The world economy is about to embark on its fourth industrial revolution. Automation, robotics and digitisation are set to change our future. This is a dramatic change. The whole point about an industrial revolution is that it is revolutionary. This is not just a shift in economic growth trends or a change in productivity.
An industrial revolution turns society upside down alongside the economy. Where we work, what we do, how we consume, the way in which we live will all alter. The pandemic has very probably accelerated some of these changes, but the revolution was already in motion.
It is vital that we get this process right. It is not too much of an exaggeration to suggest that humanity’s future rests on the success of these changes. Done properly, the fourth industrial revolution will result in not just economic efficiency but, for perhaps the first time since the initial industrial revolution of the eighteenth century, environmental efficiency as well. After three centuries of living on environmental credit and using resources unsustainably, our future requires that we do more with less. The fourth industrial revolution has the potential to achieve exactly that.
It is tempting to focus on the technology of any industrial revolution as being the most important feature of change. Technology has all the glamour and excitement that is associated with novelty. In many cases, it is quite literally the shiny new toy that captivates us. But in reality, technology does not drive economic transformation. It is how we use the technology that brings about the change. And how we use technology depends on the people who use it.
This means that inclusion and diversity in the workforce (and in society at large) are becoming ever more important. We need inclusion to ensure that the right person is employed in the right job at the right time. Anything less and technology will not be used to its full capacity, casting aside the potential efficiencies. If prejudice is allowed to taint the hiring process, a company will end up hiring second best, which will inevitably produce second-best outcomes.
We will also need diversity to make the most of the changes that are coming. It is worth stressing once again that the economic upheaval is revolutionary in its nature. A monoculture of thinking will miss potential opportunities – because those opportunities will just not occur to the decision-makers around the table.
Worse still, a monoculture of thinking will miss potential risks. In a climate of structural change, economic risks will multiply for established businesses. Thus the importance of diverse thinking increases further. It is worth stressing that genuine diversity of thinking is required. Superficial diversity may tick the boxes on a survey form, but it can still mask a monoculture of thinking. The value of diversity comes from a genuine culture of diversity, not from targets being hit.
The problem of change
The economic benefits of diversity and inclusion at a time of structural upheaval seem glaringly obvious. It is hard to see how a rational argument could be made against them. But herein lies the problem. Prejudice is, economically speaking, irrational discrimination. If prejudice is allowed to grow, the rational arguments for diversity and inclusion can be defeated. The economic gains will then be undermined. And unfortunately, change is likely to fuel prejudice at exactly the moment when tackling prejudice is so important.
The changes of the fourth industrial revolution will not destroy overall employment. The robots will not, in fact, take over in some kind of Doctor Who-style dystopia. Some individual jobs will cease to exist, but many jobs are likely to be created as destroyed by the industrial revolution. However, economists estimate that up to half of existing jobs will change due to structural change over the next twenty years. For some jobs, that will be very positive. But other jobs will experience falling social status and lower incomes. The drivers of this decline are inevitably complex, and that is a big part of the problem.
Individual workers in some sectors will face falling status or losing their jobs and not understand why this is happening. From a personal perspective, the worker will have done their job as they have always done and performed to the best of their ability. To lose their job or their relative status in spite of that will leave them looking for an explanation. This is where scapegoat economics comes in. If your loss is not because of something you have done, it is easy to seek to attach blame to another group in society: “It is not my fault I lost my job; those immigrants took it away from me” is one possible response. That scapegoating reassures the worker that they have done nothing wrong. It is also a seductively simple explanation. The fact that it is completely inaccurate is irrelevant – the truth is complex, fake news is designed to be simple.
Politicians can exploit a climate of scapegoating with prejudiced politics. Promising to restrict the activities of a group in society can be a successful election strategy. Promising to restore the (mythical) glories of the past taps into nostalgia – a potent political force. The process relies on casting a group in society as being “less than” others and justifying limits on their rights as workers.
Fighting against prejudice
The fourth industrial revolution has the potential to sow the seeds of its own destruction. To make sure that the changes bring about the greatest economic benefit, prejudice must be contained. Diversity and inclusion underpin economic success in the years ahead. However, the process of change is likely to fuel prejudice, as those who suffer in the turmoil of structural adjustment are drawn to the simple explanations offered by scapegoat economics.
This situation is likely to put a greater burden on companies in the fight against prejudice. It is in a company’s economic interests to minimise prejudice amongst its own workers – but corporates also have a reason to take a stand against prejudice in society at large.
Companies want to hire the best staff they can, and the demoralising effects of prejudice in society will prevent that from happening. If prejudice deters someone from studying at university, for instance, their potential skills may be lost to firms and the wider economy.
Success for a company or a country depends on holding back the threat of prejudice, as we wrestle with managing complex changes in as fair a way as possible. Prejudice is irrational, and it will take careful management to defeat it. But ultimately, this is not a topic companies can be neutral over. Taking a stance against prejudice and for diversity and inclusion is an economic as well as a moral position.
Paul Donovan is Chief Economist of UBS Global Wealth Management, who has been shortlisted for the UK LGBT Awards “Inspirational Leader” category. His book “Profit and Prejudice – the Luddites of the Fourth Industrial Revolution”, written in a personal capacity, is published by Routledge.