(The piece was originally published on October 1, 2018)
Saint Louis (Missouri) and Atlantic City (New Jersey) both bear testimony to the far reaching and often debilitating consequences. St. Louis, the Midwestern city that once boasted of being the fourth largest American city with a population nearing a million, has now shrunk to one third of the population and been relegated to 60th position in the country. Reason? Industrial restructuring and loss of jobs. Now when you drive around the city you come across a number of closed factories. As a result, violence, crime and tensions along the racial fault lines have exploded earning it the reputation of one of the worst cities in America. Recent riots in Ferguson in adjacent area brought further bad name to the city.
Atlantic City on which the American version of monopoly and the recent television series Boardwalk Empire are based was once a magnet for tourism. With its sprawling hotels and casinos, it was a darling of investors. Donald Trump built his first three hotels and casinos here. That was then. However, with the gradual warming up of other states to the peculiar kind of tourism this city attracted and after the 2008 property crash it has been losing business and population rapidly. Businesses now are shutting down and houses being foreclosed. Donald Trump is no more involved in the said casinos. Meanwhile Revel, a $2.4 billion resort, hotel and casino has been sold and resold for much meager sum. Its last auction brought $82 million. The city is silently dying.
These two case studies are important because they highlight and explain two very important phenomena. The flight of capital and the rise of Donald Trump. American Midwest, once known for its industrial belt has now witnessed its transformation into the rust belt. The blue collared jobs in this region have been shipped out of the country to the cheaper labour markets in Asia. And these areas are now supposed to vote for Trump because the unemployed population here is enthralled by his message, albeit flawed in essence, of bringing back jobs. Jobs are important. Jobs make and break lives and economies.
One interesting aspect of the exodus of these jobs to Asian market is that while they have landed into other countries, Pakistan has more or less missed the opportunity. One reason has to be of the relative unrest and insecurity witnessed in past decade when these business opportunities were materializing. Another cause again is of the relative lack of political instability. Between 2007 and 2013 the country witnessed really shaky form of governments. But the most crucial of them all is the lack of foresight and planning. Before the new economic trends set in, back in 1990s when we were worrying mostly about Afghanistan, the then Indian finance minister Dr. Manmohan Singh opened up the hitherto socialist modelled economy to investment and reform. By the time the investors realized the true potential of the region – the basic infrastructure – was already in place. Attempts were still being made to reform the country’s bureaucracy which is still not fixed yet. But from IT hubs to manufacturing friendly zones, from human capital to technology incubators all were in place. Indian economy then grew phenomenally.
But Indian economy still essentially lacks two things. One, good governance. Two, discipline. Move away from big cities and Indian government vanishes without trace along with basic infrastructure and amenities. But discipline is a far more important issue. Owing to a weak and archaic post-colonial state structure and the penchant to be recognized as a democracy and part socialist part capitalist economy the country could not hone its labor class into a well-disciplined working force. Strikes, lack of efficiency, corruption, rising intolerance and absence of working ethics are exhausting the economy’s true potential. Overpopulation and so-called family values also complicate the situation further.
Compare it with China. The country has more or less similar population with poor infrastructure. However, owing to the communist takeover and gradual reform the workforce is really disciplined. First came discipline and then Deng Xiaoping’s reforms, Jiang Zemin’s concept of three represents opening doors to capitalism and eventually One Belt, One Road policy that has brought promise of riches to our doorstep. While in India the bureaucracy and the elite failed Dr. Manmohan Singh’s ambitious agenda, China has been kind to its leaders’ vision of reform. In China it is quite visible that the things have been thought through.
In Pakistan it is never too late for the right kind of atmosphere to develop. The trouble is like India – our priorities primarily remain political than economic. China however understood the principle that in order to be politically strong a country essentially has to be economically boisterous. Right now due to the heavy Chinese investment in China-Pakistan Economic Corridor the important priority has to be to bring about this crucial shift in the worldview. As we progress further we will also discuss the lessons we can learn from the Chinese worldview and the American experiments. Yet it is important to comprehend that in the coming days we are about to witness another huge transformation which will deprive these booming regional economies of their newly found riches if they do not transform by the speed of light.
The Great Transformation Ahead
Right at a time when we are learning the virtues of creating business environment and new jobs, it is heartrending to note that these opportunities will not stay with us for long. Quest for cheaper labor brought investors to these markets. An added bonus was the consumer market. However, the latter is essentially based on the purchasing power of the consumers which brings us back to the same issue: Jobs. As these economies enjoy relative affluence, consumerism is bound to increase putting a pressure on labor costs. So the appeal of cheap labor is bound to erode with the passage of time.
