Archive for June, 2014

For Future Generations – What Now?

June 24, 2014

 

 Summary

 This posting is an attempt to examine the type of world which our grandchildren, or those born since 2000 will inherit and grow up in. How should they think about the future and their lives in it? What can they do, if anything, to prepare for it?  I ended up with a smorgasbord of topics which I think have some relevance to these questions, but the choice resulted mainly from issues which interested me. What I am looking for is a framework combining these issues with others which are relevant to understanding how to cope with the future. Suggestions would be appreciated.

 

Following are the eleven issue areas noted:

 Geography

Demography

Technology

Employment opportunities

Grade Inflation

Universities and colleges

Online learning

Environment

Immigration and multiculturalism

Working of democracy

Conflict situations

 

Introduction

 

A year ago in 2013, I started a project. The aim was to think about, predict would be too strong a word, what the world will be like for those born since 2000. For example, what type of educational experience might be beneficial, what kind of work will they do, and how will it differ from my lifetime over the past 80 years. Those who had tried to forecast the events since the thirties were largely unsuccessful, and today few are able to anticipate major events which break out daily in the news headlines  – the Arab Spring, the Syrian uprising, the absorption of the Crimea into Russia, Sunni uprisings against Shia in Iraq, China’s  claims to mineral rights in the South China Sea. This is today’s list. A year hence it will have changed.

 

These political events are only a small part of past and current changes. Technological and economic factors since the 1930s have shattered and transformed firms and industries. Computers and communications are only one aspect. Energy, medicine, physics, chemistry and astronomy have all experienced new developments. No one in 1930, looking forward, imagined what would take place over the next 80 years. The same true today, although many try. One can either despair, and not make any forecasts, or one can try, by sifting through the massive literature on change, and still expect to be woefully wrong.

 

In pursuing this exercise, I had the benefit of tapping into the knowledge and experience of a number of former graduate students all of whom have interesting jobs, and were kind enough to give me ideas about issues to examine, which might be important for the next generation, often their own children. I also listened to my grandchildren and their friends who provide a sounding board for finding out what today’s world is like for them. That is my current educational experience. It requires asking questions, listening and not passing judgment on the answers.

 

Over the past year, I have read widely, mainly on economic and political topics but also a fair amount of history. I have enrolled in online courses which stimulated an interest in the future of online education in general, as well as the subject matter covered in the courses. On some of these topics I have posted pieces on a blog at cmaule.wordpress.com which provides a way of organizing my thoughts in the form of working papers on which I could receive comments. In fact there were few comments sent to the blog, but I would circulate pieces to people whom I knew were interested in a particular topic and received comments back from them directly. This is a useful aspect of blogging. Some topics which initially I thought I would cover are left out. Others are added. This will be a work in progress, probably for the rest of my life, or for as long as I can stay awake.

 

One general note: retirement for me, and I suspect for others, has been transformed for the better by communications technology which allows research to take place at home, with access to more material than there is time to read it. Contact can also be made with authors who are often willing to talk or correspond by email, so that home study and research is not only rewarding but practical. The main constraint is 24 hours in the day. The supply of productive time remains limited, while the demands made on it increase daily. Economists are trained to deal with problems of scarcity, so perhaps I have some advantage here in understanding the mechanisms at work. For example, the number of hits a website gets is used to establish advertising rates.

What then have I learned about understanding the near future? Each of the following topics is worth lengthy treatment. Here I point to selected aspects.

 

  1. Geography

 A general knowledge of geography frames an understanding of the past, present and future. The world (planet earth) is a finite place of land and water plus the air above. It has not increased in overall size but has experienced some changes to the division between land and water. Knowledge about the universe in which planet earth is situated has expanded considerably, especially over the past decade. While research of future economic and political factors surveyed here is confined to the earth, the planet itself is a minute part of the universe. In universal terms, the earth hardly matters, and if it is demolished by a meteorite or comet, no one outside of earth, will notice. In universal terms, traditional macroeconomics is actually very micro, and what we fuss about is in one sense inconsequential, although it may be less so if space travel finds another habitable planet.

 

The geography of planet earth has a political and an economic dimension. In 1945, the Charter of the United Nations was signed by 50 countries. Today there are nearly 200 with places like Scotland, Quebec and the Basque region of Spain agitating for separation from existing states. Their aim is greater independence, ironically at a time when sovereign countries are becoming more dependent and giving up powers to multilateral organizations like the GATT, regional trade agreements such as NAFTA, the EU, NATO and a myriad of international agreements.

