How will governments respond to technology wave?

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By Global Public Square staff

Several weeks ago, the CEO of Uber, Travis Kalanick, was a guest on the show. He said that the biggest development in technology today is that the world of bits is bumping up against the world of atoms. To which you might say, what is he talking about?

He was highlighting a crucial trend. For years, the technology revolution was operating within the digital world – changing the way we got words, music, movies – all products that can be produced and consumed in digital form, in other words, in bits.

But now, software and the big data revolution have moved into every aspect of life – getting a taxi, a hotel room, groceries, and other kinds of physical products. And that's causing friction where the bits and bytes of the digital world meet the atoms of the real world.

Kalanick's company is taking on the world's taxi cartels and commissions. Airbnb is battling the world's hotel industry and zoning laws. And the new global currency Bitcoin is puzzling financial regulators.

They all raise fundamental and fascinating questions about whether some of the functions governments have taken on over the past decades or centuries are necessary. But new technology shouldn’t become simply a mask to avoid paying taxes or abiding by standard rules.

Look at Airbnb, a service that allows people to rent anything from an apartment to a castle to a treehouse for a night, a week or even a month in 190 countries. Just a few weeks ago, New York State's Attorney General said that 72 percent of Airbnb’s rentals in New York City "appeared to violate" New York law.

What's more, the attorney general contends that a small percentage of Airbnb users between 2010 and 2014 accounted for a disproportionate share of the revenue. From the private rentals overall, the attorney general said, New York City may be owed some $33 million in unpaid hotel taxes. Car services like Uber and Lyft have also been met with resistance in several cities. Germany recently issued the first nationwide ban of Uber.

To help navigate this regulatory minefield, the techies even turned to a politico – Uber hired David Plouffe, Obama's former campaign manager.

Steven Strauss, a visiting professor at Princeton’s Woodrow Wilson School, says that while some aspects of this technology are troubling, these companies are forcing society to confront its regulations and to ask whether they make sense.

We would probably agree that people who we hire to drive us around ought to undergo background checks, but should the local taxi union really be able to limit the number of drivers and cars on the road in a city like New York, asks Strauss. That is about restricting competition.

Indeed, many of the regulations in place today have created mini-monopolies that allow cartels to limit competition and raise prices. That's of course bad for the consumer. Clearly, we do need regulations. But we need smart regulations that allow for innovation, new enterprises, and growth.

The greatest problem with government regulations is not that they are good or bad, but that they are eternal. Once in place, lobbies form to sustain them and they are rarely modified or eliminated.

But governments will have to come to terms with the wave of technology that is creeping into every aspect of life. Even in Germany, which takes pride in its highly regulated system, officials recently overturned the nationwide Uber ban and have created a compromise that is complex but workable.

Advanced economies like Germany and the United States always face the danger of getting sclerotic, jammed up over time with an accumulation of regulations and rules. The interests of the past and the present are well represented in politics by special interests formed to protect them. But the future has few lobbies for its cause.

Perhaps technology will change that, representing the future, injecting some dynamism into the economy, and shaking up the old way of doing things.