Given the above challenges actions shall be taken on two fronts. On the one side, the positive aspects of digitalization shall be fostered. On the other side, the impact of digitalization on the production and service sectors and on workers shall be monitored to take pre-emptive policy actions that can avoid the social unrest in some sectors, regions or cities.

Reforming banking and fostering alternative intermediation

The crisis has shown that the banking industry, whose primary goals are that of providing risk-sharing opportunities and monitoring expertises of investment projects, is susceptible to risks that can have an impact on investors. The digital technology provides alternative investment opportunities that can contain the consequences of bank panics. Those alternatives, while helping to improve risk-sharing abilities of investors, might however endanger the sustainability of the banking sector.

First, the banking sector shall be reformed not only in terms of its safety, but also by re-directing its business models so as to take advantage of new technologies. While bank officers are being substituted by internet intermediation services and financial analysts are being substituted by robot advisers, it is possible to devise alternatives business areas. For instance, currently investors wishing to engage into digital platform investment face large search costs are those platforms are dispersed and do not provide comprehensive retail services. The banking sector can re-direct part of its activity and human resources to organize the logistics of those comprehensive digital retail services, thereby taking advantage rather than suffering the information externalities.

Second, alternative intermediation sectors shall be fostered, albeit supervised. As explained earlier digital intermediation can improve risk-sharing possibilities through better data and information handling. But another aspect is particularly important. In most European countries firms are small and many do not have access to traditional banking sector funding, let alone to equity funding. Crowd-funding and peer-to-peer lending can provide alternatives for innovative start-ups and other small firms to get funding for promising projects. Creating alternative funding markets, also through digital platforms has also been one of the declared goals of the European Capital Market Union.

An important concern that shall be addressed relates to investor protection. While digital investment platforms provide several signals that improve projects’ assessment abilities, they still require a minimum knowledge of the financial products sold. Therefore, while fostering those alternative intermediation means, it is crucial to guarantee that all investors have a minimum level of financial literacy.

Monitoring the automation of job tasks and re-directing investment in human capital

To guarantee sustainability of the digital revolution it is important to monitor the automation of jobs in the various sectors. This will provide early warnings for possible employment stagnation.

Second, it is important to direct investment in human capital toward abilities that are most needed in sectors which are not at risk of automation. Much of the investment in human capital is driven by its returns on the job. Engineers’ tasks in the manufacturing industry have been at an increasing risk of automation. The same is true now for many tasks in the financial industry. On contrary tasks in the caring and education industry are less susceptible of automation. This suggests that it might be important to target investment in education toward abilities needed in sectors which are less at risk of automation. Furthermore since the type of skills required in more IT-based sectors change rapidly, education shall direct efforts also toward improving malleability of skills. This might require investing more in a knowledge-based as opposed to a competence-based education, as the first implies more flexibility.

This requires two things. First, Labour Ministries shall commit to develop consistent databases that can help to trace the automation developments. Second, there is need for conscious investment in pedagogical methods that foster originality and social skills. This will be a crucial part of sustainable development.

Addressing inequalities and social unrest.

As many jobs can be automated there is no doubt that a large portion of the population will observe its employability shrinking, particularly so workers in routinary jobs. It is also possible that the Keynes prediction that we will all be working few hours will materialize (some countries have already taken actions to reduce the working hours; see for instance Sweden, which is currently testing a six-hours working week). Furthermore we observe mounting under-employment in many industrialized countries. For instance data from Bell and Blanchflower (2013) show that under-employment has been growing in the UK, particularly so after the Great Recessions. On the other side, we observe successful digital companies extracting extraordinary rents. If this process contributes increasingly to polarization and inequality, actions on this front are unavoidable. A proposal to tax robots is not viable as this would discourage innovation in new technologies that might be useful on many fronts. However for companies that extract extraordinary large monopolistic rents (well beyond what is needed to incentivize innovation), a viable solution might be higher and more harmonised taxation, whose proceeds can be used to contain social unrest. Other active labour market policies (like facilitating skill/matching or lowering tax wedges) might have to be considered.