Digital society’s many disruptions

Live Mint, February 22, 2017

By Pradeep S. Mehta and Marc Saxer

The digital revolution will go well beyond the disruption of industries; the entire social contract will have to be renegotiated

Digital revolution is the new buzzword in India. The government had already announced a campaign on Digital India with the mission of digitally empowering every Indian and ensuring that all information is digitally available. Following the demonetisation measure, consumers were asked to use the digital space to make payments for their purchases in view of the cash shortage. That was not too easy, though the usage of digital platforms for cash transactions has jumped hugely.
What has also been thrown up in this campaign on digitalization is experts’ difficulty in getting a handle on cybersecurity even as entrepreneurs make plans to take advantage of the vast opportunities that the Internet of Things offers. Only a few, however, seem to address the elephant in the room. How can India create one million jobs per month if its production systems, for both goods an d services, are run on artificial intelligence, which includes remotely controlled robotics?

East Asia manufactured its spectacular rise by putting its rural millions into urban and semi-urban factories, and exporting cheap consumer products to the financially squeezed consumers in the old industrialized countries. After the revolt of the losers of globalization, access to these markets is now at risk. At the same time, while investors are standing in line to set up shop in India, the factories they build create jobs for only a few hundred people who work amid intelligent machines. Already today, in the midst of its historical boom, India is losing 550 jobs per day. With digital automation set to accelerate, the spectre of jobless growth looms large. The World Bank gloomily predicts that a whopping 69% of jobs in India could potentially be automated. What it would mean for social and political stability if millions of aspirational job seekers cannot find livelihoods can be a profoundly disturbing thought.

At the same time, robots are levelling manufacturing costs in the old industrialized countries. Why would an investor go through the hassles of weak governance, long shipping lines, and the lack of a skilled workforce if labour cost barely makes any difference? In the fast-moving consumer industries, those companies which can react quickly and flexibly to the rapidly shifting tastes of consumers will carry the day. In investors’ calculations, being closer to the home market increasingly outweighs cheap labour cost. Already today, in some industries the trend to re-shore production facilities back to developed markets is picking up. On the global scale, stagnating trade figures and disintegrating supply chains seem to indicate that globalization is reversing. With the global window for export- and manufacturing-led growth closing, the quest for development has turned into a gigantic race against time.

What can India do to create livelihoods for its growing population? Will the green economy create green jobs? In India, the build-up of renewable energy promises to create 1.1 million jobs. Will the blue economy create jobs in coastal areas? The Bay of Bengal initiative hopes to jumpstart blue-water farming, boost pharmaceutical and cosmetic industries, and build up coastal infrastructure. Can India leapfrog into a service-led economy?

Savvy Indians, used to making their way in an informal and hyperflexible economy, seem to be well positioned to profit from the global gig economy. But will these crowd-sourcing platforms fuel a global race to the bottom, where services are only provided by the cheapest bidder? Much hope has been pinned on India’s potentially big domestic market. But are India’s consumers in a position to afford all those products? If the country wants to avoid backsliding, new ways to generate income have to be devised. Rewarding care work is one possibility, making better use of services like tourism, food and health another. India needs a grand debate over its development model.
Yet, the impact of the digital revolution will go well beyond the disruption of industries. A digital society will need to renegotiate the entire social contract. To illustrate what is at stake, it is useful to follow the heated debates over universal basic income. Cutting across the ideological lines of the industrial age, universal basic income schemes are promoted by a bizarre alliance of Silicon Valley techies who seek to boost consumption demand, Davos billionaires who fear the coming of the pitchforks, and some on the left who seek to smoothen the social impact of digital automation.

Opponents fear the replacement of solidarity-based welfare with naked redistribution will trade the common effort to enlarge the cake with cut-throat competition over the remaining cake slices. The toxic conflicts over immigration show how quickly the competition between native and migrant recipients can turn xenophobic or even violent.
What this quick glance into the future shows is that the digital revolution will not only disrupt economies, it will transform societies. This phenomenon will be aided by myriad social networking platforms which disseminate information speedily and invite citizen action, some of which may be irrational and harmful.
We therefore need to broaden our understanding of the impact of the digital revolution, and start a grand debate over how to shape digital society.

Pradeep S. Mehta and Marc Saxer are, respectively, secretary general, CUTS International, Jaipur, and resident representative of Friedrich Ebert Stiftung, New Delhi.

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