Eradicating poverty and income inequality in a Hi-tech Era (2)

Dr. Alfred Mak

Over the past thirty years, the world has seen huge progress in technology. During this period, advances in technology have provided us with new capabilities, making our life more comfortable and enabling an increasing number of us conveniently connected. Certainly, innovations in hi-tech and automation technology have tremendously enhanced human productivity. With globalization in full speed in the same period, production across the world continued to grow, presenting us an ever larger global economic pie. While this appears to be encouraging for those struggling to eradicate poverty and income inequality, hurdles are yet lying along the path of sustainable development in many countries. On the one hand, according to World Economic Forum (2017), as global poverty continues to decline, rising income inequality and the polarization of societies have now posed a risk to the global economy, engendering a greater likelihood of political instability. On the other hand, there is growing evidence that the exponential nature of digital and robotic technology has resulted in an alarming volume of job displacements worldwide, which further worsens income disparity. Adding the unrelenting financial globalization, particularly foreign direct investment, which effectively generates inequality (IMF, 2013), the problem of widening wealth gaps the world over deserves scrupulous attention of all who do care about the continued existence of poverty and inequality in the contemporary world.

To put the matter in perspective, it makes sense first to examine the extent and consequences of the problem, then explore how people explain its cause and development. For the former issue, a glimpse at following table throws some light about the global wealth distribution. Without doubt, the data shows how the share of wealth starkly fails to match the population share. In fact, in 2015, the Suisse’s Global Wealth Report indicated that half of all assets around the world were controlled by the richest 1 percent of the global population, while “the lower half of the global population collectively owned less than 1 percent of global wealth.

Even in industrialized countries, the middle class similarly suffers different degrees of income inequality. In USA, for example, the top 1 percent get in one week 40 percent more than the bottom fifth received in a year; and the richest 20 percent of income earners earn in total after tax more than the bottom 80 % combined (Stiglitz, 2013:5). Then in Norway, a place said to be the best to live in, a 19 percent jump in income inequality was recorded in the past four decades (Picketty, 2014). Back home, Hong Kong’s Gini coefficient rose by 0.002 from 0.537 in 2011 to a record high of 0.539 last year – the highest figure since the city began keeping records on income equality 46 years ago (SCMP, 2017); and the richest 10 per cent of the population now earn nearly 29 times what those on the other end of the spectrum get. The city’s 18 richest people are sitting on a collective fortune of HK$1.39 trillion, exceeding the entire amount that the government has stashed in reserves for rainy days (SCMP, 2016). And the list of countries experiencing the same goes on.

Meanwhile, government officials, opinion leaders and academics are eager to find out what causes income inequality, as they understand different answers elicit different policy solutions. Together, most of them agree on naming two most important drivers behind the process – globalization and technology. True, despite some economists disagree on what exactly globalization has played in the increase of inequality, globalization, with its concomitant competitive forces, creates threats of jobs moving elsewhere. And as automation makes possible replacing unskilled jobs, it puts workers at a particular disadvantage. The situation is aptly reflected by Harvard economist, Richard Freeman’s description: “The triumph of globalized market capitalism has improved living standards for billions while concentrating billions among the few.”

On the industrial front, technology in particularly the past decade has brought profound changes in economic systems and social structures. Digital technologies are becoming sophisticated, and, in fact, are transforming societies and the global economy. One typical example is the use of smart phones. The ubiquitous iPhone was first launched in 2007, yet there were over 2 billion smartphones at the end of 2015 (Schwab, 2017). In the like manner, it is reasonable to expect that the groundbreaking development of Artificial Intelligence (AI) will before long make fully auto-vehicles and robots with human intelligence a reality. While successes as these need to be congratulated, they have brought both blessings and bane to the world. With the fourth industrial revolution in sight, there are concerns that the shift of economic paradigm impacts severely on wage earners, particularly the bottom level of workers. As the digital age makes possible new businesses to start with minimal cost, such as Instagram and What`s App, talent other than capital is a factor that can equally enable a company to prosper. Already Schwab (2017) has pointed out that the great beneficiaries of the fourth industrial revolution are the providers of intellectual or physical capital, the innovators, the investors, and the shareholders. And this serves well to explain the rising wealth gap between those who depend on their labour and those who own capital. In another instance, French economist, Thomas Picketty (2014), has made two well-known observations in his studies relevant to Schwab’s finding. The first is that over the long run, the rate of return on capital (r) far outruns that in economic growth (g); the second is that focusing on the highly skilled has created a class of “supermanagers”, such as top software developers, in particularly US and UK, who command huge premiums in the form of bonuses, stock options, and lavish perks. In both cases, unfortunately, the real income of the ordinary workers tend not to increase over their lifetime, thus inevitably jeopardizing sustainable development.

Although a consensus regarding a fair return on capital investment, talent, and labour can hardly be reached, most people would agree on reining in rampant wealth inequality. Indeed, while it may be true that people do not die from inequality itself, they do suffer from the ills of unequal societies. A report by the UN Development Programme (UNDP) concludes that inequality is linked to higher crime rates, lower life expectancy, conflict and political instability (UNDP, 2015). Globally, inequality is associated not only with a wide range of negative social outcomes but also, according to IMF, with slower and less durable growth.

As people are increasingly repelling the “winner-take-all” or the “winner-take-most” mode of the business world, fearing that the gap between the very rich and everyone else continues to grow, it seems logical to find ways to redistribute those gains through viable means. Quite naturally, if technology in this hi-tech era has exacerbated discrepancies in education and skills, it simply makes sense for us to re-invest greater effort to spread education, build skills, and provide universal health care. Needless to say, we need innovative thinking to achieve these goals as well as to create new ways to bolster income. Arguably, our understanding of the reasons for cross-country differences in inequality remains weak, and much research is yet desirable on this topic. Overall, if we trust the saying that, “Humanity has the ability to make development sustainable – to ensure that it needs the needs of the present without compromising the ability of future generations to meet their own needs” (World commission on Environment and Development, 1987), the fatalism that globalization and technological progress give us no choice should have no place in our united world today. After all, as economies are based on rules, it is up to the people of a society to determine the right fix of those rules governing shared prosperity, and sustainable development of their future generations!


  • 樂施會《香港貧窮狀況報告(2011-2015)》,
  • 國際貨幣基金組織 2015 環球財富報告  IMF (2015). Causes and Consequences of Income Inequality: A Global Perspective, June 2015, International Monetary Fund.
  • Credit Suisse, Global Wealth Report 2015, Oct., 2015.
  • Jaumotte, et al, in Economic Review, Vol 61, No.2, 1 Jun, 2013, pp 309(39)
  • Piketty, Thomas (2014). “Capital in the 21st Century, Harvard University Press.
  • Sachs, Jeffrey (2011). “The Price of Civilization”, Economics and Ethics after the fall. London: Bodley Head.
  • Schwab, Klaus. (2016) “The Fourth Industrial Revolution.” New York: Crown Business.
  • Solt, Frederick (2014) “The Standardized World Income Inequality Database,” working paper SWIID, Version 5.0, October, 2014.
  • Stiglitz, Joseph (2013). “The price of inequality”. England; Penguin Books

About the Author

Dr. A. Mak was a senior civil servant and later a NGO director before retirement. He is presently an honorary lecturer/tutor at a few tertiary institutions.