As I look out to the remainder of the 2020s, I believe that economic inequality will be one of the most important issues facing humanity. Excessive inequality undermines the life chances of individuals, families, and communities—sometimes for generations. The very real unsustainability of where we are at present was laid bare by the COVID-19 pandemic, during which an increase of 0.1 point on the CDC’s Social Vulnerability Index was associated with a 14.3 percent increase in the incidence rate of COVID-19. When inequality means life or death, it cannot and will not be ignored.
The question is how to address this global challenge, while preserving the innovation and dynamism associated with market economies.
Income inequality is not a new issue. The Gini coefficient, a standard measure of income inequality across populations, has been rising for decades and is now at or above levels last seen during the Gilded Age of the late 1800s—a time that preceded an era of revolution, social instability, and the birth of the modern welfare state. The rise in income inequity impacts virtually every country. In the US, the Gini coefficient has risen about 10 percent in the last 30 years. In China, nearly 10 percent annual growth in real GDP since 1979 has been accompanied by a Gini coefficient estimate of .47 which puts it not far behind the US.
For the private sector, the question is how to address this global challenge, while preserving the innovation and dynamism associated with market economies.
Part of the answer lies in aiming our investments more squarely at sectors that level the playing field so that all can share in the creation of value. Software is one of the best examples of this idea.
Software’s central attribute is that it dematerializes economic production, taking us from a world of atoms, to a world of bits. That has vast implications for the world, most of them positive, including in regard to inequality.
Software slashes the fixed costs of starting almost any type of business, radically lowering the barriers to entry and scale. It took decades for the internal combustion engine to become a cheap and readily available platform for entrepreneurs to build new products and businesses upon. It takes a fraction of that time and cost for software platforms to become available to anyone, anywhere in the world.
Software is also powering innovative ways for new ideas to challenge incumbent institutions that have often stifled competition and worsened inequality. Blockchain is a great example. While best known for its role in enabling cryptocurrency, it is actually a computing and information architecture that can accelerate many sectors of the economy, much as cloud services did in the 2000s. Imagine the capacity to build new organizations in a decentralized manner that routes around traditional incumbents. Blockchain may ultimately prove to be a more important way to reduce inequality than legislation and regulation, which are often too slow to keep pace with technology.
Digital security is another area where software can create value that is broadly shared. As demand for enhanced cybersecurity increases, it is creating the need for ever more workers. Today, there are an estimated 4 million unfilled cybersecurity positions around the world—jobs that in the US offer an average starting salary of over $80,000. Many of these jobs can be filled by individuals with certificates, which can often be earned on-the-job rather than through four years of college. Compare that to the average starting salary of $55,260 for all US college graduates in the Class of 2020 and the appeal of the cybersecurity sector becomes clear.
Of course, we cannot afford to be naively optimistic about software’s impact. No transformation this far-reaching will yield its full benefits in a seamless fashion. Long-term, and at the global level, software has the potential to change the economy in ways that make it a force that drives equality. Ensuring that software is such a force is less a choice than an urgent necessity. The question shouldn’t be whether this issue of income inequality is tackled, but when and how. If left unattended, it has been shown to lead to social disorder and erratic, unpredictable politics, or worse.
It is within our grasp to choose a better path. The technologies that are emerging today can be transformative tools that create not just wealth but broadly shared prosperity. The challenge for those with the means to make a difference is to start evaluating our success not just by near-term profit, but also by how well our investments and efforts pay off in a world that is more equal and stable for the long term.