Tag: economics

  • Dealing with the demographic dividend

    Dealing with the demographic dividend

    “In the 20th century the planet’s population doubled twice. It will not double even once in the current century,” states The Economist in a lengthy article on how the world’s aging population is going to affect economic growth.

    One of the most overlooked aspects of modern day economics is the changing demographics of the developed world, the aging army of baby boomers has been effectively ignored by policy makers and voters alike and now we’re about the see the consequences.

    Japan is the case study as the country is well ahead of the pack with an rapidly aging population and the indicators aren’t good.

    Amlan Roy, an economist at Credit Suisse, has calculated that the shrinking working-age population dragged down Japan’s GDP growth by an average of just over 0.6 percentage points a year between 2000 and 2013, and that over the next four years that will increase to 1 percentage point a year.

    Despite that drag on growth, the Japanese are still living quite well and could be showing that an economy can grow old gracefully and productively.

    The key to doing that is to have a well educated, skilled and productive workforce. An efficient health system that ensures older workers stay fit enough to work doesn’t hurt either.

    What The Economist illustrates in its story is that some countries are going to perform better than others as their workforces age. Those who’ve neglected their education systems and workforce skill bases are not going to do well.

    One can’t help but think the ideologies that gripped the Anglo-Saxon countries in the 1980s that saw skills being discarded, investment neglected and education cut are going to have a high cost on those nations over the next twenty years.

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  • Software’s modern loom weavers

    Software’s modern loom weavers

    Are we coming to the end of the hand crafted era of software development? Pegasystem’s Alan Trefler thinks so.

    “Technology has completely dis-served the modern economy;” Alan Trefler, the founder and CEO of software vendor Pega Systems, told the audience at the opening of his company’s new office in Sydney yesterday.

    Trefler sees there being an ‘execution gap’ between what software promises and actually delivers; that development is too slow and programs don’t give users what they need.

    Ending the hand crafted software era

    A key reason for this in Trefler’s view is that too much software is ‘hand crafted’ and that his company’s object orientated methods speeds up development time and delivers a better product.

    This may well be true, Pegasoftware’s client list is impressive, however moving from the age of ‘hand crafted software’ may well spell the end of many IT industry worker’s careers.

    One of Pegasystem’s key Australian customers is the Commonwealth Bank and the company’s CIO, Michael Harte, gave some comments at the opening that illustrated how the software industry is changing.

    Freeing up resources

    “Does an IT organisation want to change fast enough to adopt a new model driven approach so they can free up capital and free up resources?” Harte asked.

    That freeing up resources and capital is exactly what befell the Luddites when the 18th Century mill owners decided to change the technology they used.

    For modern IT workers, the last decade has been tough as a whole generation of business analysts, software engineers and project managers have found the enterprise computing industry has been offshored and automated; Harte and Trefler are describing how that process is by no means over.

    “Older project models necessitated people to build a use case and then to design something, go through requirements and start crafting software, that’s on old idea,” says Harte who sees a model orientated approach as being more effective for modern enterprises.

    Let the machines do the grunt work

    That’s not to say that either men are pessimistic about the future of the software industry; both see an improved industry delivering better results for business.

    “Let’s move people into higher order things and allow the machines to do the grunt work,” Harte urges.

    “Not that long ago when I was learning how to do this stuff we’d have to fill in punch cards and then fill in Word Documents to write out technical requirement, that’s not much fun.”

    “Lets have some fun and get some work done.”

    Harte is describing a very different IT industry and workplace, one that doesn’t need older skills and – more importantly – doesn’t need as many clerks or middle managers carrying out routine administrative tasks.

    It should be noted that both Harte and Trefler were adamant that their visions did not mean job losses when asked by this writer about the employment consequences, but it’s impossible not to come to the conclusion that a fundamental industry change means many skill sets become redundant – again this is what happened to the Luddites in the 18th Century fabric mills.

    “What we think the next ten years are going to be about is changing those metaphors,” says Trefler. “There can be a more highly evolved communication between IT and business folk.”

    Both Trefler and Harte see design as the future of software with most of the human work being in creating the interfaces that work for the people using the computers, this is where the high level, high value work is to be done.

