The economy is headed for a period of decline. The explanations of the economists and politicians who represent the self-perpetuating organised money establishment, lack any kind of credibility. They are so bound up with the latest set of figures and next quarter’s results, they have completely lost sight of the long term and its more profound effects. Technology is of far greater importance than Brexit, but it just doesn’t hit the headlines in quite the same way.
At the beginning of the nineteenth century, no country in Europe had yet re-attained the living standard of Imperial Rome. But three decades ago it was noted that over the previous hundred years, real income per head had risen by around 700% on average. It has slowed considerably since then, of course, but the only explanation for that explosion in income growth rates is technological innovation. Otherwise, William Baumol wrote, ‘the economic history of the period, and its contrast with the world’s economic performance in the previous, say, fifteen centuries, is difficult to account for.’
Technology is the engine which drives economic, social and organisational change. The connection between innovation and economic growth has been widely accepted since the original work of Kondratiev and Schumpeter. Analysts associate the great expansions with periods when major innovations coincided, referred to as technological revolutions. We appear now to be coming towards the end of the third such.
The first was the 18th century industrial revolution based on innovations in the physical power extracted from coal, and the steam engine, which gave rise to the mechanisation of textiles and other manufacturing industry, plus the development of steel and railway transport on a massive scale and the launching of inorganic chemistry. The ingredients of this revolution and its results in terms of economic growth are readily identifiable and dramatic. That set of innovations grew up and grew old together. The 1930s depression was not just a short term economic crisis, nor a crisis of capitalism, but resulted from the ending of that great wave of major innovations.
The second had its embryonic phase in the 1930s and was based on oil, motor vehicles, aircraft, sheet steel, organic chemistry and synthetic materials. The growth from this revolution was interrupted by the second world war, but was realised in the period of post-war reconstruction in the 1950s and 1960s, slowing down in the 1970s, brought to an early maturity by the oil price crises of the mid 1970s, and in decline by the 1980s.
The third revolution is based primarily on computer and web based systems enabled by electronics and information technology in a newly globalised format. The ability to computerise calculation also enabled the development of math and science based theoretical models which were made calculable and applied in many different areas such as biotechnology, molecular engineering and genetic engineering.
We have become so used to rapid technological development that it is difficult to imagine the process ever coming to an end. Biotechnology and genetic engineering, have impacted agriculture. While productivity gain could make even a third of today’s farmland surplus to agricultural requirements, if applied with crude industrial scale savings for short term gain as the sole objective, the long term impact could be disastrous not just for agricultural output, but for the conservation of land quality and species.
Molecular engineering is also making its impact with, for example, new synthetic materials such as graphene far surpassing the performance characteristics of steel at an inherently lower cost. The technology of melting metal should in due course be consigned to museums and small craft units.
The overall result of this third technological revolution is that products and services are becoming cheaper, more reliable, more flexible, more sophisticated and ‘intelligent’. Flexibility and variety in these industries is instantly available. One-offs are as cheap as standard products. Labour costs have become less critical. The implications are revolutionary for all firms, large or small and whether actively competing at the forefront of technology or languishing as dominant near monopolists in the maturest of cartelised industries.
This third revolution is changing the nature of work as well as eliminating jobs on a massive scale through robotisation. The remaining work is either in high skill manufacturing, high skill professional services associated with production, distribution and personal services, or lower level work offering flexibility through part-time or zero hours contract working. At the same time, the computerisation of stock markets has enabled the creation of a whole new shadow banking industry, the focus of which is no longer on supporting the real economy’s satisfaction of the population’s needs, wants and desires, but on maximising its own take.
Judged by the pattern of previous experience, it appears we may well be coming towards the end of this third technological revolution. It has created vast amounts of new data, knowledge and understanding, and powerful new technologies which are revolutionising the world we live in. The case of Apple illustrates the current position. After years as a leader of innovative development, the Apple watch was introduced as the next major leap forward. But its incremental innovation was marginal and it created negligible economic growth. That is the general position that might be expected towards the end of a technological revolution.
The world is full of threats and opportunity from innovation. Huge new problems have been created and discovered. But possible routes to their resolution have also now been indicated and are understood. Governments’ responsibility is clear: to invest in the many exciting new opportunities to create a wholly sustainable future, for example investing in the myriad of possible applications of graphene and further development of renewable energy supplies and storage.
However, democratic governments have, so far, fallen short of what is required, appearing to be focused on achieving short term gain, ignoring the longer term implications. Rather than seeking to understand the real processes that are shaping the world, their focus appears more on self-presentation to mass media, backed by superficial knowledge of simplistic economic dogma. Their aim appears to be to maximise the short term interest of themselves and their organised money supporters.