Luohan Academy

Boosting Shared Prosperity: Technology and Equality in the Digital Era

Event materials

  • Symposium Summary

Digital technologies have been successful in promoting inclusive accessibility in many countries. However, inequality is still prevalent in many regions globally. In advanced economies, wealth inequality is at a high level over the past century. In emerging economies, while a sustained period of strong economic growth has helped lift hundreds of millions of people out of absolute poverty, the benefits of growth have not been evenly distributed enough and high levels of socioeconomic inequality remains.

Reducing inequality has become a priority for academia, industry leaders and policy makers across the world. Luohan Academy recognizes the urgency of this issue and believes digitalization, properly used, can play an essential role in promoting more equitable development. The digital economy must be broadened to disseminate new technologies and productive opportunities for SMEs and wider segments of the labor force. Policies need to be designed to better facilitate digital innovation to drive more inclusive socioeconomic development. A proper and dynamic balance also needs to be found between equality-enhancing policies and efficiency-enhancing policies. In addition, how to combine redistributive programs and complementary reforms requires our attention.

On September 28, 2021, the Luohan Academy hosted the 7th Frontier Dialogue, this time focused on the pressing issue of inequality, which has stubbornly grown in many countries through the 21st century. Panelists and attendees joined the online event from across China, Europe and North America. The 2.5-hour session was moderated by Dr. Ginger Jin, Professor of Economics at the University of Maryland, College Park.

The first speaker was Stanford Graduate School of Business Professor and Dean Emeritus Michael Spence, who elucidated the links between technology and inequality through a review of recent history. On the positive side of the ledger, globalization and technology diffusion has broadly reduced inequality between countries due to convergence, especially in India and China. However, there are concerns over less future “low hanging fruits” of catch-up. On technology, the ledger again has positives. Digitization has greatly lowered entry barriers and expanded markets for entrepreneurial activity, supported by an entire ecosystem including global finance, but are also different than earlier industrial mechanization which still relied on humans for thinking. Some middle-income jobs have been replaced by digital automation. Dr. Spence emphasized his key point that although impacted by technology, inequality is very much a “constrained social choice”. If societies make appropriate choices, they can capture the tremendous benefits of innovation while maintaining their norms on equality.

Dr. Erik Berglof, Chief Economist at the Asian Infrastructure Investment Bank (AIIB), followed up with his real-world policy experience. Berglof outlined different ways to define the goal of equality and described how focusing on equality of opportunity based on an economic-efficiency argument proved to garner the most consensus. He believed in a positive and corrective role for institutions using technology and cited examples of how digital technology is providing new opportunities for populations previously marginalized from economic systems. This included the financing of a satellite to improve internet access in rural Indonesia by the AIIB. He also pointed to Taobao Villages in China providing far-flung communities with the opportunity to participate in e-commerce, and how the rise of telemedicine in Pakistan is enabling women to balance family and work to practice as medical doctors without leaving their homes.

The discussant, Professor of Economics at the University of Pennsylvania Hanming Fang, continued with the theme of technology’s potential to help alleviate the various unsavory ways the market determines and distributes incomes. Online lectures can now be broadcast to remote areas and new platforms are finding ways to innovate educational financing. Meanwhile technology has been the basis of shifting architectures of trust – and power – in society. Where we once relied on institutions and contracts, digital intermediaries have to a great extent been able to disrupt those systems with their vast data and dominant market positions. The next stage may very well be the blockchain and “in code we trust”, which could further level the playing field and make transitory unequal outcomes at each stage of technological development. 

