The Second Great Divergence

“As we accelerate further into the 21st century, it’s becoming increasingly likely that a Second Great Divergence will be soon upon us.”
The term “Great Divergence” is used to connote that moment in the 19th century when western Europe and parts of North America, in the wake of the industrial revolution and colonialism, became “fabulously wealthy” in the face of “horrible” poverty almost everywhere else over the globe.[1] It’s a divergence that is only just being redressed, yet, as we accelerate further into the 21st century, it’s becoming increasingly likely that a Second Great Divergence will be soon upon us. With the increasing correlation between technological expertise and wealth, the future will see a distinction of the “Haves and Have Nots” not drawn along traditional class lines, but along differing tiers of technological proficiency.

This being said, predicting the direction and pace of technological advancement is no easy matter. Many of today’s leading economists are in agreement that we are entering the fourth great technological revolution with the birth of robotics and competent AI – the earlier three being the invention of steam power, the discovery of electricity, and the widespread adoption of computing. Yet the effects this fourth revolution on society are anything but certain.[2] For some, rapid developments in technology are a gateway to an unprecedented era of equality, with more and more people around the globe having access to all the luxuries that cutting-edge tech can afford. For others, the technological revolution is exacerbating inequality at an alarming rate. As we move further into the 21st century, the question becomes ever more urgent: how will society cope with modern technology?

“People will need to continue working alongside machines to produce the growth in per capita GDP to which countries around the world aspire.”
When discussing modern technology, the first topic that comes to mind is AI: how will it affect our economies and how will it affect unemployment? A recent report by McKinsey and Company has predicted that roughly half of all existing jobs will be replaced by AI by 2055.[3] Yet this does not necessarily translate to mass unemployment. According to the same report, “people will need to continue working alongside machines to produce the growth in per capita GDP to which countries around the world aspire.” This means that workers displaced by automation “will have to change,” and McKinsey expects “business processes to be transformed” in order to accommodate this shift.

Be that as it may, change is one thing to predict, another thing to effect. In late 2014, MIT’s Technology Review looked at the correlation between technology and inequality. David Grusky, speaking to the Technology Review, focused on the current inequalities surrounding education in the United States. Educational inequality is not only depriving children in poor neighbourhoods of the chance to advance, but also reducing the pool of potential high-skill workers as fewer students have the opportunities to become well-educated in fields relevant to the modern economy.[4]Because of this, Grusky says, “we overpay for high-skill workers,” and in so doing contribute to the inequality between skilled and unskilled labour. As technology progresses, society will need to address disparities in educational opportunities, often related to postcode and parental income,[5] so that technological expertise does not become akin to class privilege.

This said, improvements in technology have led to a huge increase in the availability of knowledge to the less well-off. Knowledge is no longer barred behind steep walls of books, library memberships, and educational institutions with high fees and low intake. In a piece profiling technology and social change, Fast Company highlighted the emergence of online learning platforms. “Numerous organizations are going beyond informing to experiment with deeper means of improving practice and/or behavior. Some are using e-learning solutions – e.g. Khan Academy’s free YouTube lessons and leading universities’ massive open online courses – to flip the classroom, let students learn at their own pace, and bring their questions to class physically or virtually.”[6] With the increasing democratisation of education brought about by modern technology, there is a growing premise that anyone who is connected might access the tools needed to become technologically literate.

“the opportunities FinTech is creating cannot be accessed without digital inclusion”
But what does being connected really mean? In an article entitled “The Limits of Technology,” John Clayton and Stephen J. Macdonald highlight the difference between access and benefit. “While technology, particularly computers and the internet, is becoming more accessible, the manner in which technology is used and the benefits discerned and accrued are largely dependent upon socio-economic positions.”[7] Moreover, even access itself is not as universal a privilege as commonly supposed. In an article on the possibilities of FinTech, TechCrunch highlighted that the opportunities FinTech is creating cannot be accessed without digital inclusion.[8]
t risk of falling behind are those who have no access to a bank account due to their “inability to prove their identity,” some 1.5 billion as of 2014.[9] As technological innovation continues to provide opportunities to those with established digital identities, the gap between those connected and those who are still unconnected will only increase. Luckily, progress is being made. The United Nations has a global legal identity listed as one of their sustainable development goals for 2030, as well as increased access to internet, phone coverage, and bank accounts across the developing world.[10]

Modern technology, in principle, should drive social mobility. It increasingly provides lifestyle-enhancing resources to all those who can access and use it, irrespective of their current social standing or income. But with the disappearance of traditional class boundaries, society must be careful not to create new boundaries based on technological literacy. Increasing global access to modern technology must be a priority, while educational institutions must adopt a proactive role, giving the younger generation comprehensive educations in the desired and required skill-sets of the future, tech-centric world.

[1] The Economist, [2] Financial Times, [3] McKinsey, [4] MIT Technology Review, [5] MIT Technology Review, [6] FastCompany, [7] Taylor and Francis Online, [8] TechCrunch, [9] TechCrunch, [10] United Nations

This article is designed to throw an everyday lens on some of the issues being discussed and debated by investors across the world; it is not research, so please do not interpret it as a recommendation for your personal investments. If something has piqued your interest and you would like to find out more or discuss what investments might be suitable for you, please contact one of our Investment Managers on 020 7337 0777.