One of the defining economic challenges of our time is how to distribute the value generated by groundbreaking technologies, such as generative artificial intelligence and recent innovations in biomedicine and manufacturing. To improve living standards, the benefits of transformative technologies must be widely shared. So far, however, these benefits have been monopolised by a small cadre of tech billionaires.
Tesla CEO Elon Musk is a prime example. Most people recognise that Mr Musk did not deserve the US$56 billion (1.9 trillion baht) in annual compensation that the company's board of directors attempted to give him in 2018, given Tesla's relatively modest profits and years of losses. Nevertheless, the board argued that this enormous sum was necessary to incentivise Mr Musk to remain at the company -- an argument so baseless that a Delaware judge recently invalidated the board's "unfathomable" compensation package.
But Mr Musk is hardly alone. Other tech behemoths have similarly lavished their CEOs with hefty salaries and stock options under the guise of retaining top talent. In reality, however, their contribution is often unclear.
Moreover, Big Tech companies' huge profits reflect their market power, which they have achieved by offering users "free" services like search and email while harvesting their personal data to train AI models. In the absence of competitive checks, the quality of these services has deteriorated. At the same time, the adverse effects of Big Tech's business models, from misinformation and deepfakes to clickbait, have become increasingly apparent.
The emergence of generative AI has further fuelled concerns about tech giants' dominance, as writers, artists, and other creative professionals find their livelihoods undermined by large language models that circumvent copyright-law restrictions with impunity.
It does not have to be this way. In a recent essay, MIT economist David Autor argues that emerging AI technologies have the potential to complement the skills of human workers, particularly those, such as nurse practitioners, who typically do not receive incentive-based pay packages. Similarly, research by Prof Autor's MIT peers Erik Brynjolfsson, Danielle Li, and Lindsey Raymond finds that AI significantly boosts the productivity of call centre workers. Taken together, such studies suggest that generative AI could augment the work of creative freelancers instead of replacing them.
But systemic change requires more than individual efforts. The overwhelming power of Big Tech companies calls for government intervention to ensure that the value they create, as well as the value they extract in monopoly rents, is distributed fairly among workers and consumers. Although policymakers in the United States and Europe have rightly focused on competition-enhancing measures, including by examining the impact of major tech firms on labour markets, these actions are not enough.
To curb the market power of Big Tech firms and ensure that new technologies benefit everyone, governments must invest in developing digital public infrastructure. The concept of an open-standards technology stack -- consisting of digital identification, a payment system, and a data exchange platform -- has gained traction in economic development circles in recent years, and such frameworks could also streamline the provision of public goods.
But achieving this requires a change in mindset. Digital public infrastructure, typically viewed simply as a means to provide government services to individuals, has the potential to become a powerful platform for facilitating interactions among governments, businesses, and citizens. Ideally, a publicly owned payment system could process transactions both between firms and among individuals across different jurisdictions.
Moreover, the establishment of public digital infrastructure is crucial to implementing certain policy measures, such as Nobel laureate economist Paul Romer's proposed tax on digital advertising. The revenues from such taxes could, for example, finance waste collection and recycling initiatives.
A thriving market economy operates as a partnership between the government and the private sector. Under this arrangement, businesses are allowed to manage their own affairs, provided they comply with laws and regulations, pay corporate taxes, and withhold their employees' taxes.
But Big Tech firms have undermined this implicit agreement by exploiting various legal loopholes to minimise their tax burdens, compromising the quality of their services, and routinely violating copyright laws. The time has come to establish effective and necessary institutional mechanisms to ensure that potentially transformative technologies benefit everyone, not just a privileged few. ©2024 Project Syndicate
Diane Coyle, Professor of Public Policy at the University of Cambridge, is the author, most recently, of 'Cogs and Monsters: What Economics Is, and What It Should Be'.