Spotlight on Governance in the 4th Industrial Revolution

internet switchThe Fourth Industrial Revolution is disrupting almost everything about the way we live, work, and do business, including the way we make the rules and laws we use to govern industry and society. Historically, public policy and decision-making systems evolved in a strictly top-down, linear fashion, with decision makers having ample time to study a particular issue in detail and develop and implement an appropriate regulatory framework. But this style of approach is far from feasible today, given the incredibly rapid pace of change and the sweeping scope of impact of the Fourth Industrial Revolution.

As a result, today’s legislators and regulators are rushing to find new ways of building legislation that preserves and protects the interests of consumers and the general public while ensuring that innovation and technological development remains supported. And, as argued by Gillian K. Hadfield, a professor of law and economics at the University of Southern California, it’s critical that we get this question right: if we are not able to properly govern the Fourth Industrial Revolution, we will not be able to fully realize its true economic and social potential. In a recent World Economic Forum article, Professor Hadfield shares the following thoughts on governance and the Fourth Industrial Revolution.

Why is governance important in the Fourth Industrial Revolution?

It’s a widespread, but dangerous, assumption that economic progress will happen no matter what the governance environment looks like. As common thinking has it, the Fourth Industrial Revolution is happening anyway. Figuring out how to govern it will just ensure that it happens more effectively.

But Hadfield argues that seeing governance as a luxury rather than a necessity is the wrong perspective. Instead, we should be thinking of governance as a form of infrastructure—an invisible and interconnected platform of rules and practices that allows us to make cooperation and planning part of our economic activity and social interactions, and without which, just like any other kind of infrastructure, economic progress does not happen.

Who will be the key players in implementing governance policies for the Fourth Industrial Revolution?

codingWhen considering the rules of the Fourth Industrial Revolution, people put a great deal of emphasis on what the rules should say and how that will be agreed upon, but they give much less attention to the question of who will be doing the agreeing. However, determining who the key players are is a critical step if the rules are to be not only designed, but delivered on in this new and complex space. It’s not an easy question, though: governments tend to lack the necessary expertise, but relying on the innovators themselves, who do have the appropriate experience, could lead to difficulties with the effectiveness of self-regulation.

How can we solve this government/innovator governance conundrum?

The tension between governments and innovators when it comes to regulation has led to the emergence over the last two decades of a trend known as the “new governance theory.” Under this model, rather than writing the rules themselves, governments define what the rules should achieve, and then delegate the responsibility of writing those rules to the entities that are going to be impacted by them.

A good example of this model is the recent “right to be forgotten” decision. After ruling that individuals should have the right to have references to themselves removed from online search results, European courts tasked Google—which was clearly in a far better position to know how to do this than any government—with figuring out how to achieve that objective.

Hadfield further speculates that this type of legislative collaboration between governments and private-sector bodies could be made even more effective by introducing third-party competition and innovation into the process. At present, for example, many jurisdictions are debating how to handle the advent of self-driving cars, which are set to bring a host of never-before-considered issues to our roads and our courtrooms.

What if, rather than having either governments or self-driving car companies writing the rules, they were created by a number of private bodies who then had the responsibility of persuading governments to approve them and self-driving car companies to agree to them? Incentives like this could be a big step in ensuring that goals are achieved in an effective and cost-conscious way and that the results remain accountable to the public interest.

What will governance of the Fourth Industrial Revolution look like in 2030?

Hadfield emphasizes that one of the leading challenges for governance in the Fourth Industrial Revolution is the pressure to create globally harmonized rules—something that makes perfect sense in an age where global companies have no interest in dealing with dozens, if not hundreds, of different sets of regulations. Hadfield imagines that, by 2030, we will have tackled this challenge by harnessing market incentives to create private regulation providers that compete on a global level, thus building a world-wide network of regulators for governments and companies alike to choose from.