tube ticket no longer counts as economic activity. GDP is lower. Productivity, as measured, is lower. We are, according to the stats, worse off.

The failure of traditional GDP metrics to measure digital economic impact is off the scale, according to Hancock:

It’s not just CityMapper. The watch that reminds you to take your medicine. Ordering your weekly shop online. Sharing pictures with your family, even though you’re a continent away. These all have no impact on measured GDP, but they enrich our lives immensely.

What about the money saved from an online home-swap? The app that saves energy? How about the time and cost saved when you make a money transfer on your phone for free? These changes, formally, reduce existing measures of GDP and therefore productivity. Yet these are the innovations of our time.

Job-stealing robots

Hancock also referenced the inevitable ‘rise of the robots coming to steal our jobs’ argument, noting that academics at Oxford University have warned that 35% of UK jobs are at risk from automation. Hancock countered with:

While every period of unprecedented innovation has seen its pessimists predicting mass unemployment, technological advancement has never previously failed to deliver new opportunities. The same is true today.

In the future machines will do lots of the things that are currently done by humans. But get this right and technology will free us up to do the jobs that only we humans can.

Jobs that involve problem-solving, creativity and social intelligence, for instance. Coming up with new business ideas, writing thrilling books, making scientific breakthroughs. Caring for one another, teaching one another, motivating one another.

We should automate work and humanise jobs. Let’s give the mundane to the machines and purpose back to people.

Beyond that, there’s a role for government in encouraging disruption in what Hancock called a “modern, dynamic, free economy”. He noted that Sir Keith Joseph saw government as “a maker of rules for men who want to fashion their lives for themselves”, concluding:

Today we must remake those rules, drawing inspiration from and learning from the past, recognising that technology is not an enemy of humanity but a collective expression of humanity. We have a duty to win this battle against the reactionaries of left and right. We need to be on the side of the disrupted, as well as the disruptors.

My take

It was ironic timing that Hancock should be out espousing digital innovation so soon after he was caught up in the outage of the online voter registration system for the EU Referendum. As he noted:

Technology sometimes has its frustrations, as I’ve discovered myself in the last 24 hours.

Yes, Minister.

Overall, Hancock’s speech would have won the support of Sir Keith Joseph. Leaving aside the claims that it’s down to the “compassionate Conservative” to be the natural defender and supporter of innovation - I’ll leave your own political belief systems to come to their own conclusions there - the point about the equally reactionary responses of the Hard Left and the Far Right was well made.

This was the most impressive digital speech I’ve heard from Hancock to date. From a UK citizen’s perspective, now let’s see the fine words about encouraging innovation backed up with action.

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