I had spent much of 2022 speculating and pontificating about the trajectory of major segments of the world’s economy based on a few core observations, primarily zeroing in on the relationship between value and personal ownership – and the impact of that on the global economy.
In my previous articles, going back a while, I had highlighted the persistence of the “fragility” of economic growth experienced in much of the world in the period since the Great Financial Recession of 2008 and how the reality of the intervening period has been a serial decline in productivity rates. What has kept up the numbers in the interim has been largely slick financial engineering, with extended bouts of suppressed interest rates and rabid money printing – oh, quantitative easing – propping up valuations and keeping people away from the reality of their positions. The years since the outbreak of the coronavirus pandemic, in 2020, has seen the abrupt and forceful dismantling of this stubborn edifice of propped-up value cutting across sectors in the economy.
Those governments, businesses and even individuals who kept away from asking the tough questions regarding their fundamental utility and value propositions and from making the necessary changes during this extended lease of financial rope are in the throes of being faced with their moment of reckoning in the wake of the triple crises: One, the coronavirus pandemic and its fallout; two, the runaway inflation in developed economies, forcing central banks to go on a warpath by raising interest rates for the first time in 30 years, not once, not twice but a total of eight times within two years; and three, the Russia-Ukraine War and its multi-faceted impact on global energy supplies, global commodity supplies and on climate change mitigation efforts.
What we are witnessing is increasingly turning out to be the summary reversal of so many of the trends that defined the preceding three to four decades. I had previously called it “The Great Unbundling”; The Economist has preferred to call it “The Great Reversal”. I was there before them!
Whichever way the wind blows, the core question remains, as much for the individual as for businesses and governments, “Where do I find value?” The experience of the past few years has made it abundantly clear, and the turbulence of the coming few months will only double down further on the point, that it is only the cultivation of enduring value that will enable an enterprise at any level to survive and continue. All that the aforementioned triple crises have done is to take the cover off those who had not been working on improving their productivity and had, consequently, been living off the froth of an abnormally conducive environment.
The changes are abrupt and discomforting and span across a wide range of areas, simultaneously. Like the abrupt rise in interest rates is signalling the unwillingness of capital providers to continue to subsidise risky bets in business and commerce, and the abrupt withdrawal of NATO from key operational areas such as Iraq and Afghanistan is signalling the unwillingness of the traditional security providers in the region to continue to subsidise risky security bets in international relations. Overall, the world’s appetite for risk or largesse has undergone a severe deflation. The response from economic entities will be as expected: There will be balance-sheet trimming, there will be asset sales, there will be contract renegotiations and there will be lay-offs.
Governments that are running budget deficits will find it more difficult to manoeuvre, as France is finding out to its chagrin, as the country faces crippling strikes from government workers protesting against proposals to increase the age of retirement by a single year. The strikes in the United Kingdom over pay rates in the National Health Service have a similar flavour. Things get far more basic and fundamental in several cash-strapped governments with unmeetable welfare commitments, such as much of northern Africa, the Levant and South Asia. Clearly, this year will be tough for a lot of people across a number of countries. Sustainable Development Goals? Yeah, right!
Suffice it to say that but for a few notable exceptions, most people across the world who are counting on the welfare state are in for a very rude awakening.
But, what about the rest of us? The current state of affairs poses a predicament for an entire generation of working people. Not only have occupational and commercial conditions become inclement, but rapid technological change is rendering a number of even “traditional” jobs and skills-sets of the 1990s and the noughties redundant. The rapid development and mass adoption of new, more efficient ways of getting work done – apparently, this entire article could have been dreamt up by Open AI’s Chat GPT within seconds, and be possibly of a higher quality – which in decades past led to large-scale displacement of blue-collar work, will now begin to impact white- collar work, as well. The hyper-efficient automatic check-out counters at Carrefour are merely the first examples of this. Watch out for when AI models begin to give you investments advice and valuations, engineering designs and motoring solutions upon a few command words. Wait, they already do in many ways!
It would not be hyperbolic to suggest that fundamentally, an entire generation of working-age people find themselves unaware and under-skilled for the economy shaping up around them. And the number of new, young people joining the workforce is not decreasing. The “obsolescence rate” of previously acquired skills is also increasing rapidly, making it critical for present members of the working-age population to keep up-skilling themselves. College education, once a rite of passage, is now merely a passing but firm and useful stepping stone for a lifetime of continuous learning, up-skilling and adaptability. Charles Darwin’s words seem prescient at this stage, “It is not the strongest, or the largest or the most intelligent that survive; it is those that are the most adaptable to change that do.”
And this takes us right back to notions of value. Where does value come from? What makes us valuable? What makes us useful in the economy of today and keeps us useful in the economy of tomorrow? Can institutional frameworks complement efforts of the working-age population to remain sufficiently skilled and valuable? In the UAE, the public sector has taken cognisance of this and is increasingly encouraging its workers to take a whole year off, on a fully funded basis, to use the time to acquire new skills or to experiment with starting a new venture. The idea may not be so much to witness the next flurry of unicorns; but it may be simply to “nudge” the workers to draw first blood in a world of open risk and opportunity and come out of their sheltered existence.How many public sector enterprises and their state managements across the world can dare try this out?
There is a crying need, now more than ever before, of entire sets of working-age populations in various geographies to have their skills-sets upgraded for the emerging economic and technological world. The emergence of a national-level, or even multinational-level, “skills bank”, to collate skills-sets and to encourage its constant nourishment and growth, is becoming an inevitability. Cue the move by the UAE government to instate a national skills bank in the form of “NAFIS”.
It would be worthwhile for companies to follow suit and for HR departments to begin to view their company’s manpower in terms of “captive brain capacity”, to chart out ways to nourish and cultivate this capacity and to make this a source of competitive advantage in the market. It requires mature consideration at an all-firm level, cutting across all age-groups, to identify ways in which the knowledge-and-skills quotient of the company can be improved. Several consultancies do that internally, and several companies have internal training programmes, but increasingly, this must align with fundamental questions regarding the role of each individual across the firm. I cannot think of any other way that the call for change can be dealt with in any more a humane manner.
At the national level, and even at the level of individual businesses, issues of accessibility and convenience to information and knowledge are becoming ever more critical, lest the skilling systems of today leave possibly billions of humans un-catered to. It is becoming increasingly clear that the amount of information and educational resources existing within the gilded halls of our universities is dwarfed by what exists outside of it, much of which at present exists in a state of disorganisation and entropy. The search for enduring value in all this is a continuous, ceaseless process. It behoves us all to constantly strive and improve our preparedness.