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Tuesday, 18 December 2018

Towards a New Trade Global Deal beyond Austerity (4)

This article is based on several UNCTAD and other UN agencies both international and regional as well as some expert’s contributions

on the issue of the economy and austerity policies; but first the start is with the UNCTAD 2017 World Trade and Development Report.

Intense lobbying by the patent community has been a major force driving the consolidation of market power, along with regulatory capture by large corporations. As a result, the scope and life of patents, for example, have been expanded considerably, and patent protection has been extended to new activities that were not previously considered areas of technological innovation, such as fiancé and business methods. Patents are being granted for “innovations” in fiancé, e-commerce and marketing methods that are not tied to any particular technological product or process, but involve data and information processing in purely electronic form. This not only fosters greater concentration, but also restricts access to data and knowledge. Such a strategic, rather than productive, use of IPRs to boost excess profits by keeping rivals at bay has become a core rent-seeking strategy.
Multinational corporations’ excessive use of patent protection for defensive purposes also directly affects innovation dynamics in major emerging economies such as Brazil, China and India. Sharp increases in United States affiliates’ sales over the past two decades in relatively high-technology goods (e.g. information and communication technologies, chemicals and pharmaceuticals) in these three countries have generally been closely associated with their strongly expanding patent protection.
In addition, mounting evidence suggests that other non-financial rent-seeking strategies, such as tax evasion and avoidance, public sector gouging (of both assets and subsidies) and rampant market manipulation to boost compensation schemes for companies’ top management, are being adopted by firms not only in the more advanced economies, but also, increasingly, in developing economies.
Reining in endemic rentierism, and the inequalities it generates, requires filing the power imbalances that allow such behaviour to flourish. This will not be easy, but it is indispensable if the objective of truly inclusive and sustainable growth is to be realized. A good start would be to recognize that both knowledge and competition are fist and foremost global public goods, and that their manipulation for private profit should be effectively regulated.

Rage against the machine

Hyperglobalization has ridden a series of technological waves that have compressed time and distance. These have lent an air of inevitability to the growth and distribution patterns that have emerged primarily from political and policy decisions, and have also shaped the policy response to growing worries about people being “left behind”, with a singular emphasis on boosting education and training.
In reality, the rise and spread of new technologies and the associated breakdown of existing ways of life have been a recurring source of policy debate and design since at least the Industrial Revolution, if not earlier. And if history is any guide, over time the benefits of new technologies can outweigh the costs. Past technological breakthroughs, such as the steam engine, electricity, the automobile and the assembly line, were disruptive, and resulted in substantial job losses and declining incomes for some sectors and sections of society, but only in the short run. These adverse effects were more than offset in the long term when the fruits of innovation spread from one sector to another, and were eventually harvested across the economy as workers moved to new and better-paying jobs.
Still, the digital revolution (in particular the rapid march of robot technology) is making people more anxious.
On some accounts, because robots are exponentially getting smarter, more dexterous and cheaper, they are threatening to upend the world of work. With an ever-smaller number of highly skilled people required for their
operation, large-scale job displacement and wage erosion are already seen to be hollowing out the middle class in the more advance deconomies and halting its rise in emerging economies. The worry is that the 2030Agenda’s commitment to inclusive economies is being technologically subverted before it even gets off the ground.
While there may be cause for such concerns, in hard economic terms, these technological changes cannot explain current labour market woes. This is not to deny the potentially employment-threatening effects of digital technologies in the future; rather, to point out that their real novelty lies less in their wider scope, faster speed or greater dexterity than in their emergence at a time of subdued macroeconomic dynamism in the more advanced economies and stalled structural transformation in many developing economies. This has tended to hold back the investment needed to properly absorb the new technologies and to create new sectors that can provide improved employment opportunities for displaced workers.
Industrial robots can affect employment and income distribution through various channels, but in one way or another their spread involves firms weighing the potential savings on labour costs against the cost of investment in the new capital equipment. This means that job displacement by robots is economically more feasible in relatively skill-intensive and well-paying manufacturing, such as the automotive and electronics sectors, than in relatively labour-intensive and low-paying sectors, such as apparel production. Many existing studies overestimate the potential adverse employment and income effects of robots, because they neglect to note that what is technically feasible is not always also economically profitable. Indeed, the countries currently most exposed to automation through industrial robots are those with a large manufacturing sector that is dominated by industries which offer relatively well-paying jobs, such as automotives and electronics.
By contrast, robotization has had a relatively small direct effect in most developing countries so far, and this is unlikely to change in the foreseeable future, given their lack of diversification and technological upgrading.
Despite the hype surrounding the potential of robot-based automation, the use of industrial robots remains small, with an estimated total of only 1.6 million units in 2015. However, their use has increased rapidly
since 2010, and is estimated to exceed 2.5 million units by 2019. The vast majority of operational industrial robots are located in developed countries, with Germany, Japan and the United States, combined accounting for 43 per cent of the total. Robot density (the number of industrial robots per employee in manufacturing) is the highest in developed countries and former developing countries that are now at mature stages of industrialization, such as the Republic of Korea. The recent annual increase in robot deployment has been the most rapid in developing countries, but this is mainly due to China, which has a large manufacturing sector.