Articles

At last something serious from Davos

Every year at about this time, the rich and the powerful gather together in the Swiss resort town of Davos to congratulate each other on another year in power and in control. Most years nothing much of any significance happens because attendance is an ego trip for the attendees, which they immensely enjoy, being very impressed with themselves and each other.

This year, however, is different. Klaus Schwab, initiator and ringmaster of the Davos talkathon, distributed to the participants in advance a lengthy tome about the “Fourth Industrial Revolution,” which is taking place now, and which differs from the first three, according to Schwab, in “…velocity, scope and systems impact,” which, if true, makes it significant indeed, since the first three industrial revolutions were no pikers in these areas

In 2014 the French economist Thomas Pickety, published “Capital in the Twenty-First Century,” meticulously and in great detail documenting the unprecedented concentration of wealth in recent decades in an ever-decreasing percentage of the population in the developed countries. Last year the Silicon Valley entrepreneur Jerry Kaplan published “Humans Need Not Apply”, which outlined why and how the phenomenon Pickety detailed had taken place, namely the accelerated pace of technological innovation, in such areas as advanced robotization, three-dimensional printing, miniaturization, materials engineering synthetic biology, artificial intelligence and others.

The results are already at hand and will accelerate and strengthen in the future. The ever-increasing role of material and human capital in the productive process and the ever-decreasing role of labor, resulting in structural unemployment and under-employment; the increasing social and political polarization of society into a tiny group which owns the bulk of the wealth (defined as income-producing assets), a small class of knowledge workers and managers, and the great majority consisting of low-paid workers and those dependent on governmental income transfers to survive.

As Kaplan, Pickety and Schwab all say, if nothing is done, the results of all this will be either increasing authoritarianism, with or without a veneer of democracy, or revolution. As Schwab writes: “…legislators and regulators are being challenged to an unprecedented degree and for the most part are proving unable to cope.”

So what is to be done? Pickety recommends greater taxation of wealth, but that is unlikely to have any major effects, since the owners of wealth are able not only to buy the best lawyers and accountants, but also the politicians. Schwab has no solutions to offer, limiting himself to forecasting paradise or apocalypse: “There has never been a time of greater promise, or one of greater potential peril.”

Kaplan, however, suggests that the situation be addressed at its source, not its symptoms, namely that what must be done is to develop and apply systems to promote the wider distribution of capital, not of income. There are many such programs which have been and are being applied in various parts of the world: production, distribution and marketing cooperatives, employee stock ownership plans and community investment trusts, among others. In the US, the Center for Economic and Social Justice (CESJ) has proposed a “capital homesteading act” in imitation of the homesteading act which widely distributed the lands west of the Mississippi River, signed by President Lincoln in 1863.

Israel, where human capital abounds, is by no means immune to the effects of the fourth industrial revolution; cooperatives and employee stock ownership plans are common but could be encouraged further. Community investment trusts, established on a local regional, ethnic or religious basis, should be implemented on a wide scale, thereby providing ever-larger segments of the population with access to the ownership of wealth.

Originally published by Globes.