Technology, Inequality, and Democracy

- Overview

Advances in digital technology and artificial intelligence hold great promise for boosting economic prosperity. But as these technologies transform nearly every aspect of business and work, they are reshaping growth and distribution dynamics, exacerbating economic inequality. In fact, inequality has been rising in many countries, especially in the United States. 

Rising inequality and associated disparities and anxieties have been fueling social discontent and are key drivers of the growing popular dissatisfaction and political polarization that is so evident today.

In what ways are today's technological changes increasing inequality within economies? What impact do new technologies have on global inequality and economic integration between economies? What risks arise from rising inequality, including to democratic governance? How can the promise of the digital age be harnessed to achieve more inclusive economic prosperity and strengthen democratic societies? What are the new challenges for public policy?

- Technology and Inequality

The relationship between technology and inequality is multifaceted. Technology increases productivity, accelerates economic growth, enables knowledge and information sharing, and increases access to basic services. However, this is also a cause of inequality.

Technology increases inequality because it can: 

• Automating routine tasks: This increases the demand for highly skilled workers, while workers with less education and expertise fall behind.
• Income shifts from labor income to capital income: the distribution of capital and labor income becomes more unequal.
• Slower growth: The economic pie is distributed more unequally and growth is slower, exacerbating social discontent.

 However, technology can also reduce inequality by:

• Providing access to information: Individuals and businesses gain access to more information at a lower cost.
• Empowering disadvantaged groups: Technology can provide electricity, education, health services, economic development and environmental risk information. 

Technology is a key driver of overall economic growth by increasing productivity, but its contribution to economic growth varies widely across countries. Technology can also be a driver of income and wealth inequality due to its skill-biased nature and the high rents available to innovators.

[More to come ...]