The 2020-2021 pandemic struck just before the global economy could enter an era of robust growth and more equally distributed incomes, according to the attached article. While bringing suffering, the pandemic may accelerate strong growth if it pushes leaders and workers to transform behaviors. Small annual growth gains compound over decades into massive impacts on living standards. Recent leaders have framed this potential shift as the Fourth Industrial Revolution.
After slow growth since 1975, productivity slowed further despite new technologies like AI and cloud computing. A new general purpose technology emerged, but its benefits are unrealized so far. The article explores the economic, social and political changes required to shift from disappointing growth and inequality to strong growth and equality. This demands altering resistant legacy behaviors. Pressures like the pandemic may drive these changes by pushing investment in new capital and technology, spreading knowledge, and shifting income shares.
Industrial revolutions represent breakthroughs into new eras of technology, organization and capital. They introduce new energy sources, innovations, and competition between nations. Economists identify four industrial revolutions since the steam engine based on innovations like railroads, steel, electricity, automobiles, information technology, and more. They have installation periods when technology is experimental and deployment periods when it diffuses widely. Three phenomena characterize the periods: capital age, knowledge diffusion, and labor share.
Economic shocks like financial crises, pandemics, and wars have impacted past industrial revolutions. Disruption forces migration between eras. Three forces drive revolutions: capital investment, new technology, and creative destruction. In installation periods, creative destruction is narrow as leaders innovate. In deployment periods, it spreads widely as technology diffuses, increasing growth and equality. Pressures from slow growth must compel behavior change.
While traditional policies targeted growth, they may now be insufficient without addressing risks to democracy blocking progress. Small and medium enterprises need confidence to adopt new tech. AI advances require managing risks and fairness issues. Workers and businesses should increase engagement and satisfaction. New social contracts should form among workers, business, and government. With such changes, robust growth and equality may come in the Fourth Industrial Revolution.
Harberger (1998) and Perez (2002) proposed installation and deployment stages. Installation brings experimentation as technology finds early uses without transformed practices. Deployment enables widespread diffusion as practices transform. Financial crises separate the periods. Expectations and state dependence drive investment. Three phenomena indicate periods: knowledge diffusion increases, labor share declines then recovers, capital ages then renews.
With potential ahead but also risks, policy alone looks insufficient. Small and medium enterprises require confidence for transformation. AI progress needs managing risks and fairness. Workers need engagement via careers and compensation. Workers, business, and government require new mutually beneficial social contracts. Thus, robust growth and equality could emerge.
