In its October 4 edition, The Economist ran a special report with accompanying leader on ‘The the third wave’ – the ‘modern digital revolution’ now breaking and its consequences for the world economy. This being The Economist, the overall conclusion, adduced from the historical evidence of the first and second industrial revolutions, is cautiously optimistic: ‘this newspaper believes that technology is, by and large, an engine of progress’. Yet despite the proviso that the favourable results could on past precedent take many years to feed through, or more desperately that the technological revolution could ‘create vast numbers of jobs nobody has yet imagined, or boost the productivity of less-skilled workers in entirely novel ways, perhaps through robotic exoskeletons or brain implants’, the interesting thing is how little the positive conclusion is supported by what has gone before. The evidence simply doesn’t justify it. A truer flavour of the piece is given by the title of the accompanying leader, ‘Wealth without workers, workers without wealth’.

Briefly speaking, the report notes that ubiquitous computing driven by Moore’s law (which predicts that computing power per chip doubles every two years while halving in cost) is about to unleash a tsunami of economic disruption which upends all established ideas about the job split between humans and computers. Nearly half of all US jobs could be automated away in the next 20 years, according to one estimate. The income distribution is being hollowed out, with many fewer jobs in the middle tier, many more at the bottom and a very, very few soaring away at the top. In the developing world, the change threatens traditional routes to development through ‘premature deindustrialisation’. As the author concedes, whether the digital revolution will bring mass digital job creation to make up for the mass job destruction – or as I would put it, whether it represents progress or a step backwards for human civilisation – remains to be seen.

As you would expect, the report is well written and thought-provoking. But all the sources, references and thinking here are economic. In this analysis everything is down to economic determinism, and nothing to human decisions and motivations. This is a common failing in neo-liberal economics, and it substantially undermines even the report’s hesitant techno-optimistic conclusions

There is no mention here, for example, of the rise of big data, giant computing ‘clouds’ and National Security Agency pointing ‘to a future in which technology’s ability to set mankind free is far from guaranteed’, as a recent FT book review mildly puts it. No mention either of the point (made in the same review) that the new digital reality looks suspiciously like the old one before PCs, a world of centralised computing but this time concentrated in the hands of a few giant companies and governments. It ignores the ‘winner takes all’ tendencies this enables, brilliantly illustrated by the woefully-misnamed ‘sharing’ economy, which crunches up real jobs and spits out the remains as pitifully paid micro-jobs – all this at a time when, as the survey does acknowledge, computers are having no mitigating effects at all on the costs of living basics such as housing, healthcare and education, which are soaring everywhere. There is no mention of the issue of power – the fact that the US banks at least, and some of the internet companies, now far outstrip the ability, or willingness, of the authorities to regulate them.

Most glaring of all, comparisons with previous technological upheavals – the first Industrial Revolution in the late 18th century and the second a century later that brought in electricity and the internal combustion engine – are vitiated by the fact that in neither of those cases were the outcomes influenced if not determined by an ideology that dictates that the sole beneficiaries of corporate activity are shareholders. There were of course plenty of immediate losers both times round, and it took time for the cumulative benefits to spread through the economy. But even though capital emerged dominant over labour, by the early 20th century there were sufficient countervailing forces in the shape of trade unions and enlightened employers to ensure that until well after the mid-century the labour share of GDP remained robust and stable.

Is it coincidence that the decline of the labour share, the hollowing out of the Anglophone economies and widening income inequality all began in the late 1970s and 1980s with the advent of the shareholder value movement and have picked up pace ever since? As just one example, Thomas Piketty has identified the emergence of corporate ‘super-managers’ as an important element in increasing wealth and wage inequality. While the Economist author assumes that pay differentials are simply the market reflection of different levels of talent, no one who has looked at it in detail can doubt that soaring pay for CEOs and collapsing pay for everyone else are two sides of the same coin, driven in different directions by the incentives created by governance based on maximising shareholder value. Here is not the place for a description of the multiple pathologies associated with shareholder primacy (there is an impressive list compiled by the consistently excellent Steve Denning on his Forbes blog here and a more academic statement of doubts here) – but as I have argued before, at the very least they are shaping the way the digital revolution plays out in practice, and not in a good way.

The Economist’s leader on the subject warns that governments will have to react faster than they did last time, when it took 100 years to make the education investment that enabled workers to benefit from the original industrial revolution. But while no one would quarrel with better education per se, it’s an illusion to think that this time it can solve a problem that’s posed on a wholly different plane. The big issue this time round isn’t levels of education, it’s the investment behaviour of CEOs. To echo city economist Andrew Smithers, if we can’t change the incentives that govern CEOs’ allocation of corporate resources, all the rest is whistling in the wind.