December 15, 2016

Sparking a high-tech economic revolution

Sparking a high-tech economic revolution

Rory Broomfield examines how the next big financial crisis could trigger a high-tech economic revolution.  

I remember when Lehman Brothers went down. I was working in the City of London at the time and, to put it mildly, there was a state of shock, disbelief and, in many cases, panic in workplaces throughout the sector. Although the work culture had changed since the collapse of the sub-prime mortgage market in Q3 of 2007, coupled with the collapse of Bear Stearns, the music still played. This, however, escalated the unease in the City.

Those who survived in the City had a niche; they didn’t just know information, they had knowledge and often political skills to navigate the new environment. They could use these assets to demonstrate added value and performance. This helped them survive the offshoring and outsourcing processes that were happening throughout the sector beforehand and, given the new financial environment, allow them to become nimble in the face of change. But times changed and, along with the nationalisation of RBS and Lloyds Bank, it became harder to sustain previous performances and as a result many lost their jobs.

This didn’t just go for the City of London. The wider economy was affected from the changing financial environment and unemployment went from 5.3 per cent in 2007 to 8.1 per cent in 2012 in the UK. However, the next financial crisis could go even further than the 2.8 per cent rise over that five-year period; it could lead to a revolution in the workplace not seen since the industrial revolution. The reason: the rise of technology.

Fundamentally, the rise in unemployment over the five-year period was down to changes in risk that led to changes in human behaviour. Banks sensed risk and reduced lending, government saw risks to the system and required more greater capital reserves. All this led to plummeting levels of business financing, consumer confidence and risks of deflation – all of which helped lead to QE and chronically low interest rates.  That said, despite the incremental adoption of new technology by firms, unemployment practices weren’t radically altered due to it.

That was then, this is now.

Since 2012 (and especially since 2007), technological practices and knowhow have increased dramatically. With a few well-known exceptions (automobile production, for example), where workers have been replaced largely by inventions that do the jobs more efficiently, previous technological changes were set to help increase efficiency of workplace practices. However, it has got to the stage where the workplace practices in many sectors can now replace entirely those of human beings.

Of course, different sectors are and will be influenced more by technological change than others. Indeed, some work environments are visibly changing more even now. This is especially seen in retail, where machines are taking over the checkouts at supermarkets, however, with what could come next, these sorts of changes to the workplace could intensify.

What’s coming next?

As detailed in CityAM recently by the economist and best-selling author, James Rickards, the cause of the next global financial crisis could be triggered by a host of reasons. In an excellent article that channels Nicholas Taleb’s Black Swan theory, the underlying causes could be multiple; however, Rickards’ assessment shows that the fallout could be dramatic.

What would the fallout be? Ultimately, as Rickards explains, a lack of liquidity. He believes that the IMF will be called to stump the bill. I’m doubtful. Nonetheless, what will businesses, faced with overheads and potentially rapid inflation, do to survive? The answer: adopt (a lot more readily) new technology. In this scenario, the consequence would lead to widespread creative destruction as businesses who adopt low costs and overheads will come out in better shape to take over others that fall behind.

Nonetheless, the initial stage will be wholesale technological adoption and, although it won’t directly have a wholesale effect on every economic sector and job initially, people will lose their jobs throughout the real economy.

How can we address this? Is there a solution? My answer is that there is a solution: change.

In an economy where the lowest overheads win, make sure you are either on the side of the implementer of change or are a benefactor of it. In short: you want to be an Audrey Hepburn – who excelled in advent of films with sound – rather than a Mary Pickford – a silent film star who faded away in the advent of cinematic sound.

With the rise of the high-tech economy – not as the cause of the next big financial crisis but one of its consequences – retraining and the ability to innovate, as an individual, is crucial. Also, with the rise of the “gig economy” – and other areas of the sharing economy (developing and not yet realised) – the owning and use of assets like cars (Uber) or homes (Airbnb) is likely to be helpful.

But above all, the development of this new economy would (if legislators permit) be faster than previous economic revolutions. In being able to keep up with this, people that possess the asset of knowledge and the skills that can be adapted to this new ‘Uber economy’ will succeed.

5.00 avg. rating (95% score) - 2 votes
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Rory Broomfield
Rory Broomfield is Director of The Freedom Association and the Better Off Out campaign. He is an authority on the EU and has written a number of books including his latest, co-authored with Iain Murray, Cutting the Gordian Knot: A Roadmap for British Exit from the European Union. He has previously worked in the City of London and in Westminster for a number of Members of Parliament, including the current Prime Minister, Theresa May; the current Chairman of the 1922 Committee, Graham Brady; and Sir Richard Shepherd.
  • Shadow Warrior

    Hammond is continuity Brown. He is a hand-wringing lefty looking for clever wheezes to raise more tax in ways that people don’t immediately notice.

