One fascinating discussion at Davos was titled ‘A Future Shaped by a Technology Arms Race’. It was moderated by Susan Minton Beddoes, Editor, Economist , and comprising Ren Zhengfei, Founder & CEO of Huawei along with Professor Yuvi Harari, author of ‘21 Lessons for the 21st Century’. Harari is fearful that the combination of new technologies such as artificial intelligence (AI) and biotechnology can lead to a technology race that threatens democracy as we know it. At its extreme, he fears that the data collected, combined with biotech, would make it possible to hack not only systems, but humans themselves. Wars would not require sending boots on the ground; it is unnecessary when ‘data colonies’ can be created.

Ren Zhengfei was not as concerned, believing that humans would find ways to avert threats from technology, just as they did after the first atom bomb was dropped on Hiroshima. He believes that technology can be used for human good, such as finding better cures, safer autonomous vehicles or others.

To this columnist, the threats perceived by Harari are real and need to be dealt with. Using technologies such as AI, governments have acquired a huge ability to snoop on people; eg, China already has the ability to use facial recognition to pinpoint, within minutes, an individual in a public place. Governments have also pushed for digitisation, giving them the ability to not only track financial transactions, but also to cut the digital umblical cord of those they feel threatened by. As, indeed, governments have.

In a conflict between individual privacy and ‘state security’ (or so perceived) the latter always wins. We seem to be heading from 2020 to 1984.

The technology arms race is being played out in the pressure applied on Huawei, by President Trump, putting it on the ‘entity list’, and denying Huawei use of technologies/apps for its phones such as Google search and mail, Google maps, Watsapp, and others. But Huawei has developed its own search engine, maps and chat, etc, and so the technology war will ultimately result in consumers having to chose which of two systems they want more! That is ridiculous!

Sadly, India is not a serious player in the technology arms race, at least, in 5G telecommunication technology, a key component. The government is destroying existing telecom companies, insisting on sharing of revenue on a gross basis, which is likely to lead to companies such as Vodafone-Idea going bankrupt. Vodafone has not paid the amount due, pending an appeal. Its exit will send a wrong signal to companies wanting to make direct investments in India.

The other theme at Davos was on environment, with Donald Trump poo-poohing Greta Thunberg’s concerns on it. The WEF has launched a programme to launch one trillion trees (www.1t.org). The goal appears ambitious until one of the panellists mentioned that the tree population has come down to three trillion from six trillion.

The economic system is based on consumption; higher consumption leads to higher GDP growth. The environment takes a back seat. The push for GDP growth comes from corporate owners of listed companies. Money has been institutionalised, and the incessant quest for shareholder returns results in pressures on corporate managements to encourage consumptive growth. Which, in turn, has led to low (sometimes negative) interest rates to spur that growth. Lowering of rates, and easy money policy, continues, despite evidence that this has led to asset bubbles (stock markets are high globally) and not to greater investment or consumption. In fact, several large brands (Macy’s, Gap, Hallmark) are shutting stores. In 2019, 9,300 stores were shut down; in the first nine days of 2020, 1,700 stores have shut down.

Interestingly, a sportswear brand, Under Armour, is opening 15 stores in India, indicating that thanks to a younger population, India still presents a case for growth.

In short, GDP growth is being impacted by several factors, including over-leverage, pressures from environmental groups, and from investors who want a shift towards stakeholder capitalism, or more inclusive growth.

The Indian stock market is more liquidity-driven, as savers switch from fixed deposits, where interest rates are dropping, towards equity, often through the SIP route of mutual funds. When this flow abates, there would be a rush for the exit. No one knows when.

The writer is India Head — Finance Asia/Haymarket. The views are personal.

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