The nips are getting bigger

Most of the productivity gains in the last 200 years have been driven by technologies that have made products and services, delivered to people, just that much cheaper (in real terms) per unit.

Much of the technology in question has also enabled the introduction of entirely new products and services.

In terms that economists use, such as forecasting long term economic growth of Australia, a key input is future gains in productivity. What they actually use as a prediction of gains in productivity for the next 40 years is the mean % number for the last 40 years. Which means that they have no idea.

What they really want to forecast is the gains in wealth per person, which is correlated to how little of our time is required to survive (say, to earn food and pay for a roof over our heads) and how much we can afford to consume in the fraction of non-sleeping time not required for survival.

As an aside, clearly the big opportunity for the productivity freaks is to develop means to consume while we are asleep. Automated consumption. If a trees falls in the forest and no one sees it, did it happen?

My concern is that the economists are not seeing the bigger picture. In light of global warming and diminishing resources we have to figure how to consume less by becoming more virtual in our consumption, i.e. we have to enter into the Matrix.

What a paradox. Productivity may continue to improve but consumption may start to decline forever. There goes the fundamentals of our current global economies and god help us.

Due to increasing concentration of the capital for investment into technologies, much of the new emerging technologies that will drive increases in productivity will be owned by fewer and fewer groups of people. Most of them will not be in Australia and it is likely that the introduction of these technologies will not enrich many Australians.

Already we are stretching the rubber band of wealth distribution in Australia – 68% of GDP is in the services sector. Much of that is government mandated and actually works against the productivity of our tiny export sectors in resources and agriculture by adding costs that are not seen by foreign competition in these sectors.

I predict that Australia will have a wealth distribution inflection point where the wealth from our genuine wealth generating sectors will get trapped either within a small group of Australians or exported to the overseas owners of the high productivity technologies.

The wealth distributed to and circulated within the services sector will come under increasing pressure and unemployment in this sector will spiral out of control.

Compounding this problem will be the aging population that are not willing or not able to participate in the wealth generating sectors, so, if forced to work, will put even more pressure on the over-subscribed services sector.

The only responsible action from our government will be serious increases of taxes on our resources sector. Such action has just been dumped but it will be back on the table. This will only work if foreign resources, not encumbered with such taxes, don’t out-compete our exports in the global markets.

Even if this eventuates it means that government will become even more central to our lives.

I think it’s about time we invest seriously in developing a technology sector before it’s too late. Otherwise it’s not going to be pretty.

The only other solution would be to put up the walls around Club Oz and go all Amish.