    The changes that Pegasystems are describing is not just an IT industry issue; these are changes that are happening across the workforce and in all sectors. For both managers and workers, it’s a time to refresh skillsets and understand where the value lies in what they do.

    Many industries have products handmade by skilled tradesfolk become a thing of the past, it now appears the time has come for the IT industry’s craftsmen and women.

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  • Facebook and the Fax Machine

    Facebook and the Fax Machine

    The South China Morning Post reports the Chinese government is allowing access to otherwise restricted sites like Facebook to those in the Shanghai free trade zone.

    In many ways this parallels the original Special Economic Zones set up by the People’s Republic of China at the beginning of the 1980s – these areas’ separate legal, immigration and economic status attracted foreign investment and trigged the economic boom that’s seen China become one of the world’s biggest economic powers.

    Just as manufactured goods were the key to the nation’s development 30 years ago, today it’s information as the PRC leadership works on moving China up the global value chain.

    For a nation of knowledge workers to succeed, the workers have to have access to knowledge.

    It’s claimed the humble fax machine was responsible for the fall of the Soviet Union, how true that is open to debate but an open flow of information is never good for those who rule without the support of their citizens.

    With the explosion of Chinese social networking sites, it’s become harder for the government to control the flow of information between citizens and the opening of the internet in parts of Shanghai is another small change.

    How the Chinese Communist Party manages to keep the support of its increasingly affluent and better informed citizens will define the course of 21st Century history.

    As China shifts from being a low cost manufactured goods supplier to a more sophisticated, diverse and expensive economy the government has no choice to face these challenges.

    Beijing’s cadres would be hoping our children aren’t talking about Facebook in 2012 Shanghai in the same way that we talk of fax machines in 1982 Leningrad.

    Image of a fax machine courtesy of Kix through sxc.hu

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  • We’re all Luddites now – Wage deflation and falling living standards

    We’re all Luddites now – Wage deflation and falling living standards

    A post on today’s Macrobusiness describes how Australia’s General Motors workers being asked to take a pay cut is the harbinger for a general fall in the nation’s wages.

    This is coupled with a post by Paul Krugman in the New York Times sympathising with the Luddites as technology takes away many middle class jobs that were not so long ago thought to be the safe knowledge jobs of the future.

    Krugman points out that in the United States income inequality started accelerating in the year 2000, the stagnation of most Americans’ incomes started a decade or two before that.

    For the last few decades, expanding credit allowed the consumerist society to continue growing, but the crisis of 2008 marked the end of that that economic model. Although governments around the world have tried to keep it alive by pumping money into their economy.

    Now we have to face the reality that the Western world’s standard of living is falling for the first time in a century.

    For some this is going to be really tough – although one suspects those who will really complain are those least affected.

    What is clear is that many of our business and political leaders aren’t prepared to face this change. Dealing with that is going to be the biggest challenge of this decade.

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  • is G’day China a good idea?

    is G’day China a good idea?

    Yesterday’s announcement by the Prime Minister’s  of an Australia Week in China may prove far more successful than the G’day USA events the idea is based upon.

    G’day USA has been run for a decade and showcases Australia’s attractions, skills and businesses at events in Los Angeles and New York.

    It’s been moderately successful but an emphasis on movie stars appearing at black tie Hollywood events illustrates Australian governments’ disproportionate focus in throwing money at US movie producers.

    If China Week follows the US example we can expect private, exclusive dinners where Twiggy Forrest, Clive Palmer and the BHP board entertain Chinese plutocrats over bowls of shark fin soup and braised tigers’ testicles.

    Should China Week follow that model then it will probably share G’day USA’s middling successes.

    The opportunity to do it differently though is great as the Chinese-Australian relationship is far younger and hasn’t been locked into Crocodile Dundee type stereotypes on both sides.

    As the Chinese economy matures and evolves, there’s an opportunity for Australian businesses and industries which haven’t been available for exporters to the US.

    Done properly, G’day China could help the profile of Australian businesses in many sectors, particularly in those affected by the great Chinese rebalancing.

    Let’s hope they do it properly.

    Image of the Chinese embassy in Canberra, Australia from Alpha on Wikimedia

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