Afternoon Must-Read: Dani Rodrik: From Welfare State to Innovation State

…governments defused the threat of revolution from below that Karl Marx had prophesied by expanding political and social rights, regulating markets, erecting a welfare state that provided extensive transfers and social insurance, and smoothing the ups and downs of the macroeconomy… reinvented capitalism to make it more inclusive…. Today’s technological revolutions call for a similarly comprehensive reinvention…. The trouble is that the bulk of [our] new technologies are labor-saving…. Few jobs are really protected from technological innovation…. A world in which robots and machines do the work of humans need not be a world of high unemployment. But it is certainly a world in which the lion’s share of productivity gains accrues to the owners of the new technologies and the machines that embody them. The bulk of the workforce is condemned either to joblessness or low wages.
Indeed, something like this has been happening in the developed countries for at least four decades….

Imagine that a government established a number of professionally managed public venture funds, which would take equity stakes in a large cross-section of new technologies…. Central banks offer a model of how such funds might operate independently of day-to-day political pressure. Society, through its agent–the government–would then end up as co-owner…. The public venture funds’ share of profits from the commercialization of new technologies would be returned to ordinary citizens in the form of a ‘social innovation’ dividend…. The welfare state was the innovation that democratized–and thereby stabilized–capitalism in the twentieth century. The twenty-first century requires an analogous shift to the ‘innovation state’…