An interview with Alec Ross, technology policy expert, innovator, and author

Alexander Görlach: You have been working on AI, automation, digitization and their implications on the workforce for a while. In your assessment, what has happened? Where are we heading, what has already come true?

Alec Ross: There isn’t a word that I would change in anything that I have written on this topic. I think I’ve always taken a balanced view of the next wave of technology-driven innovation and believe that it contributes to both the promise and peril of our future. I think that the automation of labor that isn’t merely manual and routine but increasingly cognitive and non-routine represents some enormous challenges when you think about the skilling and re-skilling of the workforce.

There are states and societies that are most aggressive when looking at where future employment is and making sure that the outputs of  their education systems map to the inputs of where future hiring will be. They are going to be those that compete and succeed the best. But there’s a step beyond that. We have moved from an industrial-based economy into a technology-rich and knowledge-based economy. I think that we are at an inflection point that happens once every few hundred years.

The most important thing that can be done from a public policy standpoint is a rewriting of our social contract. There’s very little of that taking place anywhere. I think that the states in societies that will have the best next 50 years are going to be those that redefine the relationship between state capital and labor in a way that reflects the changing nature of the global economy.

Alexander Görlach: When we talk about this topic, there are two things to disentangle. There are algorithms that are increasingly becoming more and more capable of linear purposes that until now were given to white collar jobs. Then there is another branch: the rollback of globalization. That may have heavy implications on the global distribution of work. We also have a crisis for blue collar jobs coming around the corner quite soon.

Alec Ross: This is not hypothetical or theoretical. The crisis has existed for the last 25 years, people have just failed to recognize it because there have been, overall, healthy conditions in the economy. In the global economy for the most part, with the massive exception of 2007 and shortly thereafter during the financial crisis, by and large we’ve had 25 years of changing labor in the blue collar workforce.

In the Western world, people blame the loss of labor on globalization but if you dig into the data, automation has already been more consequential in terms of labor substitution in the West than globalization. For all the difficulties that there will be with marginally-skilled white collar labor, we are already into the second quarter century in terms of challenges for the blue collar labor workforce. It was not recognized earlier because in many respects, especially in the United States where we have low unemployment, people did not necessarily become unemployed. They were able to move horizontally in the workplace or take a step backwards. Their well-being may have stagnated or decreased but they did not, more often than not, plummet into unemployment or into poverty. In my opinion, that masked some of the more forceful effects of automation.

Alexander Görlach: That is also reflected in data. When you look at the GDP of several democratic countries, it is rising but yet the household income is stagnating or even decreasing. There’s a lot of consensus that this has contributed largely to the crisis of our political system because our political system rests upon a social contract. Can this be solved on a national level or on an international level?

In the Western world, people blame the loss of labor on globalization but if you dig into the data, automation has already been more consequential in terms of labor substitution in the West than globalization. For all the difficulties that there will be with marginally-skilled white collar labor, we are already into the second quarter century in terms of challenges for the blue collar labor workforce.

Alec Ross: I think that both are possible. Even though a lot of these challenges are transnational and the labor forces are increasingly transnational, the levers for doing something about them tend to exist within the functions of the public sector due to the architecture of our world’s 196 sovereign nation-states. Under ideal circumstances you are able to do things transnationally. But more often than not, I think the innovation is going to have to come from within individual states.

If you take a look at how certain states have reformed their delivery of education programs or are experimenting with basic income programs, I think more often than not the experimentation and innovation will come from individual states that can then spread.

I do think there are certain challenges. If you look at taxation for example, the only solution to inequity abuse by multinationals right now is through international accords. So many of our problems could be solved if the private sector paid its taxes in a way that made sense. Unfortunately, because of tax havens and shelters and due to the global nature of capital at this point, we have lost the force and effect of taxation as a means for fully funding our social welfare programs. We have all of these needs as the economy changes and in this technology plays an increasingly dislocated role. But if corporations and individuals are not paying tax, then we will not have the necessary resources to make those reforms and I don’t know how to do that, except transnationally.

