All Financial Wisdom
Innovation and Equality Can Coexist
Wage inequality, social inequality, the gap between the rich and poor…the debate has come down to those who think that inequality is an evil to be eradicated, a toll to pay to promote meritocracy, or a just reward to those who contribute most to society.
Whether you like it or not, equality is a parameter to be measured and taken into account in the face of the sustainability of our socioeconomies in the long term. But although equality must remain on the radar of our leaders, in reality there is another very important factor of progress that, coincidentally, results in more equality for all: innovation.
A passionate and ideological debate
Part of this debate on equality has been rekindled in some economic circles, for example, in this recent Bloomberg article. We are also going to analyze this controversial issue but will strive to be more objective, no matter how difficult this may be.
The aforementioned Bloomberg article addresses the issue brings up some interesting points. The first one fits with some of the most traditional economic myths of the American economic landscape. The author explains how, for example, in the health sector, innovation has reached such a fast pace of progress, that inequality is inevitable, and that future health coverage will be more focused on “what” to cover, as opposed to the traditional “who” to cover approach.
Indeed, there are increasingly more specialized treatments that are bringing us closer to the cure of many diseases even before they are suffered (via genetic editing). But these treatments have a disadvantage: they are often expensive, very expensive.
Another example is related to the financial industry. Innovation in this sector of finance also outpaces media coverage (for the most part). For example that, although the deposits or current accounts of our citizens federally insured against bankruptcy, other innovative assets, like cryptocurrencies not only do not have any type of coverage, but they don’t even have regulation!
Innovation is inherent in Progress
Although I admit that there is an evident inequality in our systems, I almost hate admitting that innovation, specifically, is inherently unequal. Inequality inevitable, and ultimately I don’t advocate intervening in it in if one believes in a truly capitalistic and free market society. In fact, innovation has two sides, and the most visible is that great innovations are often only available to a privileged few who can afford them.
But the other side of innovation is much more egalitarian, and that is that it brings a progressive cost reduction, which allows it to scale to the mass economy. Thus, innovation ends up meaning socio-economic progress for the whole of a society that ends up having access, after a few years, to new and disruptive technologies.
There will always be rich and poor (and people who can afford the latest technology and people who can’t), but it is also true that innovation also makes it possible so that today’s poor have access to the technology of yesterday’s rich. In this way, in the long term, innovation ends up bringing socio-economic and social progress, including greater equality.
I’m obviously a fan of technology and innovation, but innovation shouldn’t be the only thing to take into account when promoting our socioeconomies. Innovation is a great remedy, but it is not the remedy for all evil.
The innovation of our days
As popular maxim in finance is that “past performance is not indicative of future results.” Well “past progress does not ensure future progress” either. I’m not a staunch defender of rigid and perennial socioeconomic prescriptions. Quite the opposite. All socio-economic policies must be flexible and adapt to new situations in such an unpredictable future. There are recipes that worked in the past that may require adaptations so they can work again in the future. Again, the ability to adapt to an ever changing world is the key.
And innovation has also changed significantly in recent times, so we can not assume that all innovation is good per-sé, or that it is good regardless of how we model it in our system.
The innovation of today is characterized by fast paced advancements. Startups become full fledged companies in record time, and then a few short years later, become giants of their respective industries. At the socioeconomic level, the pace is just as frenetic, and we see how the penetration of new technologies advances at a rapid pace in all levels of society.
But there is another main feature of today’s innovation, and it is how deeply disruptive we are of the progress we are making. From that disruptive Internet of the nineties, to the broadband of the 2000s, to the social networks of this decade, etc… With each advance, we see technologies that are even more disruptive than the previous ones. Watch out, we will soon be witnessing the redefinition of hardware and genetics of the human being, creating a new type of bionic being with superhuman capabilities.
The (potentially) dark side of today’s innovation
It is from the combination of those two main factors of today’s innovation, speed and disruption, that the primary risk for equality emerges. Again, a certain social inequality is necessary to encourage meritocracy, the reward for effort, and to give the individual the incentive to strive to progress, dragging behind him/her that progress to society as a whole. The danger that the digital divide may become an insurmountable gap for those who are most disadvantaged.
In fact, as we have already written about, inequality has been only been growing, exacerbating our social differences and the gap between rich and poor.
That is why legislation must adapt to the new scenarios on the horizon. We must monitor inequality, and based on its evolution, establish a minimum level of innovation for all citizens that ensures equal opportunities. It is one of the main keys to success for any socio-economy – a thriving middle class.
Times are changing, and this new equality of the 21st century takes on many shapes, such as free access to information, net neutrality, or the regulation of the Data Economy. Today, we are pointing out that new definitions of equality should also include not allowing the differences in technological-social innovations to be so far out of reach of the rest of mainstream society that it no longer becomes possible within a reasonable amount of time for those less fortunate to have access to the benefits that have accrued from said innovation.
Equality of digital opportunities must be on the same level as the freedom of opinion, the freedom of thought, freedom of speech, or any other freedoms that we hold so dearly throughout our free society. That is true innovation. That is true progress.