The hook to very song sung at Davos is “jobs, jobs, jobs.” The machers on stages here operate under an article of faith that growth can come back, that they can stimulate it, that that will create jobs, and then that all will be well.
What if that’s not the case? I am coming to believe, more and more, that technology is leading to efficiency over growth. I’ve written about that here.This notion is obviously true in some sectors of society: see news and media, retail, travel sales, and other arenas. How many more sectors will this rule strike: universities? government? banking? delivery? even manufacturing?
I’m watching a WEF panel moderated by Reuters’ editor, Steve Adler, with Larry Summers and government and business leaders. They’re discussing growth strategies and we’re hearing the same ones we hear around Davos, the complete trick bag here: spend money on infrastructure, be nice to business, regulate less, fix tax systems, understand the benefits of immigration reform. OK, OK, OK.
“The problems of job creation are more complicated than that,” says Summers. “They are more complicated than wealth creation. This is a group that understands wealth creation better than job creation.” He says “there are inherent limits” on the number of people employed in various sectors. “There are fewer jobs for regular people because those innovations happened than there would have been if those innovations hadn’t happened.”
I don’t hear any strategy there that reverses the trends underway in the transition from the industrial economy to the digital economy. What will offset the shrinking of vast industries? New industries? Well, we have new, digital industries, but they are even more efficient that restructured old industries. Compare the staffing at Google to that at GM. Note well that Facebook serves almost a billion people with the staff the size of a large newspaper. So those new industries will bring growth but not many jobs.
Summers extols these innovations but points out: “There are fewer jobs for regular people because those innovations happened than there would have been if those innovations hadn’t happened.” It would be “a delusion” to think that encouraging this innovation will increase jobs, he says. He says that the largest growth category in the U.S. in the next decade is projected to be health. That doesn’t create value so much as it creates cost.
So what if the key business strategy of the near-term future becomes efficiency over growth? Productivity will improve. Companies will benefit and be more profitable. But employment will suffer.
I’m hearing no strategies focused on this larger transition in a meeting about the transition. I think that’s because power institutions’ trick bags are empty. They ran an industrial society. That’s over. And the entrepreneurs who will create new companies but also new efficiency aren’t yet in power to solve the problem they create.