Alexander Görlach: Of course, this is not just an invention of the digital age. In the analogue times we have had many letterbox companies minimizing their tax liability. We were not able to solve it in the analogue age when it was allegedly easier to handle these policies. Now we have a claim in the air to tax corporations such as Apple.

Alec Ross: This goes beyond just one company. Just because the problem was not solved in the past does not mean we cannot continue to seek to solve it in the future. In the same way in which we sanction countries right now for developing chemical weapons, we can fundamentally change the banking system because of money laundering. I think we need to begin to take more seriously what means and method we can use to ensure equitable taxation.

You can have pilot programs and philanthropic programs, but if you want to achieve things at that great of a scale, you can’t just increase the taxes on the middle or working class. You’ve got to isolate the bad actors. In the United States, there are politicians such as Alexandria Ocasio-Cortez and Elizabeth Warren who are getting a lot of attention for saying that we should increase the marginal tax rates to 70%, which I am not in favor of doing. Before we contemplate that, let’s get some of these companies to pay a dollar of tax. The wealthiest and most sophisticated individuals and entities have an ability to minimize their tax burden in a way that is legal. What we need to do is take practices that are currently legal and make them illegal.

Alexander Görlach: This comes with a lot of underlying currents, identities, and personal convictions. In my opinion, the underlying current is one about fairness. You mentioned middle class tax payers who are already compliant with the law and the lack of fairness. When you go back to the financial crisis of 2008, Barack Obama came into office and was looking to create new jobs. He didn’t do a bad job at it, but still it could not prevent something eight years forward like what is happening with Donald Trump. I believe that has a lot to do with the neglect of fairness as a key component in the social contract and as a fluid of our international engagement in economy and finance.

The ideas of economy that are based in moral philosophy and fairness has been severely damaged. Going back to 2008, bailing out banks has gone astray from our moral philosophy. Was this the beginning of it all?

Alec Ross: I don’t think this was the beginning of it. If you look at the stagnation of the working class income and issues of perceived unfairness in the economy they go back well before 2008. I don’t think they have their roots in the response to the financial crisis. I think Barack Obama was elected in part because of the perception that these banks were getting bailed out. If you remember about the bank bailout, the liquidity injections took place in substantial part during July and September 2008, before Obama was elected. I think that helped create some enabling conditions for his election. I ran the tech policy for that campaign of Obama’s.

So no, I that is only one of a great many things that contributed to this hostility. But I would not give it any greater weight than a handful of other factors.

Alexander Görlach: In terms of ethics, what do you think is necessary for the social contract? Is this an ethical question? Who is going to address it?

Alec Ross: The real creation of an industrial, post-agricultural age and the social welfare state was really a byproduct of work that began in the 1850’s. Some of the greatest accomplishments and truly revised social contract followed the period from 1800 to 1840, the byproducts of which of were ideological movements like communism. The Communist Manifesto was written in 1848. In the 1840’s the largest wave of Revolutions in Europe’s history occurred.

What came out of that were two things: a reassertion of authoritarianism and the thereafter the development of a social welfare state. I believe we are globally seeing a rise in authoritarianism right now. When you look at Duterte in the Philippines, Erdoğan, Putin, Trump, Orbán, and Bolsonaro, it’s exactly that which followed the Engels’ pause following the first 40 years of rapid industrialization of the economy.

How do you get past that? You get past it through good old-fashioned leadership such as Bismarck and others who developed the elements of what is today considered the social contract. Minimum wage, the 40 hour work week, environmental controls, youth labor laws, free public education until age 18 – these were all elements of the Industrial Age social contract that developed over a period of decades. It had its roots in individual acts by states which eventually knit themselves together into the makings of a social contract that has held for the better part of a hundred and fifty years.

