Gloom and doom and an aging world and lots of government debt and all that aside – I'm still an optimist, big time, about the future of the global economy. Thing is, although there are lots of things that could potentially slow things down over the next couple of decades, you could offset them all in one fell swoop if productivity gains were high enough. That's why a new report put out by the McKinsey Global Institute caught my eye this week.
The full title of the report is "Disruptive Technologies: Advances that Will Transform Life, Business, and the Global Economy", and the contents live up to the promise. McKinsey details 12 of what they call "potentially economically disruptive" technologies, describing what they see as the practical impact of each.
For example, "mobile Internet" has already caused the number of smartphones and tablets to grow sixfold following the launch of the iPhone in 2007. McKinsey figures there could be a further $1.7-trillion (U.S.) increase in global gross domestic product related to the Internet. Cloud technology, according to McKinsey, will likely affect 80 per cent of North American institutions as they host or plan to host critical applications on the cloud. That's also likely to boost GDP by $1.7-trillion globally.
So is this all good news – mostly – in an economic sense. What we have consistently seen over the past couple of hundred years is that technologies – from the industrial revolution onward – have boosted economic potential. The catch, however, is that many of them have turned out to be disruptive, too. Computers – starting with what were called "word processors" – pretty much destroyed the market for typewriters, after all. And indeed, McKinsey details the destructive power of the technologies in question too. For example, 3-D printing – something that has already lowered by 90 per cent the price of a home printer compared with four years ago – has the potential to affect 320 million manufacturing workers in the future. That's a lot of disruption, and it will come at a considerable adjustment cost.
Still, just a look at some of McKinsey's estimates and you can see why I am upbeat about the direction of global growth. For example: $100 and one hour will be the cost and time to sequence a human genome over the next decade; the potential share of solar and wind in global electricity generation will be 16 per cent by 2025; autonomous vehicles could reduce driver-caused deaths by 1.5 million in 2025. It is mind-boggling stuff.
All of the figures are projections, rather than certainties. They could be wrong. But I'd argue that they are likely underestimations rather than overestimations. When technologies are in the infant stage (as many of these are, effectively), it is often difficult to see their complete potential.
For example, in 1983, AT&T made an attempt to figure out how many people in the United States might have mobile phones by 1999, and in conjunction with a consulting firm came out with the figure one million.
The actual figure, it turned out, was 99 million.
Linda Nazareth is the principal of Relentless Economics Inc. and a senior fellow at the Macdonald Laurier Institute.