A four-day gala event on the global economy is kicking off on Wednesday, the World Economic Forum in Davos. The annual meeting has been organized since 1971 and is meant to bring together business and government leaders so they can raise and discuss key topics that will determine the future of the world's economy.
A very prestigious event with a very select guest list, Lithuania has not always been represented at Davos. This year, the forum will be attended by 40 international leaders and about 2,500 business and society representatives.
The theme of this year's Davos meeting is how to manage the fourth industrial revolution, characterised by the synthesis, combination and convergence of physical, digital and biotechnology. A new wave of innovation will once again substantially transform the world we live in. Unlike previous waves of innovation, this one is predicted to develop exponentially, both broadly and quickly.
Innovations will penetrate all branches of industry, they will affect not only our lived environment, the things we use, the food we eat, but our body too, everything we are made of. New transformations will change the structure of industry, it will infiltrate healthcare, logistics, finance, education - it will sweep away some jobs and create new ones, decentralizing processes, cutting logistics costs, eliminating middlemen.
For probably the first time, macro-economic waves of change will be discussed at such a high level; for some reason, they receive much less attention that the short business cycle we are more familiar with. Nikolai Kondratiev was probably the first economist to study big cycles in economic development. According to his followers, what is in store for us is not the fourth, but the sixth wave of innovation; if we look at the entire history of the modern economy, there have been some two dozen waves of change.
Just like the previous ones, the current industrial revolution gives us the choice of going in step with innovation or, contrarily, resist it and even halt it. Just like every other revolution before, the one at our doorstep now can be used for good or for bad ends. With Davos in the background, it pushes you to start thinking about how the Lithuanian government is responding to the global economic transformation.
The State Tax Inspectorate is entering the era of Big Data, building smart accounting systems, with ambitions to collect and process increasing amounts of data about individuals' assets, bank accounts, and transactions.
We should welcome that a state institution is embracing innovative techniques, but Lithuania’s broader approach dampens the enthusiasm somewhat. And the reason for this is that businesses in Lithuania are not granted the same freedoms, flexibility or options.
Reforms of the Labour Code, which were drafted in the spirit of the second industrial revolution at best, have stalled. New sharing economy platforms introduced to Lithuania are greeted with the scrutiny of tax authorities. Peer lending, still in its infancy, has been burdened with heavy regulation, just in case it goes wrong.
The social insurance system is not ready to meet future challenges, but pension reform has been removed from the political agenda. It has been replaced by populist suggestions to index pensions to income, promoted by politicians including our President who is going to Davos.
The distance between Vilnius and Davos is about 2,000km, or a two-hour flight. But will travelling there bridge the distance between Lithuanian politicians’ mind-sets and Davos?