Economics vocab: how do the following words relate to economics?
growth (n.)
pie (n.)
drive (v.)
fuel (v.)
offshore (n.)
wave (n.)
model (n.)
capital (n.)
stock (n.)
lever (n.)
mature (v. and adj.)
slump (n.)
inject (v.)
Discuss the picture above. Does it show growth or development?
Before watching the lecture:
What drives development in an economy?
What drives economic growth?
What's the difference between growth and development?
What's the connection?
What happens of there is no growth?
True or false? Guess.
1. The global economy has grown in the past 50 years.
2. Historically, growth has always been fuelled by
manufacturing revolutions.
3. Relocating manufacturing plants offshore makes the
supply chain more flexible.
4. Factories today are not very different from
factories 50 years ago.
5. Robots today can only perform repetitive tasks.
6. Aerospace engineers have not begun to use 3D
printers.
7. There is no future for manufacturing in mature
economies like France.
8. It is as expensive to produce in Brazil as to
produce in France.
Now skim
through the transcript to find the answers.
Guys, we have an issue. Growth is fading away, and
it's a big deal. Our global economy stops growing. And it's not new. Growth has actually declined for the last
50 years. If we continue like this, we need to learn how to live in a world
with no growth in the next decade. This is scary because when the economy
doesn't grow, our children don't get better lives. What's even scarier is that
when the pie does not grow, each of us get a smaller piece. We're then ready to
fight for a bigger one. This creates tensions and serious conflicts. Growth
matters a lot.
If we
look at the history of growth, times of big growth have always been fueled by
big manufacturing revolutions. It happened three times, every 50-60 years. The steam engine in the
middle of the 19th century, the mass-production model in the beginning of the
20th century -- thanks, Mr. Ford. And the first automation wave in the 1970s.
Why did these manufacturing revolutions create huge
growth in our economies? Because they have injected huge productivity
improvement. It's rather simple: in order to grow, you need to be producing
more, putting more into our economy. This means either more labor or more
capital or more productivity. Each time, productivity has been the growth
lever.
I'm here today to tell you that we are on the verge of
another huge change, and that this change, surprisingly enough, is going to come
from manufacturing, again. It will get us out of our growth slump and it will
change radically the way globalization has been shaped over the last decade.
I'm here to tell you about the amazing fourth manufacturing revolution that is
currently underway.
It's not as if we've done nothing with manufacturing
since the last revolution. Actually, we've made some pretty lame attempts to
try to revitalize it. But none of them have been the big overhaul we really
need to get us growing again. For
example, we've tried to relocate our factories offshore in order to reduce cost
and take advantage of cheap labor. Not only did this not inspire
productivity, but it only saved money for a short period of time, because cheap
labor didn't stay cheap for long. Then, we've tried to make our factories
larger and we specialized them by product. The idea was that we can make a lot
of one product and stockpile it to be sold with demand.
This did
help productivity for a while. But it introduced a lot of rigidities in our
supply chain. Let's take
fashion retail. Traditional clothing companies have built offshore, global,
rigid supply chains. When fast-fashion competitors like Zara started
replenishing their stocks faster from two collections a year to one collection
a month, none of them have been able to keep up with the pace. Most of them are
in great difficulties today.
Yet, with
all of their shortcomings, those are the factories we know today. When you open
the doors, they look the same as they did 50 years ago. We've just changed the
location, the size, the way they operate. Can you name anything else that looks the same as it did 50 years ago?
It's crazy. We've made all the tweaks to the model that we could, and now we
hit its limits.
After all of our attempts to fix the manufacturing
model failed, we thought growth could come from elsewhere. We turned to the
tech sector -- there's been quite a lot of innovations there. Just to name one:
the Internet. We hoped it could produce growth. And indeed, it changed our
lives. It made big waves in the media, the service, the entertainment spaces.
But it hasn't done much for productivity. Actually, what's surprising is that
productivity is on the decline despite all of those innovation efforts. Imagine
that -- sitting at work, scrolling through Facebook, watching videos on YouTube
has made us less productive. Weird.
This is why we are not growing. We failed at
reinventing the manufacturing space, and large technological innovations have
played away from it. But what if we could combine those forces? What if the
existing manufacturing and large technological innovation came together to
create the next big manufacturing reinvention.
