Why specialization matters in our society
About growth and scarcity
This is the first piece of a series of articles that will explore the effects of a specialized economic system in our society from a worldwide outlook.
It's no surprise if I say that our society is profoundly polarised. It's enough to put one newspaper next to the other and see how the same story has two very different approaches, even though journalism is supposed to be a discipline based on objectivity. Through this article, I argue how these levels of polarization are an undesired consequence of specialization.
The purpose of specialization
During the Industrial Revolution, the division of labour emerged as a way of increasing the efficiency of production. Specialization is when a worker, firm, region or country concentrates all their efforts on producing a narrow range of goods and services to become the best at doing it. Workers specializing in only one task don't need to comprehend the whole process. This condition reduces the number of skills demanded by the job while increasing the quality of that particular step or product.
For a specialized economy to work, trade is required. The concentration of efforts on only one product or service increases the availability of this particular one but not the possibility of others unless you trade them. Through trade, you have the opportunity to reduce the scarcity of those things you are not able to produce. You can exchange the excess of your specialized product for whatever products or services you need. To simplify trade around the market, we use money as payment for goods, services or even debts.
Plenty of economists claim that specialization is indispensable to the growth of society because it's necessary to develop complex products or deliver specific services. When it comes to technological advances, I agree with them on that. Humanity managed to decode all proteins and found a vaccine to help in the fight against Covid in an incredibly short time. That said, I think economists are missing what social growth actually is. I'll get into that further down in the article.
Reduction of scarcity
One of the benefits that specialization brings us is the reduction of scarcity. It is often used as an example of growth because it's supposed to give citizens access to a broader range of goods. In theory, it seems true. In reality, it's not so simple.
The average specialized worker is often a poor citizen (low-income citizen if you wish to give them a more euphemistic name). While these citizens are a part of the socioeconomic system and therefore are meant to have access to all these new available goods and services, they have not. It's necessary for them to choose how they spend the little money they get, so even if the market has plenty of things to offer, they are not acquiring more.
Specialization is not reducing their scarcity but broadening their consuming choices while their life options and opportunities remain the same.
An article from WHO reported that according to the United Nations "there was a dramatic worsening of world hunger in 2020 … much of it likely related to the fallout of COVID-19". Here we have a good example of how, even though the specialization has helped during the pandemia, it doesn't have any power to control the real impact of scarcity.
But this "Covid-period" example might lead you to think that this is an isolated issue created by the difficult circumstances that everybody had to deal with during 2020. Don't let yourself be fooled. It isn't a new problem.
This graphic (left) shows how the prevalence of people suffering from lack of food jumped from 23% to 27.6% in the pre-Covid period from 2015 to 2019. As you can see on the map (2019), the southern hemisphere is suffering the most. It is easy to forget that there are billions of people struggling to get food when you are an economist playing with billions of dollars on a Monday morning. It is easy to think about all the benefits of having thousands of different types of shoes and shirts at your disposal when you forget about the people making them. People who cannot choose what they are wearing or how much they will be eating that very same Monday morning.
According to an FAO report, "an estimated 1 in 10 people worldwide are suffering from hunger". According to the data provided by the UN to WorldoMeter, in 1992 we were about 5,4 billion people on this planet, and now we are reaching 7,9 billion. That means that, in 30 years, the population has increased by 2,5 billion, give or take. Thanks to World Data Lab, we also know that currently, 2,39 billion people are living in water-scarce areas. In 1992, 1,35 billion people were living in such conditions, so today, there is one billion more suffering than thirty years ago.
Half of the total world population increase consists entirely of people living in water and food scarcity conditions.
Since the 90s we have had the internet, we have many sorts of videogame consoles, we have computers like the one I am using to write this article, we have twenty different types of chocolate creams… But can we truly keep saying that trade and specialization can reduce scarcity?
Growth
If you hear that a county has experienced growth, you instantly think about economic growth. Social growth as a concept doesn't even have a proper/official definition. When you search for it online, you mostly get information about personal development or self-improvement. Hopefully, there are some institutions like Friedrich-Ebert-Stiftung's (FES) that are trying to analyze the international picture and propose a growth model not only based on economics but on sustainability and justice too.
The traditional economist will tell you that measuring growth from an economic perspective is the best way to do it because money is related to all other aspects of life. It is easy to argue that there is very little that you cannot buy, and for those things, money certainly helps.
For a long time, it has been said that the general economic growth of a country raises the incomes of the poor and everyone else in society proportionately. In the following video, you get an example of such an opinion.
Alex Tabarrok explains why he thinks Real GDP (Gross Domestic Product) Per Capita is the best measure of a country's average standard of living. Real GDP is about the total income of a nation, and, mainly, it grows according to the total production, which has a great connection to the level of specialization of that country. When you calculate the GDP per capita growth, you expect to get a picture of how much the standard of living has improved. As an illustration, he provides some data to prove the correlation between GDP per capita and life expectancy or happiness.
