Technology has been blamed for a lot recently.
Automation and artificial intelligence have supposedly led to substantialjob losses, reducedbargainingpower for workers, and increaseddiscrimination.
But perhaps we should be careful about so readily blaming technological innovation for these social problems.
We shouldnt be trying to obstruct technological innovation and diffusion.
Germany is a particularly useful case to study.
In recent decades, inequality has risen fast, and tounprecedentedlevels since unification.
Whereas the US runs a huge trade deficit, Germany runs a large trade surplus.
Importantly, evidence shows automation hascreated morejobs in Germany than it has destroyed.
So why is inequality rising so rapidly in the EUs largest economy?
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Public and corporate gross fixedinvestment spendingare dwindling.
And this is one of the fundamental mechanisms driving German inequality.
Germans are saving too much money.
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This conclusion may seem at odds with common perceptions of Germany as a successful, technology-driven developed economy.
Despite falling overall investment, the country certainly gives the impression of spending massively on stimulating innovation.
The question is: what is all this money buying?
Why are productivity and economic growth not accelerating?
Put simply, Germanys innovation is less effective and less likely to be commercialized than in the past.
The relative quality of patents as measuredby citationshas also declined.
And while total innovation spending is high, its concentrated in larger companies.
Most small and medium sized firms in Germany areinvesting nothingor very little in innovation.
The decline in the impact of innovation also reflects the fact that entrepreneurship has been stagnating in Germany.
To reduce inequality, Germany needs innovation that will increase labour productivity.
Urgent measures are also needed to refocus the countrys vitalauto industryaway from being locked into out-of-date technologies.
This will be good for innovation bycreating the demandfor new products and services.
And one way of funding this would be tomore effectively taxbig corporations.
