Second Machine Age – Are the good times here?

Each generation blames previous ones, usually their parents, for the current state of the world. This can be a perilous exercise depending on whether one emphasizes the good bits or the naughty bits which precede the present. I would argue that today’s younger generation has much to be thankful for from the past, despite the problems that exist in the world, but then that’s what you would expect from me.

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The Way We Live Now is the title of a satirical novel by Anthony Trollope describing the trials and tribulations of young love, the pettiness of Victorian upper class life, the energy of London, the most powerful city in the world, and the greed and corruption that lay just below the glittering surface. Queen Victoria reigned from 1837-1901. My grandfather lived from 1824 – 1899 and my father from 1889 – 1976. Both survived this era and some years thereafter. They witnessed Trollope’s world at first hand and passed down some of it. Evelyn Waugh, his son Auberon and grandson Alexander, Somerset Maugham, P.G.Wodehouse, George Orwell and Rudyard Kipling chronicled parts of the 1900’s, and Christopher Hitchens the more recent years. For the USA today, Jon Stewart, on the Comedy Channel, focuses a television spotlight on greed, corruption and other kinds of knavery. No change from the past here.

Each generation blames the previous one for causing the mess it lives in. The current younger generation is no exception. No doubt their children will do it to them. But how bad is the current state of today’s world? After the crash of 2007-08, the pessimists point to unemployment, the loss of good paying jobs, public and personal financial deficits and high debt levels, environmental problems, deteriorating public infrastructure, growing income inequality, the failure of public and private institutions and democracy in general.

But are things really that bad relative to the past? Since 1900, there was the Boer War, World War 1, the Great Depression, World War 2, the Cold War, Korean War, Vietnam War, the rise and fall of Nazi Germany and of Japanese militarism, the overthrow of the Tsar and the rise and fall of Communism. Many other military and domestic conflicts, in China for example, could be listed. So conditions today  are probably no worse, perhaps better than what took place in most of the twentieth century. There is no need for today’s older generation to feel overly defensive about the accusations of those younger. For example, today’s elderly had to live through and adjust to the destruction caused by WW2 and the great depression.

A world war cured the high levels of unemployment of the 1930s. But a postwar recovery did occur and there is a partial good news story to tell future generations. Today, people in developed and developing countries have a much higher living standard than a century ago. There remain pockets of poverty in rich countries, but globally, the proportion of people living below the poverty line has decreased. The absolute numbers of poor may be higher but this is because the world population of 1.7 bn in 1900 is now over four times higher at 7.2 bn (Canada is almost six times higher, 5.5 mil and 32 mil).

Before examining today’s problems in the next section, let’s look at the forces affecting global society today.  Erik Brynjolfsson and Andrew McAfee in the Second Machine Age describe how, the world has entered a second industrial revolution. While the first one from about the 1760s revolved around the steam engine replacing manpower and horsepower, the second one is related to the computer and the digitization of information and communications stemming from developments since the 1930s which are ongoing.

The effects of the second machine age are seen in the growing interdependence between people, firms and other institutions locally, domestically and internationally, labeled as globalization; the changing patterns of skills required in the workplace; the demise of some businesses and the restructuring of others. Examples include the book and newspaper industries (the magazine industry seems to be less affected, as do community newspapers which grow fatter as daily newspapers slim down). Restructuring has occurred in the music, television, cable and film industries as well as in the financial industry and many traditional manufacturing industries with the use of programmable robots. Some industries have speeded up their operations so that a fraction of a second makes a difference to the value of a transaction (see Michael Lewis, Flash Boys, A Wall Street Revolt, 2014). Quality has improved for many goods and services, while at the same time prices have fallen, for example for computing power, an online stock trade, payment of a bill, watching a movie and listening to music online.

These changes are causing disruptions. Some are weathering them better than others, but the changes which need to be made so that those in the workforce adapt to the Second Machine Age are fairly clear. Measurement of economic change in terms of GDP and the skills required for the new economy are the subject of a future posting.

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