THE AGE OF PERPLEXITY: RETHINKING THE WORLD WE KNEW
An apparent paradox
Evidence of technological change, led by advances in digital technologies, is all around us. One must only bear witness to the increasing sophistication of cell phones and computer systems, digital platforms transforming information and communication, and expanding uses of robotics and artificial intelligence. Technology is a key engine of productivity growth, allowing humans to achieve ever higher levels of efficiency. How is it then, one might ask, that productivity growth has been slowing in major economies in the past few decades, just as these technologies boomed? What explains this apparent paradox?
Productivity and income
Concurrently, income inequality has been rising in most major economies. The distribution of both labor and capital income has become more unequal, while income has shifted from labor to capital. Might these trends in productivity and inequality, which have been particularly marked in advanced economies, be interconnected?
The slowdown in productivity and the rise in income inequality have emerged as two dominant concerns of our times. Together, they contribute to weaker and exclusive economic growth, slower and unequally-shared rises in living standards, and societal woes and divisiveness. In fact, they are tied to the forces behind the recent rise of political populism seen in many major economies. How should policy respond to reinvigorate productivity and support a pattern of growth that is more inclusive?
This paper intends to address these questions, through the analysis of recent and ongoing research. These questions are rich in import and of considerable Slowing productivity growth in major economies amid seemingly booming technology presents a paradox. Income inequality has been rising at the same time. Is there a nexus between technology, productivity, and distribution that explains these trends? Indeed so.
Slowing productivity and rising inequality have important common drivers, with technological change and its interaction with market and policy failures playing a major cross-cutting role. The agendato boost productivity and improve equity, often seen in terms of a trade-off, is positively interconnected in significant ways. It will require much innovation in policies to respond to the profound ways in which digital technologies are reshaping markets and work.
Unsurprisingly, they have spawned much analytical investigation and policy discussion. The aim of this short paper is to provide an overview of the key issues and findings, and demonstrate how they are reshaping policy agenda.
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Source: preface of the paperBBVA-OpenMind-Zia-Qureshi-Advanced-Tech-but-Growth-Slow-and-Unequal-Paradoxes-and-Policies