 

While there exists no world government, the UN tries to enforce commitments from member countries. In turn these countries try to use the UN when it suits their purposes, and otherwise ignore it. Although ineffectual in providing world government, the UN does act as a mail box and meeting place to deal with issues of international concern. It does little to address obvious cases of violence such as in Rwanda, Syria and Iraq, and refugee issues through the so-called Responsibility to Protect agreement, but aid to alleviate famine and the landmines agreement are where the UN does some good.

 

One dimension of the present and near future to note is an increase in the number of sovereign states covering a finite land area, and no world government to manage the interdependencies which arise. The term globalization refers to growing interdependence of countries and peoples in a number of dimensions. Knowledge of geography is one essential to understanding present and future events. When I was Director of a School of International Affairs, there was no world geography requirement. There should have been. (It is sometimes wryly remarked that Americans go to war in order to improve their knowledge of geography.)

 

   2. Demography

 How many people are there now and likely to be in the future? Until about 1800, the world’s population was stuck at around one billion. It reached 1.7bn in 1900, 6bn in 2000 and 7.1bn today. Forecasts for the end of the century are for just under 10bn and then a decline. Many issues which are the topic of public discourse are the result of population growth. Yet few point to this as a factor if it implies possible measures to curb growth, which only a few countries like China have seriously undertaken.

 

Population is linked to issues like ageing, the adequacy of working age people, the cost of caring for seniors, people living longer, employment opportunities, immigration procedures for regular immigrants and temporary foreign workers, the cost of providing educational, health and welfare services and so on. Together with the need for physical infrastructure such as roads, railways, airports and sea ports, these place a tremendous demand on global resources and the means to finance them either privately or by governments. The private-public distinction is never clear cut, as governments create the framework for firms, and firms supply governments with the goods and services they need.

 

A knowledge and understanding of demographic factors is essential for living and working in current and future conditions. Combined with geography, these are part of the foundations of living and working in today’s world. Both are fundamental to understanding both domestic and international affairs, and the world that future generations will inherit.

 

  1. Technology

 Labour and capital are foundational inputs used in an economy. Combined with technology they create different industrial opportunities through a process which Joseph Schumpeter described as “creative destruction.”

Over time, horse and animal power displaced human power. Then water power and the steam engine, followed by hydrocarbon generated power and then nuclear power. These represent part of the forces of “creative destruction,” which cause economic change, and the rise and decline of industries and occupations. Understanding where a national economy sits in the process of change is vital to being informed about the employment opportunities today and tomorrow.

 

John Mauldlin is a consultant whose writings examine future developments and are useful to those contemplating near and long term employment opportunities. A recent (June 2014) piece discusses the increasing rate of economic change based on a measure of the turnover of companies in the Standard & Poors index: http://www.mauldineconomics.com/frontlinethoughts/the-age-of-transformation

 

“And while your job may be one of those that will ride easily into our brave new future, the same may not be true of your stock investments. Companies show the same pattern of destruction and rebirth. Only five of today’s hundred largest public companies were among the top hundred in 1917. Half of the top hundred of 1970 had been replaced in the rankings by 2000…..the average lifespan of companies in the S&P 500 Index was about 60 years in 1960. Today they last about 15-20 years. That means we are currently replacing a stock in the index about every two weeks.

 

I can see many of my readers rolling their eyes and saying it won’t happen in 20 years. Or 30 or 40. Things just don’t happen that fast, you say. But that is just your old Homo sapiens brain extending the past in a linear fashion into the future. Moore’s law tells us that the number of transistors on a chip roughly doubles every two years (and the chip drops in price). But other industries, like solar tech and genome sequencing, are on exponential paths that make Moore’s law look positively snail-like. If the power of exponential change keeps working – and it will – we will see more change in the next 20 years than we saw in the last 100!”

  

  1. Employment opportunities

 Two of the most frequently heard concerns of younger people are that in the future there will be no jobs for them, and that the available jobs will be poorly paid. The first refers to the “lump of labour fallacy,” that there is only so much labour that an economy requires, and if the supply of labour exceeds this amount the excess will be unemployed. Joseph Schumpeter, writing in the 1940s, explains how economics approaches these concerns

 

“The opening up of new markets, foreign or domestic, and the organizational development from the craft shop to such concerns as U.S. Steel illustrate the same process of industrial mutation – if I may use that biological term – that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism.”
– Joseph Schumpeter, Capitalism, Socialism, and Democracy (1942)

 

Schumpeter describes capitalism as the “perennial gale of creative destruction.” This leads to a paradox involving the demise of old industries and the rise of new ones as explained by W. Michael Cox and Richard Alm

Schumpeter and the economists who adopt his succinct summary of the free market’s ceaseless churning echo capitalism’s critics in acknowledging that lost jobs, ruined companies, and vanishing industries are inherent parts of the growth system. The saving grace comes from recognizing the good that comes from the turmoil. Over time, societies that allow creative destruction to operate grow more productive and richer; their citizens see the benefits of new and better products, shorter work weeks, better jobs, and higher living standards.