And while this realization has not fully dawned on the planners in these markets, another challenge is silently arising. That of the rise of machines. We all work with machines. They make life easier for us. But what happens when the machines can think for themselves and can work on a pre-programmed trajectory with more efficiency and precision than any of us. I know it feels like a page out of Isaac Asimov’s book. But it is not.
While we were sleeping or sleepwalking, the man has revolutionized science. He has split atoms, learnt to read and rewrite codes hidden in the DNA. One such conversation he had was with the machines. The supercomputers of yesteryears have shrunken into the palms of your hands in the shape of your smart phones. With the rise of the internet and satellite based communication the conversation has moved forward. Experiments in robotics and artificial intelligence both are about to revolutionize our societies. These extensions of our own knowledge and experience are conspiring to take our jobs away from us. Not convinced? Consider this.
Transportation industry is a huge employer all over the world. According to an estimate of American Trucking Association there are 3.5 million professional truck drivers in the U.S. alone. When you factor in other position in the industry that do not involve driving the number reaches 8.7 million. One out of every 15 workers in America are associated with this field. And for a second picture it is all gone. Daimler’s eighteen wheeler Freightliner Inspiration driverless trucks are already in testing stage in Nevada. According to an estimate these self-driving vehicles will be available for broader commercial use in five to ten years. Such prototypes are first developed at exorbitant prices but once mass production starts and appetite increases the prices come crashing down. Now imagine truck drivers all over the world losing jobs at once. An average everyday driver after all is a high maintenance liability compared to a self-driven machine which doesn’t need food, sleep or weekly offs. Now apply the same principle in every industry that employs a large number of people.
In defense industry too we have witnessed the rise in the use of drones. Behind these drones sits the pilot back in his own country controlling the technology remotely. While most of this action takes place in real time, communication over long distance has its disadvantages. So consider one leap of imagination where smart chipsets are fixed on these drones with elaborate programming and instructions. What will be the future of fighter pilots then? And please do not live with any delusions. That technology is already here. An artificial intelligence program called Alpha has already been developed to fly drones and according to the results published in the Journal of Defense Management it has already managed to beat human pilots in simulations. Now take this principle and apply it on every machine used in warfare. In the age of cloud computing and ever shrinking chips there is no dearth of possibilities.
Social Consequences of Technological Shift
If this transformation comes to pass as seems inevitable, the most frightening prospect is of human societies without jobs. If loss of jobs in America can bring about such a devastating change in people’s mood that the racial fault lines in one of the world’s most advanced societies start exploding and voters do not mind opting for political choices as mindboggling as Trump, just think of its impact on societies like ours.
It is clear that with each passing day the dissatisfaction and the rage in the third world countries with huge populations may increase astronomically and result in total collapse in social cohesion. Poverty hurts when affluence is unknown but once you taste the fruits of wealth, losing it can have totally debilitating consequences. It is imperative then that a country like ours plans ahead and avoids hitting a brick wall unwittingly. The secret is to know that jobs do not disappear altogether but shift to the higher planes of knowledge and learning. Behind each machine and each artificial intelligence there always will be human influence and human presence. The trick then is to realize which kind of workforce to produce. And that can only happen when our priorities are well defined and basically correct.
Getting Priorities Straight
The first priority that we have to get straight is the emphasis on economics. Politics is an essential part of who we are. A country that exists in such rough neighborhood, is encircled by such mammoths of countries and has been at the crossroads of history forever is bound to think politically. And yet China’s experience has shown us when focus is on economics, the political priorities sort themselves out. Without economic prosperity every political gain proves momentary and ephemeral.
The second issue is that of numbers. Planning ahead essentially needs data. And in our country not only do we have dearth of institutions that generate credible data needed for effective planning, we even have not been able to conduct census in past two decades. And even the one we had back in 1998 was lacking in authenticity as the crucial process of post census survey was delayed for considerable time compromising original results. So basically we are making do with the projections since 1981. 35 years of projections, hunches and speculations. If our arithmetic slipped even a bit as must have happened given the quality of scholarship in the country a huge chunk of population would remain disenfranchised. No wonder then that this country had to endure instability and disquiet for decades. In a country where elections have repeatedly been held we keep deferring this crucial exercise. This has to change as was rightly pointed out by the Supreme Court of Pakistan.