But just for a moment, think about the impact that the specialization process has on the daily lives of citizens and their countries. Competition over energy sources between powerful governments generates long-lasting conflicts. This means war zones where people lose their lives. Other countries go for a different approach; instead, they allow exploitation in their country so that production can increase rapidly and they can be a competitor offering better labour costs. We cannot forget that, while the GDP of a particular country might increase, the GDP of the competition will decrease because when we look at the general state of the world, we see that scarcity hasn't stopped rising; which means it only has changed hands.
And finally, I cannot but think that the primary reason life expectancy has increased so nicely in this period is the drop-off in child mortality; a fact that is very well proven and connected to other factors like the obstetricians washing their hands before delivering a baby. (You can see this in the graphics below.)
Specialization is the best way to improve production efficiency and, as a consequence, revenue increment. But who is getting all this money?
Tabarrok mentions that the Real GDP Per Capita measurement misses the distribution of wealth, as in the case of Nigeria, Pakistan and Honduras which have similar GDPs while the prevalence of poverty varies greatly. This fact doesn't discourage him, though, because immediately he shows a graphic that seems to illustrate that growth is good for the poor. This statement got my attention, so I searched the paper and looked at it for further analysis.
This paper is not particularly objective. It makes a bunch of assumptions that are then used as if they were facts to prove its theory. Most of the text is a display of a particular view instead of actual contraposition and research. And what worries me the most, the empirical strategy for measuring the income of the poor is very weak.
They define the poor as the poorest 20% of the population and given that Alex Tabarrok already stated that the GDP Per Capita doesn't consider wealth distribution I think the research team shouldn't have taken the easy road here as they themselves explained in a side clarification.
We understand that the concept of specialization cannot be separated from trade or money, and we get social growth (or an increase in the standard of living) as its supposed great benefit. But when we are meant to measure it, we widely use GDP despite its doubtful reliability. Are we making this mistake intentionally or is it pure ignorance?
Fortunately, it seems like more people are realizing that this might not be the best way of doing it. During a Yahoo Finance Live Show, Andy Serwer highlights that GDP "doesn't measure the right things which is to say quality of life and sustainability", and that there are other options to use as a guide when it comes to planning for the future of our countries. He says that countries like Italy, France and Spain, even though they are not always considered strong economies, are very nice places to live as they have invested in health and education for centuries.
Think about the availability of food. Those countries where the consumption of food that has been processed thanks to the magic of specialization is high are not the best places to enjoy gastronomy. In fact, their cuisine is usually worse, and their eating habits tend to fall toward cheap, unhealthy products. That might be a sign of "development" but not a sign of an increment in the population's wellbeing. If else, it is the opposite.
Polarization as an undesired consequence
When all this started, I mean, the specialization of services and industries, humanity expected a lot from it. We thought we would have better lives and we would eventually be able to eradicate poverty. Clearly, it didn't happen; because people nowadays work more daily hours in exchange for proportionally lower wages, and again, the amount of population living in scarcity is growing. Not only that, people struggling to get proper food and healthcare in developed countries are rising too. We even thought we could stop conflicts with a good trading deal, but that is proved to have failed, as trade and competition avoid as many conflicts as it creates.
All of this is creating a massive gap between people fighting to survive every day and people reaching and exceeding the so-called standard of living, unaware of how many billions are very far from ever attaining such a life.
On top of that, we have a matter of perspective. This is a subject that I will get into detail in future articles, but it has quite some relevance in explaining why polarization is an undesired consequence of specialization.
In a specialized world, a citizen will learn and build their opinions based on the knowledge that their specialization provides them. It is only logical because we have a limited amount of time and attention per day to dedicate to our development (personal and professional). So it makes sense that in the pursuit of our careers, we focus on achieving a thorough understanding of a very narrow subject. It is great for inventions and discoveries, but it is detrimental when we need to comprehend others' perspectives. We spend so much time figuring out life from only one side of the room that we forget that there are many walls and corners. There are even doors that lead to other rooms with a totally different kind of setting. More often than not, we stay in our spot, as it is necessary in a specialized world. But then, we lack the knowledge that would allow us to communicate in a healthy and constructive way with others. Our opinions then get stronger and static, and our perspective shrinks until we see ourselves living in a polarised world.
Political polarization: when public opinion divides and becomes oppositional
Economic polarization: a faster decrease of moderate-skill jobs relative to low-skill and high-skill jobs
It doesn't matter if we think about polarization in a political way or in an economic sense. The surge in perspective differences (being the discrepancy in the standard of living or the varieties in the focal point of their daily lives) creates a growing gap between individuals, social groups, regions and countries that is definitely an undesired consequence of our current socioeconomic system.
The intention of this article
I don't want to demonize the specialization process. In research and technological development, it can even be crucial. But I think we have gone too far without measuring the consequences of it, without questioning where and where not should be implemented. Most of us complain about how fast the world is going. We no longer have time to enjoy just being alive because we are too busy being productive. Well, specialization is one of the main reasons for its velocity.
Specialization needs to be redirected towards an increase in knowledge and not in production.
I only wish that, with this article and the following ones, some of you will start thinking about this differently. From a different perspective, I would say. Not so you reach a precise point of view but as the best way to walk towards a future where we all are willing to converse and find the solutions that we very much need.
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