The crumbling economies of Europe demonstrate that current trends cannot be sustained. What lies ahead can be understood from reviews of current thinking and analysis of the obsolete paradigms relating to how wealth is generated. This will affect America and the rest of the world to the extent that new forms of capitalism will emerge.
Capitalism is supposed to generate wealth for everyone through ‘enlightened self interest’. However, the current model is hardly enlightened; ego, greed and selfishness are winning in the name of free enterprise. The ‘Occupy’ protests actually reflect the unfairness of current forms of capitalism, but are being ignored and ridiculed by the establishment as ignorant under-class disgruntlement. While most segments of the economy are shrinking, take a look at ForbesLife magazine which caters to the wealthy – it is getting fatter and more decadent than ever. In the present paradigm, clearly the rich are getting richer while the middle-class continues to decline.
Today’s stock markets are poorly disguised forms of gambling for the rich. They actually produce nothing, but simply shift winnings to those who know where to place bets. What are hedge-funds and credit-default-swaps, other than astute gambling? Why were the big losers ‘too big to fail’? Is that ‘capitalism’?
Let us get back to fundamentals. Wealth is generated through just three types of resources:
1. Labour: productive human activity to generate economic gain.
2. Natural resources: oil, minerals and the like, which are location sensitive, clearly not generated through capital investment. Through accidents of geographical location, unskilled, uneducated people are wealthy. Capitalism does not make them rich – they become richer through capitalism.
3. Knowledge: this is developed through diligence and declines through negligence. This type of resource started spreading centuries ago through the invention of the printing press. It is now spreading worldwide via the Internet, only very much faster.
4. The ability to adapt assures capitalism’s survival. In his book, Capitalism 4.0, Anatole Kaletsky (a Times editor who previously worked for The Economist) suggests that the current financial crises will bring the transformation of modern capitalism, and a new, improved version will evolve. The beginning of the classical era of laissez-faire was capitalism 1.0; the Depression brought the government-heavy era of capitalism 2.0; the stagflationary 1970s generated free-market capitalism 3.0. The latest transformation will alter the relationship between markets and governments and between politics and economics as capitalism 4.0 develops.
The fast-developing budgetary problems, the accelerating pace of technological change and the mobility of multinational capital are combining to reduce the unfairness of the current blend of capitalism. The ‘new capitalism’ will create a more balanced and effective world. This paradigm shift will happen in this decade.
Education revolution
Technology is revolutionising education – no one needs to attend college anymore. Last year, Stanford University computer science professor Sebastian Thrun decided to allow anyone, anywhere to attend classes online for free. Soon, there were more than 160 000 sign-ups from 190 different countries – high school students, people with disabilities, teachers and retirees – all taking the same classes as Stanford students.
Now, independent of Stanford, Sebastian Thrun has lined up venture capital to create Udacity, committed to free online education for everybody. It offers full curricula in computer science.
In 2006, a Harvard & MIT graduate Salman Khan started Khan Academy, with the stated mission of ‘providing a high quality education to anyone, anywhere for free’. Khan’s website supplies a free online collection of micro lectures via video tutorials on YouTube: mathematics, healthcare and medicine, finance, physics, chemistry, biology, astronomy, economics, cosmology, organic chemistry, American civics, art history, microeconomics and computer science.
There are some 3200 videos, usually 7-14 minutes long, with voice-over by Khan. More than 2 million watch every month and Khan Academy now has more than 320 000 subscribers, with over 140 million total views. His website offers software that generates practice problems and rewards good performance with badges.
Khan Academy now has significant backing from the Bill & Melinda Gates Foundation and Google; several people have made $10 000 contributions.
Anant Agarwal, director of MIT’s Computer Science and Artificial Intelligence Laboratory, and president of the MIT and Harvard online edX venture, says this is “disruptive, and will completely change the world.” He considers it “the biggest change in education since the invention of the printing press.”
Around the world, millions of people have access only to the poorest quality of education or sometimes nothing at all. Technology changes that by making it possible to teach 100 000 students as easily and as cheaply as a class with just 100. Online videos let students anywhere in the world do courses with their own schedules; embedded quizzes let them monitor their own progress and provide vastly better feedback for teacher improvement.
Technology is finally remaking education and it has reached an inflection point. Watch for enormous, rapid changes in this decade.
Jim Pinto is an industry analyst and commentator, writer, technology futurist and angel investor. His popular e-mail newsletter, JimPinto.com eNews, is widely read (with direct circulation of about 7000 and web-readership of two to three times that number). His areas of interest are technology futures, marketing and business strategies for a fast-changing environment, and industrial automation with a slant towards technology trends.
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