Digitalization requires an active and modernized welfare State

Social standards are not downsides for economic growth but, rather, form the foundation of innovative societies in which both producers and users benefit from faster, more successful and more customized innovations. This also means that more investments are needed, especially in the digital infrastructure, to modernize the economy and the welfare State. However, this requires a functioning tax system and also a shift away from the strict financial and austerity policies so that States can become more active again and invest, for example, in innovation, research and education. If the European Union is to be a project of international solidarity and of common economic and social progress, innovative processes for social progress must not remain limited to a handful of regions or nation-States but have to be promoted systematically and across the EU. We better join forces here—that is a strong asset of the European Union, especially in comparison to many other regions in the world.

Are concerns justified that digitalization is destroying the social State? And how so?

Absolutely. We do already notice an increasing concentration of data in the hands of a few monopolies able to evade state control, an intensification of the digital divide and the polarization of society. Therefore, societies need also financial contributions and taxes of companies and capital owners in order to invest in the modernization of the welfare State—in technical as well as social infrastructure.

How will the economy of the future pan out in Germany and the European Union without state intervention in the high-tech sector?

Without regulation and democratic public intervention, we will see more concentration and even more polarization of skills and labour, wealth and health, I guess. We can see that already.

Where do you see dire need to exert control on the economy at the European policy level and what action steps are needed?

Digitalization requires an active State that not only provides a [digital] infrastructure, digital administration and comprehensive investments in research and education but also ensures social and technical standards, general data protection and data security—and also knows how to use public procurement actively. For all these tasks, a welfare State is required that is able to proactively manage its responsibilities: one that makes use of the opportunities of digitalization for its modernization and tries to better align and orchestrate its economic and innovation policies with health, care and labour market policies.

What dystopic scenario keeps you up at night because it places technological development as the beginning and end of any economic policy?

Concentration of data and knowledge, power and opinion in the hands of a few digital platforms— like Amazon, Google, Facebook— that are able to avoid taxation and other state regulations. Or governments using digitalization for repression and coercion, as for example the case with social scoring in China.

Are there any scenarios that bring you hope for inclusive economic growth through digital transformation?

We should continue to develop a vision in which we use digitalization to bring about social progress: by enhancing our welfare State in such a way that, on one hand, it absorbs the risks of growing flexibilization and, on the other hand, it offers us new ways of harnessing the opportunities of working and living without space and time constraints—ways that ultimately bring about social progress. This could perhaps be the vision of Welfare 4.0.

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For more information on the publication Industry 4.0 and European Innovation Policy, contact Philipp Fink, head of the Working Group on Sustainable Structural Policy and responsible for Climate, Environmental, Energy and Structural Policy in the Division of Economic and Social Policy at Friedrich-Ebert-Stiftung in Berlin.