The Future

by Al Gore

  When one of these experts, Joseph Stiglitz, recommended remedies to prevent the recurrence of the Flash Crash, he suggested a new rule to require that offers to buy or sell must remain open for one second. The captains of finance in charge of the financial companies with the most at stake in the current pattern of business, however, reacted with horror to this proposal, claiming that the one-second requirement would bring the global economy to its knees. The proposal was then rejected.

  The global market crisis of 2008 was primarily caused by a particular kind of derivatives: securitized subprime mortgages hedged with an exotic form of insurance that turned out to be illusory. Supercomputers sliced and diced the subprime mortgages into derivatives that were so complex that no human being could possibly understand them. And once again, the robosourcing of these exotic financial instruments aided and abetted the marketing of those same products to buyers throughout the global economy.

  When the actual quality and real value of the mortgages in question were belatedly examined, they were suddenly repriced on a mass basis—triggering the credit crisis and bursting the housing bubble in the United States. The fact that they had been linked to a complex web of other computer-driven financial transactions (collateralized debt obligations, or CDOs) led to the credit crisis, a massive disruption in the availability of capital as a basic factor of production in the global economy—essentially, a global run on banks. This led, in turn, to the Great Recession, the effects of which we are still struggling to escape.

  Incidentally, after the manufacturing of these derivatives gained momentum and scale, virtually the only remaining role for human beings in the process resulted from the legal requirement for a signature on each underlying mortgage by someone with the responsibility for reviewing the integrity of each mortgage that had been sliced, diced, securitized, and rubber-stamped with a AAA rating by corrupted and captive ratings agencies, then sold around the world.

  As the subsequent lawsuits revealed, this requirement for signatures by actual human beings could not keep up with the speed of the supercomputers—so low-wage employees were hired to forge the signatures of loan officers a hundred times a minute, without the slightest attention to the substance and meaning of the documents they were signing—a practice that’s been popularly labeled “robosigning.” Though no robots were involved, the very term illustrates the intertwining of robosourcing and outsourcing.

  Until the crisis of 2008, the volume of trading in derivatives had been increasing since 2000 at an average of 65 percent per year. Since banks in the U.S. have been earning roughly $35 billion per year off these derivatives trades, there is no reason to believe that the growth in volumes will not once again resume; and no reason to expect that the banks will not continue to use their lobbying power and campaign contributions to prevent them from being regulated.

  GLOBAL INTEGRATION

  The causes of this unprecedented acceleration in the integration of the global economy have included several factors simultaneously: the collapse of communism and the introduction of more market-oriented policies in the former communist bloc countries; the opening and modernization of China under Deng Xiaoping (a process that has also continued to accelerate with the rapid rise of China’s economic strength); and revolutionary changes in transportation, communications, and information technology.

  Perhaps most significantly, trade barriers were lowered in the liberalization process that began with the General Agreement on Tariffs and Trade (GATT) at the end of World War II (a process that has accelerated in the years since). International trade flows have increased tenfold over the last thirty years—from $3 trillion annually to $30 trillion annually—and are continuing to grow at a rate half again faster than global production.

  There have, of course, been previous periods when new surges of global trade resulted in significant changes in the pattern of the global economy. The famous though brief voyages of the legendary Chinese eunuch Admiral Zheng He during the first three decades of the fifteenth century to East Africa prefigured the Voyages of Discovery by Christopher Columbus to the New World, by Vasco da Gama around the Cape of Good Hope, and by Cortés, Pizarro, and all the others that linked Europe to the New World and to Asia.

  Prior to the development of intercontinental ocean trade routes, the establishment of the Mongol Empire in the thirteenth century and the Pax Mongolica that followed opened land routes for then unprecedented trade flows between China, India, Central Asia, Russia, and Eastern Europe. Following the Black Death in the mid-fourteenth century, and the weakening of Mongol rule, the closing of overland routes between Europe and Asia once again created a bottleneck that flowed through the Middle East, trade flows that were largely controlled by Venice and Egypt.

  It was, in part, the intense economic pressure in Western Europe that contributed to the daring effort to find an ocean route to India and China. The influx of gold and silver from the New World to Europe—and not long after, the sharp gains in agricultural productivity that accompanied the introduction of maize (corn) and other New World food crops into Europe and Africa—revolutionized the old pattern of the global economy, such as it was.

  Economic historians also remind us that China and India together accounted for half or more of world GDP from at least the year 1 through the beginning of the Second Industrial Revolution midway through the nineteenth century. China’s economy was the single largest in the world in 1500 and again in the early nineteenth century prior to the First Opium War, which began in 1839.

  Seen in that perspective, the dominance of the United States and Europe in the global economy over the last 150 years was the interruption of a much longer period of Asian dominance in the share of world GDP. That century-and-a-half period represented a breakout by those nations that first embraced the Industrial Revolution—the United Kingdom, then the United States and northwestern Europe—while four fifths of the world’s population was left behind. In the modern era, it appears that China and other emerging and developing economies are the ones breaking out. Prior to the nineteenth century, the distribution of wealth in the world roughly correlated with population, but the surge in productivity enhancement that accompanied the Industrial Revolution and the Scientific and Technology Revolution led to much faster accumulations of wealth in the West. Then, when the East gained more access to the new technologies, the older pattern began to reassert itself.