Herein lies the paradox of progress. A society cannot reap the rewards of creative destruction without accepting that some individuals might be worse off, not just in the short term, but perhaps forever. At the same time, attempts to soften the harsher aspects of creative destruction by trying to preserve jobs or protect industries will lead to stagnation and decline, short-circuiting the march of progress. Schumpeter’s enduring term reminds us that capitalism’s pain and gain are inextricably linked. The process of creating new industries does not go forward without sweeping away the preexisting order.

The sad news is that some jobs will be lost forever. The good news is that new jobs are created all the time. The job of public policy is to minimize the harm done by the losses.

An examination of the labour force by occupations reveals the changes which have taken place. One of the most glaring examples is the proportion of the labour force in agriculture in 1900 and now. It has declined from over 20% to less than 2% while the output of this sector has expanded enormously. The change is due to the substitution of capital (machinery, fertilizer and seed improvement) for labour.  In 2010, the average cow in Canada produced 22,000 lbs of milk per year versus 5,300 lbs in 1950, a 5% increase a year for each of the past 60 years….if only humans could increase their productivity to the same degree.

Allister Heath (Daily Telegraph, June 11, 2014, B2) notes similar forces:

 “Most of the jobs that allowed our ancestors to earn a living no longer exist, replaced for the most part by machines of various kinds, but more people in the UK work than ever before….In fact, many of the trades listed across the UK in the 1891 census no longer exist at all….In one hundred years’ time, many of the jobs we fill today will have gone the same way….The speed of the transformation has been phenomenal. Imagine someone from 1980 reading a jobs website today – not only would they have no idea what the internet was, they would barely recognize the jobs on offer.”

 Heath goes on to argue that “…it will be vital to help individuals displaced by the new technologies to find work in new areas…..The lump of labour fallacy is the oldest myth in economics. There is no fixed stock of jobs; in a dynamic economy, millions of new ones are created every year to replace the equally large numbers that are lost. The luddites are as wrong today as they were two centuries ago.”

 

This may seem cold comfort to the recent university or community college graduate looking for a job and unable to find one today, but it alerts people to the need to marry their interests to the actual job opportunities which exist now and are likely to exist in the future.

 

    5. Grade inflation

 This is a topic which should concern students because the marks they receive in school, at least in Ontario, may not be a good reflection of their abilities and a measure of their expected performance.

Contrast the UK with Canada. In the UK there are state wide exams at the high school level used by those applying to university. Students are prepared for these exams and there is no discussion of the grades assigned. It is as universal and about as fair a process as can be designed. One consequence is that teachers teach to the exam and at the end each student takes only three subjects, and is required to apply for the degree she or he wishes to study for, in contrast to the North American liberal arts degree approach at the BA level.

In Ontario, each school grades its graduating students.  Except in limited cases, for example those enrolled in the IB (International Baccalaureate) program there is no province or nation wide exam. The consequence is that grade inflation occurs. Up until the late 1960s, there was a province wide exam and when it was abolished teachers warned that there would be grade inflation. They were right. Now when there is discussion of returning to province wide exams teachers oppose it, knowing that schools and their teachers will be judged according to the success of their students.

Universities are faced with the problem of knowing whether two students with the same grade, one from school A has the same qualifications as one from school B. They respond by putting all students in a first year class and finding out which ones do better. From this the universities can begin to evaluate schools so that first year classes become a sort of university entrance exam, but note this too is not perfect. It is university specific and not a common course evaluation.

Universities are meant to treat all students equally, which is fine when there is a common examination process. In fact, they make judgments based on accumulated experience about how students from different schools perform. Students in turn have adapted to this process by engaging in sports, music and other activities which receive a grade, but also shows the versatility of the student.

A different aspect of university admission flows from the fact that a higher proportion of the 18 to 24 age cohort now goes to university. While the distribution of student IQs in the population is bell shaped, university admissions have increased the share of the total population being admitted. This means that more students with lower IQs are admitted than previously. Partly this resulted from too few university places, and partly because of the vote getting attraction of offering families more opportunities for post-secondary education. At some point the vote getting pressures can lower the caliber of those accepted to universities, which either have to fail the students or lower the quality of those who graduate. This can push the evaluation problem to being dealt with by employers. Part of the requirement for BAs for those working in fast food outlets is due to the declining caliber of university graduates at the BA level; part due to the lack of jobs for which they are qualified.

