01 May 2017

Interpreting the facts: Technology, populism, and the economy

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by Jim McCaughan , Chief Executive Officer

Key Points

  • Economic growth is measured by growth in the workforce and growth in productivity –  technology has a profound impact on both of those factors.

  • Technological progress has been a critical component in an advancing standard of living throughout history.

  • Technology is generating more productivity than we recognize in our growth measures and advancements have made it so the global economy can now function with less capital than was previously needed.

  • If a combination of technological change and aging demographics leads to persistent low interest rates, there may be a potential impact for retirement planning.

Facts are facts.

The challenge arises in how we interpret and apply those facts. Circumstances change. Views mature. Knowledge progresses. What was state-of-the-art becomes obsolete. Each of these processes affects how we interpret and apply facts over time. With technological progress, the underlying fabric of our society is also shifting at a rapid pace, while at the same time change, maturation, and progress occurs, complicating the picture even more.

Since our topic is technology, consider the term “Luddite” as an example of misinterpretation. Now commonly understood as a person who is opposed to, or inept at, using technology, the term originated in the early 1800s after a series of manufacturing disturbances where workers destroyed laborsaving machinery. With the origin of the term some 200 years distant, popular assumption and romanticism supposes that a group of skilled artisans destroyed modern industrial equipment because they feared the obsolescence of their handmade craftwork. The truth is more nuanced. Luddites, named after their fictitious leader Ned Ludd, were, in truth, factory workers. The technology they destroyed (mechanical knitting machines were a popular target) was hundreds of years old by the time the Luddites brought their hammers and axes down. Rather than any fear of technology, the Luddites were actually motivated by poor wages and working conditions.1 In the absence of labor unions, destroying textile equipment was one of the only mechanisms available to workers to protest their treatment by the factory owners. This “collective bargaining by riot” was more akin to a labor strike than a political statement against technological progress.2 The facts remain the same: workers destroyed machines. It is the interpretation that has changed. I believe rapid technological progress, an unquestioned benefit to humanity, is at the same time leading to misinterpretation and misreading of some of the basic measurements that define our lives, our livelihoods, and our economies. In this paper, we will explore some of these common misinterpretations, their effects on the economy and capital markets, and potential solutions for making progress into the future.

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