Making the global economy work for everyone

The Source
By: Guest contributor, Tue Apr 5 2022

Author: Guest contributor

Marco Magnani, economist and essayist Fellow, IAI-Istituto Affari Internazionali and Adjunct Professor at Luiss Business School explores whether it is possible to pursue more balanced, environmentally and socially sustainable growth while defusing today’s apocalyptic alarmism about climate change, energy and demographic constraints, and the future of work.

In the past two decades several events have revealed the weaknesses of globalisation, exposed the fragility of the current economic growth model, and accelerated the ongoing tech revolution. The 2008 financial crisis started in the U.S., the following sovereign debt crisis in the eurozone, the Covid-19 pandemic and the consequent economic recessions, have all contributed to the question of whether the current growth model is still viable and sustainable.

The strong connection between innovation, economic growth and employment is not as strong as in the past. The world is increasingly facing the risk of decoupling between growth and employment, of a jobless growth with a disconnect between productivity and wages. And the digital revolution is reinforcing this trend.

Making the global economy work for everyone is an in-depth analysis of these weaknesses and fragilities in the context of sustainability, asking the questions: Is it possible to pursue a more balanced, environmentally and socially sustainable growth while defusing today’s apocalyptic alarmism about climate change, energy and demographic constraints, and the future of work?

We are living in the most innovative period in all of human history. Innovations such as artificial intelligence (AI) and big data, augmented reality and Internet of Things, quantum computing and blockchain, and biotechnologies and nano-materials are all occurring substantially at the same time. And are all innovations that may have a disruptive impact on the economy, society, and the future of work.

On the one hand, the technological and scientific revolution opens up unprecedented opportunities: accelerating human progress, improving the quality of life, overcoming many constraints. From an economic point of view, technology and science can increase productivity and expand the economy generating wealth, relieve humans from heavy and dangerous activities, and increase labour flexibility. On the other hand, some technologies can be used for criminal activities, terrorism, sabotage, restriction of personal freedoms, repression, and other ethically controversial objectives. The risks also affect the sustainability of economic growth, the fabric of society and the future of labour, humanity as a whole and its role.

Specifically on the future of work, in many cases humans will be replaced by machines and entire professions will be eliminated. This is true not only for heavy, dangerous, and alienating jobs, but also for traditional ones; not only in manufacturing but also in services; not only for work with simple and repetitive tasks but also for roles requiring complex and intellectual skills.

Replacing humans with machines will be more difficult for those jobs with a strong emotional, creative and relational component and requiring decision-making skills and judgement ability. In a number of cases, technology will not substitute human labour but will support it by increasing its efficiency. Even at these junctures, however, job transformation will profoundly change the skills required of workers, making the transition complex.

New technologies will also encourage the creation of new jobs. However, their quantity, quality and geographical location are very uncertain. In order to understand the impact of technology on employment, it is important to analyse the most exposed sectors and the most at-risk occupations and to try to identify what will be the new jobs.

It is not the first time that innovations disrupt the labour market. Just as in 1831 silk weavers destroyed looms because they feared losing their jobs, in 2015 taxi drivers set fire to Uber’s cars in Paris, and in 2019 dockworkers went on strike against increasing automation of logistics giant Maersk in Los Angeles. However, in the course of history innovation has always fostered employment. And economic growth has been the main conduit between innovation and employment.

The transition has never been easy. In the short term, innovation has led to the sacrifice of certain sectors and related jobs. But in the longer term it has brought productivity gains, rise in average wages, enlargement of the size of the economy and creation of new jobs. The benefit on employment emerged only after some time - due to the necessary adaptations to new technologies and working methods - and the beneficiaries were not necessarily the same people who had lost their traditional occupations. Nevertheless, once the transition was complete the impact on employment was positive.

Things may be different in the future. First of all, it is no longer a foregone conclusion that innovation generates growth. And in the event of degrowth or secular stagnation employment suffers. Second, even when innovation expands the economy it may pave the way for a jobless growth and technological unemployment. The effect on employment may also be conditioned by sustainability constraints to economic growth. As a result, the new jobs may be fewer than those lost, less value may be placed on work, and transitioning to new professions may be challenging. In this case, the overall wealth grows but significant redistribution problems emerge.

The health emergency caused by the coronavirus and the subsequent economic and social upheaval inexorably throw us into a different era. The pandemic has accelerated a revolution that was already underway, involving sustainability and technological innovations, with disruptive consequences on the economy, society, politics and ethics. Many are the lessons to be learned. However, redefining new equilibria and eliminating the economic and social contagion generated by the pandemic will take much longer than the creation of the vaccine.

The coronavirus pandemic marked the beginning of a long and difficult journey through uncharted and stormy waters. Our future largely depends on our ability to navigate through these perilous and treacherous currents. In order to successfully manage this difficult transition, confidence and vision are essential. And so is the ability to learn from the past and adapt to the new reality. In this context, it becomes more important than ever learning about innovation, discovering the threats of globalisation and the uncertainties of the labour market, redefining the man-machine relationship, and finding a path to sustainable growth. The end goal is improving people’s lives, leveraging robots and machines despite their formidable and unjustifiably frightful rise, to make the global economy work for everyone.

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About the Author
Marco Magnani

Marco Magnani teaches International Economics and Monetary & Financial Economics at LUISS University in Rome and lectures on Dynamics of Innovation at Alta Scuola Politecnica of Polytechnics of Turin and Milan. He has been visiting fellow at the School of Advanced International Studies of Johns Hopkins University and senior research fellow at the Harvard Kennedy School.


Author: Guest contributor

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