March 16 2018
By Salahuddin Hisham
RECENTLY, Prime Minister Datuk Seri Najib Razak warned Malaysians that the coming Industry Revolution 4.0 (IR 4.0) based on digitalisation and artificial intelligence could result in major loss of jobs.
Had Najib not highlighted it, no one in Malaysia would be seriously discussing and talking about it. Let alone planning and preparing the country for the challenges forward. It is forecasted that 40 per cent of the current types of job could be replaced by computers and machines.
New jobs will likely emerge but at this stage, a Stanford University graduate with keen interest in the subject claimed that no one in the world has any idea where it is heading and how it will evolve to be ready for it. But it is coming.
Major corporations are planning forward to transform their companies out of its existing core businesses into data companies and outsourcing existing operations.
Klaus Schwab associated IR 4.0 as the second machine age in terms of the impact of digitalisation and artificial intelligence on the economy. It covers current trends of automation and data exchange in manufacturing technologies, cyber-physical systems, the Internet of things, cloud computing and cognitive computing.
It is being hyped as the next Economic Revolution. The first was the evolution of economic activities from hunter-gatherer to agriculture, then followed by mechanisation and finally access to information and knowledge of the Information Age.
To claim it as an economic revolution is somewhat misleading. An economic revolution should bring about changes that benefit mankind. If computer and machine could further replace humans and result in loss of jobs, then it does not serve nor benefit mankind.
Then again, the field of economy has long forgotten the need to look into the need of mankind. Classical economic theories look at the economy from the perspective of production and consumption of goods and services and the supply of money.
Marxian economics emphasise on labour in the development of the economy. However, both thinkings divert from looking at the whole economy as an ecosystem. The capitalist cyclical thinking of money makes money to make more money, leaving out people as an important component of an economy.
People have been reduced to a factor of production and/or consumers but never the well-being of the people. Darwinian natural selection in the form of market mechanism is left to determine the fate and welfare of each individual.
There is a view that the negative consequence of IR 4.0 includes high unemployment, loss of job security, reduced tax revenue, tax migration, and on fiscal policy to deal with the social consequences.
There have been many events that claimed to be an economic revolution. The Bolshevik revolution was once claimed as revolutionary in the attempt to introduce socialism to the world.
Margaret Thatcher’s supply side economic policy to introduce privatisation, deregulation, tax cut, increase VAT and introduce Poll tax at a time of high inflation, strong pound, falling output and high employment was claimed as revolutionary.
There is the belief that in education lies the next economic revolution. Recently, the media dubbed Trump’s tax cut to attract investment as economic revolution for the US.
One can conclude from the examples that an economic revolution is a drastic way to address major problems besieging the people.
The idea behind IR 4.0 is to increase efficiency but it could create more problems, thus it cannot yet be dubbed as an economic revolution.
To transform economic thinking to look at people beyond their role as consumers or means of production and to take into account the current well-being and future welfare of the people could be considered as revolutionary.
The current government policy based on the theme, 1Malaysia: People First, Performance Now, can evolved into something revolutionary.
Behind the BR1M is to reallocate subsidy into cash advance to help the poor and bridge the transition to a high income economy. Despite budget constraint from falling oil revenue and massive leakage in the tax system, welfare programmes looking into people’s well-being are still retained albeit in a different form.
To prepare the economy for the future, it is essential to upgrade the country’s logistics and connectivity. The development of the Digital Economy to give greater access to opportunities and uplift the people to be economically independent is aligned to people-centric economic thinking.
The construction of the Trans Borneo Highway could create economic activities and establish a working local economy for the people of Sabah and Sarawak.
The new thinking of the government to shutdown tolls and not charge toll for new highways could be viewed as an attempt to unwind past privatisation policies that burden the people.
It is a departure from past administration that failed to take a wholesome look and consider the people’s well- being.
Policies then were driven by mega projects for political PR. Growth was driven by artificially pumping money under the pretext of new investments but lack long-term viability thus turning into a burden for the people in the long run.
Cynics could dispute it as no different than any other economic policies but government could prove its resolve for people-centric economic thinking through more initiative to create platforms of opportunities for economic activities.
Educational, employment and other economic opportunities will be needed to plan for the rising number of school leavers in the future and preparing for possible loss in jobs.
Greater access should be given to education and training to improve people’s economic well-being through upgrading skills and knowledge, raising the quality of education, research activities with application value, and specific industry needs such as in tourism and customers service.
Malaysia could harness the knowledge and experience within the country to other region for instance in rice plantation in Aceh.
Revolutionising the economy for the people would mean transforming out of the low-cost producer mindset to develop other specialised activities. Countries are transforming their economic activities out of their established competencies into other core competencies.
The Economic Revolution along with the people need more effort from government planners to study and develop the plan.
For instance in tourism, the number of tourist arrivals into Malaysia far exceeds that of Indonesia though the republic is famous for such attractive destinations as Bali. More education and training opportunities related to tourism and customer service need to be made available.
It will include priority among town planners to improve the living conditions of the people. Economic affluence is associated to the quality of their life and aesthetic values. Gardens and parks can be found in abundance in developed countries.
There are also thriving activities in arts, literature, music, and creative expression.
To make all this happen, Malaysia must tighten up its revenue management and generate the revenue from the increase activities in logistical activities.