In Memoriam: S. MALCOLM GILLIS

Economies, Societies and Technologies in the 21st Century

 

Commencement
Texas A&M University 
at Galveston
December 15, 2012
Malcolm Gillis

 

            Mr. President, Members of the Board, Mayor Lewis Rosen, students, and their fathers, mothers, grandparents and siblings — Good Morning and Howdy.

 

I have had the pleasure of speaking at many college graduations, including Texas A&M, College Station. Some graduation speakers are indiscreet enough to try to make grand predictions about the future.  For my part, after enduring so many endless, boring forecasts of the future by too many graduation speakers over five decades, I took a solemn oath to never, ever, make predictions on occasions such as these.  In any case, I am particularly unqualified to make predictions, since I am, for my sins, only an economist:  a member of a discipline that has forecast seven out of the last three world recessions.

Rather than predictions, I will try instead to help you sort through some emerging worldwide tides and crosscurrents of change that will profoundly affect your future, presenting you, new graduates of Texas A&M University at Galveston, with opportunities, challenges and perils not faced by your parents.

Some of these are economic in nature, some are demographic, others are geo-political, many are technological; they are not wholly independent of one another.  China, Europe, India and, to an extent, North America, are important venues for all these changes.       

 

Consider first the economic, demographic and geo-political significance of the emergence of 21st century China.

 

Few people are aware that in 1820, prior to the Industrial Revolution in Europe and America, China had the largest economy in the world.  Now, with its 1.3 billion people and expectations of very rapid economic growth, China now has the second largest economy in the world. It is the largest exporter among nations.           

 

How significant is this development?  A few years ago, Lee Kuan Yew, then prime minister of Singapore, was asked this same question.

 

His response:  this is not just a significant event; it is the most significant economic event in the history of the world.  At the time, I could not agree with Lee Kuan Yew.  Now, I think he may have been right. China is already the world’s largest producer of coal, steel and cement, and the second largest consumer of energy.  At the same time, this huge nation has yet to turn attention to the very serious problems of air and water quality that have accompanied rapid economic growth and now threatens China’s growth.  Beijing and Shanghai are already heavily polluted.  China surpassed the U.S. in 2006 as the world’s biggest source of C02 emissions. Consider that in 2004, China had but eight motor vehicles per one thousand people vs. 840 per thousand in the U.S.  Think about urban air pollution when China reaches just 100 vehicles per thousand.  China is also the first large nation in history where virtually all children are “only children,” with no brothers or sisters. This is a demographic trait that will surely have economic and social, if not military implications.  These and other features of 21st century China could have far-reaching internal and external consequences that are, well, inscrutable, at present.

 

What of Europe?  Could anyone have predicted in 1975 that by 2005 the six-member European Common Market would have expanded to the 27-member European Union, including the Baltic nations as well as Hungary, Poland, Czech Republic and Slovakia?  Who knows where Europe is headed in the next ten years?  Will some European nations be outside of NATO?  Will Turkey ever be allowed to join the European Union?  Will Greece have to leave the Euro area soon? Will the economies of Spain and Portugal ever recover from their present dire straits? Youth unemployment in Italy exceeds 25 per cent, in Spain 51 per cent of youth are employed. Will these economies remain stagnant for years to come?           

 

Major cultural and political changes are also underway in the Western Hemisphere as well.  The world’s largest Hispanic nation is Mexico.  What is the second largest Hispanic country?  Spain?  No.  Argentina?  No.  The United States is now the second largest Hispanic nation in the world:  over 17 per cent of Americans—50 million—are of Mexican or other Hispanic descent. And according to estimates of the census bureau by 2050, nearly 30 per cent of Americans will claim Hispanic background.           

There are other very significant ways in which your world is already strikingly different from that of your parents.      

     

Consider urbanization, a phenomenon that is both a blessing and a curse.  It is a blessing because it makes possible strategic concentrations of brain power, artistic talent and manufacturing materials.  It is a curse because of its implication for traffic congestion, urban crime, air and water pollution and, often, mental stress.        