  

  1. Community colleges and universities

 

There has been steady enrollment growth experienced by community colleges as a result of the changing nature of the economy and the availability of jobs. Students are now attracted by the salaries and work conditions being offered to those who have certain skills training.

 

The adjustment has seen more students enrolling directly in these colleges, or going first to university and then to a college, or enrolling in a combined university and college program. Each alternative may involve some form of work experience while studying, thereby easing fulltime entry into the workforce.

 

Students (and their parents) will have to evaluate where the job opportunities exist and what is the best route to qualify for these positions. They will also need to realize that potential employees will have to be prepared to travel to the workplace. Canada’s recent restrictions on the use of temporary foreign workers suggests that Canadian workers are unwilling to take the jobs which the foreigners will accept. In the past Canadian workers in areas of high unemployment were more willing to travel to available jobs. This no longer seems to be the case, or at least to the same extent as previously.

 

  1. Online learning

 (Please see cmaule.wordpress.com posts for 2014, March 2, 11, 12, 14, April 27 for further discussion of this topic).

 

Where and how students receive their post secondary education in the future will depend on where and how courses are offered. Students will be able to choose what they study and where they study it. The traditional on site educational experience is now displaced or combined with some form of online learning. There will be a range of offerings from 100% on site to 100% online offerings at different prices, and at different costs to the student.

 

Those taking online courses can study at home thereby reducing transportation and living costs, in contrast to travelling to classes and paying for room and board to some third party. While the online experience is not a direct substitute for the on campus experience, the rising cost of post secondary education is partly alleviated by new means of communication, as was the case with its forerunners, correspondence courses and the Open University in the UK.

 There are many other aspects to consider. For those interested, a number of these are discussed in the posts noted above and will not be repeated here.

 

  1. Environment

 

If today’s discourse over the environment had taken place in 1900, it is difficult to imagine the landscape of the Canadian economy. Would the following have been built, the James Bay project, the aluminum smelters at Arvida and Kitimat, the St Lawrence Seaway, the network of pipelines which cross Canada and so on? It’s interesting note that while there are strong forces arguing in 2014 against the Keystone Pipeline and the Northern Gateway Pipeline, there will be additional oil shipped through the Kinder Morgan Pipeline which ends in Port Moody BC, requiring tankers to enter the Gulf of Georgia, Burrard Inlet, go under the Lions Gate Bridge and proceed up river to the storage tanks at Port Moody.

 

No one working today can ignore the environmental debate. I hesitate to enter this minefield, but will do so by referencing Matt Ridley’s summary of the 2014 Report of the International Panel on Climate Change (IPCC) as reported in the Financial Post, June 19, 2014, p.FP9. Ridley is a columnist for the Times (London) and a member of the House of Lords. He has reported on this topic for 25 years.

 

“The IPCC commissioned four different models of what might happen to the world economy, society and technology in the 21st century and what each would mean for the climate, given a certain assumption about the atmosphere’s “sensitivity” to carbon dioxide. Three of the models show a moderate, slow and mild warming, the hottest of which leaves the planet just 2 degrees Centigrade warmer than today in 2081-2100. The coolest comes out just 0.8 degrees warmer.

 

Now two degrees is the threshold at which warming starts to turn dangerous……That is to say, in three of the four scenarios considered by the IPCC, by the time my children’s children are elderly, the Earth will still not have experienced any harmful warming, let alone catastrophe.”

The fourth scenario produces 3.5 degrees of warming by 2081-2100. It is based on the following assumptions:

The global population will increase to 12 billion – this is at least one billion more than the UN expects, and the rate of population growth is presently declining.

The world will burn ten times as much coal as today, producing 50% of primary energy in contrast with 30% today. Assumptions made in the report about nuclear and renewable energy sources mean that fossil fuels will dominate energy production – Ridley considers these assumptions “very, very implausible.”

“That is to say, even if you pile crazy assumption upon crazy assumption till you have an edifice of vanishingly small probability, you cannot even manage to make climate change cause minor damage in the time of our grandchildren, let alone catastrophe. That’s not me (Ridley) saying this – it’s the IPCC itself.”

I am interested in the world inhabited by my children’s children. From what I understand from experts, environmental disaster should be of lesser concern relative to issues such as nuclear destruction, the use of chemical weapons and their delivery provided by rockets and drones. Nevertheless, the environmental debate is one these children should study in order to be familiar with the findings of those with expertise in the field.

