Pay attention to technology, innovation, entrepreneurship for long-term growth
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WARREN Bennis, a management guru, once remarked that the factory of the future will have only two employees: a man and a dog! The job of the man is to feed the dog, and the job of the dog is to bite the man should he touch the console that remotely controls the factory. This scenario is true today in smart factories — minus the dog, of course!
The World Economic Forum (WEF) predicts that nearly half of the jobs may be automated in the future. By 2030, 800-million jobs will be lost to machines. Erik Brynjolfsson, a professor at the Massachusetts Institute of Technology, puts it frankly: “There is no economic law that states that everyone will benefit from an industrial revolution. It is possible for a majority to be left behind.”
True, job disruptions have been rampant across all the industrial revolutions. James Watt, a Scottish inventor, triggered the first with his invention of the steam engine in 1776. It led to the Luddites — English factory workers — destroying machinery which they considered was destroying their jobs.
Subsequent revolutions also transformed commerce and industry, albeit with severe dislocation to employment. But the fear that they would cause a permanent decline in employment has not materialised.
For example, during the first industrial revolution, despite the Luddite vandalism, the average income in the UK rose by 40 per cent from 1823 to 1873, while its employment ratio spiked from 43 to 47 per cent.
The demystification of the apparent paradox that technology destroys jobs, yet creates many more, has three primary implications for our economy.
First, as Robert Solow, a Nobel-Prize winner in economics, postulated, technological progress catalyses economic expansion. Similarly, Joseph Schumpeter, an Austrian economist, viewed that the ‘creative destruction’ of companies is the basis of economic growth. Industrial mutations induce productivity growth which increases incomes. These then boost the demand for goods and services and new industries, and create new employment for the displaced workers.
The US economic transformation on the back of technology has made manufacturing and services the greater source of employment. In the 1850s, agriculture employed half the US workforce. Today, it employs only one per cent.
Second, entrepreneurship is vital for technological progress. Schumpeter considered innovation “a feat not of intellect but of will”. It requires an entrepreneur who is persistently seeking supe-rior returns in the marketplace. The remarkable achievements of Ren Zhengfei and of Steve Jobs are the embodiment of the entrepreneurship that Schumpeter envisaged. Ren, for example, grew Huawei from an importer of telecoms equipment in 1987 to the world’s largest telecoms-equipment manufacturer today.
It behoves therefore the government to accelerate entrepreneurship in the economy. Start-ups should be inspired through cheaper financing and institutional support.
Innovation requires research and development (R&D) in products and technology. Advanced countries have succeeded in innovation on the largesse of government support of R&D of around 4.0 per cent of GDP. We need to upgrade our innovation capacity by at least doubling our current spending to 2.0 per cent.
Third, to respond to the tectonic shifts in employment, we need to upskill our workforce so that it can move away from 3D (dirty, dangerous and dull) to 2D (digital-driven) jobs and to become relevant in the 5G era. The WEF identifies the soft skills of critical thinking, creativity, people skills and emotional intelligence as equally vital in the digital era.
We hope that long-term growth on the back of technology, innovation and entrepreneurship, as well as the cultivation of IT and soft skills will be adequately addressed by the government.