Carpe Diem and prospects for our grandchildren

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.”

Source: http://www.foet.org/lectures/lecture-hydrogen-economy.html

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.

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3 Responses to “Carpe Diem and prospects for our grandchildren”

  1. whistler boy Says:

    This is nicely written Chris. I am sure that you have passed plenty of wisdom along to your grandchildren over the years. With respect to your question, I think that while the changes that are occurring are different than those that have occurred in the past, they do not appear to be more profound (if there were a profundity index). I am also less concerned about technological change than I am about demographics (aging populations), the political process (what I perceive to be the increasing prominence of interest group politics) and social organization (the increasing reliance on centralized government bureaucracy).
    With respect to the middle class, to the extent that union scarcity rents are essential to provide a middle class standard of living, there has been and is going to be some slippage in the tradeable goods (and services) sectors. The erosion in the non-tradeable and protected sectors (government employees, utilities, etc.) is likely to be very slow and bitterly fought.
    In terms of career advice, it seems that there are few sure things other than medicine. A few worm’s-eye anecdotes. One is that when my son Craig was taking engineering, mining engineering was perceived to be a dead end. Now they are fighting off job offers. Who knew? The other comes from my experience up the valley. A number of my neighbors up there are in “the trades” (for example, refrigeration technician). They do very well financially and each job presents non-trivial analytical challenges. It may have less status than sitting in a cubicle or making meetings but it may be far more rewarding.

  2. T Says:

    Chris & whistler boy

    I don’t yet have any grandchildren to whom to pass on any wisdom, but I doubt they would listen in any event, except to be polite. It seems that the overview that comes with age would be the most difficult thing to impart, as the younger the listener, the more remote they are from the perspective being presented. By the time they are able to understand, it would appear that the die is already cast and the choices made, often irrevocably. I derive this view from my experience with my children, but I suspect the same would apply vis-a-vis grandchildren.

    The last para of whistler’s response raises an interesting issue. Yes, the offspring could find very rewarding lives in the trades, with lots of interesting challenges (albeit mostly of a mechanical nature) and a fat paycheque. And a middle class life – surely a plumber earning $70,000 p.a. would be considered ‘middle class’ ?
    The problem is most children of professionals have been raised in such a way as to think that the trades are somewhat demeaning, and that white collar work, especially that with an intellectual component, is far more socially acceptable and in all respects much more desireable. It is very difficult to change that mindset after 20+ years of indoctrination, even though it appears that there is a growing shortage of skilled trades and, if my anecdotal experience is shared by others, rising incomes. A six week wait at the cottage to get an electrician is an example. And these are all jobs that for the most part cannot be replaced by technology, and that cannot be farmed out to other countries – i.e. guaranteed work here in Ontario.

    Raphael Patai in “The Arab MInd” tells us that in Egypt, blue collar work is so demeaning that an office clerk earning $5000 a year will actually hire others who earn twice the wage to do simple unskilled manual labour, rather than be seen doing such work himself. And I know people in Ottawa, usually of a similar cultural background, who will avoid manual labour at all costs, even if no one were to know that they did it themselves.

    On Al Gore, I saw a television interview recently with him, in which he was asked about selling out to a company backed by Oman. His rationale had clearly been thought out in advance, as one would expect, and it was that the American public deserved the quality that Al Jazeera brings to the airwaves, and that he was in essence doing a service to the public by so arranging for his small operation to grow and thrive. The interviewer didn’t press him. I would imagine that his sacrifice was offset many times over by his ever expanding bank account.

    • cmaule Says:

      Thanks for the comment – some thoughts on parts of it.

      I agree grandchildren wont listen when they are young but their parents might, and they need are the ones who will direct their children as best they can, and even then it may be too late.

      The trades are often considered demeaning work by professionals and their children, but good pay may be an incentive. I have a few examples of those who have taken this route. Note some social changes occur quickly, such as % of women in the workforce – also 90% of the Cdn population are in provinces where women are now the premiers.
      House cleaning is perhaps demeaning but as an ex-professional I find it therapeutic as well as rewarding (that’s what I tell myself).It is a financial saving while in retirement, perhaps $2600.00 per annum.

      Small correction. I think Al Gore sold his firm to Al Jazeera owned by the Quatari not Omani government. Quatar is ranked as one of the world’s richest countries based on proven oil and gas reserves. This does not seem to bother Al, as he pursues his environmental agenda.

      PS. I get good service from an electrician at the cottage. I always pay him without delay.

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