Jonathan Schiessl Head of Equties at Ashburton Investments discusses the theme of this year’s World Economic Forum (WEF) in Davos: “The Fourth Industrial Revolution”.
This vast subject is touching all our lives in ever more ways. Anyone with young children /adults will be well aware about the issues parents are facing controlling technology in the home. But this is a subject that doesn’t only touch us as individuals. It is requiring businesses, governments and indeed countries to reappraise how they go about doing things. Structures and international institutions that were put in place decades ago are struggling to adjust to the pace of change.
This is particularly relevant for emerging markets, where some countries are using this revolution to develop certain parts of their economy at a speed that was unimaginable only a few short years ago. The more forward thinking governments are also doing the same. The use of technology is helping spread the mantra of e-government, enabling governments to more easily reach their populations in wider ranging but more cost effective ways. India under the stewardship of Prime Minister Narendra Modi is pioneering the use of e-government, and many parts of her economy are using technology to rapidly speed-up development and make generational shifts.
The Indian government is using technology to pioneer new ways to interact with residents that is changing many areas. The introduction of a biometric scheme to identify residents is enabling large portions of the population to access the formal financial system for the first time. This scheme is also beginning to be used to aid welfare schemes, resulting in better directed subsides that have already saved billions for the Indian government by cutting down on leakages.
The dramatic growth of e-commerce is also having profound implications for the Indian economy. Whilst still at a very nascent stage, e-commerce will likely mean India will skip a generation in the move to organised retailing and will not require land hungry hyper-markets. As shopping online becomes easier, and more and more people gain access to the internet the government’s tax base will widen as more transactions are undertaken in the formal online sphere. The push for better infrastructure will only intensify.
Of course change does have consequences. One of PM Modi’s pet-projects is to expand India’s manufacturing base to aid job creation. India has to generate at least 1 million jobs a month as a result of demography, but in an age of robotics and 3D printing will modern manufacturers need as much labour?
One thing we can all be sure of is that the pace of change is accelerating and the economies and governments that adapt and show flexibility will ultimately be the winners. Whilst much of the technology and IP may have originated in developed economies, it is perhaps emerging economies where the changes will be most profound.