Sunday, June 16, 2019

Déjà Vu?

The generations born after World War II could be forgiven for believing that economic growth was their birthright. Nowadays, intrinsic metrics for human progress have come to include faster, always on, more abundant, thinner, more liberal, cheaper or, better still, free. As these and similar expectations ratchet up in a frenzied and hyper-connected world, perhaps a little perspective is in order.

Until about 200 years ago, agrarian societies relied on animate energy and power provided by water and wind. In a labour-intensive but low productivity era, the daily routine for most of humanity was to rise, work up a sweat, till the land, and anticipate a good harvest. Today, how many people are aware that 50 years after the United States of America gained independence, China’s GDP was about 18 times the size of the US economy and represented a third of global economic output? India’s was about half China’s size, but was equivalent to the combined GDP of Great Britain, France, Spain and Germany! At this point in history, the peak GDP per head was less than US$2.0 per day.

In the 18th century, the first textile mills in the UK increased productivity a hundredfold and massively destabilised British weavers and hosiers. Consequently, proprietors took advantage of mechanisation by reducing wages and employing unskilled machine operators, thus raising the tension between the owners of capital and workers. In the event, demands for higher pay, as well as for better working and living conditions, were ignored or repressed. In response, this led to arson, riots and, for posterity, great English poetry.

This phase of industrialisation turned out to be a mere prelude to what was to follow. The refinement of the steam engine in the 19th century improved the design and efficiency of pumping machines, waterwheels, windmills and rail transportation. But the epic game-changer was the internal combustion engine, which represented a remarkable inflection point in human history. 

This invention led to pistons generating motive force on steroids, thereby boosting productivity and turbocharging industrial growth throughout the 20th century. The car industry indirectly spawned the suburb, aviation blurred distances, telecommunications streamlined information flow, rocketry landed the first man on the Moon, and corporations transformed all facets of life.

With the advent of assembly lines and factory automation, predictions of mass unemployment became rife. However, the spread of secondary and university education, surprising innovations during gruesome wars, and economic development upended the most dire forecasts. In the process, capitalism may have become a victim of its own success, with opponents and critics quick to highlight its flaws.

In a shrunken world, poor and fleet-footed people everywhere want what others have, unlike in the past when just about everyone was poor and few knew what transpired beyond their immediate community. Furthermore, as income inequality has widened, the idea that people would readily accept stagnating living standards, like they did prior to the 18th century, seems quaint.

At the beginning of the 21st century, the post-industrial age is signalling the long-anticipated coming-of-age of Artificial Intelligence (AI) and genetic engineering. Under the searchlight of sophisticated algorithms, machine learning, additive manufacturing, gene-editing technology, and advanced robotics, unparalleled efficiency gains could emerge. While no one is certain what a new economic order will look like, the impact of data as a resource is expected to be as pervasive as the imprint of oil and the internal combustion engine over a century ago.

Meanwhile, the creative destruction of whole industries continues unabated. In the ensuing makeover, let us hope that the floundering hands and idle feet of the dispossessed do not steer them into the devil’s workshop. Banish the thought, but could we finally be running out of road in creating high-quality middle-class jobs, with the rapid shift from an industrial to a knowledge-based economyYet, we could be witnessing anotheexpectation-defying paradigm shift driven by digital propulsion.

Looking ahead as an adventurous species, it seems that we have the capacity to keep innovating until we encounter the limits of the laws of nature, we might even colonise Mars, but should we expect economic growth in perpetuity against all odds?


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