As Poslovni Dnevnik/Josipa Ban writes, some of the most highly regarded countries in the world have become aware over the last few decades that the well-being of every nation, as well as their security, depend on STEM achievements,” explains Boris Podobnik, professor of economics and vice dean for research at ZŠEM, a researcher at the Center for Polymer Studies at the University of Boston, and professor of mathematics at the University of Rijeka.
That’s all well and good being said, but precisely how do STEM disciplines affect equality or inequality? Podobnik was further motivated to ask this question by economist Joseph Stiglitz, who stated in his book “The Price of Profit” that a rather small portion of companies actually control entire economic sectors and contribute to the dizzying growth of inequality.
“Although it’s clear that today it’s STEM fields that drive innovation in the economy and in social relations, we aren’t yet fully aware of the extent to which STEM education quantitatively contributes to economic inequality and how STEM and non-STEM companies behave during an economic crisis or in a pandemic,” points out Podobnik, who together with his colleagues – Marina Dabic, Dorian Wild and Tiziana Di Matteo – investigated the impact of STEM on the growth of wealth at the level of individuals and companies.
They also analysed the operations of STEM companies during the global coronavirus pandemic in a scientific paper entitled: “The impact of STEM on the growth of wealth at different levels, from individuals to companies and countries: The operations of STEM companies during the pandemic in different markets”.
“At the company level, we’ve shown that inequality in STEM companies is greater than it is in non-STEM companies, and this is also true for individuals,” Podobnik revealed when discussing the results of the research.
What does the Forbes list say?
They came to their results by analysing companies included in the American S&P 500 and the German and French DAX and CAC40. As for individuals, they analysed the Forbes list of the richest people in the world.
That list, Podobnik says, that is, those included in it, reveals yet another rather interesting fact. It turns out that in Data Science, formal education no longer plays an important role, as evidenced by Bill Gates and Mark Zuckerberg, who went to STEM college, but didn’t finish it. Despite this, researchers still treated them as STEM graduates.
“Today, if you solve a big problem in data science, and you don’t have a formal education, you’ll be accepted not only in every American company, but you’ll also be easily appointed as a lecturer at elite faculties. This is valid only in Data Science, not in physics or economics, and it’s still a warning and a threat to the education system,” points out Podobnik.
The analysis of STEM companies’ operations during the coronavirus pandemic also showcases some very interesting results. It proves that American companies from the STEM field, which are included in the S&P 500, have shown better results than non-STEM companies both in times of expansion and during the pandemic.
We can explain this, Podobnik points out, by the fact that STEM companies have better chances in the long run because it is precisely innovations that push the economy forward. “And we naturally associate innovation more with STEM,” he adds. However, such results haven’t been shown by the analysed European companies. For example, the analysis shows that STEM companies included in the German DAX index in the period of economic expansion don’t show better results than non-STEM companies.
“This is probably because America is an attractor for real STEM high-tech companies, while Europe isn’t. Can you think of any large European company that is at the level of Google, Tesla, Microsoft, Intel, Netflix, or Amazon?” asks Podobnik. Indeed, Europe today doesn’t have a single technology company that can compete with any one of those from the USA, or even with those based in China. This is the case, explains the professor, because America has about twenty times more venture capital per capita than there is in the whole of the EU. In addition, the USA has stronger universities, so it shouldn’t really be surprising that all great innovations come from there.
“Europe prefers mediocrity a little bit too much, and here the average is looked at too much, there’s therefore no room for rare events that give way to great technological innovations in the same way that has been done in companies that we’ve all heard of by now. There are very few highly innovative companies based in the EU, and that’s why there is little difference between STEM and non-STEM companies here,” points out Podobnik.
Croatian unicorns are therefore quite miraculous indeed…
In such an environment, Croatian unicorns and some of what has been happening over more recent years with numerous domestic companies is actually a real miracle, Podobnik notes, because despite the bad business environment, high levels of corruption and a generall poor attitude towards entrepreneurship, there are two wildly successful Croatian unicorns. “For comparison, Denmark and Italy don’t have a single one,” he notes.
So, even though research shows that STEM contributes to the growth of inequality, the fact remains that technological development, which is mostly based on STEM disciplines, is unstoppable anyway. The pursuit of equality will not stop this development, and the fruits will be reaped by those who do decide to invest in STEM innovations.
“Society must be the one to deal with equality, it just needs to have the right measure to do so. Too much equality leaves no room for the innovation of those who actually are geniuses. However, what is ideal or optimal inequality remains a big unknown,” says Podobnik, noting that complete equality of everything is characteristic of communism, a model that proved to be astonishingly economically ineffective. On the completely different side is absolute libertarianism, which does not need the state at all – two wings on the same bird.
“Both extremes are bad ideas, meaning that the optimum lies somewhere in between the two. But the question of all questions is where that optimum is. Society, therefore, takes from the more successful and gives to the less successful, but the question is how much is optimal, that is, how much can you take from the more successful, without destroying the space for innovation of the most successful and most ingenious?” Professor Podobnik warns.
Here in Europe, on the other hand, he believes, we definitely haven’t been able to find that optimum. “Europe has gone too far in the direction of socialism, where the emphasis is placed only on equality and on trying to achieve a good life for everyone. European societies are too standardised, and the more restrictions there are, the less space there is for the degrees of freedom that are essential for new technological innovations to come about.
Europe has clearly not found the right balance between taking care of the majority of people and taking care of those who are indeed the most inventive, whose inventions would keep Europe in the world as a place of wealth and technological progress. Today, we all know that due to the policy of excessive taxes and regulations, the EU is rapidly falling behind America and China. So, did we need the war in Ukraine to decide to produce our own chips? Taiwan can do it, but the EU can’t!? That’s pretty poor,” he warns.
Europe, and therefore Croatia, remains the guardian of old, outdated industries
And while Europe, the custodian of old and heavy industry, is lagging behind thanks to its policies, China, much like America, has long understood what will be the key to economic growth and development. China, points out Podobnik, has targeted students in STEM fields more and more over recent decades.
“Back in 2013, 40 percent of students in China graduated with a STEM degree, twice as many as in the US. This is probably one of the main reasons why China was able to surpass the US in terms of GDP measured by purchasing power parity some five years ago,” Podobnik explained.
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