Think global, act local

All governments must work to improve the condition of their economies and their policies before they rush into strategies to cope with Industry 4.0.

The world is wading into many global challenges. Climate change is one of them. The misuse of social media is another. The impact on jobs (and the ‘future of work’) by advances in digital technologies is yet another. All countries must take actions to protect their citizens against the adverse effects of these challenges. They should also cooperate to implement appropriate, universal solutions. Think global, act local.

Though some forces creating these challenges will cross borders, and are therefore global, responses must fit different local conditions. When hurricanes were advancing recently from the Caribbean towards the US, weather channels broadcast pictures of their movements across national and state boundaries. Citizens were warned to protect themselves. For some, living in areas likely to be severely flooded, the appropriate action was to get into their cars and flee. Those living on higher ground would be better off if they stocked up on water, food, and fuel. The right response to a global challenge will be contextually apt.

Consider the bundle of technologies that, it is feared, will cause large-scale destruction of jobs — robots, artificial intelligence, 3-D printers, etc — collectively bundled into ‘Industry 4.0’. The anticipation of consequences and preparation have become a multi-billion-dollar consulting industry. Governments in developed and developing countries are being advised to develop strategies. It seems they may be sold medicines for a disease they may get in the future when they should be diagnosing the disease they already have, that of slow job growth in their economies, even before these technologies have spread.

The recent report from the World Bank, ‘Trouble in the Making?’, says that the impact of these new technologies may have been exaggerated. It estimates that technology will eliminate less than 8 per cent of present jobs in any country in the foreseeable future. Therefore, governments should be focused on why jobs are not being created now, to understand the mix of forces creating so-called ‘jobless growth’, of which technology is only one. A Ficci-Nasscom report on ‘The Future of Jobs in India 2022’ prepared by E&Y says that, whereas new technologies will be disruptive for the IT/ITES, retail and financial services sectors, their effect on sectors such as apparel, textiles, leather, etc which are the primary sources of jobs in India, will be relatively marginal in the short term.

‘Sewbots’ developed by SoftWear Automation, based in Atlanta, can replace human beings in sewing apparel. Sewbots can make simple items like pillow cases and bath mats. A Sewbot will be able, as soon as next year, to tailor a T-shirt. However, this will not reduce jobs in garment factories in Bangladesh, says Palaniswamy Rajan, the firm’s founder. While a Sewbot can produce 17 times the number of T-shirts a traditional garment worker can, it may not be economically sensible to replace cheap Bangladeshi labour with expensive Sewbots. Rajan says that Sewbots will automate only 20-25 per cent of the garment industry even 20-25 years in the future.

Why is India not creating more jobs in apparels and textiles, industries in which it should have competitive advantages? A special report in The Economist (October 7-13) on premature de-industrialisation in emerging markets, suggests many causes, including poor logistics, and an import policy to protect some Indian manufacturers that raises the cost of manmade fibres which are the principal staples of the global textile and apparels business. The point is, all governments, including that of India, must look inwards at the condition of their economies and their policies and improve them before they rush to strategies to cope with Industry 4.0 which providers of technology would love to sell them.

W Brian Arthur, professor at the Santa Fe Institute writes (in The McKinsey Quarterly , October 2017) on where technology is taking the economy. He says we are entering a new economic era, where intelligence resides in the virtual economy, and where different rules apply. It is an insightful analysis. Here too, the question is what India (and other countries) should do now. Certainly, we should be cognisant of the change in the economic climate which is under way. However, we would be wise to know that it will not change overnight, and that its effects will be differentiated according to local conditions.

The old rules of the economy will continue to apply alongside the new rules for a long time. Technological transitions always work out well in the end, propagators of new technologies, including Industry 4.0, say. Therefore, we should not resist them. Technological and economic transitions may always work out well in the end, but transitions take many years. The mechanisation of agriculture in the US and Europe, which improved the productivity of economies, took decades. During the transition, populations moved from rural areas seeking jobs in cities and factories. The transitions were not painless. Many policy changes were necessary to support millions who were affected, including labour laws in factories, and social security systems.

The Santa Fe Institute is a pioneer in the new sciences of complexity. Natural systems, such as ecological and biological systems are complex, self-adaptive systems. They differ from ‘engineered’ systems, which are designed by an expert outside them. Natural systems follow a few universal laws. Within those laws, they produce remarkable variations and innovations. Thus, no two human beings are completely the same, nor two trees. Similarly, no two economies are alike. Therefore, there cannot be a standard application of Industry 4.0, or the emerging new rules of the economy.

Local governments and stakeholders must do a systems analysis of their present situation and of how new forces will affect it and evolve contextually apt solutions. A good ‘industrial policy’ for an economy must be an ongoing process of systematic stakeholder collaboration, to continuously self-adapt and produce outcomes desired by stakeholders as the environment changes. Any economic policy can only be as good as the process that produced it.

The writer is a former member of the Planning Commission. Via The Billion Press