Siemens CEO Hopelessly Ill Informed About Global Economy

Sure, we should plan this global economy of ours. After all, all those clever people telling us all what to do will be vastly more efficient than that chaos of markets and liberty, won’t it? This those depend though on those clever people knowing their fundament from their elbow. Not something greatly on show. As an example, this from the CEO of Siemens:

Global workforces will be decimated as the next industrial revolution gets under way, the head of one of Germany’s biggest firms has warned, unless workers are retrained with new skills.

Joe Kaeser, global chief executive of the engineering giant Siemens, said up to almost a third of jobs could be lost as the transition from combustion engines to electric cars takes place over the next decade, in what will be “one of the single most important transformations of all time”.

Well, no, not really, a decimation is a reduction by 10%. The original meaning is 10% slaughtered on the spot which isn’t what we do with workforces – outside North Korea at least – these days. But the 10% still stands. And we’d need to have manufacturing employment decline to near zero for a decimation of the global workforce to happen. For it’s just not that large a part of the economy.

“It may cause quite a dip in employment, because if you have 20-30 less value chain, then … you have 20%-30% fewer jobs. That is how it has been in the first three industrial revolutions. There has always been a significant change in employment. And then by enabling growth, it actually turned out that more jobs were created. Higher growth was achieved and obviously more people moved out of poverty and had better lives.

“So the first three worked very well and now we’re on the verge of the fourth industrial revolution which will obviously affect manufacturing massively as it accounts for 70% of global GDP.”

No, hopelessly ill informed. Manufacturing is nothing like 70% of global GDP. We’re not in that world he thinks we are:

Globally, manufacturing continues to grow. It now accounts for approximately 16 percent of global GDP and 14 percent of employment. But the manufacturing sector’s relative size in an economy varies with its stage of development. We find that when economies industrialize, manufacturing employment and output both rise rapidly, but once manufacturing’s share of GDP peaks—at 20 to 35 percent of GDP—it falls in an inverted U pattern, along with its share of employment. The reason is that as wages rise, consumers have more money to spend on services, and that sector’s growth accelerates, making it more important than manufacturing as a source of growth and employment.

It’s never been that sort of portion of the economy either. But then McKinsey are just sharp suited spreadsheet warriors, what do they know? Well, OK, how about the World Bank?

We’re simply not in that world he thinks we are. And thus we get to the difficulty of anyone planning this world or economy. The people who would be doing the planning, who would advise upon it, provide inputs into those plans, are wildly deluded as to the state of the world they’d plan. Something which isn’t going to work out well, is it?

Think mapreading. Plotting a course from Wickhampstead to Worcester might be possible given the right map. But it’s not going to work well if you think you’re starting in Wickhampstead and are actually in Sullom Voe.

There’s also a more conceptual point. He says that this all means everyone must get trained to do the new stuff instead. And sure, the availability of training is a good idea. But if governments start to plan that training, who should be trained in what, then we come back to this knowledge problem, don’t we? Who knows what people should be trained in? Especially interesting are the views of those who think manufacturing is 70% of global GDP…….