The economy grows on ideas and education

The recipe for economic growth has been lost, stated Matti Pohjola, Professor of Economics at the School of Business, during the Economics Defence Course event (Taloudenpuolustuskurssi) which was held at the Finlandia Hall on Wednesday 13 September.

‘The economy grows on ideas, i.e. products and production methods, training and fixed assets such as machines, equipment and structures. Since 1860, 2/3 of growth has come from ideas and 1/3 from training and education. The proportion produced through fixed assets has been low. Ideas used to come from industry, today it is from information technology. Above all, ideas are generated in knowledge intensive service sectors,’ explains Professor Pohjola.

Professor Pohjola presented three visions of the economic future. One alternative is that economic growth slows down or even stops. This could happen because the impact of information technology is not comparable to the previous “generally used technologies” such as steam and electricity. It is also possible that there will be no jobs since ICT, robotics and artificial intelligence will automate almost all the jobs done by people. In his third vision, Professor Pohjola puts forward the idea that automation will accelerate the productivity of work and so we will experience a time of glut. This could result in a society characterised by well-being and luxuriance, but perhaps also by inequalities.

Technological development should be used to improve well-being and promote economic growth

According to Professor Pohjola, it is possible to have an impact on the rate of growth of ideas, i.e. products and production methods, and thus on economic growth.

‘We have to increase education, both by investing in research and development and by dismantling regulation to promote competition’, he says. ‘Jobs will be automated, but work will not come to an end because new tasks and jobs will be created to replace those that disappear. We need to take action to help employ people in new roles. Productivity will reduce work in industry, but will increase the amount of work in services.

The theme of this year’s Economics Defence Course was the pain of renewal. In addition to Professor Pohjola, speakers at the event included Professor of Accounting at the School of Business, Teemu Malmi, Professor of International Business, Kristiina Mäkelä and Emeritus Professor Sixten Korkman. Following the contributions of the professors, various members of parliament and alumni from the School of Business, including investor in start-ups Inka Mero and the chairman of Marimekko’s board, Mika Ihamuotila as well as Tomi Viitala, Assistant Professor of Business Law at the School of Business who all discussed economic regeneration and the role of politics in accelerating economic growth.

The event was organised by Aalto University Executive Education (Aalto EE) and the newspaper Helsingin Sanomat. Other partners were TEK (Academic Engineers and Architects in Finland), the Elo Mutual Pension Insurance Company, Finnish Business School Graduates and the Jenny and Antti Wihuri Foundation.

There was a lively discussion on Twitter during the afternoon and evening on the hashtag #tpk2017.

Text: Terhi Ollikainen