Horizons 114 - The biggest challenges

Focus: Updating the economy

The new monopolies Limited resources for perpetual growth Many more than the world’s current population of 7.5 billion people are going to have to share our natural resources, such as land and drinking water. According to the UN’s prognosis, by 2100 the world population will have grown to more than 11 billion, and will make demands on resources that are already rare in some places today.

Once those resources have been exploited, countries’ sources of income will disappear too. Climate change, pollutants and mismanagement will make the soil infertile, and cultivating foodstuffs will get more difficult. What we need are new, resource-friendly technologies, a more responsible approach to our existing resources, and sustainable supply chains.

The famous four – Google, Apple, Facebook and Amazon – are the giants of digitisation today. They are developing at a rapid pace and are untouchable in the current domination of their respective sectors. They gather user data from all areas of life, they manage their prices dynamically, they hold sway over digital advertising markets, and are ousting traditional businesses.

Some think that these companies have already attained such a dominant position on the market that they are distorting competition. Is it at all possible for competitors to attain the critical mass necessary for them to participate in the market too? Who will get access to these mountains of data, and at what price? And how can countries adjust their antitrust laws to their business models to make them applicable to these multinational concerns?

Regulating digital finance Digital transformation is revolutionising the financial sector. Algorithms are replacing financial advisers and investment bankers. Mobile phone payment systems are replacing cash, while unacquainted private citizens are offering each other online credit.

Virtual currencies such as Bitcoin are radically decentralised, anonymous and volatile. We still have no answers to questions of regulation and security, nor do we know just what impact, say, automatic trading has on the financial markets.

THE BIGGEST CHALLENGES Artificial and friendly ­intelligence Fair sharing Airbnb, Uber and others have shown that the principle of sharing, not buying, can enable successful business models to emerge. The ad-hoc service providers of the sharing economy also have unwanted side-effects, however.

For example, Airbnb is soaking up the housing market in town centres and is competing with hotels. Furthermore, the tax authorities are losing out. Uber places the entrepreneurial risks on its drivers, who in contrast to normal employees have neither social nor accident insurance. Legislators and service providers will now have to design sharing business models that are socially acceptable.

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Swiss National Science Foundation – Swiss Academies: Horizons No. 114

Algorithms permeate our everyday lives. They don’t just determine our Internet search results and write simple news announcements. They analyse huge volumes of data so quickly and efficiently that the advice we are given by online shops, and the timelines in our social media, reflect our interests in a manner both accurate and frighteningly manipulative. There is hardly any profession today that is immune to automation.

Should we be controlling algorithms?

Who will be responsible if a robot causes an accident? How can today’s education system produce the workers needed for the jobs that will only emerge in 20 years’ time?

New definitions of work The traditional concept of work is a ­productive activity by human beings that enables them to earn money. But this concept is facing a stern test.

Digitisation means some workplaces are being lost, while others are being created. It is difficult to discern how, in future, the vacancies offered and the candidates available will be able to adapt to each other.

Do alternative, socially compatible and financeable models exist for fulltime paid employment until the age of retirement? To what extent should unpaid work in the family and volunteer work be taken into account by social systems? How can we regulate globalised micro-jobs distributed by crowd-sourcing? Is the idea of a basic income politically realistic?

Society, politics and the economy are faced with major challenges on account of the increasing pace and global scope of change today. Horizons has been looking at the most important issues.

Text: Pascale Hofmeier Infographics: CANA atelier graphique

The South is catching up The West is no longer the centre of the economic world: China, Brazil, India, Russia and South Africa have risen to become important partners in industry and trade. A multipolar, global economy has emerged with a multitude of new trade agreements and rules that are not exclusively dictated by the West. The challenge remains of opening up the markets to those countries that have not yet turned the corner economically. And the West has to be prepared for a new distribution of power.

The next crisis Financial crises occur on a regular basis, and there is no reason to believe that this will change. How can countries and businesses prepare themselves properly for the next big shock?

The return of protectionism Monitoring migration and profiting from it One in 30 people today is a migrant.

In the year 2015 there was a total of roughly 244 million people in countries other than their own. They were there for the most varied of reasons, such as political instability, climate change and unemployment in their native lands.

The number of people who are fleeing their homes has increased considerably: by late 2016, it was over 67 million.

Globalisation means that we can hardly expect migration to decrease.

What influence do these movements of people have on the economic systems of their home countries and their destinations? How can society – both local and global – adjust so as to be able to integrate them and also profit from their development potential?

Major shifts in the global labour market have led to a growing number of people being left behind by globalisation.

While the West is divesting itself of its industries, the economy is booming in lands of cheap labour where there is also often little concern shown for its social and environmental impact. The more visible the real and perceived negative side-effects of globalisation become, the more countries turn again to protectionism. Two examples of this are Brexit and the ‘America first’ slogan of President Donald Trump.

Should our economies prepare themselves for a wave of de-globalisation?

Should politicians start to question our basic liberal principles and strive for protectionism in certain sectors while at the same time supporting globalisation through the targeted support of other sectors?

Swiss National Science Foundation – Swiss Academies: Horizons No. 114

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