Scapegoat economics: a potential pitfall for the Fourth Industrial Revolution

The 21st century is when everything changes. The Fourth Industrial Revolution is not an abstract economic idea. Everything from social status to economic geography is shifting right now. These changes are bound up with the current rise in prejudice. Political hostility to immigrants, often using dehumanizing terms, was a common feature of election campaigns throughout 2024. Russia has declared the LGBT movement to be a terrorist organization, and Iraq criminalized same-sex relationships. The Organisation for Security and Cooperation in Europe’s hate crime report documented a depressing tendency to push racial, religious, and other forms of prejudice across advanced economies.

The current upswell of prejudice has economic origins. One of the fascinating features of the information age is how much the Fourth Industrial Revolution is reversing the broader changes of the first industrial revolution. To take one obvious example, for centuries people lived and worked in the same building – it was the original industrial revolution that broke that arrangement. In the Fourth Industrial Revolution, traditional physical working arrangements have been re-established, though adapted for the virtual world. That single shift alters real estate demand, investment spending, transport, food supply, and energy use. Just as it did 250 years ago, the sense of stability is crumbling. The difference today is the speed with which familiar ways of living and working are brought crashing down.

Change should eventually bring considerable benefits. The Fourth Industrial Revolution will promote efficiency, and raise living standards. Doing more with less must also be a part (perhaps a sizeable one) of tackling the sustainability crisis. And yet, there is a real possibility that this revolution will devour its children. Change, and the fear of change, may halt the collaboration necessary to benefit from the opportunities technology can bring.

Inevitably, wider economic changes can threaten an individual’s relative status. Jobs that were high status and high pay may become obsolete. Jobs that were never imagined in the past can now earn high rewards. The fact that some people experience or fear a relative decline in their status leads to a desperate search for an explanation. Inevitably, explanations are complex – and humans shy away from complexity. It is easier to cling to a superficially simple solution, even if it is wrong. Thus, we get the rise of scapegoat economics.

Scapegoat economics involves blaming a single group (generally a social minority) for all of the negative aspects associated with change. Scapegoats are often groups that are obviously different from the majority population – like immigrants, or groups that have recently made some (often limited) gains in terms of equal treatment, like the LGBTQ+ community. The former can be readily dehumanized by a majority, and the improvement in the condition of the latter can be falsely linked to increases in economic and social insecurity.

The natural result of scapegoat economics is prejudice politics. Reducing or removing the influence of the scapegoat in the economy can be presented as a way to return things to how they were (with the positive characteristics of the past exaggerated by a romanticized haze of nostalgia). Immigrants did not steal your job, and marriage equality did not undermine society – but if you can be persuaded to believe the false narrative, then logically the rights of these groups should be reversed. Thus, political and economic barriers go up.

Prejudice throws away the skills the world needs with an ill-informed contempt. Every innovation results in a lot of excitement about the shiny new technology, but economically the technology is a minor step on the path to productivity and higher living standards. It is not the technology, but how the technology is used that matters. That puts the emphasis firmly on people; having the right person in the right job at the right time. Prejudice uses irrelevant characteristics to ration political and economic rights, and deliberately prevents the right people from being employed.

Reducing diversity in the workplace compounds the damage, by risking a monoculture of ideas. A monoculture of thinking is not great at any time – but rejecting different approaches at a time when the world economy is in a ferment of change makes it more likely that the opportunities and risks of the brave new world will be overlooked.

Thus, rapid change in a complex world risks instilling a fear of the future in the general population. Those that fear a loss of status may be seduced by the apparent simplicity of scapegoat economics and prejudice politics. A rise in prejudice may then constrain the economic benefits that technology can bring – potentially fuelling more economic insecurity, and generating more vicious forms of prejudice.

This negative spiral is not inevitable. Companies can play a significant role in limiting the damage. Quite aside from morality and social responsibility, a company is more likely to maximize its profits if it is getting the most out of its people – after all, for almost every business, labour is the largest cost. It is therefore in the economic interests of the business sector to push back against prejudice, and advocate for diversity and inclusion in society.

Whether in person or virtually, people spend a large proportion of their waking hours at work. The culture of the workplace influences the values we take into the wider world. What happens in the workplace can be a subtle force for social change. Moreover, the information age brings people together virtually – as we get to know others online, the ability of prejudice to dehumanize those groups is undermined. The information age enables us to learn that people with superficially different characteristics are, in fact, just like us.

The recent past seems to have presented a depressing sequence of developments, threatening our ability to make the most of the opportunities technology presents. We should not be too despondent. Ultimately, there are reasons to believe that prejudice can be contained, and the damage of scapegoat economics can be minimized.