The problem is that a pension system does not work if you invest after 30 years. In today’s economy more people are likely to have 30 jobs in 30 years than one job in 30 years. What is an eight-hour work day or a 40-hour work week? How does that work if you are a contract-based employee as opposed to an employer-based employee? If labor is increasingly moving from being unionized to being on-demand, where are those traditional worker protections that were the hallmark of the Industrial Age social contract?

If you get hurt at work and you are a contract or gig worker as opposed to a unionized worker, you have none of those protections. The changes are not just because of the hostility to labor unions. It’s innovation and business models that have created digital marketplaces that enable on-demand labor.

This comes with wonderful benefits, not just to the purchaser of labor but to the laborer themselves. But it also comes with significant disadvantages, such as the lack of pension and worker protections. So from my standpoint, the world’s most important innovators and leaders over the next 10 to 20 years are going to be those individuals who think about new models for how to create a relationship with an equilibrium between capital and labor that allow for broadly shared prosperity.

The social contract of the Agricultural Age in Europe helped for a few hundred years, but it didn’t hold in the first half of the 19th century when feudalism was long gone and labor was migrating from farm to factory and from country to city. This kind of dislocation taking place has been happening for the last 20 years. It’s similar to the dislocation that took place between 1800 and 1840 which then produced ideological movements like communism, which in turn produced a reassertion of authoritarianism and the largest wave of revolutions in Europe’s history. Then eventually, we got a new social contract over the period of decades, not all at once. I think that model will probably hold again.

Alexander Görlach: How do we avoid the trap of making the same mistakes as we did 100 years ago? If we have the same situation as we did in the 1870’s, how do we avoid fascism and reassess this leadership? How do we move towards a Bismarck-like figure who will take on the challenges of a new social contract?

So from my standpoint, the world’s most important innovators and leaders over the next 10 to 20 years are going to be those individuals who think about new models for how to create a relationship with an equilibrium between capital and labor that allow for broadly shared prosperity.

Alec Ross: Without sounding like I am stating the obvious, the transition of leadership tends to take place with much longer runways than the transition in economies and in technology. For the first 40 years of the 19th century even though we had a quickly industrializing economy the leaders and the elite were rooted in the aristocratic model of agrarian Europe. If you look at today’s leaders, they are mostly natives of the Industrial Age or have an understanding that is based in the Industrial Age. I don’t say this just about Trump, let’s talk about Hillary Clinton. She is a very intelligent woman and I loved working for her, but I don’t think anyone would say that she is native to 21st century economics. Her difficulty wrapping her head around technology-driven change is well known.

This is not just something that you point to populists or right-wingers about. The shortcomings are maybe not evenly distributed, but they are well-distributed across ideologies and political parties. I think you have to get leaders emerging who have a fully-formed understanding of what can actually be done to produce positive change. They don’t have to be young necessarily.

If you think about the development of the institutions of the welfare state, whether it is free education, pension, or a minimum wage, in many respects they were non-incremental. They were bold and they often times cut across convention. If you think about child labor laws, the ugliest caricature of the early years of industrialization was that image of the prepubescent eleven-year old losing a hand in the factory. The idea that you would create a minimum age like 16 to be able to do full-time work worked completely against the conventions of the Agricultural Age, which held that every member of the family becomes a productive part of the workforce.

The only way to produce a new social contract is non-incremental. It is original, bold, controversial. At its outset it strains convention. Then ultimately, if it works and it draws popular support, it’s institutionalized and it scales. When you talk about a social contract, you are talking about things that are defining.

A lot of the problems, let’s talk again about Hillary Clinton just to work against convention here, part of why her message to the American public and the working class did not resonate was because it was viewed as too technocratic, incrementalist, and lacking boldness. It lacked a creativity and vision to reimagine the relationship between state capital and labor. She had been working for decades, including the eight years of her husband’s presidency, within a particular frame: defining the relationship between state capital and labor. She was not the one is going to break the frame.

We need leaders who will break through by coming up with entirely new frames and new schemes that reset the relationship between state capital and labor.