The Erosion of the middle class
In my book “The End of Certainty” I talk extensively about how the world of work is changing, that technology, whether that be robots or globalisation are quickly eroding the abilities of both the American and European middle classes to grow richer when many of their jobs are either being replaced by robots, AI (Artificial Intelligence) or folks in China. It may matter to the individual to whom they lose their job, but it doesn’t at a whole economy level.
Keeping up with the Jones’s
Many people will say that when they were kids we had no money and everyone was happy. The majority of people are less worried about how much they have, but are far more concerned about how they are doing relative to others. So when others, who ever these others are are changing their relative position it makes people at best uneasy, and at worst angry.
All people want is a better life for their children
Trajectory dear boy
The promise of ever rising prosperity has been a fulfilled promise in Western countries for the last 150 years or so. By any measure the quality of life of each generation is higher than those that came before. It seems not to matter how poor people start, but their trajectory. So long as it gets better for them and their families throughout their lives they are happy. That promise is beginning to break down, the average baby boomers will enjoy a higher quality of life than your average Gen X.
Partly because the Baby Boomer generation started from a lower starting point, partly because things like pensions promised 20 -40 years ago are having to be repaid now and partly because of the huge transfer of wealth from Europe to the USA caused by WWII. These benefits have run their course and are unwinding.
Spain in not Uganda
During the depths of the Financial crisis the Spanish Finance Minister got into hot water when saying some less than nice things about Uganda. Interestingly the Spanish were more depressed about their place in the world than the Ugandans even though the Spanish economy was over 100 times larger and by any measure the average Spaniard has a much higher quality of life than the average Ugandan. What matter was the trajectory. Uganda’s average salary has increased by 15%, in the same period the average Spanish one had decreased by 2%.
Globally the number of people living in abject poverty has shrunk dramatically over the last 20 years. From 1990 to 2010 the number of has halved from 43% to 21%. There is still much to do but the trend in in the right direction. There is however a problem. At the same time the world’s poorest are pulled out of misery, the global under middle class, who of course might not feel upper middle class at all in their own countries have suffered. Globalisation has moved many of these low skilled and interesting mid level jobs to China and other low cost locations.
Capital can be like a weather system, it moves from one location to another as pressure ebbs and flows. As a result of the world becoming more equal those previously blessed have relatively lost out. They can no longer see their own, or their children’s trajectory being ever upwards.
Angry white men
So just as capitalism takes a bow for lifting more humans out of poverty than any religion, government or charity in history, there are others who want to reverse the trend, to close down the globalisation system and bring back that prosperity. Many people feel angry and cheated that their financial trajectory has been somehow stolen, that it’s not fair, that someone is to blame. The political left and right like to blame different things. It’s immigrants, the Chinese and poor people for one side, the 1%, an unequal working environment and the lose of unionization on the other.
The Golden age
Geoffrey Chaucer of the Canterbury Tales fame harked back to a golden era, and he wrote his works in the 12th century. I think it’s safe to say there is no golden era. Yes for certain people at certain times things were better, but on a global level this continues to be the best time in history to be alive. For those harking back to a 1950’s America, there are plenty of women, minorities and non married, non heterosexual folks who shudder at the idea.
The Illuminati aren’t in charge
One of the general ideas about the world economy works is that somehow there are some shadowy figures up in the top 0.001% who run the world economy and control everything in some sort enormously sophisticated game of chess. One has to wonder who could believe such a thing. After all if you were in charge would you let the world run like this?
This sort of thinking comes from the false conceit that their are adults out there somewhere. I’ve got news. No there isn’t, we’re all just making it up as we go along.
There is no doubt that the top 1% are increasing their lead in wealth over the rest of the world population. But what is less reported is that the growth in wealth of the 5th to 65th percentile is also doing well too. The problem lies with the 66th to 99th percentile, and most of these folks live in Western democracies.
The Robots are coming
During the next 20 years a new force will emerge. That of AI and robotics. Jobs won’t be shipped off to China or another lower cost economy. They will stay at home, but they will be done by AI Artificial Intelligences and Robots in one form or another. For a very sobering vision of what is at stake in the near future take a look at this Ted Talk about Deep learning.
The US and Europe do at least have the advantage of being where these technologies primarily being developed. For much of the world the need for cheap labor will go away before they even had the opportunity to raise their standard of living to something many of us would accept as being a basic human right.
Understandable but misplaced rage
The rage that many, caught in stagnating cities, with worse prospects for themselves and their children is completely understandable, but attempting to bring back yesterday is both impossible and a false promise with dangerous implications for society when the demagogues offering it are proven incapable of delivering it. A better future needs to be built, not simply wished into existence.
A new way to think
New technology has always produced creative destruction. Smashing one status quo to replace it with a new model of successful business, before that too is replaced. For many, the rate of change and the movement of jobs has made their heads spin so badly they simply don’t know where to start.
The first step is to understand that these forces are at work. That constant reinvention is the only way to stay in the game in the modern era. There is no learn a trade, do that for the rest of your career type work anymore.
Secondly be sure to be asking questions about yourself, the world and your existing business model. If you can see a whole in it, you can bet someone else can too. You need to build a culture of being contrarian.
Thirdly never think you’re done with learning. It’s a constant process and those facts you base your assumptions on should be regularly checked. Because facts have a habit of decaying over time.
You’re unique just like everybody else
In a world of low cost and high availability of everything, unique will become ever more prized. We are already seeing that with experiences such as rock concerts, but increasingly the global middle class want something that they can have for themselves that is non replicable.
Lastly think is scale. The primary driver of technological growth in the 20th century was the military industrial complex. Technology that started as huge prices and then worked its way down to mass adoption over time.
The 21st Century is much more consumer based. As the global economy and all those newly minted global middle class folks become consumers the opportunity to make a billion dollars by selling a hundred million things at $10 each is becoming possible. Much of the growth we are already seeing in that world economy is centered around that idea. To be successful we need to embrace it.
There is plenty to get enraged about, the rest of the world getting richer while the US middle classes effectively stand still for 20 years causes societal problems. But the answers to these problems do not lie with demagogues promising to make America great again.
Even if their promises were real, their ability to deliver is zero. We need to built our own careers, work up the value chain, think scale and don’t believe things are true just because they used to be.
Yes there needs to be a revolution, but it needs to be in our thinking.
About the Author: Simon Dudley
Simon is a contrarian. He makes a habit of being the guy who questions the orthodoxy, the guy who doesn’t believe it just because the good and the great said it’s true. This has not always been good for his ascent up the corporate greasy pole. However it’s been very good for his employers if they are prepared to listen.
The Book The End of Certainty "How to thrive when playing by the rules is a losing strategy" explains why groupthink and the doing what you’ve always done is no longer the right move.
To keep tabs on his work please follow him on: ExcessionEvent.com