  Some economic experts attribute the rise of China and its imminent displacement of the United States as the world’s largest economy to advantages inherent in their system of state-guided capitalism, which they claim is superior to the much freer form of capitalism in the United States. If that were truly the explanation, the United States could take comfort from the fact that similar warnings about the advantages of an allegedly superior form of economic organization turned out to be false alarms in the late 1950s (when the Soviet Union was seen as an economic as well as military threat) and the 1970s and 1980s (when Japan Inc. was feared as a new economic hegemon).

  However, if the emergence of Earth Inc. is more responsible for this phenomenon, as I believe it is, this time really is different. All over the developing world, nations like India that have long been mired in poverty are now beginning to unlock their vast potential as young entrepreneurs connect to their counterparts in countries throughout Earth Inc. and discover and develop innovations, large and small.

  IN THE PAST, centers of expertise in a particular technology or industry usually emerged in specific locations where a cluster of people with similar skills and experience developed a local network of connections with one another, learned from one another, and improved one another’s innovations with incremental advances, sometimes called “tweaks.” British-Canadian journalist Malcolm Gladwell, writing in The New Yorker, gives a powerful example of this phenomenon:

  In 1779, Samuel Crompton, a retiring genius from Lancashire, invented the spinning mule, which made possible the mechanization of cotton manufacture. Yet England’s real
advantage was that it had Henry Stones, of Horwich, who added metal rollers to the mule; and James Hargreaves, of Tottington, who figured out how to smooth the acceleration and deceleration of the spinning wheel; and William Kelly, of Glasgow, who worked out how to add water power to the draw stroke; and John Kennedy, of Manchester, who adapted the wheel to turn out fine counts; and, finally, Richard Roberts, also of Manchester, a master of precision machine tooling—and the tweaker’s tweaker. He created the “automatic” spinning mule: an exacting, high-speed, reliable rethinking of Crompton’s original creation. Such men, the economists argue, provided the “micro inventions necessary to make macro inventions highly productive and remunerative.”

  When the Industrial Revolution gained momentum in the United Kingdom during the eighteenth century, there was a proximate connection between the inventors, tinkerers, blacksmiths, and engineers who contributed to the improvement of a large cluster of technologies that later spread throughout the world. The revolution they started was at first confined to one country and then, slowly at first, spread throughout the North Atlantic region.

  It’s true that technology clusters still matter. Silicon Valley, in Northern California, is one of the premier examples. Face-to-face, personal interactions among cutting-edge experts focused on the same set of technologies is still one of the most powerful ways to advance innovation. Yet global connectivity is speeding up the application of new technologies to ever more fields of endeavor, simultaneously pointing the way toward ever more frequent macro- and micro-inventions that accelerate the replacement of human jobs by connected intelligent machines. And seemingly small improvements in automation and efficiency often have outsized consequences for the overall efficiency and productivity in a particular sector.

  SMALL CHANGES, BIG IMPACTS

  To illustrate this point, consider two examples: one from the late stages of the mechanization of agriculture, in the 1950s, and the second a seemingly mundane but highly significant example from the late stages of the global Transportation Revolution, also from the 1950s, that marked a significant empowerment of much higher levels of connectivity in the global economy.

  When I was a boy spending my summers on our family farm, I sometimes helped retrieve eggs from the chicken coop—one by one—when the hens had left the coop for their morning chicken feed. I remember being slightly amazed less than twenty years later when my father automated this process by building two new large chicken houses, each one containing 5,000 chickens, according to a design that was then spreading quickly on many American farms with chickens. In each house, the chickens roamed on wire mesh and then retreated to the only dark and inviting place where they could lay their eggs—which happened to be located directly above a conveyer belt. All of the eggs thus automatically collected were then funneled to a relatively simple sorting machine near the front of the building where the eggs rolled precisely into cartons. When each carton was filled, the next moved automatically into place for the collection of its designated allocation of eggs.

  Out of deference to the chickens’ need for a rudimentary social life—so that they would remain sufficiently contented to lay eggs every day—heavily drugged roosters were placed approximately every fifteen square feet inside each chicken house. When they recovered from their stupor, they each established rule over their respective segments of the roost, and the hens in their immediate vicinity were happy. It also turned out that placing all the chickens in a confined area also conferred the operator of the chicken houses with a new ability (mildly disturbing to me at the time) to make the sun rise more than once per day—with artificial lighting—and thereby stimulate a greater production of eggs. (Note to PETA: I no longer have any connection to chicken houses.)

