With the recent news that the euro zone’s economy grew 0.3% in the final three months of 2013, there is growing optimism for 2014 to be the year of economic recovery. There seems finally to be light at the end of the tunnel, at least from an economic perspective.
Financial experts believe that the global economy (Eurozone economies, in particular) is now on the road to recovery. Experts suggest that the outlook for the global economy is “cautiously optimistic”. Christine Lagarde, Managing Director of the International Monetary Fund, suggested at the Word Economic Forum’s (WEF) annual get together in Davos earlier this year that while there was reason to rejoice about the economy, recovery was in a consolidation process. Financial reforms are well under way; however, there is a clear need to ensure that consolidation takes place at a steady rate in 2014. Lagarde further noted that while old risks in the economy are still present, there are now new risks that need to be addressed in order for the economy as a whole to grow, rather than just rebound.
These new risks merit careful thought when addressing the job problem. Job seekers should pay particular attention to these risks, as doing so may give them a unique opportunity to get ahead in the “new economy”.
The job problem
The World Economic Forum ranks global unemployment as the third most pressing issue on their “trends of 2014” list. Clearly, they think it’s a big problem.
While the global economy is showing encouraging signs of recovery, unemployment remains a major issue. The economic downturn has, without a doubt, played a major part in the job problem. However, delegates at Davos recognized that the economic crisis was not the sole cause of the problem. There was a good deal of discussion on how technological advances would lead to significant job losses in the future (think of the industrial revolution). A surprising supporter of the hypothesis that technology was a root cause of job losses was Google’s Eric Schmidt, who suggested during a small discussion on the sidelines at Davos that “the jobs problem will be the defining one in the next ten to twenty years”. Indeed, the International Labor Organisation (ILO) predicts that the world will need at least 600 million jobs in the next 15 years in order to sustain economic growth.
Another participant at Davos argued that technology was already doing most jobs. For example, a law firm in the past would employ an army of typists to type complex legal documents. Nowadays, simple and inexpensive voice recognition software can create these documents in a fraction of the time and at a fraction of the cost. Imagine the day when all jobs will be done by robots, and we will be left to choose how we spend our days –without being driven by the need to pay our bills.
Root causes: Who or what is to blame?
It is difficult to find the right combination of actors to blame. Labour representatives of course blame politicians for making bad decisions, while politicians blame business leaders for not reacting quickly enough to the economic recovery that they worked so hard to achieve. Academics, on the other hand, take a more focused and theoretical approach to the problem.
A poll conducted at the WEF’s annual meeting indicated that there was a case for blaming jobless growth on technological innovation, with 57% in favour of the argument and 42% against (labour representatives would of course be against the argument).
There is no doubt that technological advances are doing away with jobs. The transportation sector, for example, is doing away with the need for drivers and pilots, as advances in auto-pilot technology become ever more sophisticated. The retail sector is using technology to change the way people purchase goods, even in a physical location, by introducing automatic checkout systems that decrease labor requirements.
As another example of how technology has had a great impact on the world, Erik Brynjolfsson, (Professor of Management at the MIT Sloan School of Management), suggests that software is eating the world. He gives the example of turbo tax the tax preparation software package developed by American entrepreneur Scott Cook. Clearly, the winners of such services are the entrepreneurs themselves as well as consumers who embrace such technology as it is virtually free, perfect and instant. The losers are, of course, are the tax preparers.
Brynjolfsson points out, however, that technology has always destroyed jobs but at the same time, it has always created them. An example of this is cloud computing and social networking sites, which give entrepreneurs immense low-cost resources for new business creation (which, in turn, leads to job creation).
The way we think about jobs: the case for entrepreneurship
What is needed is a fresh look at the global economy as a whole. We need to stop blaming job losses on the economic crisis and technology, and embrace what is seen as a shift towards a creative economy.
While existing economies have focused on extracting minerals from the ground, creative economies seek to tap into the creativity of the human mind. Indeed, the only way to solve the world’s current problems is to creatively innovate our way out of them.
The WEF, along with many institutions, has long advocated the benefits of entrepreneurship in boosting the global economy. The WEF in particular emphasizes the importance of creating an entrepreneurial culture both globally and regionally. Furthermore, the WEF took the opportunity at its annual meeting to stress the importance of entrepreneurship in economic recovery, and calls for an “entrepreneurial revolution”.
The journey towards a creative economy
There is no doubt that in the post-crisis era, the global economy is charting a new course. Thanks to international governmental collaboration, the global economy is gradually escaping the financial crisis. Yes, there are still many problems that need to be addressed in terms of slow growth and high unemployment, to name but two. Delegates at Davos suggested that what is really needed is not macroeconomic policies and piecemeal fixes, but a complete change in the way we think and embrace the creative economy.
Bringing the creative economy closer to home
While Switzerland enjoys one of the lowest unemployment rates in the world, the job market remains a problem. Addressing it is all the more pressing, given the period of change Switzerland’s economy is going through in terms of its key industries (banking being the prime example). In this light, there has never been a better time to think about what’s next for Switzerland.
While global leaders think about how to best foster the entrepreneurial spirit, so should Switzerland. Certainly, Switzerland has competitive advantages in numerous industries. With its well-established watchmaking stronghold, its chocolate empire and as host to a number of pharmaceutical giants, the country plays an important role in the global economy. The banking sector is, of course, Switzerland’s greatest asset. The sector has, however, gone through significant change in recent years, not least due to the demands of countries for greater transparency in its activities. With banking secrecy a thing of the past, Swiss banks are now left without their unique selling point. They must reinvent themselves to keep up the appeal of Switzerland as a major International financial centre. Perhaps this is the right time for the sector to embrace entrepreneurship?
While Swiss banks in the past have focused on providing services to the “high net worth market”, perhaps now they should refocus their strategies on supporting entrepreneurship by building an adequate financial system which supports start-ups and encourages entrepreneurs to try again when they fail (by restoring their credit ratings, for example). Swiss bankers are, after all, regarded as the world’s finest. Such expertise and reputation should not be wasted.
Sources:
World Economic Forum Annual Meeting 2014 report
BBC News "Davos 2014: Eurozone inflation 'way below target'"
Massachusetts Institute of Technology (MIT) Center for Entrepreneurship
Swissinfo.ch "Keeping Innovation Alive"
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