We need a new Bismarck to tame the machines; The power of the new technology barons must be held in check

February 10, 2014 4:18 pm

We need a new Bismarck to tame the machines

By Michael Ignatieff

The power of the new technology barons must be held in check, says Michael Ignatieff

Aquestion haunting democratic politicseverywhere is whether elected governments can control the cyclone of technological change sweeping through their societies. Democracy comes under threat if technological disruption means that public policy no longer has any leverage on job creation. Democracy is also in danger if digital technologies give states powers of total surveillance.

If, in the words of Google chairman Eric Schmidt, there is a “race between people and computers” even he suspects people may not win, democrats everywhere should be worried. In the same vein, Lawrence Summers, former Treasury secretary, recently noted that new technology could be liberating but that the government needed to soften its negative effects and make sure the benefits were distributed fairly. The problem, he went on, was that “we don’t yet have the Gladstone, the Teddy Roosevelt or the Bismarck of the technology era”.

These Victorian giants have much to teach us. They were at the helm when their societies were transformed by the telegraph, the electric light, the telephone and the combustion engine. Each tried to soften the blow of change, and to equalise the benefits of prosperity for working people. With William Gladstone it was universal primary education and the vote for Britain’s working men. With Otto von Bismarck it was legislation that insured German workers against ill-health and old age. For Roosevelt it was the entire progressive agenda, from antitrust legislation and regulation of freight rates to the conservation of America’s public lands.

All three leaders also held power when public investment began to flow into science and technology. On their watch, governments began to create the infrastructure of a modern knowledge economy. These patricians came from families threatened by the industrial revolution, yet they embraced change instead of fighting it. They held on to power convincing their electorates to be unafraid of the future, even as change was revolutionising their lives.

They were activist politicians, with a formidable talent for the bully pulpit, as Roosevelt called it. But they never used it to turn their people against the “creative destruction” intrinsic to capitalist economies. Each understood that the function of political leadership in a time of technological change was to keep the working classes inside the tent and to ensure the power they exercised retained popular legitimacy.

The lesson for modern democrats is clear. They should not resist the forces of change but mitigate unequal distributive effects by incorporating the excluded and holding in check the power of the barons enriched by the new technologies.

What has to be controlled in any technological revolution is the power that flows to those who profit from it. Every disruptive innovator seeks monopoly. That is why Roosevelt and the progressives fought so hard to break up cartels in energy and transport. For the progressives, as for 19th-century liberals such as Gladstone, free competition was more than an economic goal. It was essential to preserve a pluralist democracy in which the economic power of the few was offset by the political power of the many.

In the 21st century, democracy’s true challenge is to sustain the competition that protects economic innovation and democratic freedom alike. Here, the Victorian progressives were right: if the problem is monopoly power, the solutions lie in vigorous, unabashed and progressive competition policy.

The Victorians created the modern state to tame the market in the name of democracy but they wanted a nightwatchman state, not a Leviathan. Thanks to the new digital technologies, the state they helped create now has powers of surveillance that threaten our privacy and freedom. What new technology makes possible, states will do. Keeping technology in the service of democracy will not be easy. Asking judges to guard the guards only bloats the state apparatus still further. Allowing dissident insiders to get away with leaking the state’s secrets will only result in more secretive, paranoid and controlling government.

The Victorians would have said there is a solution – representative government itself – but it requires citizens to trust their representatives to hold the government in check. The Victorians created modern, mass representative democracy so that collective public choice could control change for everyone’s benefit. They believed that representatives, if given the authority and the necessary information, could control the power that technology confers on the modern state.

This is still a viable ideal but we have plenty of rebuilding before our democratic institutions are ready for the task. Congress and parliament need to regain trust and capability; and, if they do, we can start recovering the faith of the Victorians we so sorely need: the belief that democracy can master the technologies that are transforming our lives.

The writer teaches politics at Harvard and is author of ‘Fire and Ashes: Success and Failure in Politics’

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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