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Future trends, what comes next?12th of May 2014
There have always been financial bubbles whenever radical innovations have become widespread. As such, the computer will bring in its wake a more healthy working culture and informational cooperation - according to Erik Händeler, German author and future scientist. He writes here for ECJ.
Debt crisis, stability crisis, economic crisis – these have not been caused by some malevolent forces acting on the financial markets. They are in fact quite normal manifestations of a free market economy which changes at an irregular pace. Now that the computer has largely taken over from us all the structured knowledge work it can manage, the costs of lower increases in productivity are missing. Profits are falling and debts can no longer be serviced so easily.
There is a lack of profitable investment possibilities, hence interest rates are low and the free money is being channelled into speculation and is driving up property prices. It will be uncomfortable for us until we succeed in reaching the next stage of prosperity. The financial crisis is therefore just a symptom of the end of the previous structural cycle.
The banks have not really done anything different from previous years – only the environment has changed. A surplus of free capital suddenly became available and interest rates were at a historic low. Investors were wringing their hands in desperation to find new ways of getting rid of their money. That was why credit was also available even to those who had virtually nothing. This was markedly different from the long years of the early 80s into the late 90s, when the computer gave rise to so many new applications and made profitable use of the abundant capital even with higher interest rates.
This technological network has now spread far and wide even into the newly industrialised countries but an even faster notebook does not make a knowledge worker even more productive. The savings in time and resources achieved so far each year by the use of newer and better information technology are what is now missing in the entrepreneurs’ game of competing to reduce each other’s profits. This leads to increasing pressure on prices and margins and the economy goes into reverse – a historically normal process.
It has always been like this: in their day, certain technological networks like the railways or electricity increase productivity and prosperity. They change the whole of society because they have their own model of success: company structures, management culture and educational curriculum. Those companies or countries who embrace the new infrastructure and the new intellectual and social behavioural patterns are the ones which are always the most successful.
The pace at which new inventions are developed, implemented and demand investment capital fluctuates over a long period of time. For this reason, real life increases in prosperity which drive the economy will also fluctuate. Before the building of the railways, a businessman took three weeks to travel on horseback from New York to Chicago, whereas by train the journey took only three days – he had gained two-and-a-half weeks in which he could do more work and that was the growth driver, not the money spent on rails or tickets.
Similarly, the computer was not the engine for growth because more people were paid to solder printed circuit boards or write software. It was because a storekeeper was able to receive the information required immediately at the click of a mouse instead of forever having to search through card indexes. Some other work can be done during the time saved – this is how growth occurs. Likewise, in the future, health will be a growth engine not because we spend more money in this sector but when knowledge workers stay healthier for longer and improve payback on the expensive investment in their education.
This point of view is difficult for many economists to integrate into their world vision – discussing the economy only in terms of prices, interest rates and money supply. These things are just the result but not the cause of economic development, wrote Russian economist Nikolai Kondratieff (1892-1938) in the 1920s. He undertook research into long-term economic developments, which Joseph Schumpeter later named after him.
Kondratieff annoyed the communist dictatorship by stating that the Great Depression was not the predicted collapse of capitalism but only a deep dip between two long structural cycles (for which he paid with his life). He had already predicted this crisis in a paper in 1928, in relation to the stagnation in coal consumption which was at that time the most appropriate economic indicator.
Computer penetrates economy
From a real economy point of view, Kondratieff maintained that the “founders’ crash” of 1873, followed by a two-decade long depression, occurred because the railway had been built between the then main centres of industry. By the beginning of the 1920s all factories and by the end of the 1920s 90 per cent of private households in the industrialised countries were connected to the electricity network.
After this, development stagnated and caused the Great Depression of the 1930s. The stagflation at the start of the 1970s happened when most middle class families owned a car and the road
network had been extensively developed. And now the economy has been penetrated by the computer.
Perhaps the global economy would have fared better if Kondratieff’s explanation had received more support in the sphere of monetary economics through the writings of economist Joseph Schumpeter, since it offers a pointer to the direction in which the real economy will change in the future. The scarcer a particular factor of production becomes, the greater are the efforts made to remove the bottleneck by devising different organisational structures and other devices.
When English industrialists could no longer cope with draining the mines, they asked James Watt to develop a steam engine. When transport became the pinch point for industry, the railways had to be built. When the volume of information exploded and it became too expensive to be organised on paper, we needed the computer.
What will be the next shortage to be overcome in the work process if it is to recover again? Many people think it will be energy and raw materials. Yet, for example, the less oil there is available, the more viable renewable sources of energy become – coal from sewage sludge, solar fields in Africa, improved energy efficiency. The latest multi-layered solar cells have achieved 41 per cent efficiency. This will offset the losses today but does not really represent a higher level of prosperity.
It is ultimately for the marketplace to decide who is allowed to use energy by determining who uses it most efficiently – and that depends on the quality of the knowledge work: analysing a situation to make the right decision; scanning the immense flood of information for the knowledge that someone needs to solve a problem; understanding what the customer actually needs. There will however be no new steam engine to make our thoughts more productive.
The only thing we shall be short of is educated people and their value-added problem-solving capabilities. These people will only be motivated to contribute their knowledge and to work voluntarily beyond the age of 67 if working patterns are geared up for this: less pressure for appropriately adjusted pay, more flexible working hours, further training up to retirement age and beyond.
Driving an upturn
Because training represents an expensive decades-long investment, it will also take longer to recover the investment – the need to maintain the health of employees becomes so intense that it can drive an upturn. Hardware will of course also contribute to the next structural cycle – gene technology and nanotechnology in medicine, and other material health investments.
But these only serve as trappings around the current shortage: intelligent, unstructured, cooperative information work and the productive working lifetime of the knowledge workers. Lifestyles will be changed by economic pressures and a new market will be created in products and services for maintaining the health of the healthy.
Because a single individual is less and less able to have an overview of a particular subject area, we are increasingly dependent on the knowledge of others. No-one has the time to read five books in order to find out the required information. It will in future be important to know someone who has digested these five books and can solve my problem in 30 seconds. Instead of being an obedient, replaceable cog in the wheel of the old industrial society, each individual will suddenly become an indispensable specialist in an intermediate stage in production or in a particular area of knowledge who must share his skills with those of others to achieve overall success.
The previous hierarchical forms of company structure impeded the flow of information – the future will bring with it (in addition to clear definition of responsibilities) flexible hierarchies in which the value of each individual will be determined by the demands of the day. The flat structures necessary for this kind of operation and the constantly changing business partners, customers and outside employees have increased the number and complexity of interfaces and hence also the reasons for conflict among those involved. There are many indicators of inefficient information work, such as ‘mental resignation’ or communication problems – the new bottleneck in the national economy.
This puts workers and their social behaviour under pressure to change and to work more efficiently in order to make better use of knowledge. History shows us that new technology such as the railways can be invented more rapidly than people can adapt to different models of success. But we shall learn to in the end, even this time: the perfectly normal crisis following the structural cycle of the computer will help us to make better use of knowledge in a better working culture.