economics · philosophy

The future of the World, part I

Predicting the future of the world is pretty hard, I imagine. As Joost Vullings once remarked: “making predictions is hard, especially about the future.” As such, I don’t really want to make predictions, I’d like to call them provisionals. That is, if nothing changes about the way things are run, this is kinda where we’ll end up.

Without further ado, I think there are many parallels between the labour situation in the US in the seventies and high education in most of the western world. The 70s marked a major shift in the US labour market. In the 150 years or so before, real wages grew steadily, and anyone born back then in the US knew their lives were gonna be better than their parents’ lives. Real wage is wage corrected for inflation and various other things. Even though we may earn more now than 30 years ago, that doesn’t mean the standard of living is better. The steady rise of real wages furthermore attracted a huge influx of migrants, coming to the land of opportunity to seek a prosperous life.

This all came about through a labour shortage that lasted until the 70s. Capitalists had to compete for labour, resulting in the steady rise of living standards. But then, two things happened: economic stagnation combined with the saturation of the labour market. Capitalist ventures moved production to Asia, where labour was much cheaper. As a consequence, labourers had to accept concessions in wages, which resulted in the remarkable fact that real wages have been more or less constant ever since. If anything, they even declined a little bit. All of a sudden, the promises of capitalism were no longer coming true. There didn’t seem to be any “trickle down effect” or a “rising tide lifting all boats”. The rich continued to grow richer, but the poor remained poor.

The parallels with the high educated labour force are legion. When I was young, my parents told me that getting an education ensured a life a prosperity. Much like the parents of US children before the 70s might have told their children. Or perhaps especially the children of immigrants in the US. One single fact somehow promises a lifetime of plentitude and wealth. Moreover, there has been a steady increase in high educated people worldwide, especially in western countries. In the Netherlands, where I live, the percentage of the population with an education is well over a third. And growing. Besides from that, there’s such a high demand on educated labour that the Netherlands, and many western countries alike, are actually importing it. For instance, there are huge tax breaks (something like 30% for ten years) for foreign educated labourers who have at least two years of foreign work experience. Meanwhile, by the way, the Dutch government is decreasing funding to universities; I guess they figured it’s cheaper to import.

Now we come to the prediction bit. I think in the not-so-far future, educated labour is going to move to Asia wholesale. At the moment, the only reason this isn’t happening on a large scale is, or so I’m told, the quality of the education. In particular, Chinese universities emphasise recital over insight. Engineers are trained to know solutions to standard problems, but they aren’t trained in problem solving itself. This has to do with all sorts of ideological and political reasons. The story goes that the communist party is afraid of teaching critical thinking, as it might be turned against them. Yet, the Chinese are turning more and more capitalist continuously. They also have several programmes in place for the improvement of their universities. Some examples are guest lecturers from western universities and seemingly massive numbers of exchange students coming to the west. Thus, with increasing quality of educated labour in Asia, the barrier for keeping high-tech mostly in the west is gradually crumbling.

The migration is already underway, of course. Many of the high-tech products we use every day are mostly or completely produced in Asia. Good chance your phone, tv, computer, or any other device was partly or wholly produced in Asia. Even devices that claim to be made in the west are usually only assembled here, while most or all components are still produced in Asia. There are some exceptions, namely high-tech companies that compete with Asian production based on quality. Yet, in many cases, the price of the products from Asia are so low that large stocks outweigh the western counterparts based on statistics. It’s possible to determine, with mathematical precision, the number of products out of a batch that meet the western quality demands. Another type of educated labour involves medical care. Indeed, some Westerners decide to get non-emergency medical care in Asia. For instance, it’s currently very popular in Sweden to go on holidays in Thailand. As dental care is not covered by basic ensurance and rather expensive back home, many Swedes elect to have their teeth checked during their stay.

The current educated labour situation is nothing new, as we’ve seen with unskilled and low-educated labour, capitalist production reliant on it migrates to a place where it’s cheaper and plentiful. In fact, migration of production itself is a recurring theme in capitalism. For example, during the industrial revolution production moved from the major cities to the countryside. Why? Because labour was cheaper and in abundance there. There’s absolutely no reason to think this migration won’t happen to educated labour. Yet the belief persists. Many people seem to think high-tech jobs are somehow immune to this process. The illusion is powerful, as right now, there appears to be a shortage of educated labour in the west. This leads to the reproduction of many of the characteristics we know from the US before the 70s. The educated part of the population has indeed enjoyed many of the promises made by capitalism. Current policy focuses on import of educated labour, which will eventually, and inevitably, saturate the market. On top of that, the quality of education is increasing in many parts of Asia. This removes a barrier that’s currently in place, holding some industries reliant on educated labour in the west. If nothing is done to stop it, they will inevitably migrate to Asia as well. If history teaches us anything, it’s that this will lead to the stagnation of real wages for the educated in the west.

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