Sunday, December 13, 2015

If there is no work what will people do?

Our Prime Minister is frantically trying to increase manufacturing in India under the 'Make in India' initiative to create millions of jobs for around 69,000 people who are turning 25 years old everyday in our country. The revolution in Egypt that overthrew Hosni Mubarak is a lesson of the dangers of unemployment and poverty. But can India become a manufacturing hub like Japan, South Korea and China did? Regardless of all the advances in computers and space travel, human beings will still need clothes to protect us against the weather. To make clothes we need yarn which will come from cotton, which has to be grown by farmers, or from polyester, which is manufactured in factories from petroleum. The yarn will need to be tailored into clothes before being transported into stores for us to buy. So for every shirt or trouser that we wear a chain of people is working to provide it. Likewise for every car we drive in, every house we live in and every bulb we use to light the house at night. Manufacturing will always be needed, so all we have to do is to provide the infrastructure and simplify the rules and companies will rush in to build factories to take advantage of the cheap labor that we have in abundance. But it is not that simple? The nature of work itself is changing as efficiency of production has resulted in the manufacture of higher quality goods with fewer people. Developing countries, like India have moved into services without first establishing a large manufacturing base. This has been labeled " premature deindustrialization " by a professor. As artificial intelligence and robotics develop more and more manual jobs will be done by machines, which work 24/7, produce prefect results every time and do not need salaries. Therefore, those who are educated or highly skilled will get high end jobs with huge salaries while others will be employed in part-time or low end service jobs which pay little and offer no benefits. But strangely, by 2014 the global Total Factor Productivity, which measures combined productivity of capital and labor, was zero for 3 years running. TFP was down 1% from 1996-2006 and down 0.5% from 2007-2012. Surely if productivity is declining then employment of young people should be rising? But that is not happening. As technology changes the resulting disruption results in falling productivity at first which then begins to rise. This is best illustrated in how medical records are filed. As electronic systems take over there is increasing confusion as these systems are incompatible and hence do not communicate with each other. The first industrial revolution resulted in vast numbers of deaths as western countries conquered peaceful peoples to exploit natural resources, finally resulting in the 2 world wars. Is that what is happening now as new technology disrupts the old order? In which case more wars are yet to come. Terrifying thought.

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