Digital upheaval to test Morrison

Scott Morrison announces his new Cabinet at Parliament House on Sunday. Picture: Getty

The 2019 Morrison cabinet faces challenges no other government has faced in our history.

During the next three years the fourth industrial revolution will really take hold as technologies in the physical, digital and biological spheres begin to come together under the impetus of the “internet of things”, artificial intelligence, robotics and additive manufacturing.

But the revolution goes much further than totally transforming service industries like banking, medicine, sales, law and accounting. The chairman of the A.T. Kearney Global Business Policy Council, Paul Laudicina, came to Australia last week first to alert us that the new era has begun but, secondly, to point out that globalisation, which has dominated economic development for half a century, is now being replaced by “an island mentality” in many developed regions including North America and Europe.

And, in a third development, communities are demanding a greater voice in the way changes be being made. Google and Facebook, along with many other technology leaders, are discovering the force of the people power which they helped create.

Paul Laudicina is warning governments and companies around the world that they will need to develop strategies for what Kearney calls “digital disorder”.

In physical terms the revolution is staggering with 3.9 billion people now having access to the internet (up 400 per cent since 2001); 3.2 billion active on social media; e-commerce embracing 17.5 per cent of global retail sales by 2021 and mobile payments reaching $US14 trillion in three years.

The two great drivers of the revolution, the US and China, are on the surface having a trade war over where manufacturing plants should be sited but the real war is about leadership of the fourth industrial revolution. In backing the US for defence reasons there is a risk Australia may have chosen the losing side.

Kearney says: “If the development of artificial intelligence is an arms race, then China wants to become the world’s unchallenged AI superpower.

“While the National Science Foundation in the US has no increase in funding this year, China has promised to ‘vigorously use governmental and social capital’ to dominate the industry.”

In my view, the Morrison government needs to button into any new US technology drive.

But we also need to understand the other fundamental changes. Globalisation delivered great wealth to the world, particularly Australia, but it left many areas with suffering and, as President Trump showed, these groups can be mobilised. With greater communication the differences within nation states becomes stark.

In the US, states are dividing on issues such as carbon emissions and abortion. In Europe, migration was a key factor in Brexit and is dividing the continent. In this month’s Australian election, we saw very different views in Queensland and across the nation and the mobilisation of retirees and people of faith was amazing.

Laudicina’s message to those leading government and business is that it is extremely dangerous to look at technology in isolation. The technology changes will require careful management or there will be a revolt. And there is a final twist. People no longer trust institutions whether they be governments or corporations, but they want to trust (and usually do) trust the person who provides their employment. The power of small- and medium-sized enterprises to shape the nation has therefore never been greater. But just as free trade is on the decline so is exploitation of smaller enterprises. The so called “gig” economy provides 36 per cent of US jobs. Laudicina says this method of employment will dominate the fourth industrial revolution and if contracts are not fair then it could potentially stall the revolution.

In my view, Australia’s small business tax tribunal, new fair contracting rules and fast payment steps are world precedents and it was no surprise that the ministers who implemented them Michaelia Cash and Stuart Robert were both promoted in the 2019 ministry.

Meanwhile its worth quoting some of the Kearney conclusions for the new era:

“We are now moving into a new digital order that is at once critically important and profoundly uncertain.

“The stakes are massive for all concerned. The capacity of societies to adapt to this sweeping change in digitalisation has monumental implications for the course of geopolitics as well as the level of social stability and the degree of economic dynamism in countries the world over.

“The implications for companies are equally profound. Genuine paradigm shift. Companies must engage in nothing less than end-to-end transformations in order to persevere and prosper.

“They must also do significantly more to shape the markets in which they operate by working with — or around — embattled and populist governments.

“A supportive environment for start-ups and entrepreneurship is essential. IP rights are vital in the digital economy. Access to 5G wireless technology will be a key differentiator in the coming years Continuous re-skilling and upskilling of a country’s labour force is required to compete in the digital economy.

“Tech-focused immigration policies are intensifying the global competition for talent. Global R&D spending is at a record high, with most of it coming from the private sector R&D funding is one of the clearest ways for governments to support digital economic development”.

Footnote: One of Australia’s great advantages is the combination of the NBN and emerging 5G network. We need to stop the bickering.