Whither the evolution of the contemporary social fabric? New technologies and old socio‐economic trends

• DOI: http://doi.org/10.1111/ilr.12145
• Date: 01 December 2019
• Author: Maria Enrica VIRGILLITO,Giovanni DOSI
• Published date: 01 December 2019

International Labour Review, Vol. 158 (2019), No. 4

Copyright © The authors 2019

Journal compilation © International Labour Organization 2019

Whither the evolution of

the contemporary social fabric?

New technologies and

old socio-economic trends

Giovanni DOSI* and Maria Enrica VIRGILLITO**

Abstract. This article considers whether societies are witnessing another industrial

revolution in the light of an assessment of the impact of technological change on

today’s socio-economic fabric, especially with respect to employment, income dis-

tribution, working conditions and labour relations. The authors argue that the pro-

cesses of innovation and the spread of what they term “intelligent automation” are

likely to exacerbate incumbent patterns of uneven income distribution and power,

some of which existed well before the arrival of the technologies concerned, while

others have emerged over the past 30 to 40 years. They venture to consider policy

implications on the basis of such developments.

The rst man who, having enclosed a piece of ground, bethought himself of

saying “This is mine”, and found people simple enough to believe him, was the real

founder of civil society. J.-J. Rousseau, 1755, p. 109

The reections in this article build on two interrelated questions that have

been of great concern to us and to many other observers of contemporary

socio-economic transformations,1 namely, whether we are witnessing another

“industrial revolution”, and the impact of technological change on the current

socio-economic fabric, especially with respect to employment, income distribu-

tion, working conditions and labour relations. We could take the easy reduc-

tionist road and fall back on the economist’s standard repertoire of production

* Institute of Economics, Sant’Anna School for Advanced Studies, email: g.dosi@santan

napisa.it. ** Department of Economics, Catholic University of the Sacred Heart, Milan, and

Institute of Economics, Sant’Anna School for Advanced Studies, email: mariaenrica.virgillito@

unicatt.it. The authors wish to thank the editor of this special issue of the International Labour

Review and three anonymous referees who helped them improve their initial draft. They grate-

fully acknowledge the support of the European Union Horizon 2020 Research and Innovation

programme under grant agreement No. 822781 – GROWINPRO.

Responsibility for opinions expressed in signed articles rests solely with their authors,

and publication does not constitute an endorsement by the ILO.

1 For further discussion see, inter alia, Franzini and Pianta (2015) and Milanovic (2016).

International Labour Review594

function, proxies for changing skills, and labour supply and demand, to come up

with a ready answer: in the long run, the system will self-adjust to a new equilib-

rium, with all unemployment being merely frictional or voluntary and pay ris-

ing for those who perform the tasks required by the new technologies and

falling for workers whose tasks can be replaced by machines. This last group is

in fact partly to blame for not satisfying market demands and should retrain.

In this article, however, we take a different approach. We go back to the

basics, addressing the coupled dynamics of technological change and socio-

economic development at intertwining levels of analysis. We believe that, be-

fore assessing the impact of new technologies, we have to examine pre-existing

trends in income distribution, labour relations and industrial structures. Then,

we have to assess the nature and impact of technologies, old and new, in their

own right before plugging them into a relatively far-fetched, history-invariant

economic model. Those new and old technologies are nested in complex polit-

ical economies, at all levels of analysis, ranging from the division of labour and

power at enterprise level to legislative, scal and demand-management policies.

Lastly, we have to gauge the impact – no matter how strong – of technological

and institutional changes in a much broader light than that of per capita GDP

growth rates alone. For example, welfare and working conditions, equality of

opportunity, social mobility and quality of life are just as, if not more, import-

ant. In our view, we are currently facing a historical paradigm shift in which

the long-term patterns of the future will be shaped by the socio-economic

structure, power relations and policies of the present.

