No, tech’onomy isn’t a klingon word as it might seem, it is an almost human one.
In a recent article we’ve invited you to consider the subject of the impact of technology over human nature.
Well, today we are going to do pretty much the same thing except this time we’ll invite you to meditate on the impact of technology over economy. On tech’onomy.
We live the days of the Digital Revolution which, of course, does what all revolutions do: it replaces old orders with new ones, basically an euphemistic way to say it messes-up everything.
The mayhem has profound effects in economy and we’re going to mention some of them for you as were devised by specialists in economy (sorry for the oxymoron). These effects concern money, jobs, education, plans for the future and other insomnia-generators alike, so they might prove of some interest.
Basically it goes like this: everyone knows that digital technology era means highly invasive automation, which means replacing humans by software and hardware, which means low- and even medium- educated people seeing their jobs at risk, which means lots of people willing to be part of the mighty high-tech industry. Which means high-tech industry tending to offer lower and lower salaries to higher and higher skilled employees due to the imbalanced supply-demand ratio on one hand and due to globalization on the other, as digital globalization allows high-tech employers from the most developed countries (usually called « Westerners« ) to hire remote and unpretentious but skilled personnel from developing countries.
Digital technology era also means that « value » in abstract forms (like algorithms or collections of data) becomes more and more important than value residing in a material form.
In other words, intelectual property became so important it is nowadays possible to quit school as a student, establish a Company based on your knowledge and ideas, hire a few fellows to provide the extensive knowledge required for bringing your embryo ideas into actual being then, if successful, sell the whole thing for some dozens or even hundreds million bucks.
All in a matter of just a few years.
Some six decades ago, owning a similar level of wealth implied you perhaps had vast amounts of land or many factories, employing lots and lots of workers or say, a fleet of commercial ships.
No matter what, value was material and visible to the naked eye.
But not nowadays: just 3 months ago Facebook completed the acquisition of a startup Company which employed some 75 persons working on a yet unreleased (ie, still under development) virtual-reality product, for 2 billion USD!
And this shouldn’t be really shocking given that Facebook itself, like all other IT giants, has « only » 7,200 employees for its 190 billion worth, an almost insignificant fraction, that is, if compared to similar worth classical-industrial monsters.
In 1955 General Motors for instance used to have some 577.000 employees (at the time it was world’s biggest car maker) and adding them to the number of employees of its suppliers, GM was responsible for about 3 million jobs overall.
So at this point it seems that T-Rex gets defeated by the much smaller but proportionally much bigger-headed velociraptor.
Now for globalization and outsourcing, how many of you, folks, have honestly ever heard about « Yue Yuen Industrial Holdings »?
No? No one? Well, then let’s ask a slightly different question: how many of you, folks, heard about Adidas, Reebok, Nike or Puma? All of you? Good! Exactly the point! Because the Asian Yue Yuen Industrial Holdings are the actual manufacturers of Adidas, Reebok, Nike and Puma (among other brands) footware. They have 413.000 employees and although the Company’s business is run from headquarters in Hong Kong and Taiwan, their factories are located in China, Vietnam, and Indonesia.
US Apple with Chinese Foxconn are a more notorious example but examples goes on and on. The idea here is that money and manufacturing share no longer the same place and this separation is one of the answers to why « Made in USA » or « Made in France » or « Made in Germany » stamped products seem to slowly move towards extinction.
And in the meanwhile, the « Made in China » products are made by a quickly decreasing number of workers even as they are far more expensive than robots.
« Wealth without workers, workers without wealth« , as The Economist online put it in an interesting article.
Stating that the digital technology revolution is by no means a bad thing. But it has, however, the potential of driving us to an unwanted future. They don’t mention sci-fi scenarios, of course, but using just a bit of extrapolation it isn’t hard to picture out. A world divided between a few skilled elites ruling over empires of countless robots and vast masses of ordinary people, pariah of sorts struggling for mere survival and addicted to the gadgets ‘the other side’ is making, as software is doing everything better: it drives cars and planes, makes cross-disciplinary scientific analyses and synthesis, makes accurate forecasts and it even composes music or creates complex multimedia pieces of art. That is to say it’s not an inevitable future but it’s a very possible one. After all, something similar happened before during the industrial revolution. And all premises required by a dystopic scenario are in place already, all around us.
So what now? Did we mean by this article we have some idea on where technology-driven economy is heading to or at least do we have some tips to share regarding the rather scary future?
Absolutely not, unfortunately.
We’re not economists (thankfully) and besides, you already know by now we limit ourselves to providing some hopefully interesting facts for you to contemplate or consider.
So let’s just conclude that the « Money makes the world go round » assertion is as true as always except that digital technology makes both money and the world spin vertiginously faster.
So much faster that the ‘centrifugal force’ might determine seriously painful segregations.
But hey, we’ve made it so far, we’re going to make it further, aren’t we?
We just have to make sure to always choose the red pill.
P.S. Quick sidenote: since this article is about economy, let us proudly mention that the Nobel Prize for economic sciences this year just « landed » here in Toulouse for Jean Tirole, Professor at the ‘Toulouse School of Economics’ and Director of the ‘Industrial Economics Institute’ of Toulouse.
Nos respects, Monsieur!