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Debate Part 1: Two views of the future

Watch Prof. Carmignani & Prof. Ross Guest consider the economic prosperity of the next generation, in part 1 of an ongoing debate.
Hi, I’m Professor Anne Tierman, and I’m Dean of Engagement in the Griffith Business School. I’m very lucky, because I’ve been invited along today to moderate this important debate. I’m here today with my colleagues, Professor Fabrizio Carmignani and Professor Ross Guest, to debate the critical question confronting many policymakers around the world. Will the next generation be better or worse off than they are currently? This has been playing out in politics all over the world and here in Australia as well. And who better than these two to debate this question? We haven’t tossed a coin, but I as moderator, am going to invite Professor Ross Guest first to offer his view. Well, thank you, Anne. Thanks for the opportunity. Thanks Fabrizio.
Look, I’m an optimist about the future. And I think the reason for that is history. Because if you look at world history over the last 200 years, since the Industrial Revolution, it’s a history of prosperity and growth in prosperity. And it’s been pretty relentless, there hasn’t been a decade since the Industrial Revolution where we haven’t had rising prosperity. And I think that’s been driven essentially by scientific advances and it’s led to a virtuous circle. So the scientific advances have generated income and that income has generated wealth to provide education, and health, and so on. And that has in turn bred further scientific advances. So we get a virtuous circle. A virtuous circle and that’s the basis for your optimism.
Fabrizio, what do you make of that? Well, Ross is correct when he says that in the last 300 years we have had economic growth. But there was no economic growth before then. And economic growth is happening only because of the Industrial Revolutions. We have had three Industrial Revolutions that have generated three waves of economic growth. Now the question is, is there going to be a fourth Industrial Revolution? Now, the reason for my lack of optimism is that it seems to me that the conditions globally are such that the likelihood of a fourth Industrial Revolution are declining.
And even if the Industrial Revolution happens, there will be a lot of disruption, which will put the next generation in a rather difficult position. So we probably need to start with demographics, don’t we? There’s some big drivers here, in terms– I mean the fact that we’re having this conversation at all is about the fact that the population is shifting so markedly. Yes. Look, I think there are some headwinds that are going to possibly slow the growth in prosperity over time. And one of those headwinds is demographic change, population ageing. Populations around the world are ageing, not just in advanced societies, but in all societies, in fact. And that’s a headwind.
It’s going to mean that prosperity will be less than it would otherwise be if we didn’t have population ageing. And what population ageing does is it essentially means that you’ve got fewer workers relative to consumers, fewer workers to support consumers. And that is a headwind. It is a drag on growth, but it’s not going to reverse growth. It’s not going to stop it. It’s going to slow it down and it’s going to slow it down very marginally, in fact. When you have a look at the evidence on the effect of population ageing on future prosperity, you see that it’s marginal.
For example, in typical Western countries, the effect of fewer workers relative to consumers will mean that national output of goods and services, the economic cake that we produce, might be 10%, 15% less than it would otherwise be in say 30 years time. Now, in 30 years time, if we get anything like the growth rates that we’ve had over the last decades, the economic cake will be double the size. So what we’re saying is that 10% to 15% less than it would otherwise be, but what it would otherwise be is double. Now, there’s some tensions in that, I think, in terms of intergenerational equity, in terms of the ownership of the cake. That’s one debate that’s being had internationally.
When we consider the economic future of the next generation, conflicting predictions quickly arise. Professor Fabrizio Carmignani holds a pessimistic view, while Professor Ross Guest is optimistic. Let’s see why.

As Ross sees it…

Ross argues we have every reason to be positive, considering the history of prosperity since the first industrial revolution. Scientific advances have generated wealth, which has provided education, which in turn has generated more scientific advances. Ross upholds this process will continue, despite an ageing population, ensuring continued growth for future generations.

As Fabrizio sees it…

While Fabrizio agrees we have sustained continued growth over the past 300 years, he argues this has only occurred because of the three industrial revolutions experienced over this time and that before this, the economy was in a stagnant state without growth. Fabrizio is convinced we need a fourth industrial revolution for continued growth, but is concerned declining global conditions reduce the likelihood of this occurring. If we do see a fourth industrial revolution, Fabrizio maintains the next generation will still be in a very difficult position because of the significant disruption associated with it.

Your task

Watch part 1 of the debate between our Professors, then click on the comments link below to post your view. What do you see for the next generation?
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Exploring Economics: Will the Next Generation Be Worse Off?

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