Demographic destiny

There are some ‘facts’ about the world that are treated as axiomatic. One of them is that future economic health is based on demographics: if you have a young population you will do better as there will be young workers to pay the taxes and look after the increasingly aged older generations. India looks good but Japan awful. China is not good with its one child policy but Brazil a rising star. It is this that gives emerging markets their lustre and makes investors worried about the developed world.
Is this correct?

This narrative ignores one factor that has the real potential to not only nullify it but also to turn it on its head, namely robotics. Technological focus, in the popular mind, has recently been on the internet and consumer changes that are changing business, communications and entertainment at an astonishing speed. In itself this has been destructive to middle class incomes but not so much yet to the unskilled and those on lower incomes. Robotics will change that – for the worse.

Take driverless cars. This is now very close. A driverless Mercedes recently crossed a 100kms of Germany with no fuss. There are price and legal issues but the technology is there and the likes of Eric Schmidt of Google reckon that driverless cars will be the norm, not the exception within fifteen years with enormous benefits to the old, disabled and drunk – but not to the huge number of people worldwide who drive for a living. There are estimated to be around six million people in America alone that drive taxis and limos. They will have to do something else.

And what about those two service stalwarts for low skill employment, care homes and restaurants? Smart homes with remote diagnostics and robotic cleaning are already happening in Japan where there are now more nappies sold to old people than babies. A large chain of restaurants in the USA has recently installed tablets on each table for ordering and childrens’ entertainment. One part of a waiter’s job has gone; how long until the rest is automated?

It is estimated – and it is right to take any such estimate with a massive pinch of salt – that automation could destroy two billion jobs worldwide over the next twenty-five years. Out of a global population of about nine billion this has the capacity for mischief that hardly bears thinking about. At a stroke it inverts the current thinking about demographics. Instead of a young population being a blessing, it becomes a millstone of underemployment, radical disaffection and a tax burden rather than a tax generator. It also makes that perceived basket-case of nightmare demographics, Japan, a much more interesting proposition as it leads the world in the technologies of automation and its practical applications.

If economics are politics then this next industrial revolution – and revolution is not too strong a word here – will demand a rethink of how societies work with a real question mark over traditional capitalism and its capacity to fulfill society’s needs. Francis Fukuyama postulated that with the fall of the Berlin Wall we had reached the ‘end of history.’ He meant this in the Hegelian sense - with liberal democratic capitalism as the apogee of centuries of political and economic experimentation. If capitalism fails to give humans something to do and something to hope for, ‘history’ is certainly not over yet.