  But what was most startling to me was that one employee was all that was needed to collect the daily output of eggs from 10,000 chickens. It was amazing that a single person could gather so many eggs, but why was a person involved at all? Sometimes an egg would be cracked and would have to be removed from the carton; sometimes a mechanical problem would interrupt the process and would require human intervention; it required a person to coordinate the transfer of the cartons to the truck that would regularly pick them up, to keep track of the total number of cartons per day, and so forth.

  But it’s easy to see how the introduction of rudimentary layers of intelligence into the machinery and the connection over the Internet of the chicken house and its various components to quality control programs, computers scheduling the delivery trucks, and mechanics on call to respond to the rare interruptions in the process could easily displace that sole remaining job.

  Is it possible to imagine any set of government policies that could protect the jobs lost in this process? Consider the earliest efforts to stem the loss of agricultural jobs: at the beginning of the second half of the nineteenth century in the United States, the loss of jobs on farms was already well under way, but few could imagine the transformation that was in store during the decades that followed. In a speech prior to becoming president, Abraham Lincoln noted on September 30, 1859: “farmers, being the most numerous class, it follows that their interest is the largest interest. It also follows that that interest is most worthy of all to be cherished and cultivated—that if there be inevitable conflict between that interest and any other, that other should yield.”

  By the time of his inauguration, the percentage of all jobs represented by farm jobs had steadily declined from 90 percent at the beginning of the republic in 1789 to a little under 60 percent. The following year, in the spring of 1862, President Lincoln established the U.S. Department of Agriculture, and six weeks later signed the Morrill Land Grant College Act, providing public land for states to establish colleges of agriculture and the mechanical arts. Every state did so.

  The crowding of cities with farm hands looking for work in factories led to a wholesale transformation of the nature of work for the vast majority in the U.S. The reforms of the Progressive Era, and later the New Deal, were introduced to address the human consequences of this transformation and, in part, to replace the lost flows of income with income transfer systems such as unemployment compensation and Social Security and disability payments.

  When I became vice president in 1993, there were, on average, four different offices representing the Department of Agriculture located in every one of the 3,000 counties in the United States—yet the percentage of total jobs represented by farm jobs had declined to 2 percent. In other words, a determined and expensive national policy to promote agriculture for a century and a half did little or nothing to prevent the massive loss of employment opportunities on farms, although these policies arguably contributed to the massive increase in agricultural productivity. But the larger point is that many systemic technology-driven changes are simply too powerful for any set of policies to hold back.

  Today, in fact, what is now referred to as factory farming has led to the mass introduction of partially automated systems for raising chickens, cattle, pigs, and other livestock—and for producing eggs. Over the last forty years, global production of eggs has increased by 350 percent. (China is by far the largest producer of eggs, with 70 million tons annually—four times the production of the United States.) Global trade in poultry meat has increased over the same period by more than 3,200 percent.

  Here is a second example of a seemingly mundane advance that led to truly revolutionary progress in the efficiency of an entire industrial sector: the containership revolution began on October 4, 1957—on the very day that the first space satellite, Sputnik, was launched by the Soviet Union. Malcom McLean, a businessman who owned a trucking company in North Carolina, had wondered for almost twenty years why the cargo coming into U.S. ports from foreign countries was carried in boxes and enclosures of every size, shape, and description, which then had to be lifted and sorted individually onto the dock and moved from there to whatever conveyance was available to deliver each box to its ultimate destination—rather than packaged into enclosed s
ymmetrical containers of the exact same size that could be lifted from each ship onto trains and trailer trucks and then transported to their destination.

  In the spring of 1956, McLean experimented with his revolutionary idea by equipping one special deck on a ship bound from Newark, New Jersey, to Houston, Texas, with the bodies of fifty-eight trailer truck units that had been detached from the cab and chassis and loaded into slots on the ship. The experiment was so successful that eighteen months later he made history by outfitting an entire ship to carry 226 containers that were sent from port Newark and offloaded a week later in Houston onto the chassis of 226 trucks waiting to carry them to their destinations. The “containership revolution” that began in the fall of 1957 has had such an impact on global trade that in 2013 more than 150 million trailer-truck-sized containers will carry goods from one country to another.

  The progressive introduction of intelligence and networking is accelerating this same process in almost all areas of manufacturing. High-quality large-screen television sets, for example, have come down more than 5 percent in price each year and are now in surplus supply (much as food grains were a few decades ago). The first color television set was sold in 1953 at a price that, in today’s dollars, would be $8,000. The cheapest color television sets for sale today—with the same or larger screen size, much greater picture clarity, and the ability to play hundreds of channels instead of only three—are available for as little as $50—or approximately one half of one percent of the cost in return for a product of much higher quality and much higher capacity.

  We take such dramatic price reductions (and simultaneous quality improvements) for granted these days, but on a cumulative basis the impact for the world of work can no longer be ignored. Indeed, many consumer products that were once described as high-tech are now referred to by economists as commodities. The massive increase in world trade, combined with outsourcing, robosourcing, the new flows of information and investment connecting virtually all locations in the world to one another have all reinforced each other in a massive global feedback loop.