   

Urbanization, at least, is nothing new.  For the past century, the world has been in the grip of a massive shift from rural to urban society.  Far from subsiding, this demographic shift is accelerating.  In 1900 only 14 per cent of the world’s population resided in urban areas.  While “only” 50 per cent of the world’s population lives in urban areas today, the best census estimates suggest that 20 years from now, two-thirds of the world’s population will be urban dwellers.  Just this year, the number of urban dwellers in China became greater than those in rural areas. Today, only two cities—Tokyo and Mexico City contain more than 20 million people.  I take no joy at all in noting that, according to demographers, in 20 years, at least seven of the world’s cities will have 20 million people or more; none of these seven will be in the United States.           

 

Just two decades ago, the world was preoccupied with what was seen as a population explosion that would severely stress natural resource availabilities as well as social fabrics.  As late as the seventies, doomsayers such as Paul Erlich of Stanford were issuing especially shrill warnings about effects on high birthrates in his best-selling book The Population Bomb.  The ‘bomb” turned out to be a dud. Today population growth is leveling all over the world, often sharply largely because about one-third of countries now have fertility rates below the 2.1 children per woman that is the population replacement level.  The “population explosion” has imploded.         

 

Now, instead, there is a “birth-dearth” in many nations, including Japan, Italy, Spain, Germany and Russia.  China, should it continue its one child per family policy much longer, will soon follow that pattern.

 

The point is that A&M graduates of 2012 will increasingly be living in geriatric, urbanized societies— increasingly dominated by older people—in ever-crowded cities—with all that means for support of schooling, for costs of health care and for the financial health of pension systems, especially in Europe, Japan and the United States.

 

As notable as are these economic and social changes, they may pale in influence beside the coming scientific and technological revolutions of the early 21st century.  I am not speaking of concepts and devices that may be discovered in the distant future.  I am not predicting any new technologies. Rather, I refer to already known technological innovations that, when mature,  will have profound, far reaching effects on the way we live, how well we live and, especially, how long we live.

 

A grand technological revolution is unfolding before our eyes, driven by stunning advances in three increasingly related technologies:  biotechnology, information technology and nanotechnology.  The intersection of these three fields looks to be especially promising in saving, enriching and prolonging lives for humans, but there are risks involved.

 

Consider first biology, the cornerstone of biotechnology.  In less than half a century, biology has been radically transformed from a discipline centering on the passive study of life to one allowing the active alteration of life, almost at will.  Biology also has become an information science.  How is that?  Visualize your genes as your own personal, customized software, containing recipes—or codes—for proteins that tell your body what to do, and how and when to do it.  Humans possess at least 30,000 genes and the body utilizes perhaps 300,000 proteins.  We have no hope of understanding how these particles work together without highly advanced mathematical, statistical and computer methods.

New fields, new research methods, new medical therapies and new ethical issues are arising from the new biotechnology.  These developments have allowed the fashioning of bold, new and safer, genetic-based therapies, especially cancer treatments; it has enabled the development of information technology-based pharmaceutical products that can be customized for individuals.  It is allowing remarkable advances in the new field of tissue engineering, which is yielding amazing products to repair damaged or diseased human tissue, and is providing safe new blood substitutes.  Startling discoveries beginning in 2004 have taken the world to the brink of success in using stem cell research to combat diseases.           

 

And then there is nanotechnology, a field born at Rice University in 1985, with the discovery of Carbon 60, “buckyball,” a fullerene measuring about 1 nanometer across. A nanometer is one billionth of a meter. My thumb is about 10 million nanometers across.           

 

Nanotechnology involves the measurement, manipulation and fabrication of objects from less than one nanometer to about 100 nanometers across—where one nanometer is a billionth of a meter.  The most interesting nearer term applications of nanotechnology lie in biomedicine, energy conservation and materials.           

 

The world now boasts dozens of new nano substances:  nanowires, nanoribbons, nanobubbles and even nanohorns.  But the most promising at present is the carbon nanotube, which comes in several forms.  Some scientists call the nanotube “God’s molecule,” because of its extraordinary properties.  Some nanotubes can be woven into fibers 120 times stronger than steel at 1/6 the weight.  Think of what this means for building construction and aircraft manufacture.  

