Rethinking the role of the State in a digital society

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Markets change, and so does the economy with them. The economy changes, and so does society with it. Society changes, and so do governments with it. What’s interesting to notice about this short succession of apparent chain reactions is that we can assume that governments, usually, will always be at the end point of this process. The answer is quite intuitive, and it’s based on the fact that as long as democracy lives, only a few people in governments today would consider re-organizing the State and the economy around five-year plans and autarchic ideas.

A word that does not really belong anymore to our times’ political vocabulary is what describes best these periods of unimaginable shifts in history and society: revolutions. Pairing this term with innovation, the elephant in the room in this piece so far, provides an insight on which revolutions have more starkly marked the development path of our modern society – the industrial revolutions, the ICT revolution, the post-industrial transition, and all those historical phases that are so tied up with economics and society that we can’t help but talk about great transformations, in Karl Polanyi’s words.

So if innovation, progress, and technological advancements, are among the drivers of dramatic shifts in the society affecting our work, the way we interact with other people, and our systems of values, questions arise on the role of the State when this is presented face-to-face with momentous shifts.

Of course, there’s not a simple a unique response to this situation – otherwise, how could we even distinguish countries from countries if they all had, or have, the same approach to dramatic changes? Especially when these changes happen in the tech sector, but are set to bring disruption to the labour market, our systems of production, and the organization of the State itself as well. Sandra Särav, Global Affairs Director at the Estonian Ministry of Economic Affairs and Communications, outlined it quite well just a couple of months ago: “Each country has its own specificities, political structure, historical background, and different user needs”, so it doesn’t come as a surprise that the recipe for a successful adaptive work is not fixed, pre-determined. Governments can respond to the disruptive forces of innovation in very different ways, but summing them up in three paradigms proves helpful to understand how Estonia fares on this spectrum, and how a proactive approach towards technological revolutions can keep the State away from obsolescence.

Two worlds of passive approaches: the State as a mere regulator, or as a bureaucrat

Discoveries are made by men and women of science, new technologies and different implementations directly descending from more primitive artifacts spread throughout countries and continents – a technological revolution is taking place, and every aspect of our life is involved from that point on. This is how great transformations have taken place in the past, from the United Kingdom to the New World, and they always have marked a point-of-no-return from that stage. Working relations change, families change, living conditions mutate for good. It is up to the State when the first option is not to just leave the market by itself, to take action and understand how to counterweight the disruptive societal and economic effects of technological upheavals.

In this case, those in power usually opt for a predominantly passive approach: they set laws and regulations for the use and the implementation of such technologies, trying to look over the possibility of market failures, taking care of potential losses in jobs due to increasingly high levels of automation. The State operates as a regulator, and what makes this approach “passive” is the fact that the State limits itself to administrate or supervise what companies, inventors, speakers are doing. When the State becomes too invasive in its will to regulate markets and market activities, it turns into the heavy, slow, autarchic, bureaucratic State that we’ll all trying to run away from. Examples run through European history for centuries, and can still be found nowadays in Europe.

Progress runs fast through our veins: the State as an innovator

There is, then, the second approach to these societal changes: embracing innovation, becoming one of the drivers of change, and lifting the public administration to the grade of innovator itself. This means investing generously in research projects that can add value not only to just a few companies, but to the society as a whole – and not being scared of doing so even when a large number of these investments goes lost: for two projects that do not take off, there’s one that could pay back all the three of them put together. It means also reshaping the labour market and our perception of work and life to new paradigms, even employing Active Labour Market Policies (ALMPs) that could help workers reposition themselves on the market after a fall-out, through social assistance and lifelong learning programmes.

When the State joins the ground of those driving tech progress and innovation, it also becomes able to create new markets for connections, export and import, that could maybe be unknown or inaccessible to private investors or venture capitalists. It’s not a whole new idea, quite a fierce debate was born out of these topics a few years ago, but we are presented with new challenges ahead: Artificial Intelligence is going to be the next big thing, after Blockchain just about 5 years ago, or robots, or global trade of data.

The digital society that Estonia is today is the result of years of active cooperation between public and private sector actors. A series of innovative solutions and technologies have been tested, and then implemented, resulting in making our country the most advanced digital nation in the world.

What we understood, looking back at our path of development, is that progress can’t be stopped – technological revolutions took place in the past and will keep happening in the future. Right now, between Blockchain and AI,  we find ourselves in a moment of transition where, regardless, there’s one thing we know for sure – we can make technology work for the State, and we can make the State work with tech companies, but none of these things would be possible without a vision and a strong sense of digital leadership. The public sector alone is often regarded as an enemy, an inefficient venture capitalist, a cumbersome bureaucratic machine. Shifting this perception from enemy to ally can be very fruitful not only for companies, not only for the public administration itself but for the society as a whole.


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