It often seems that views on the economy fall into two camps. There are those who say we are doomed; that the Earth’s finite resources are just about all used up. You could say this is the Malthusian view of the world. Furthermore, they say, the growth we have enjoyed over the last 200 years or so was based on unsustainable credit – we borrowed from Mother Earth and from future generations by doing something called ‘burning fossil fuels’, and in the process built-up debt that can never be paid back.
Then there are the optimists – those who believe in technology. It is a shame the debate is often so polarised, because the truth is that both sides have legitimate points. In today’s piece, the focus is on technology, and something rather miraculous that is appearing in our midst, and which – by the way – is largely being ignored by economists, and those who like to debate economics.
The truth is that progress – if you want to call it progress – is accelerating. And it has been accelerating for several billion years at that. For the majority of time that life has existed on this planet it was simple, very simple, and indeed for much of the history of the world, life consisted of single celled organisms. Then half a billion years or so ago, the Cambrian revolution occurred and a blink in the eye – evolutionally speaking that is – things changed incredibly quickly.
From the evolution of dinosaurs, mammals, primates, bipedal primates and early humans, the pace of change just got quicker. And once Homo Sapiens discovered agriculture we saw another acceleration in change, and an acceleration again upon the invention of writing, and then again with the printing press and the industrial revolution.
In the 20th century too, we have witnessed it. It used to take decades for new technology to gain mass market acceptance, but now it can take a mere hand full of years.
With the Internet this process has accelerated again and now – thanks to digital technology – it is no longer true to say that technological progress is merely accelerating. Rather, it is accelerating at an accelerating rate.
Now McKinsey has highlighted what it sees as 12 disruptive technologies that it estimates will collectively have an economic impact in the year 2025 of between $15 and $25 trillion. Note that the report is talking about that one year: 2025. Presumably the impact of disruptive technologies will grow from there. Just bear in mind, by the way, that global GDP in 2012 was around $72 trillion. US GDP is around $15 trillion, so by 2025 these new technologies, based on McKinsey’s analysis, will have an impact on the world either equal to or greater than the entire GDP of the United States.
The technologies and their estimated economic impact in 2025 are:
Mobile Internet. Impact: between £3.7 and $10.8 trillion. McKinsey says it estimates: “10 to 20 per cent cost saving on the treatment of chronic diseases via the ability to remotely monitor health.”
Automation of knowledge work. Impact: 5.2 to $6.7 trillion. The report says: “Advances in additional labour productivity would be equal to the output of 110 to 140 million workers.”
Internet of things. This means billions of devices, such as sensors, some very small, and which are connected. Impact: $2.7 to $6.2 trillion.
Cloud computing. Impact: $1.7 to $6.2 trillion.
Advanced robotics. Impact: $1.7 to $4.5 trillion.
Autonomous or near autonomous vehicles. Impact: $0.2 to $1.9 trillion.
Next generation genomics. Impact: $0.7 to $1.6 trillion.
Energy storage. Impact: $0.1 to $0.6 trillion.
3D printing. Impact: $0.2 to $0.6 trillion.
Advanced materials (such as Graphene, carbon nanotubes and nanoparticles). Impact: $0.2 to $0.5 trillion.
Advanced oil and gas exploitation. Impact: $0.1 to $0.5 trillion.
Renewable electricity from wind and solar. Impact: $0.2 to $0.3 trillion.
Okay, McKinsey does not really know. Is it estimating or guessing? Its guesstimate for 3D printing seems on the low side, and why aren’t vertical farms in the top 12? But it’s an interesting list and one worth keeping a record of.
But what are the implications for the economy, for unemployment, distribution of income, education, and indeed for business and investors?
These disruptive technologies could have the effect of greatly increasing GDP, so why is there a preoccupation with austerity? Debt does not really matter if your percentage growth in income is greater than the interest on your debt. We should either be preparing for, or at least discussing these great changes?
The real point, however, is that the disruptive technologies in the pipeline are stunning and, for better or worse, they will change our way of life and drastically alter the economy very soon. This is exciting and also frightening. How often do you hear this topic discussed? We are simply ill prepared.
For the McKinsey report, see: Disruptive technologies: Advances that will transform life, business, and the global economy