What do we do with these people?

And what if one of “these people” is you or I?

My observation is that we are eliminating many jobs now and we won’t be able to train the workforce, and Ray’s argument is that it’s always been like this and we’ve figured it out before and we’ll figure it out again. Looking at the pace of change, starting with self-driving cars that can now do the jobs of Uber drivers, taxi drivers, and truck drivers, that’s millions of jobs lost over there. What do we do with these people? Many of them are not retrainable for the technology economy and we’re not going to be able to create new jobs for them within five years or so.

The more I look into it, the more I’m convinced that change is happening too fast, disruption is happening too fast, jobs are being wiped out too fast, and the fact that we’re still in denial about it and not acknowledging that this destruction is happening gets me worried. We should instead be talking about how can we minimize its impacts or come up with a safety net or retraining program and create as many new jobs as we can and spread the prosperity. We are not having these discussions. ~ Vivek Wadhwa

Bold emphasis added by me.

See the rest of the interview with Vivek Wadhwa and his thoughts on how human jobs will be replaced here: ‘RoboCop is coming’ 

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Development economics in the Vanuatu context: one size doesn’t fit all

Emergent Economics

The following is based on a talk I gave with Devpacific last Thursday in Vanuatu.

In a passage from his famous work The General Theory of Employment, Interest  and Money, John Maynard Keynes presented a novel theory of how share prices are determined. Normally economists like to think of stock prices settling at an equilibrium level where supply and demand meet. The cost of shares is a fundamental property based on the present discounted value of a company’s future worth.

But Keynes thought otherwise, likening stock market investment to a newspaper beauty competition in which the winner is the person who predicts the most popular woman in the contest. Players won’t win by saying who they think is the prettiest; if they’re rational they should try to predict others’ probable choices. Other entrants will, if behaving sensibly, do the same thing, basing their submissions on others’ likely entries.

In the…

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Sleepwalking into The Upside of Down

“Our societies’ rising connectivity and speed have a final disturbing effect. In the past, cascading failures usually occurred within single systems—like electrical grids or banking systems—but now these failures are more likely to jump system boundaries. If, for example, terrorists use a new genetically engineered organism to contaminate a Western country’s food supply, the disruption will spread in a flash beyond the food system to our larger economic and political systems. Because today’s communication technologies vastly multiply our emotional reaction to shocking events—something we saw in full force in the wake of the 9/11 attacks and anthrax letters—this kind of terrorism could easily cause a financial panic and even civil disorder, despite the fact that the threat posed to any one person from the attack might be very small. The scale, connectivity, and speed of our modern food-supply system could also spread a new bio-terror organism far and wide before authorities have figured out what’s going on, increasing the chances that it would jump from the food system to affect ecological systems in nature.”

Excerpt From: Thomas Homer-Dixon. “The Upside of Down.” Knopf Canada, 2006. iBooks.

Corporate State Capitalism

Corporate State Capitalism – speech by Noam Chomsky at Yale University (February 25, 1997)

Most Chinese growing old before China grows rich

I am not referring to the elites in the politburo of the CPC, the princelings, or those closely associated with the channels of power in the central kingdom. I am referring to the teeming masses who make the goods and provide the services that have made the aforementioned groups wealthy and powerful. For them, retirement isn’t what they expected it to be; the vast majority will grow old before their country grows rich enough to escape the middle-income trap and provide them the pension that they deserve after a life of toil and hardship.

In his always informative blog, chindia-alert.org, Chiahou Zhang (Charles Chang) links to yesterday’s Bloomberg Businessweek piece: Forget About Retiring, China’s economic Planners Say.

In it Dexter Roberts writes:

What if Chinese were required to work an extra five years, or even a decade, before retirement? There are growing calls among officials and academics in China to consider that controversial move as the country’s rapidly aging population puts new stress on its pension program. China must consider “deferred retirement,” said Hu Xiaoyi, a vice minister of human resources and social security, on Oct. 22, speaking to journalists at a seminar in Beijing.

This won’t be made easier if one considers that current projections of Chinese population aged 15 to 24 (based on the nations’ current one child policy staying in place) sees a drop off in that cohort as well as the working age population.

As I have stated previously (China won’t save the world) there are limits to China’s investment driven growth model although the amount of foreign exchange reserves and the surplus current account position permits the mandarins to pull the levers of fiscal stimulus again in order to spur growth.

Chinese GDP Growth Rate

But as Roberts hints the transition from being investment driven to consumption driven is not easy:

Meanwhile, as part of its desire to shift to a more consumption-driven economy, China is pushing an expansion of social welfare programs, expected to get a further boost at the upcoming Party Plenum meeting in November. Today, the proportion of China’s economy made up by domestic consumption is only around 35 percent, about half the level in the U.S. The logic of a stronger social safety net: Chinese who worry less about the future, including meeting the cost of health care and post-retirement living expenses, will spend more now.

 

Not Consumption Driven

How is this going to be done in a global economic system that does not sufficently vacuum the current account surpluses –particularly from China and Germany — when the goods producing nations are export driven with a household sector that consumes relatively little when compared to the Unites States. (Go here to understand the concept of surplus recycling).

Everything is interconnected. The recalcitrance of law makers in Washington adds to the confusion but also sets forward a more challenging path that will ensure greater hardship for the masses, be they in the savings prone east or the debt laden west.

References:

Charts from Gary Shiling’s deck during the CFA Society Toronto 56th Annual Forecast Dinner on Tuesday, October 1, 2013.

Roberts, Dexter. “Forget About Retiring, China’s Economic Planners Say.” Bloomberg Businessweek, October 23, 2013. http://www.businessweek.com/articles/2013-10-23/forget-about-retiring-chinas-economic-planners-say(accessed October 24, 2013).