Klaus Schwab, founder and executive chairman of the World Economic Forum, said in June 2020 that a sharp economic downturn had already begun, and we could be facing the worst depression since the 1930s. To avoid this outcome, we need a worldwide economic recovery or a “Great Reset,” and one component of the reset is to harness the innovations of the Fourth Industrial Revolution (4IR) to support the public good.

Now with COVID-19 wreaking havoc globally, the world economy is still facing considerable challenges. Scholars argue that emerging technologies have not driven economic growth as powerfully as expected, and the post-pandemic global recovery needs to be backed with real science.

In the 1980s and 1990s, the world entered the “Information Age.” Both the rate and the scope of knowledge production, diffusion, and application are dramatically rising. Technologies are advancing at an unforeseen pace. But much evidence suggests labor productivity has not accordingly experienced significant growth. According to research by Oxford University Professor Ian Goldin and colleagues, labor productivity growth in the US, the UK, Japan, Germany, and France respectively decreased by 1.5%, 1.82%, 1.17%, 0.86% and 1.05% from the period of 1995–2005 to 2005–2018.

Whereas the first and second Industrial Revolutions were characterized by large gains in labor productivity growth and subsequent wage increases, labor productivity growth in many developed economies has stagnated since the 1970s, and decoupled from wage growth, said Wim Naudé, a professor of economics at University College Cork in Ireland. Some key technologies of the 4IR, such as artificial intelligence, the Internet of Things (IoT) and 3D printing, have not lived up to expectations. 3D printing, commercialized in the 1980s and 1990s, has so far failed to ignite a global revolution in localized small-scale niche manufacturing, remaining essentially restricted to creating molds and models. As several scholars noted, the wide adoption of 3D printing has been predicted but not yet achieved.

The IoT’s potential has not fully unfolded either. William Webb, former president of the Institution of Engineering and Technology in the UK, noted in his new book The Internet of Things Myth that there is no standard for connecting distributed IoT devices, and no single technology has yet emerged around which the whole IoT ecosystem can converge.

Naudé noted that increasing market concentration is one reason why emerging technologies have underperformed. Frontier firms possessing new technologies are leveraging their technological advantages to further entrench their dominance, hindering the diffusion of those technologies.

Together with colleagues, James E. Bessen, executive director of the Technology & Policy Research Initiative at Boston University School of Law, discovered that investment in intangibles, especially software by dominant firms in developed economies including the US have soared since 2000, resulting in declining market competition and reduced leapfrogging probabilities for second-tier firms.

Software technology is subject to large fixed costs and low marginal costs, enabling larger firms to develop products and services of better quality than their smaller rivals, Naudé said. Smaller firms facing high obstacles and low benefits often choose not to adopt the newest technologies, which means those technologies are not diffusing quickly enough. The gap between the “technology haves and have-nots” in the corporate world is widening, and the energy released by technological advancement is not enough to boost productivity growth across the board. Also, the economic returns of new digital technologies often diminish over time.

Naudé suggested investing more in science and research which delivers general-purpose technologies. Digital technology is among the fastest-growing technologies today, but most of the investment in this field is driven by venture capitalists seeking quick returns. Projects that require more development time but are more likely to lead to breakthroughs tend to be starved of funds.

Mikko Packalen, an associate professor of economics at the University of Waterloo in Canada, noted that not only has economic growth in developed countries been sluggish in recent decades, but many previously fast-growing developing countries are now experiencing slow GDP growth rates. Most economists believe part of the reason is a slowdown in the rate of discovery of new ideas. There is evidence that it now takes much more time to achieve scientific outcomes than in the past. Even in areas where progress is still robust, scientific productivity is declining.

In Naudé’s opinion, higher education institutions are critical to scientific research. However, university science has been encumbered by improper incentives and box-ticking administrative requirements in recent years. Naudé advocated a “back-to-basics” movement within the scientific community, promoting economic recovery by doing authentic and risk-taking research.

“This way, the Fourth Industrial Revolution can really get off the ground,” Naudé concluded.