We need to change the narrative
To drive the Welsh economy forward we need to encourage workers to embrace new technologies, such as AI, and have a mindset focused on opportunities rather than limitations.
Geoeconomics is the latest buzzword in economics. Don’t worry if you haven’t heard of it; until recently, this word was rarely used, since it seemed at odds with modern norms. The word describes how governments can use economic and financial policies to play power games. It was generally assumed throughout most of the 20th century that rational economic self-interest ruled the roost and not grubby politics. For this period, politics seemed to be derived from economics, not the other way around.
No longer. The trade war unleashed by U.S. President Donald Trump has shocked many, since it seems so irrational by the standards of neoliberal economics. But rational or not, it reflects a shift to a world where economics has taken second place to political games, not just in America, but in many other places too.
Similarities with the Great Depression of the 1930s
Commentators frequently use the post-1945 era as a simple comparison to explain current these unsettling times. We keep hearing that a "new Cold War" is upon us, echoing the original decades-long ideological conflict between the West and the Soviet Union and its allies. This view, however, could be wrong, as today's world seems less like the organised structured Cold War competition and more akin to the disorderly collapse of the world order in the 1930s.
The Great Depression most defined the 1930s. People often misremember the Great Depression as only a financial crisis, but it was more than that. The 1929 stock market crash was only the beginning of a protracted and widespread global economic collapse.
Before the Great Depression, there was a period of rapid industrial growth and social progress called the "Roaring Twenties". This boom's profits largely fuelled speculative investments, like those in the stock market, worsening wealth inequality. Following the 2008 financial crisis, a comparable depression unfolded, resulting in global and national economic turmoil, insecurity for billions, and a loss of faith in the liberal globalization that had been the norm since the 1990s.
During both depressions, global lives were disrupted, leading to disillusionment with traditional institutions and a rise in radical ideologies. The 1930s saw economic nationalism rise to global prominence, even amidst controversy and resistance. This trend is repeated again with the recent rise of protectionist policies in numerous countries reflects.
We need to change the narrative
Given recent events, it's natural to feel discouraged about the economy. The global economic impact of Trump's "Liberation Day" tariffs was highlighted by trillions of pounds in losses across financial markets. Although the majority of "Liberation Day" measures may be on a pause at the moment, the uncertainty they created will haunt financial markets and economies for some time to come.
We are powerless to alter Donald Trump’s tariffs and policies; but we can still influence many things in Wales.
First, our political leaders should reconsider how they view world events. Despite the emphasis on geopolitics, we're in the midst of a technological revolution. Technological progress across different industries has the potential to revolutionize the country.
History doesn't repeat itself, but it does rhyme
At Bangor University, my students recognise that economic growth is driven by humankind's ability to solve problems using new technology. Sometimes, economic growth is was sometimes driven by “physical” innovations, for example the steam engine, that increased individual productivity and capability. At other times, the new technologies were “social”, such as writing and the development of laws. Through these technologies, our collaboration and coordination across multiple activities improved significantly, increasing our overall efficiency and success.
Wales needs a mindset focused on opportunities presented by today's numerous positive technological advancements, both physical and social, rather than dwelling on limitations.
Consider the daily impact of Artificial Intelligence (AI). Instead of fearing AI, let's view it as a tool to expand human knowledge, make it more accessible, and automate mundane tasks, freeing up people to do more creative work. While machines now perform many tasks previously done by humans, history shows that humans adapt by becoming more productive. If you are unconvinced, recall the technological advancements of the 1930s. The introduction of new machinery to factories and farms led to higher production with a smaller workforce. But how many jobs exist today that didn’t exist in 1930s? The rise in new jobs from innovation stems from its impact on worker productivity, expanding capabilities and enabling new work.
Although today's technology, including AI, is unlike that of the 1930s, anxieties about job displacement are not a recent phenomenon. While today’s technologies (including AI) certainly look very different from those of the 1930s, it is worthwhile remembering that worries over the future of jobs are not new. AI and advanced automation have been frequently used by companies in recent years to slash jobs and cut costs. Yet, our way forward involves a choice: we can use technology to simply replace workers, or we can use it to improve people’s skills, boosting the economy and creating new jobs.
Historical parallels, although imperfect, offer a valuable perspective on our current situation. However, our future does not need a repeat of the war of the 1930s or the Cold War that followed. We need to embrace the opportunities that new technologies offer and use them to improve all aspects of our lives. We need to embrace the future.