I was asked, why does it look like the world is falling apart? Why is every country in the throes of protests?
There are protests across Europe. In France, Belgium, Italy, Spain, Serbia, Georgia, Romania and Greece. India is seeing widespread protests. There are protests also in Chile and Argentina.
Interestingly, the common thread across all of these protests is that they are student-led and primarily youth-driven.
What is causing this?
Over the last 4 decades, there is a consistent story that has been told: get a good education and move up in society.
Source: Nature
Clearly, most kids heeded the advice and went to universities to get educated. In regions such as Asia, that jump has been threefold over the past 20 years. At the same time, the population across the world has also gone up 33%. The global population in 2000 was 6 billion; now we are well past 8 billion.
A lot of kids are going to university and joining the workforce.
During that same period, wealth inequality and wealth concentration have become extreme. There is more and more wealth concentrated in the hands of fewer and fewer people.
Source: Wealth Inequality Report
This year we minted out the first Trillionaire.
There are a very small number of people who control the equivalent of the GDP of a small country and hence have influence over how they get taxed. They pay some of the lowest taxes on the planet while also making it harder for younger people to move up.
If you are born into privilege, you will be wealthy, but the chances of rising on the wealth curve have completely diminished.
The rich have built systems of rent extraction that make them richer and also raised the wall higher so few can break through.
A large number of educated young adults are realising that the “get educated, work hard” mantra will deliver nothing for them.
The Narrative
In the West, the popular narrative has been that immigrants are taking away the jobs of locals, and that is why many university graduates are unable to find jobs, or even if they do find jobs, they do not pay enough.
No political party is going to announce that they are in cahoots with the moneyed class and bending the policy/laws in their favour every day.
The immigrant has been the fall guy.
There are two categories of immigrants.
The well educated codes, consultants, finance professionals. They possess Ivy League or equivalent degrees. They come from privilege in their own countries and have access to networks that non-Ivy League students will never be able to access.
The other kinds of immigrants are poor, sometimes illegal immigrants who undertake menial or low-paying jobs in these countries, such as waiting tables, housekeeping or labour.
University graduates unable to get jobs are not trained to go after Ivy League jobs and do not want to do other categories of jobs. They want jobs that will pay them a middle-class income.
The Middle Class
A middle-class income used to be one which would allow you to buy a house, afford a car, and bring up 2 kids, even in a single-earner household. To do that in the US, you would have to earn $300,000 per year today.
But the median annual income in the US is $87,460, and that of France is Euro 26,280. In India, that number is Rs. 1,21,000.
Most of us city dwellers in India do not realise this, but the maid who comes to our homes is probably in the top 10% of the country by annual income.
The median-income earners, the middle class, need to earn 4 times what they are able to earn today.
They save, scrounge, and borrow to get their kids educated, only to realise that the education is not going to get them a good middle-class job.
COVID + AI
Source: India Macro Indicators
There is this thing called the base effect. Say, India was at a GDP of 100 in FY 2020 and expected to grow by 7% in the subsequent year. Its GDP was expected to reach 107. Instead, because of COVID, the GDP fell by 5.8% before recovering by 9.7%. Does that mean we got back to business as usual?
The 5.8% drop meant that the GDP went from 100 to 95.2. A 9.7% growth on 95.2 gives us 104.4. As you can see, below the 107 we would have otherwise reached. This created a job gap. Most estimates at the time agreed that it would be 2030 before India made up for what was lost due to COVID.
In 2022, this company, OpenAI, announced itself with a chatbot called ChatGPT. The only selling point of every AI company is that you will be able to reduce your staff and instead pass that staff salary on to the AI company.
Source: Roger Wong
The entire startup ecosystem has joined the bandwagon, and everyone is trying to build a product which will bring AI to businesses and change their business dynamics completely.
COVID delivered a systematic job contraction across the economy, but AI will not exist unless it delivers a job contraction across the economy.
Cliodynamics
If you have read or watched Foundation by Isaac Asimov, it deals with the subject of Cliodynamics, which uses history as a mathematical model to study societal evolution. Peter Turchin is a student of Cliodynamics and writes extensively about this.
There is a concept of elite overproduction. If you have a large number of people who are competing for a small number of positions of power, expect a revolution. Pushing an entire generation of people towards education has resulted in elite overproduction. They all aspire to move up the class hierarchy, but the concentration of wealth has left little room up there. Many of these people will never be able to rise up in society.
As Amitabh Ghosh wrote in his book The Nutmeg’s Curse, revolutions rarely start on the street; they usually start in the courtyards of palaces, before they spill onto the streets.
You need someone to have the credibility to lead a revolution. This is usually an elite who has been denied access to the corridors of power. When a spurned elite realises that they cannot be part of the system, they decide to tear it apart.
They just need to find the anger and harness it.