In our last post we had a look at how digitalization and globalization cause income disparity in the developed world to rise. This time around we want to take a shot at predicting how these dynamics could shape the future.Based on the work of Jeremy Rifkin, Michael Spence, Erik Brynjolfsson and Andrew McAfee it seems likely, that the combined effects of globalization and digitalization will have three main consequence.
1. Capital and Automation will Trump Manual Labor
Increasingly, manual labor will be substituted by capital and automation. Mouse and keyboard will continue to replace hammer and sowing needle, especially in those countries who have in the last decades risen to become factories of the world, producing goods from cars, to computers and t-shirts. However, the service sector will expand further.
2. Producing in Developing Nations Will Lose its Appeal
Demand for low skilled labor has already declined in the developed world, but will also start dwindling in the developing nations. Also, jobs in the high skilled labor segment will start experiencing the squeeze. Nobel Prize awardee Michael Spence calls this “labor’s digital displacement“. This will further put pressure on income equality, demand for labor and wages paid that work will sink.
Because labor will progressively be replaced by capital and technology, the trend towards outsourcing of production to developing nations will lose its appeal. Production will be relocated closer to home markets. This will have the amicable side effect that the overall volume of goods shipped around the globe will sink and emissions of greenhouse gases will tumble.
3. The Rise of the Prosumer
A third interesting effect will be the blurring of boundaries between production and consumption. Where once there was a clear separating line, now there is a trend towards the merging of the two activities. The term “Prosumer” describes a consumer who takes on an active role, in some instances helping to produce the goods he consumes.
While on the whole the above mentioned dynamics present fundamental challenges to economies and societies around the world we are still looking at a net positive development as productivity will keep on growing: More goods and services can be provided for with less labor invested. This in turn has the effect of opening up spaces for more self-determined activities.
However, this net positive effect will only become sustainable if those at the sidelines are not left behind. Those who are set to lose out because of the fundamental structural changes ahead need to be provided with viable alternatives and compensation. The search for those alternatives is one of the big sociopolitical challenges of the coming years and decades.