Then there is the matter of education. We have already pointed out that without quality education we will have to say goodbye to jobs of the future. But there we are victims of double whammy. Illiteracy is already rampant. But the education we impart is also lacking in quality and is not designed to offer a fighting chance in changing economy. Let me give you one simple example in our higher education. I have asked successive Higher Education Commission chairmen as to why our universities are still teaching English literature meant to critique poets and writers of bygone days when they could easily be taught creative writing where they get a chance to write and sell their work in the global market. I will let you know as soon as I get a convincing answer. We need to reinvent our curriculum, throw out ideationally marred old syllabi and start afresh with some investment in research and development.
The fourth issue is of population growth. Somehow we have convinced ourselves that it is of little importance. After the 18th Amendment and devolution of the subject to provinces it has become almost a lost cause. Population does not increase, it multiplies. In a country with such a large population living below the line of basic subsistence this is, and has to be, unacceptable.
Fifth is the importance of private enterprises. Somehow job creation in Pakistan is confused with employment in government sector. For any state such a course of action is suicidal in nature. All over the world it is the private sector that is supposed to create jobs. The state needs to make it a priority that the ease of doing business has to be ensured and private investments protected.
And here two more aspects are noteworthy. One of transparency and the other of infrastructure development. I haven’t seen any other country where every other person talks and complains so frequently about corruption and yet wants to stop it at the micro/local level. Charity essentially has to begin at home. The problem is compounded when we obsess about the accountability for the past decades. That may well be important but this is often done only to shift responsibility. It is important that immediate focus should be on today not yesterday. That a set of procedures be laid out that ensure no more corruption is possible in current and future transactions. That is the only way investor will feel comfortable in bringing money to the country. And somehow we have developed the habit of jeering at the projects of infrastructure development. This has to go. Without infrastructure no investor will ever come here.
One trade route is already promising to change our destiny. China-Pakistan Economic Corridor, when developed, will bring a lot of business to the country. And yet owing to the above mentioned lack of priorities we still do not have capacity to absorb the wealth thus generated. What is more, the new opportunities may bring about a demographic shift in the country. Given our ethnic and cultural sensitivities we need in-depth studies to examine the true impact. Sadly, we do not even have the appropriate think tanks, research organizations to cater to these needs.
And would you say that CPEC is the optimum use of our true trading potential? Evidently not. Consider how many economic powerhouses exist in our neighborhood or extended neighborhood. Iran, Central Asia, Gulf countries, Russia etc., we can build linkages, benefit enormously and can still manage to protect our individuality.
We have dreamed to act as a route between Central Asia and hot waters for quite some time. The biggest stumbling block is Afghanistan. Trouble is it looks more and more implausible because of a belligerent Afghanistan that demands access to India in return. And given that India is currently ruled by a bunch of zealots that seek cheap thrills by confronting Pakistan this seems impossible. Does it not? Here China’s example should come to our rescue. Politics is supposed to serve economic interest and not otherwise. China trades with every country that can fulfil its needs no matter how belligerent. What is needed is an intelligent strategy to ensure Indian trucks passing through Pakistan are not used to undermine Pakistan’s national interest or culture. If we devise such safeguards Pakistan can start benefiting from access to Central Asia on a quid pro quo basis once Modi regime is gone. Afghanistan perhaps will never be too friendly with Pakistan. But that is no reason for us to stay away from our Central Asian friends. And Central Asia also badly needs this trade to start owing to deteriorating economic conditions there.
Do We Have Time?
How much time do we have before the technological advances change our world? It will take ten years for the technology to truly mature and further five to ten years in reaching our part of the world. Fifteen to twenty years are enough to raise an entire generation. So we do have time. Provided we really start today and plan meticulously for the future. For that we will need internal stability and national consensus. If that is achieved the preparation will essentially come in two phases. First, bringing in investors and creating traditional jobs that are already in vogue. That way a solid bedrock of wealth and affluence is created for the next generation. The second step entails bringing about the qualitative changes that have been discussed above.
Conclusion: Innovate, Innovate, Innovate
One hallmark of American economy is its neat division of labor. We have discussed the industrial belt at the start already. Similarly take a look at Silicon Valley. And with every such grid exists at least one university to provide the intellectual capital needed for growth. If we want to grow, we will have to structure our economy in this fashion. And along with that we will have to lay the foundation of an intellectual and economic environment where innovation becomes the norm. From startups to high quality research and educational institutions the state will have to ensure it is forthcoming helping the private sector comes up with the best initiatives needed. The time to act is now.
The piece first appeared here