Koen de Leus is the Chief Economist of BNP Paribas Fortis. In 2017, he released a book about the opportunities and threats of the ongoing digital revolution. We talked with him about Belgium’s ageing population, the digital revolution we are facing and how our expatriates can benefit from the opportunities of this revolution. We invited Mr. Salvatore Orlando, Head of Expatriates of BNP Paribas Fortis, to conduct this interview.
— Brussels Express (@ExpressBrussels) March 14, 2018
According to the United Nations, the aged population is currently at its highest level in human history. The number of people aged 60 years and over has tripled since 1950, reaching 600 million in 2000 and surpassing 700 million in 2006. It is projected that the combined senior and geriatric population will reach 2.1 billion by 2050. M. de Leus back in 2006 you wrote a book entitled “Naar Grijsland” (In the land of old ) that analysed the economic and social consequences of having an ageing population. 12 years after, what’s the state of play?
What I said in the book is partly coming true. For the most part. Unfortunately, what we see is there is a piling up of debt, there has never been a larger worldwide debt. This is relating to pensions needing to be paid, or pensions that can’t be paid anymore. For example, in the USA or the UK, you see a lot fewer benefit plans and more contribution plans, because the costs of pensions are going up enormously. Economic growth is faltering. Especially in ageing populations, why? what is economic growth, it’s the number of people that are working, and it’s productivity. The number of people that are working, or the growth of working people is diminishing. Because the ageing people are now taking their pension. Another side is that because they have so much debt, a lot of countries decrease their government investments, but these government investments are crucial to increasing productivity.
Economic growth is number of people working plus productivity. Number of people working is going down, and productivity is going down because of reduced investment. It is a pity because it shouldn’t have been like that, but the government made their own choices.
As you are saying on one side, we have an ageing population, but we are also having a technological revolution. Your latest oeuvre is about the 4th industrial revolution, as Professor Klaus Schwab calls it. You focus your attention on the challenges and opportunities of the ongoing digital revolution. Do you think the digital revolution is destroying our democracies?
My book is called winners economy: opportunities and threats of the digital revolution, and indeed there are opportunities and there are threats. Opportunities, what you see is that the consumer surplus is way up. You don’t have to go to your bank anymore because you can just do a video conference; There are so many apps via which you can contact your family when you are in the US when travelling; all these things. For the consumer, it is certainly a surplus.
It’s also an opportunity for companies because it creates a new business model; online services is a new business model, economy, internet of things, is a new business model. All the machines that ae talking to each other make the production process much more efficient, and that increases the productivity. The problem is we are still in the investment phase and the increase in productivity is not there yet, because the integration of all this digital stuff like artificial intelligence and 3d printing, it’s very complex, and you first have to teach the people how they can work with that, and after that, you have the integration phases, then after that, you see that productivity is rising; I think we are on the verge of the period where we see the productivity start to rise.
The conference board in the US said last year, for the first time, there were more companies that saw their productivity increase, compared to companies that were just investing and not seeing increase in productivity. So there are huge opportunities.
I think the biggest challenge is inequality, because what we saw in the last 25 years is an increase in inequality; certainly in the US, less in Europe, because we have better social security systems. Why is this? First of all its due to deindustrialisation, automation and robotization. The middle class is being squeezed; there are fewer jobs for middle class, less industrial jobs because they go to the emerging markets, and of course, the middle class has to find all the work, so they go into the service sector, and they earn less, and that is creating inequality, which aids the populist forces that are rising in the US and here in Europe, and in Italy, the election showed that populist parties gained.
So, I think that is the biggest threat; we have to see that we don’t make the same mistakes that we did with globalisation. There is deindustrialisation, there were some people who fell out of the boat, and we didn’t support them. Now going into this industrial revolution, there are going to be quite a lot of people that are going to fall out of the boat as well.
First of all the companies have to see that we reform these people, that we give them life and learning. Second of all, if you cannot do anything with the people anymore, because they are unable to learn new things, then that has to be the job of the government, and they have to retrain these people, in one year or two years, helping a banker become a baker or whatever. And that is taking a lot of time, a lot of money, and you need a lot of trainers; and we don’t have any of them.
For the moment, lifelong learning in Belgium is really sad. Only 7% of all Belgians are in a training programme of life long learning. They are in the same position of Romania, Bulgaria, Croatia, Greece.
Second, you don’t have enough training. The companies have to work together with universities to see they have these training for big data analysts, artificial intelligence specialists as well, because like that, you can fill in these posts much faster, and you can create much more growth, and growth is the essential part of creating new jobs, and these are new jobs for people that may not have the qualities to be an IT specialist.
So I think on that side we have a huge challenge and I think a kind of new martial plan is needed, not only in Belgium, but in Europe and worldwide. To attack these challenges.
And to move on from the inequality, you reminded me of an article about the co-founder of Facebook, before it was as successful as it is today, sold his part of the company for 2% and he got 500,000 million dollars, and he said, that one of the main problems with digitalisation, coincides with what you are saying, is inequality, that he could have 500, 000 million dollars in a few years of work, when a normal person will never see such an amount.
That is the winner economy, and we are in the winner economy, and I think we have to change the laws because the true laws are for a physical economy and not a digital economy; also the anti-trust laws have to be adapted, because, in a winners economy, a winner really takes all. Today you don’t ask who the first online seller of books is, everyone knows it’s Amazon, but nobody knows the second. Or online search engine, who is the second? Nobody knows, but Google is the first, and the rest doesn’t matter anymore, so we have to adapt the laws today to our new digital revolution.
If we can focus on Belgium, what do you think about the companies capacity to adapt to the digital revolution? There was a recent survey saying that 1/3 of Belgian companies are not ready to adapt. What’s your opinion on the situation in Belgium?
We just today published a survey on how ready are Belgian stockholder companies for the digital revolution. It is a follow up for the survey I did for my book, the winners economy. What we see is 2/3 companies say they are ready, which I think is pretty ok, because when I did my survey around two years ago, it was less than 50%. So the companies are clearly more aware that the digital revolution is coming. Does it mean that they are ready? I have my doubts. Only 50% say ok with regards to lifelong learning, as they have increased their budget for the HR department. I think you have to increase your budget hugely because the combination with the digital revolution with ageing means that there is going to be a struggle fall for talent. You can’t find the talent anymore coming out of the schools, you will have to find some of the talent coming out of your company and you will have to be able to retrain all your workers. on the other hand, like I said, 2/3 is pretty good, you just have to take into account that this was a survey done with the 31 biggest companies in Belgium. If you go to the medium or small companies, then I think the percentage of companies that are ready for the digital revolution is much lower. Especially if you go to the small companies, there you see that the awareness is much less. And that is a huge challenge for Belgium because we are a country of small and middle/big companies, so we still have quite a big challenge there.
You are the Chief Economist of the main bank in the country, BNP Paribas Fortis. Could you give us a concrete example of how the bank is dealing with these presentations of new tools of digital revolution and ageing population?
Well, one tool that i can think of is when you see an ageing population, the older you get, the less mobile you are. So, what we did, is if you have a question for us, you can’t come anymore to the office, you can do it in your living room, put on your computer and video conference with us. you can discuss your finance. I think this is a very nice example of implementing these new digital tools that are available for us and playing into the fact that we are in an ageing society.
This is a very good example for your expatriates’ clients because an expatriate by definition is someone who is moving.
Of course, we are 7×7 available, anywhere and anytime.