Will the future of Europe's post-pandemic, tech-driven capitalism be a Utechia or a Dystechia?
- Eighty top leaders agree that Europe must rebuild around a new kind of growth that respects both vulnerable workers and the environment.
As the effects of the global pandemic continue to depress economic activity and stifle growth around the world, there is a growing consensus in European business and political circles that leaders cannot simply wait and hope for things to get better. In addition to the COVID-19 crisis, other potentially existential crises like unemployment, automation and reskilling, climate change, income inequality, political polarization, and so on are eroding the pillars of capitalism and democracy. Doing nothing is not an option.
That's the main lesson from an ambitious new survey of 80 of Europe's top business and political leaders called Choose Growth. Said Henrik Henriksson, CEO of Scandia Group, and chair of Europe Delivers, which sponsored the report:
Among the many hard lessons of the pandemic is this: growth matters. When growth stalls - as it has in the eurozone, where the economy will shrink by over 8% in 2020 - bad things happen. Families lose their livelihoods; essential public investments dry up; and the disadvantaged lose what little margin they may have previously had.
But let's be clear: there is no going back. The growth we have relied on in the past is not the growth we need in the future. We cannot go back to a system that squeezes the middle class and the vulnerable; sabotages our climate; and runs up unpayable debts for our children and grandchildren.
The flaws of our economic model were clear even before this virus upended our daily lives and sent our economies into freefall. The pandemic has simply illuminated the truth in neon lights. It's time to reinvent growth - and we need to do it fast.
The Choose Growth report was created by Xynteo, an Oslo-based sustainability strategy consultancy, which has a blue-chip list of European and international clients and manages the Europe Delivers consortium. Its presentation is somewhat different to other similar reports because it discusses three different, but overlapping, scenarios for enterprises in Europe in the year 2025 and creates fictional characters to "live" them.
As envisioned in the report, the core features of Future 3: Utechia / Dystechia in 2025 will be:
Fourth Industrial Revolution technologies are making Europe's cities smarter and driving advances in public health systems. From the report:
Thanks to the pandemic, the evolution of smart cities is picking up momentum. By 2025, the market size of the world´s smart city industry is set to double, from EUR 335 billion to EUR 670 billion. And it is thought that smart cities could generate EUR 17 trillion in economic benefits by 2026--- driving massive opportunities for both business and citizens.
Unemployment is high, stemming from a combination of large-scale headcount reductions and sluggish progress on reskilling. From the report:
For larger firms, the great surprise was how easily most adapted; moving white-collar work online turned out to be no big deal. Indeed, with dramatic exceptions - most notably in aviation, hospitality and oil and gas - a surprising number of business reported excellent numbers in 2020.
Said Henrik Henriksson:
The pandemic has proved our capacity to pivot at pace. In the first few months of 2020, European industry kept the lights on while sending something like 80 million home to work. This upheaval was enabled by an unprecedented acceleration in digitalization--achieving in a handful of weeks what had been projected to occur over two to five years. By forcing businesses through five years' worth of digitalization in as many months, the 2020 pandemic turned out to be an effective primer for deeper digital innovation.
However, he notes, this development appears likely to deepen lines between the have and the have nots in Europe and abroad. The realization that the same output can be delivered with much lower cost will trigger a wave of headcount reductions that will send millions onto unemployment benefits and into low-pay, low-security crowd-work. Women and minorities are likely to bear the brunt. The aggressive adoption of ´digital first´ business models making much fuller use of Fourth Industrial Revolution technologies will only accelerate the headcount reduction trend.
Highly educated workers in some industries are thriving in the digital workplace, but many are being left behind. From the report:
Employers need workers who are not just digitally intelligent but able to learn and master new functions all the time. Yet the education system has not caught up - students are still overwhelmingly being trained on a one-off basis for one kind of job, with too little emphasis on advanced digital skills. And overall, we are lagging on reskilling the workers who have lost out in the techceleration.
Regulators still struggling to find the right approach to big tech. From the report:
Governance on big tech feels more robust than in the US and China. After rolling out GDPR in 2018, European regulators have continued to be assertive on tech governance, focusing hard on reining in the power of the tech titans in order to create space for smaller players. Introduced in 2020 and passed in 2023, the EU´s Digital Services Act holds platforms responsible for the content they host and seriously curtails the ability of large companies to dominate their markets.
While Brussels´ bullish posture is appreciated by citizens…the real long-term outcome is still not clear. By the time the regulation landed, big tech was already so big and experienced that, after some initial kicking, it used this size and savviness to find workarounds. Indeed, it may be that the intended cure backfires and hurts the patient, with smaller companies suffering from the cost of implementing the legislation.
Social media is helping to drive wedges into European society. From the report:
If the product is free, you are the product. This aphorism has been appropriated by critics of platforms like Facebook, whose user value proposition (free connection to friends) is severed from the company´s revenue source (advertising). This disconnect creates a perverse incentive to do whatever possible to keep human eyeballs locked onscreen - at odds with the platforms´ stated aim of fostering connection… A study published in Science in 2018 found that so-called ´fake news´ propagates to 1,500 people six times faster in Twitter than verifiable news.
There are no quick and easy solutions to any of these problems. As the report notes:
It will take years to prepare workers for a hyper-digital economy; and the digitalization of the economy can´t, and won´t wait.
So, what is to be done in the meantime? A handful of European governments have started piloting universal basic income as a means of providing financial security and so far, trials have shown that recipients overwhelmingly use the supplement responsibly. The report notes that UBI has support of both conservatives and liberals. Andrew Yang ran a surprisingly strong presidential campaign on a UBI platform in the U.S. in 2020. Said the report:
Ultimately, Europe´s skills deficit can´t be solved through universal basic income or educational reform. Companies need to take responsibility for ensuring that their workers can fulfil the jobs required of the business, or they suffer significant consequences. Thankfully, many rise to the occasion. By 2025, Europe´s top firms will offer an average of 15 days of organized training per year. And a growing number are collaborating with industry peers and suppliers to improve the quality of skills across the value chain´s labor pool.
For Osvald Bjelland, founder and CEO of Xynteo and a principal architect of the study, the solution is a paradigm shift toward a zero-carbon, job-rich, just, and competitive economy:
We need to apply the heightened pace not just to ‘keeping the lights on' during the pandemic but to reinvention--creating a new practice of growth that works with nature, not against it; that benefits the many, not the few; and that creates value across generations, not quarters.
This is a peculiarly European report that pulls together well known, if debated, strands. Focusing on education is a start but 15 days in a year? Is that the pinnacle of ambition for 2025? Whatever happened to the idea of apprenticeship and mentoring? UBI aside as a safety net, expecting companies alone to solve this problem doesn't seem good enough. If you're going to frame arguments with a technology basis but anticipating societal outcomes then the state must play a central role. How that combination works out is another matter. BUt we have to give the Europe Delivers consortium credit for setting an ambitious if optimistic agenda.