 

  1. Immigration and multiculturalism

 

While these two topics can be discussed separately, they are closely related. Immigration concerns the inflow of foreigners, and multiculturalism deals with how those who stay permanently are integrated into Canadian society. For newcomers as well as those who are first, second and third generation immigrants, as well as their children, this is a circumstance they need to recognize. There is not much they can do about it.

  

My views on immigration policy and multiculturalism are posted at cmaule.wordpress.com  for 2012, Feb 13, Nov 9,25,27;  2013,  Mar 21.and will not be repeated here. I would add, however, that the circumstances of recent immigrants differ from those who came before in one important way. Today’s newcomers are more connected to their country of origin through cheap means of communications, such as social media, as well as cheap air travel. They are much less cut off from their roots than I was when I came from England in the 1950s, and the trip from London to Vancouver by train, boat and train took just under ten days. Trans-Atlantic phone calls were over $3 per minute versus virtually free now by Skype and Facetime.

 

Today, the link with the country of origin is stretched but not broken. And when countries compete in a world sports competition, Canadian citizens of different origins may support their birth country and not Canada. This is not an unexpected situation, but it does mean that Canadians are increasingly working among people who may be less committed to Canada and associate more with their country of origin. Young people may find themselves working among contemporaries who consider Canada a convenient platform for their lives, making some newcomers a permanent form of temporary foreign worker. There is not much an individual can do about this except to realize the context.

 

      10.  The workings of democracy

Future generations will need to assess how their system of government is working, and whether predictions about the demise of democracy which they are likely to face is real or manufactured. A starting point is Churchill’s quote that, “It has been said that democracy is the worst form of government except all the others that have been tried.”

 

Accepting Churchill’s conclusion still requires being wary about the health of a democracy in any particular situation. For example contrast the British and Canadian systems. In Britain, Question Period in the House of Commons results in questions being answered directly, often with humour, and with the use of debating skills. On other occasions cabinet ministers may oppose each other, not just in cabinet meetings but in the House of Commons, often to the dismay of the Prime Minister.

 

In the Canadian House of Commons, Question Period leads to questions being unanswered, and to juvenile remarks being exchanged. A cabinet minister who disagrees with the Prime Minister is likely to be fired. The nuances and the workings of a system labeled responsible government need to be understood. However, both systems are preferable to Russian or Chinese style of so-called democracy which gives the word a bad name.

 

Under the umbrella of governance the issues of national security, human rights, income inequality, education, healthcare, taxation and the treatment of aboriginal societies are topics for discussion. Each deserves focused analysis (perhaps at some future time).

 

The same is true for anticipating future micro and macro-economic conditions. The depression of the 1930s was followed by postwar business cycles with reasonable booms and busts, until the financial crisis of 2008-09. Writing in 2014, this last crisis is too close to know exactly why it happened, and whether it will happen again leading to unemployment levels of the thirties. But in time we should learn how to analyse these conditions and reduce the likelihood of a repeat performance of 2008-09.

 

 11. Conflict Situations

 Perhaps the most difficult set of issues to consider is understanding where future conflicts, domestic and international, will arise and how to prepare for them. In 1934, I entered a world that had recently experienced a devastating world war and had witnessed the loss of even more lives due to a flu pandemic from 1918-20. Flu affected an estimated 500 million people and killed 50 to 100 million or 3-5% of the world’s population. Perhaps then we should be more concerned about diseases than violence and terrorism.

 

Few expected the outbreak of WW2 in 1939. The same could be said about the Cold War, the Korean War, the Vietnam War, the Algerian war, the rise and fall of Communism starting from 1989, conflicts in Afghanistan, Iraq, Somalia, Syria, and in Central and South America which continue today, especially in Africa and the Middle East. Some of today’s wars result from the demise of the Ottoman and Austro Hungarian Empires and agreements such as Sykes-Picot at the end of WW1 which set middle-eastern boundaries. Also, the British Empire reached its peak around 1900-14 and rapidly declined over the next 60 years to its present day status leaving the Commonwealth and a few pieces of real estate tied to the mother country.

 

Be prepared for the unknown seems the best advice for younger generations. Almost all the experts who monitor international political and economic affairs are wrong in forecasting future situations of terror, violence and economic crises.  They may appear wise but usually after the event has occurred. The means for terrorist incidents are increasing and can now be conducted by small groups against critical targets without warning. States have responded with more sophisticated surveillance techniques which George Orwell could never have imagined possible. We worry about violence but also about the loss of civil liberties. In sum, perhaps the best advice to future generations is to be aware of what Donald Rumsfeld describes the “known unknowns,” things we now will happen but not when and where.