Transformation in economics
Human economic systems undergo a number of deviations and departures from the "normal" state, trend or development.
Among them are Disturbance (short-term disruption, temporary disorder), Perturbation (persistent or repeated divergence, predicament, decline or crisis), Deformation (damage, regime change, loss of self-sustainability, distortion), Transformation (long-term change, restructuring, conversion, new “normal”) and Renewal (rebirth, transmutation, corso-ricorso, renaissance, new beginning).
Human economic activity has so far undergone at least two fundamental transformations, as the leading sector has changed: Beyond industry there is no clear pattern now.
This evolution naturally proceeds from securing necessary food, through producing useful things, to providing helpful services, both private and public.
Accelerating productivity growth rates speed up the transformations, from millennia, through centuries, to decades of the recent era.
It is this acceleration which makes transformation relevant economic category of today, more fundamental in its impact than any recession, crisis or depression.
Transformation is quite different from accompanying cyclical recessions and crises, despite the similarity of manifested phenomena (unemployment, technology shifts, socio-political discontent, bankruptcies, etc.).
The nature-produced, renewed and reproduced “resources” of land, water, air, raw materials, biomass and organisms.
The continued investment in people's skills, knowledge, education, health & nutrition, abilities, motivation and effort.
Cyclical crisis is a parallel, accompanying phenomenon, subject to different causes, special rules and separate dynamics.
Barry Bosworth of the Brookings Institution confirms: “The assumption has always been that the U.S. economy will gain back what was lost in a recession.
However, in the early 1980s, the service sector had started slowing down its employment absorption and growth potential, ultimately leading to the jobless economy of 2011.
It is still not clear what kind of transformation is emerging and eventually replaces the service and public sector economy.
While crises are cyclical corrections and adjustments, transformations are evolutionary shifts or even revolutions (industrial, computer) towards new and different levels of existence.
Persistent rates of unemployment, combined with falling workforce participation rate indicate that also this crisis is intertwined with underlying transformation and so it displays atypical dynamics and unusual persistence, presenting new challenges to conventional economic thought, business practices and government interventional “toolbox”.
Economic sectors evolve (in terms of employment levels), albeit through fluctuations, in one general direction (along so called S-curve): they emerge, expand, plateau, contract and exit—just like any self-organizing system or living organism.
Accelerating productivity growth rates are dictated by global competition and human striving for better standards of living – they cannot be stopped at will.
The first two are subject to market forces and will undergo accelerating productivity growth rates and declining employment levels in the near future[when?].
The third one, GWU, is sheltered from competition, cannot expand its share substantially because it depends on taxation from other sectors; its employment growth is unsustainable.
But the US economy is now the harbinger of the things to come, the role model for others to follow or reject, but hardly ignore.
It took remarkable ingenuity to unleash the forces that paralyzed markets, overturned governments, and ruined countless lives, not to mention causing an historic decline in global gross domestic product.
This grey area is also the space of the new transformation: that's where those who left unemployment registers are starting new ventures and enterprises, and participating in regional economies.
Pressures for increased productivity growth rates, declining employment and workforce participation, as well as budget cuts shall grow unabated.
Due to massive automation, sector GDP can grow even under the conditions of declining employment.
Obscuring the difference between cyclical crisis and the ongoing transformation (metamorphosis) is not without consequences: when true diagnosis is not attempted, and people do not know what is happening with their economy and why, all forms of contagious social unrest follow worldwide.
Second, unemployment also falls faster because, due to the long duration of the crisis, the workforce participation rate keeps shrinking (In 2007, 66% were working or seeking job, in 2013 only 63.2%), as can be seen in Fig.
Based on productivity growth rates, GDP could accelerate and yet jobs drop precipitously, due to automation, robotization, digitization and self-service of the transformation era.
Due to its productivity growth rates, each sector must emerge, grow, persist, stagnate, decline and dissipate in terms of its employment generating capacity.
[9] World capital flows include loans and deposits, foreign investments, bonds and equities – all down in their cross-border segment.
Improvement in the internal growth of U.S.A., EU, and Japan does not carry into external trade – these economies are starting to function as zero-sum.