 

Other types of nanotubes can conduct electricity with almost zero resistance, with immense potential savings in power transmission.  Others can be tweaked in a wide variety of ways to carry medicines through the body’s circulatory system to attack cancer and HIV; still others may soon be used to make quantum computers with speeds and capacity thousands of times that of today’s largest and fastest computers. Nanotubes infused with the element Boron will very soon be used to soak up oil spills with incredible efficiency.         

 

Singly and jointly, these three technologies—biotechnology, information technology and nanotechnology—will have already begun to transform your lives within the next decade.  If humanity can find ways to resolve ethical—and perhaps moral—issues raised by our fast-expanding capacities in these converging fields, their economic and social impacts could be as profound and as positive as that wrought by any previous revolution in human history. 

 

I close with a remarkable illustration of one of the implications of the union of these technologies. This has given us an unanticipated new way to make consumer goods, capital goods and even food. I speak of additive manufacturing, also called digital manufacturing.

 

The first industrial revolution began in 1820 in Britain and later spread to the U.S. and the rest of Europe. The second industrial revolution occurred when assembly line techniques were invented and adopted on a broad scale by Henry Ford and others, 100 years ago. The third was the information technology revolution beginning about 1980. 

 

There are those who believe that additive manufacturing, or digital manufacturing, will bring on a fourthindustrial revolution. 

 

Additive manufacturing is a process that utilizes 3-D printers using either ink or powder, the 3-D printers build things by depositing materials layer by layer. 

 

Already additive manufacturing is being used to make some car parts, transducers in small scanners, jewelry, lampshades and even customized artificial hips and arms for humans.

 

3-D printers are also used to print sensors on military armor, to make plastic water tanks using embedded electronics to measure how full the tank is, with pumps to turn the water on and off.

The advent of additive manufacturing has more general implications clearly it will drastically change supply management in many industries. Some believe it will drastically change both manufacturing and international trade.

 

For example, additive manufacturing enables a firm to produce on the 3-D printer items it formerly ordered from a local or foreign supplier.

 

This has major implications

 

1. Inventory management

   Companies will no longer need to go to the expense of holding larger inventories of goods, materials and spare parts

2. Transport costs

   Today transport costs are large percentage of total costs of goods sold. We now ship goods by plane, trains and mail. But, with digital manufacturing, most transport costs will be just the cost of sending the specs electronically from the originator to the firm’s 3-D printer. This will surely result in a huge drop in the cost of transporting some goods. There are those who claim that additive manufacturing will lowerall costs of production, including labor and capital costs.

 

Indeed, the labor cost in additive manufacturing may be very small, consisting mainly of labor costs of devising and implementing the software protocols for shipment to 3-D printers, and the labor costs of making the inks and powders for the printers.

 

1. International Implications

   ​In past twenty years, low-wage nations have successfully exploited this advantage to sharply increase exports to the U.S. and Europe. Digital manufacturing may completely negate this advantage in many manufacturing field.

 

Several forms of 3-D printers based on at least five different technologies have emerged- Stereolithography is one, another is called Fused Deposition Modeling. 

 

Think of the implications for international trade alone. Some traditional low wage manufacturers in many countries large and small will go out of business.

 

There are other implications of additive manufacturing. Some researchers are already using 3-D printers to print, layer by layer, simple living tissues, such as skin, muscle and very short blood vessels. 

Food can be printed too. Cornell scientists have already produced printed cupcakes. Are printed hot dogs and pizza next?

 

I now sum up.  Technological, economic, biomedical, demographic and cultural changes are already rushing toward us at a pace never before experienced in human history.  Today’s graduates will need to be especially resourceful and creative to assure that these changes magnify, rather than diminish, human potentials.  We might use William Shakespeare to illuminate this sentiment.         

  

In Shakespeare’s Tempest, the young Miranda marvels,

 

            “How beauteous mankind is.  O Brave New World.”

 

            To which the more world-wise Prospero responds,

 

            “Tis new to thee.”

 

            A Miranda of the 21st century might also say,

 

            “O Brave New World.”

 

            But now, Prospero would have to respond,

 

            “Tis new to all of us.”           

 

No graduates of any university this year are better prepared to cope with this brave New World.  Now go out and prove me to be right.           

 

Live long, and prosper.