Bingo! This is the fourth manufacturing revolution,
and it's happening right now. Major technologies are entering the manufacturing
space, big time. They will boost industrial productivity by more than a third.
This is massive, and it will do a lot in creating growth. Let me tell you about
some of them.
Have you
already met advanced manufacturing robots? They are the size of humans, they
actually collaborate with them, and they can be programmed in order to perform
complex, non-repetitive tasks. Today in our factories, only 8 percent of the tasks are automated. The
less complex, the more repetitive ones. It will be 25 percent in 10 years. It
means that by 2025, advanced robots will complement workers to be, together, 20
percent more productive, to manufacture 20 percent more outputs, to achieve 20
percent additional growth.
This isn't some fancy, futuristic idea. These robots
are working for us right now. Last year in the US, they helped Amazon prepare
and ship all the products required for Cyber Monday, the annual peak of online
retail. Last year in the US, it was the biggest online shopping day of the year
and of history. Consumers spent 3 billion dollars on electronics that day.
That's real economic growth.
Then there's additive manufacturing, 3D printing. 3D
printing has already improved plastic manufacturing and it's now making its way
through metal. Those are not small industries. Plastic and metals represent 25
percent of global manufacturing production.
Let's take a real example. In the aerospace industry, fuel nozzles are some of the most complex
parts to manufacture, for one reason: they are made up of 20 different parts
that need to be separately produced and then painstakingly assembled. Aerospace
companies are now using 3D printing, which allows them to turn those 20
different parts into just one. The results? 40 percent more productivity,
40 percent more output produced, 40 percent more growth for this specific
industry.
But actually, the most exciting part of this new
manufacturing revolution goes much beyond productivity. It's about producing
better, smarter products. It's about scale customization. Imagine a world where
you can buy the exact products you want with the functionalities you need, with
the design you want, with the same cost and lead time as a product that's been
mass produced, like your car, or your clothes or your cell phone. The new
manufacturing revolution makes it possible.
Advanced robots can be programmed in order to perform
any product configuration without any setup time or ramp up. 3D printers
instantaneously produce any customized design. We are now able to produce a
batch of one product, your product, at the same cost and lead time as a batch
of many. Those are only a few examples of the manufacturing revolution at play.
Not only will manufacturing become more productive, it
will also become more flexible, and those were exactly the elements of growth
that we are missing. But actually, there are even some bigger implications for
all of us when manufacturing will find its way back into the limelight. It will
create a huge macroeconomic shift.
First, our factories will be relocated into our home
markets. In the world of scale customization, consumer proximity is the new
norm.
Then, our factories will be smaller, agile. Scale does
not matter anymore, flexibility does. They will be operating on a
multi-product, made-to-order basis. The change will be drastic.
Globalization will enter a new era. The East-to-West
trade flows will be replaced by regional trade flows. East for East, West for
West. When you think about that, the old model was pretty much insane. Piling
up stocks, making products travel the whole world before they reach their end
consumers. The new model, producing just next to the consumer market, will be
much cleaner, much better for our environment. In mature economies,
manufacturing will be back home, creating more employment, more productivity
and more growth. Good news, isn't it?
But here's the thing with growth -- it does not come
automatically. Mature economies will have to seize it. We'll have to massively
re-train our workforce. In most
countries, like in my country, France, we've told our children that
manufacturing had no future. That it was something happening far away. We need
to reverse that and teach manufacturing again at university. Only the
countries that will boldly transform will be able to seize this growth.
It's also a chance for developing economies. Of course
China and other emerging economies won't be the factory of the world anymore.
Actually, it was not a sustainable model in the long term, as those countries
are becoming richer. Last year, it was
already as expensive to produce in Brazil as to produce in France. By 2018,
manufacturing costs in China will be on par with the US.
The new manufacturing revolution will accelerate the
transition of those emerging economies towards a model driven by domestic
consumption. And this is good, because this is where growth will be created. In
the next five years, the next billion consumers in China will inject more
growth in our economies than the top five European markets together.
This fourth manufacturing revolution is a chance for
all of us. If we play it right, we'll see sustainable growth in all of our
economies. This means more wealth distributed to all of us and a better future
for our children.
Now watch:
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