Tectonic shifts in the world economy

Directors and business leaders took a moment to reflect on the themes reshaping the world in 2018 and what they mean for Australia, at an AICD-World Economic Forum (WEF) roundtable. The roundtable’s agenda was inspired by conversations at the Forum’s Annual Meeting in January.

Global leaders, including heads of state, corporate chairs, tech giant CEOs and public policy experts, gather in Davos every year to consider the major trends, innovations and ideas impacting economies, societies, and governments.

The March roundtable provided an opportunity for many leading Australians who attended the Annual Meeting to debate ideas with peers who were not able to. Among the issues addressed were:

• The Annual Meeting theme: Creating a shared future in a fractured world;
• The unfolding impact of the Fourth Industrial Revolution on businesses, the workforce and society;
• The impact of tech on jobs, the character of economic progress, the widening disconnect between economic growth and social inclusion/cohesion;
• The need for a new social compact between business and society;
• The need for a new model of economic growth which facilitates inclusion and sustainability;
• Geopolitics and the continued rise of China’s influence; and
• The rise of populism in modern democracies

The discussion started with a positive perspective of the Fourth Industrial Revolution, with participants sharing success-stories like the growing use of drones to deliver medical supplies to isolated regions of Rwanda. Drone company Zipline delivers 20% of Rwanda’s national blood supply outside of Kigali and is expanding to Tanzania. Its founder and Schwab Foundation Social Entrepreneur, Keller Rinaudo, attended Davos this year saying, “Entrepreneurship is the only force in human history that has lifted millions of people out of poverty.”

However, roundtable participants soon expressed anxiety about how digital disruption would impact their workers and their competitiveness. One participant noted research showing 40 per cent of the Australian workforce (five million jobs) faced the high probability of being replaced by computers in the next 10-15 years. Another lamented that while their business was investing in upskilling their workforce, their op-ex was nearly ten times more expensive than the disruptor in their field. A number of participants referenced corporate tax rates as an additional burden on competitiveness in their sectors.

Intelligent operators for Artificial intelligence

On AI and disruption, the research shows enormous opportunity if governments and businesses get on board. In January, WEF in collaboration with the Boston Consulting Group, released the ‘Towards a Reskilling Revolution: A Future of Jobs for All’ report maps desirable job transition opportunities for workers affected by disruption. Alain Dehaze, CEO Adecco Group AG and Pierre Nanterme, chairman and Chief Executive Officer of Accenture wrote that artificial intelligence (AI) could be a fruitful source of job creation if workers were supported by apprenticeships and the right skills. “The age of AI does not need to be viewed as all gloom, job losses and disappearing industries. There are many opportunities in new jobs and skills to be learned, with employers driving change in both technology and training.”

Supporting this contention, a delegate pointed out their company presently produces 10 billon data points every day. “Taking those 10 billion data points, and giving the humans who operate our facilities the ability to make better decisions: it’s impossible unless you retrain the humans.” They called on government, businesses and academics to come together and recognise the “job crisis” as a burning platform for the Australian economy.

Visits to China had exposed an “ecosystem geared towards digital”, with coding part of elementary and kindergarten education and the elimination of the notion of the liberal arts degree. AI operation, automated factories and transportation leasing are the most desirable skillsets in China, according to one participant.

Fighting populism

Investing in vocational education could combat the surge in populism which has seen a pivot to protectionism and authoritarianism. They referenced comments made at Davos by London School of Economics director Minouche Shafik, “It’s no accident that the people who voted for populist parties around the world are people with by-and-large low levels of education. It’s not because they’re stupid, it’s because they’re smart. They’ve figured out this system will not be in their favour.” Shafik told Davos delegates at the ‘Saving Economic Globalization from Itself’ panel that a complete overhaul of education would be essential to “fixing the fractures in our societies”.

They also referenced Professor Klaus Schwab’s, WEF founder and Executive Chairman, address and calls for what he termed “qualitative easing” – a new social contract that provides the equivalent of quantitative easing for societies struggling with the realities of a transforming world. “Just as governments and financial oversight bodies came together with significant rescue measures a decade ago, so today’s crisis requires stakeholders to engage in a determined effort to rebuild the foundations of society.”

Turning to the global economic environment, a number of participants offered insights on China’s approach the global market with positive reports of their delegation’s engagement at Davos. One delegate confirmed that while the trajectory toward market liberalisation was sound, progress on civil and political freedoms appeared static. At Davos, Liu He, Vice-Premier, State Council of the People’s Republic of China spoke optimistically about an expected new cyclical upswing in the global economy. Vice-Premier He nominated “three critical fights” China was prepared to take up: 1) preventing and resolving the major risks, 2) conducting targeted poverty reduction, and 3) controlling pollution.