MIT Professor of Economics Robert Townsend shared some academic findings on financial access and inequality through a study in which he and co-authors modeled expansion of physical banks and better access to financial services in Thailand between 1986 and 2011. They then used this model to simulate digital banking, which in theory removes geographic constraints and further expands access to finance. Both models showed a boost to GDP and TFP, but also an increase in inequality. This was particularly at the beginning when wages to workers did not rise as fast as profits to business owners with access to cheaper credit. The models were also able to show intergenerational transfers of wealth gained could be quite pronounced. Digital banking resulted in a sharper rise in inequality, but wages did eventually increase above the physical banking baseline after 5 years showing that better finance did benefit society broadly over time. Townsend concluded by noting that the research was not “just an academic exercise”. It was built in conjunction with the IMF and used by both the IMF and IADB to weigh real world trade-offs.

The next speaker was David Autor, another Professor of Economics at MIT, whose key argument is that we collectively have agency over how technology shapes the jobs available in the future. Autor and his collaborators have conducted rigorous analysis of new jobs throughout the last century. Where technology is a factor, it not only automates jobs away, as commonly perceived, but it can also augment job functions or demand greater specialization from the humans who perform them. In the current information age, increasing societal focus on data and analytics mean the highest paid roles are often extremely specialized, such as “data visualization specialist.” While Autor believed work would continue to be available, an optimistic finding, he noted that we collectively have the responsibility to influence the path of job evolution to be more socially responsible through incentives, taxes and other social choices.

Nobel laureate and Stanford Professor of Economics Alvin Roth discussed the two speakers’ presentations by highlighting historical examples of economic transition and temporary dislocation. In the retail space, the rise of mail order catalogues in the mid-20th century provided access to goods for people in more outlying communities. It was public transit that gave rise to large-scale department stores in cities, and subsequently, the widespread availability of cars that shifted the focus to sprawling suburban shopping malls. Similarly in agriculture, increased mechanization displaced farmers who then went into manufacturing and sometimes suffered poor living conditions.

Michael Schwartz, Chief Economist at Microsoft, presented on how businesses are promoting inclusivity. He suggested that while the world is generally more prosperous than ever before, and that global inequality is shrinking as incomes rise in populous nations like China and India, there remains a digital divide, particularly among those who are able to transcend the limits of their physical locations to connect with other communities and those who cannot. Schwartz cited an initiative at LinkedIn, a Microsoft-owned online social network for professionals, which provided courses that can potentially benefit low-skilled individuals. Finally, Schwartz warned about the harmful impact of bias in artificial intelligence and need to be vigilant to avoid negative consequences for fairness and access to opportunity.

Luohan Academy President Long Chen presented next on the impact of digital adoption in China where despite rapid adoption, the Gini co-efficient has been relatively stable. Digital marketplaces like Taobao and Tmall have increased access to customers for small businesses and have also increased product variety for consumers. About half of the entrepreneurs out of Taobao’s 10 million vendors are women. Its small business owners also come from a cross-section of educational backgrounds, suggesting it plays an equalizing role for opportunities. The Ant Group was a pioneer in providing access to credit with the borrower’s information as a new collateral. Chen argued digital technology can be used as rapidly scalable solutions for inclusion. 

The discussant, Professor of Economics at UC Berkeley and former Senior Director at eBay Steve Tadelis, concurred with the previous discussant Roth that the current trends of dislocations we see today have parallels in past technological shifts have upended traditional structures and constraints. The current pandemic in particular has accelerated the possibilities for freelance work. That said, he stressed the need for businesses to transcend profit maximization to address broader issues, perhaps working with the government in the form of public-private partnerships. 

In the discussion session, Dr. Autor suggested that while technology has been an equalizing force, technology companies may not always have benevolent motives. Robert Johnson, President of the Institute for New Economic Thinking, raised the current fear sweeping across parts of the population that are being disrupted and its impact on U.S. politics, particularly in seeking out external targets of frustration rather than structural issues at home. Stanford Economics Professor Erik Brynjolfsson pointed out the enormous concentration of economic and political power in the hands of a few and to what extent we would like to see technology promote more power sharing. 

Nobel laureate and NYU Professor of Economics Thomas Sargent closed the session with the suggestion that wealth expresses itself as consumption, so both consumption and related carbon taxes tied with redistribution efforts could have broad redistributive effects. 



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