Each day seems like the countdown to the end of holidays. At boarding school I was home sixteen weeks each year, a month at each of Christmas and Easter, two months in the summer, and at school for the remaining time. During the holidays I counted the days to the inevitable return to school. Late in my eighth decade, the situation is similar. The end is in sight, carpe diem the motto, and decisions to be made for what do with the time remaining.
As a start, I would like to try to pass on to my grandchildrens’ generation things that I have learned often the hard way, as well as things which I think may affect their lives. This coincides with another interest, which is trying to understand the economic, political and social changes now taking place in the world. While these and other disciplines are taught separately, they are, in my mind, highly interconnected, although university departments continue to engage in turf warfare. Questions which arise are, what is happening in the global, national and local economies, and how can the next generation prepare for these changes and their likely effects.
Davos 2013 World Economic Forum
The 2013 Davos meeting lists five metrics of the global economy, by country: GDP annual growth rate, government debt to GDP ratios, income inequality, unemployment and CO2 emissions – details are listed at: http://www.guardian.co.uk/business/datablog/2013/jan/23/davos-2013-key-data-gdp-unemployment-debt
The data focus on a macro and business cycle approach to economic conditions to which inflation rates might be added. Many countries are currently experiencing low inflation, low growth rates, higher than desired unemployment, high or rising debt to GDP ratios. CO2 emissions are a more recent addition to these indicators, but surely welcomed by Al Gore who stands to gain about $70 million from the sale of Current TV to Al Jazeera, a firm backed by the government of oil producing Quatar.
One question to ask is whether business cycle analysis is the most useful way to understand the global economy. Or are we experiencing, as some suggest, a type of industrial revolution which is affecting how economic conditions are changing. Some see the present as the second industrial revolution. The first started in the 1800s and continued to about the 1980s. Others like Jeremy Rifkind divide the time differently and see it as a third revolution:
“The great pivotal economic changes in world history have occurred when new energy regimes converge with new communication regimes. When that convergence happens, society is restructured in wholly new ways. In the early modern era, the coming together of coal powered steam technology and the print press gave birth to the first industrial revolution. It would have been impossible to organize the dramatic increase in the pace, speed, flow, density, and connectivity of economic activity made possible by the coal fired steam engine using the older codex and oral forms of communication.
In the late nineteenth century and throughout the first two thirds of the twentieth century, first generation electrical forms of communication—the telegraph, telephone, radio, television, electric typewriters, calculators, etc.—converged with the introduction of oil and the internal combustion engine, becoming the communications command and control mechanism for organizing and marketing the second industrial revolution.
A great communications revolution occurred in the 1990s. Second generation electrical forms of communication—personal computers, the internet, the World Wide Web, and wireless communication technologies—connected the central nervous system of more than a billion people on Earth at the speed of light. And, although the new software and communication revolutions have begun to increase productivity in every industry, their true potential is yet to be fully realized. That potential lies in their convergence with renewable energy, partially stored in the form of hydrogen, to create the first “distributed” energy regimes.”
Whether it is the second or third revolution many would agree that major changes are taking place in numerous sectors. For example, communications technology is affecting industries and activities such as banking and finance, advertising, publishing (newspapers, magazines, books, blogs), postal services, telephony, music, video (TV, film), education, the provision of government services and military and defense activities such as the use of drone aircraft, and those industries where there can be further substitution of capital for labour, and the outsourcing of production.
Those who study the effects of technology suggest that changes todate are the first five percent of what is to come. My lay conclusion is that major changes are under way with implications for governments, firms, non-profit organizations (religious, charitable, educational, hospitals and others), and for individuals. This is where the rubber hits the road for future generations. Can our generation provide any useful advice for their education, training and the careers which they may want to pursue? Frankly, I am doubtful, but further discussion and input from others might lead to something useful.
What’s been happening?
One symptom of recent changes is what is taking place in the labour force. For Canada, the Dec 2012 labour force surveys shows 79% of the labour force in services and 21% in goods producing industries, 18% in manufacturing and 2% in agriculture. Thirty years ago the percentages would be lower for services and higher for manufacturing. The trend throughout North America is for increased employment in services at the expense of goods production in general and manufacturing in particular.
Associated with these changes is the substitution of capital for labour, the agricultural sector being a prime example, but also in manufacturing; and the unbundling of services so that those previously undertaken in manufacturing, for example, are now outsourced to service sector firms with some services outsourced abroad, such as call centres and printing. Some foreign outsourcing is now returning to North America for various reasons. For example, at times it is hard for Canadians to comprehend foreign accents, and in manufacturing, a small printer type machine through layering can produce inexpensively a customized machine part. These developments may return jobs to North America.
So who has benefited from these developments. A September 2011 Atlantic article, “Can the Middle Class Be Saved?” by Don Peck examines how technical change has affected job opportunities and educational requirements in the US labour market. Canada is likely to be similarly affected.
“College graduates may be losing some of their luster for reasons beyond technology and trade. As more Americans have gone to college, MIT economist David Autor notes, the quality of college education has become arguably more inconsistent, and the signaling value of a degree from a nonselective school has perhaps diminished. Whatever the causes, “a college degree is not the kind of protection against job loss or wage loss that it used to be.”
Without doubt, it is vastly better to have a college degree than to lack one. Indeed, on a relative basis, the return on a four-year degree is near its historic high. But that’s largely because the prospects facing people without a college degree have been flat or falling. Throughout the aughts (2000 to 2010), incomes for college graduates barely budged. In a decade defined by setbacks, perhaps that should occasion a sort of wan celebration. “College graduates aren’t doing badly,” says Timothy Smeeding, an economist at the University of Wisconsin and an expert on inequality. But “all the action in earnings is above the B.A. level.”
“ For more than 30 years, the American economy has been in the midst of a sea change, shifting from industry to services and information, and integrating itself far more tightly into a single, global market for goods, labor, and capital. To some degree, this transformation has felt disruptive all along. But the pace of the change has quickened since the turn of the millennium, and even more so since the crash. Companies have figured out how to harness exponential increases in computing power better and faster. Global supply chains, meanwhile, have grown both tighter and more supple since the late 1990s—the result of improving information technology and of freer trade—making routine work easier to relocate. And of course China, India, and other developing countries have fully emerged as economic powerhouses, capable of producing large volumes of high-value goods and services.
In March 2011 the national (US) unemployment rate was 12% for people with only a high school diploma and 2% for those with a college degree.”
The complete article is worth reading. It leans more to the view that North America is experiencing a rapidly unfolding industrial revolution than a typical business cycle recession.
As usual comments would be appreciated and suggestions of other readings on this topic.