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March 19th, 2015 at 1:08 pm

The best economic news in human history

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Andrew McAfee, the associate director of the Center for Digital Business at the MIT Sloan School of Management has revealed “the best economic news in human history,” claiming that we’re on the brink of the possibility of rising living standards for everyone on earth.  He says that technological progress means humanity will soon solve the problem of ‘increasing scarcity’, meaning that there are, in theory, enough goods and wages for everyone in the world.  

“We’re going to solve that,” he told an audience at the WorldPost Future Of Work Conference, “The problem that we’re not facing is a problem of not enough to go around.”

McAfee said that the industrial revolution of the 19th century meant that for the first time, human productivity can keep pace with the growing population, creating the possibility of a rising standard of living for everyone.

We have nearly reached the peak of this bounty, in an “ever-growing pie that left people better off”. Technological progress is “the best economic news in human history”, he said.

He has assessed the impact of major world events – like the foundations of religions and the the rise of the Roman Empire – to see if they had any effect on people’s income, and found that “none of them substantially changed the material conditions of humanity at all” except for the industrial revolution, whose inventions like the steam train allowed humans to be far more productive.

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But we now face a new challenge, he warned – what he called “The Great Uncoupling”.

This new economic phenomenon, which governments must urgently tackle through a drive towards immigration and education, was caused by the IT revolution and development of the internet from the 1980s, he said.

Before then, corporate profits and people’s wages had increased together “in lock step” but since the 1980s corporate profits have gone up around the world, while wages are going down.

The profits of “the best economic news in human history” are not being shared equally, he said, adding: “There is no economic law that means that all that abundance we’re sharing is going to be equally shared.”

“China is not offshoring to Mars to find even cheaper labour – there’s something else going on,” he said. “We need to start looking for more explanations.”

He acknowledged that capitalism bore some responsibility for this unfair distribution of income: “I’m an ardent capitalist. I believe about capital what Winston Churchill believed about democracy: it’s the worst possible system, apart from all the other ones we’ve tried.”

He said the world’s falling average wages could be caused by globalisation, monopoly capitalists and “headwinds, malaise and stagnation” which he called the “grumpy old man argument”.

Technological progress itself could also be a culprit, he said, because the internet can allow people to be more productive without being paid more, he admitted, but he added that it was of far more benefit than damage.

He argued that “anemic” productivity in countries like the UK and US was not down to robots stealing jobs: “There are jobs that no robots can do yet, such as making a bed in a hotel. We need a people for those jobs.”

McAfee proposed a five-part solution to ‘The Great Uncoupling’ of living standards and profits, which he coined as the E-I-E-I-O approach: education, infrastructure developments, entrepreneurship, immigration and original scientific research funded by governments.

“There are things we know we should be doing,” the MIT director said, before slamming America’s education system. “We are squarely middle of the pack, we are deeply unimpressive on our primary education programmes. The problem is we’re doing even worse at the university level than we are at primary education. It appears that around half of the students in our four-year undergraduate courses are learning nothing, absolutely nothing, in the first two years.”

He added that the US was making “really poor progress” on funding scientific research.

Mr McAfee also warned that believing that the US is technologically advanced is “misleading”.

He called on them to remember that San Francisco’s tech hub in Silicon Valley is “a distraction from the main story” and in reality “everything is going in the wrong direction.”

“When you take a jet from Bejing to JFK,” he said, “It’s like going from the Jetsons to the Flintstones.”

Image credit:  Flickr
Via The Huffington Post

 

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