With the economy being what it is, it is no wonder that many people are starting to question whether it will ever return to its former glory. In the history of mankind, an economic downturn has never lasted as long as it has in recent years. It all started in 2008, when the sub prime housing catastrophe started hitting the mainstream media. And the economy wasn’t even doing very well in the years prior to 2008. Why is the recent economic downturn taking so long to recover?
There are many things to factor in. But the most important one has to be, beyond the shadow of any doubt, technology. As long as there has been an economy, it was always technology that has led to bubbles, which sadly always tend to implode. The most recent technology bubble the world has experienced is the IT boom in the nineties. Back in those days, every guy that had read a “How To Build Websites For Dummies” book was able to get a job building websites.
Everything was possible. The sky was the limit. The economic upturn knew no boundaries. Surely, this would just go on and on forever. Or would it? As it turns out, people often have an inflated expectation of the limits of any given contemporary technology. In the case of the IT boom, it was assumed by many budding IT companies that it was possible to create endless supplies of cheaply created software and sell it at extremely high prices. As it turns out, the demand for cheap software had its limit after all.
Many shattered illusions later, the world economy has seen other revolutionary technological advancements. The epitome of this advancement is definitely the rise of the smartphone and the tablet. Who in the year 2000 would ever have thought that by the year 2010 we’d have mobile gadgets that seemed to come straight from an episode of Star Trek? The mobile device revolution has opened up a whole new world for both gadget manufacturers as well as software developers worldwide.
And while mobile gadgets have certainly contributed to the growth of the Internet and also the quality of life, there is one thing that they haven’t contributed to… the number of jobs available! And if there is anything that counts when it comes to getting the economy going again, it is jobs. Many media outlets are speaking of a jobless recovery. And every single time that the jobless recovery is mentioned, another thing is mentioned as well… robotics.
It was at the beginning of 2011 that Google came up with the world’s first self driving car which, at the time of writing, already has a registered 300,000 miles driven without accident. Then there is IBM’s Watson computer, also introduced at the beginning of 2011. Watson was able to beat Jeopardy champion Ken Jennings in a competition of answering knowledge questions. These accomplishments in artificial intelligence and robotics have quite the transformative impact on the world’s economy.
Take Google’s autonomous car, for instance. It has the potential to replace many, many jobs. Taxi drivers, truck drivers, limousine drivers and more. It is estimated that a total of 10% of all jobs in the USA are related to transport. Can Google’s autonomous car wipe out 10% of all jobs in the coming few years?
What about Watson? Watson has recently been fed many decades worth of cancer diagnostics and is now able to come up with cancer treatment plans based on a patient’s diagnosis. Doctors are saying that Watson’s proposed treatment plans are better than the ones they themselves can come up with. Watson is essentially a knowledge dispensing machine. How many percent of all jobs have something to do with the dispensing of knowledge? Next to medical workers, I imagine lawyers would also be at risk of losing their jobs because of this technology.
Currently, Amazon and many other companies, have replaced their warehouse staff with robots. Robots are cheaper than human staff and work all day long without complaint. They are more efficient at their jobs. Because of these warehouse robots, big companies are making more money than ever… with fewer personnel.
Is there no hope, then, for the common people? Is technology destined to increase the ever widening gap between the rich and the poor even more?
No, not by a long shot.
Technology has always increased the quality of life for everybody. The economic crisis of the 1930s robbed many people of their homes. But that was because people in those days didn’t own a lot more than just their house and some basic furniture. These days, everybody owns a car, a computer, multiple mobile devices, a television and whatnot. A financial crisis in the 21st century means having to give up a lot of luxuries. But not necessarily the house.
Sure, people have lost their houses in the recent financial crisis. But not nearly as many lost their house in recent years as in the 1930s.
Technology is poised to keep increasing the quality of life. And just as the financial crisis of current times isn’t nearly as bad as the crisis in the 1930, so too will a financial crisis of 2030 not be nearly as bad as the current one.
And while it is true that technology keeps on replacing human jobs as automation continues, it is also true that technology makes life cheaper. When new technology is first released, it is expensive. As new technology ages and is replaced by yet newer technology, the price comes down. This is the reason why you can buy a more powerful smartphone every year for the exact same $500.
A good example of a technology that can lower the price of living, is solar power. Solar power is said to reach ‘grid parity’ (read: just as cheap as conventional energy sources) in the USA this year, 2013. Solar power has already reached grid parity in Spain in December 2012. Other countries in both Europe as well as the USA will surely follow.
There are many more advances possible when it comes to solar technology. Solar power has the potential to become extremely cheap. Battery technology is improving as well. Better battery technology makes it easier to store solar power. Solar power that is cheap and easy to store, will eventually attract the attention of power supply companies worldwide. They will switch from convential energy sources to solar power. Competition will drive prices down.
Energy prices worldwide have the potential to come plummeting down in the next decade or two. Lower energy prices translates to a lower cost of living. A lower cost of living will restore purchasing power to the people. Greater purchasing power will cause consumers to spend more money. Consumers spending more money, in turn, leads to a better economy.
While things may seem bad at the moment, rest assured that the economy is still moving from upturn to downturn to upturn, ad infinitum. There will be better times. And they might arrive here sooner than you think!