Arguably not since the First Industrial Revolution has competition be-

tween humans and machines and its impact on working conditions painted such

a bleak picture, especially when coupled with the explosion of rent-seeking

behaviour and the risk of social exclusion characteristic of today’s globalized

and nancialized economy. What can we learn from the past? Historians are

quick to point out that these concerns, far from being unique to this age, have

characterized all industrial revolutions, all of which dramatically changed the

relationship between machines and human labour. On the one hand, new tech-

nologies threaten established ways of doing things, working conditions and em-

ployment patterns; on the other, they provide new opportunities for economic

growth and social change – so much so that, in the long run, technology has

proved a formidable engine of growth and led to substantial improvements in

living conditions. Emergent technologies can foster new business opportun-

ities and enable effective solutions in areas of application that existing tech-

nologies are unable to cope with. Sectors such as medical services and health

care, for example, where costs are increasing rapidly and disproportionately,

can derive enormous benet from the adoption of new technologies, provided

those in need have adequate access to them.

Similarly, at the macroeconomic and societal levels, to paraphrase Chris

Freeman, new technologies may herald an “economics of hope”, with work for

all and equitable social inclusion, or, conversely, mass unemployment, mass in-

equality and social exclusion, leading to a “re-feudalization” of Western socie-

ties (Freeman, 1992; Freeman and Soete, 1994). In both scenarios, it is not the

New technologies and old socio-economic trends 595

technologies as such that are good or bad; it is the social and economic factors

that are crucial as new dominant paradigms emerge and start to be adopted.

Today, we have a rare historical window of opportunity collectively to

“choose” where we are heading in terms of constellation of paradigms.2 There

are two extreme archetypes. The rst we will call the Blade Runner scenario

– after Ridley Scott’s 1982 science ction lm: it consists of a sort of techno-

feudalism in which a highly sophisticated but tiny ruling class exists alongside

an enormous lumpenproletariat of very intelligent but largely obedient people

enforcing power and income distribution in favour of the rich and power-

ful. Indeed, one drawback of the aforementioned lm is that it does not por-

tray an even more extreme scenario: a class of ignorant and greedy rentiers

sharing power and wealth with the techno-feudal class, and a lumpenproletar-

iat basically made up of almost subhuman slaves without citizenship or rights.

At the opposite extreme, the alternatives range from Keynesian (1931)

progressive and liberal proposals that remain within the scope of capitalist so-

ciety, to the Communist Manifesto, which advocates the reorganization of en-

tire societies based on the Marxist creed “from each according to his ability,

to each according to his needs”. Under this archetype, new technologies will

free people from boring, degrading and alienating work and enable them to

spend most of their time at leisure, playing, satisfying their curiosity, learning

and enjoying life. We are now in a position to consider this a workable utopia,

at least in developed economies.3

Be that as it may, the processes of innovation and spread of what can be

termed “intelligent automation” are likely to change, and most likely reinforce,

the uneven patterns of income and power distribution that existed well before

the arrival of the technologies discussed here; indeed, some of them have been

intrinsic features of capitalism since its inception, while others have emerged in

the last 30 to 40 years. Technologically, elements of paradigmatic discontinu-

ity exist alongside more incremental change. What is new about the current

technological transformations is the “intelligent” use of big data to exercise

control over the social sphere without, apparently, a comparable paradigm

shift in the use of “Industry 4.0” technology or devices vis-à-vis the previous

ICT-based automation of production (Moro et al., 2019).

The remainder of this article is organized into six sections. In the rst, we

take a vast ensemble of secondary evidence to paint a picture of certain trends

that certainly preceded any potential “Fourth Industrial Revolution” but will

be amplied by it, in line with our concept of “rentication of capitalism”. In

the second section, we discuss the features of a possible new techno-economic

paradigm, distinguishing between Industry 4.0 and the more pervasive impact

2 Techno-economic paradigms consist of a constellation of micro-technological paradigms

as dened by Dosi (1982) (e.g. semiconductors, electronic computing, etc.) that have a pervasive

impact on the entire economy as discussed by Freeman and Perez (1988).

3 For developing economies, this is still a far more distant goal: much technological and

organizational learning, together with demographic control, lies ahead. Qualitatively, however,

the choice between the two archetypes applies at all levels of development.