Creative job destruction: Freeing up talent for real progress

Human productivity has increased manyfold through technological advances, creating widespread prosperity. The resulting scientific and technical progress and innovation is mostly found in the developed world, yet even less affluent parts of the global population today can afford consumption and an ease of life which in the past was reserved only for the very rich. Life expectancy has increased sharply. The emerging world − with some unfortunate exceptions − is also swiftly advancing toward more broadly shared prosperity.

However, in today’s world − primarily in the more developed areas − it appears to many that the future is no longer very bright. This is not necessarily the case, though very legitimate reasons for concern do exist. These anxieties are felt and perceived, rather than being well grounded. As the situation is seen in a foggy way, half-truths and myths are presented, whether from self-declared experts, scientists or economists. Many in politics and even the serious media are not immune. In this confused world, ideological quasi-religions are substituting common sense and hope.

Increasing productivity and the range of services and care offered through technology and innovation could be the solution.

 

Yes, we have to take necessary measures against pollution and waste; we face changes in demography and age structure; there is a crisis of political institutions in democracies and autocracies, huge debt and deficit problems abound. Retirement payments and healthcare costs of an aging population are not covered and no solution is in sight.

At the same time, increasing productivity and the range of services and care offered through the use of technology and innovation could be the solution, as it has been in the past. But this will not happen by itself or as a miracle. Additionally, many are afraid of technological developments.

Precious human capital

The imminent and long-term decline in the global population necessitates a full paradigm shift. It is a phenomenon which the world has not witnessed (apart from in regional, temporary episodes such as the plague or total war). Today, there is a general worldwide decline in fertility rates: In the developed world and China, it is far below the replacement rate, while in places such as India and Latin America the birth rate is barely keeping up with mortality. Everywhere there is a negative, downward trend.

In the past, the primary function of a prosperous economy was job creation. Employment should be available for the youth and people should retire in their sixties, to rest and make room for further generations.

The imminent and long-term decline in the global population necessitates a full paradigm shift.

 

Jobs were created by the public services and supranationals, as an overall awareness of the scarcity of human resources was lacking. Over time the public sector expanded, and with that, so too did the regulatory environment. The growing bureaucracy needed additional talent to manage, advise and feed it. So not only did it take talent away from the real economy, but it also forced other professions such as lawyers and auditors to redirect their efforts from bringing useful advice to society, to administering compliance to regulations.

At the same time, businesses had to beef up the unproductive part of their overheads to comply with opaque rules. Ordinary citizens are left confused and are made to believe that this chaos will somehow increase their security. In an era when everyone talks about “sustainability,” ironically, the necessary realization of the scarcity of humans gets lost. And a terrible waste of talent – human resources − follows.

On top of that, in Europe (primarily) a fear of technologies that support people in their work is becoming widespread. Governments are busy issuing regulations, limiting the use of helpful technologies and, consequently, missing an opportunity to increase efficiencies and prosperity.

Europe already has a competitiveness problem due to lower overall productivity and a misallocation of talent, especially in state administration. In many countries, jobs in the public sector are better paid than in the private sector, which itself is struggling amid excessive and arbitrary taxes, exaggerated compliance burdens and overregulation stymieing efficiency.

Enough of the Luddites

Now the great opportunity: We need new thinking, we need disruption. Technology helps. We also need sustainability in human endeavors. This will imply a turbulent, but creative destruction of inefficient jobs. This will free people to do more productive work, even more so when supported by technology.

By better allocating employment and eliminating unnecessary positions and rules, many problems − such as debt and deficits − can be solved. Byzantine tax rules can be streamlined, leaving businesses more capital for investment. Then, productivity and competitiveness can increase and, as a result, so too will prosperity.

The only thing needed is replacing technocracy and ideology with common sense. In a time of declining population, job elimination can be as important as job creation.

This comment was originally published here: https://www.gisreportsonline.com/r/creative-job-destruction/