  • captainslugwash

    I predict the Budget will attempt to show the Left how caring the Tories are, and it will be funded by screwing over the working man.
    If Corp Tax comes down, I bet Divi tax will be going up.
    I would love to be wrong.

  • skynine

    We really need to look at tax credits, in particular in work tax credits that encourage people to work part time to preserve the benefits. 45% of women work part time and I would hazard a guess that tax credits are the main cause. This leads to low pay, low skill work in supermarkets and the retail sector including coffee shops. The government needs to get back to the employer paying people to do a job for economic reasons rather than to get onto the tax credit ladder. Like all government benefits it distorts the market and diverts government expenditure into non productive areas.
    The refrain that the government has cut expenditure is not true, it increases every year as more and more goes into welfare.

  • MrVeryAngry

    fat chance

  • MrSauce

    So, when wouldn’t we want a ‘budget for growth’?

  • Rob

    I note that the UK Government has just slapped on a 25% tax charge for anyone moving abroad and wishing to move out their private pension from the UK.

  • SonofBoudica

    The Remoaners will do their utmost to sabotage the Government’s negotiating position. They do not want a successful outcome; they want a failure. They want to be able to scream “Told you so!” from the rooftops.

  • EnglandLaments

    Thank goodness for Andrew Neil, the one media hack who scares the pants off the established politicians. He was spot on with Heidi Allen!

  • joshuafalken

    I had a very long, hard, studied and considered look at the hope, care and aspirations of all Europeans, before I voted to get the UK out of the toxic grasp of Brussels.

    The European Union and it’s charge of “ever closer union” has borrowed and spent its way to oblivion, whilst enslaving the working and middle classes in debt.

    The central control mantra of the unaccountable Brussels ruling elite, delivered through a mixture of socialism, globalism and corporatism is entirely responsible for the populist revolt by the millions of “Just About Managings” across Europe.

    We must remember the ultimate goal of socialists, globalists and corporatists is control, not prosperity. see https://mises.org/blog/goal-socialists-socialism-—-not-prosperity.

    Social equality and economic growth always fail under central control and fighting against the Brussels doctrine on behalf of all Europeans is why I voted for Brexit.

    Britain has a long history of helping Europeans depose tyrants and Brussels is just the latest incarnation.

    Britain is the most racially advanced and accepting society on the planet. We welcome those in need and those that can help us with open arms and a smile; that will not change.

    We are also one of the most innovative, talented and open societies in the world, which why everyone wants to live here. However, we cannot fit everyone in, so we have to have clear, balanced and fair immigration policy which is where the arguments start between the monetarists and humanists will never be reconciled.

    I thought long and hard before coming to the conclusion that leaving the EU was in the best interest of all Europeans, as Brussels is toxic and cannot be reformed from within.

    Also, I find it insulting that people who voted Remain have insufficient faith in British ingenuity, compassion and skill to get a good deal for us and see the Europe that we love get a better deal from Brussels and the reform that European people deserve. https://mishtalk.com/2017/03/29/bad-brexit-deal-better-than-no-deal-mathematical-idiocy-odds-of-no-deal/ and https://www.worldheadlines.info/2017/03/after-brexit-9-reasons-to-be-bullish-on-great-britain/

    The politics of left verses right are dead because neither have delivered the promised economic growth and social mobility for anyone, but themselves. The populists are not selfish per-se, they just want to take back control of their own destiny that left/right politicians have freely given away and/or exploited for their own ends. In my constituency, the local residents group are taking over the councils as politicians ignore voters, so Westminster should beware of the well-organised, local resident independents at the next election. This is a peoples revolution which should be shouted from the rooftops, but liberals remained deafened by the socialist, globalist and corporatist “vested interests” that have spectacularly failed us and are obediently crying foul and fake.

    There will be an initial unpalatable inflationary cost to fighting globalism and rolling back central control that few appear to have factored in, but dismantling failed left/right vested interests should eventually free libertarian socially-conservative capitalism from the shackles of TBTF corporatism to feed economic growth and social mobility.

  • agdpa

    The EU usually makes the wrong decision – on immigration, on freedom of movement, on the euro, on the Ukraine, etc. etc. Little hope it will get Brexit right.

  • brownowl

    Eh? Reference please!

  • Neil2

    Sod caring. Screw the spongers and breeders. Kill HS2. Stop all “green” subsidies. Slash “foreign aid” and walk away from the EUSSR with immediate effect.

  • Rob
  • John C

    What a confused article. It conflates surveillance by the security services with poor defences against fraud.

  • John C

    Err, it’s the UK that’s leaving the EU, not vice versa.

  • John C

    Me, now. ‘Growth’ is a manic obsession.

  • La Face Nord

    Mr Redwood – are you aware of the Biased BBC website? It’s been exposing their agenda for a long time, but I imagine you’ve been well aware of the BBC’s agenda for quite some time…

  • Contact Rvtech

    The post is great

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