Photo: Bloomberg
Photo: Bloomberg

A peek into the robotized economic future

It is highly likely that job augmentation will overwhelm job destruction, enhancing consumption demand and leading to a boom

Man’s creation of God in his own image, as alleged by the 18th century French philosopher Voltaire, is matched in magnificence only by his creation of his own substitutes: robots endowed with Artificial Intelligence (AI). The trillion-dollar question is: will robots (AI) benefit humanity or prove to be its undoing?

My research with Mousumi Das (Institute for Financial Management and Research) has explored the possible impact of robotization on the world economy in the next 20 years. We conclude that predictions of a near doomsday scenario are unfounded. It is highly probable that economic disturbances will be eclipsed by the propensity for an economic boom derived from the limitations of AI and benefits reaped from it.

It is important to understand the meanings of the terms “AI" and “robots".

AI endows machines with the power to replicate both human faculties (calculation and cognition) as well as non-human ones, say satellite imaging. AI can vary from “very narrow" to “fairly broad" and “very broad", exemplified respectively by a calculator, a computer, and a network of computers replacing a team of consultants.

Robots are merely receptacles, possibly mobile, for storing AI.

Our review of the impact of robotization refers to work done by futurists Martin Ford, Erik Brynjolfsson and Andrew McAfee and economists such as Daren Acemoglu and Dani Rodrik, as well as numerous articles in international news outlets. It reveals that AI has already caused noticeable job destruction, which will only become more significant in the next 20 years.

To illustrate, robots are being employed to harvest flowers and fruits to enhance mechanization in agriculture. In manufacturing, industrial robots, often endowed with three-dimensional vision and capable of precise movements and ceaseless work, are replacing humans. In services, vending machines dispensing diverse products ranging from DVDs to cars; automatons preparing, charging and serving meals; and robot pharmacists are taking over from humans.

Computers have enabled high-level white collar workers to perform the chores of communication, computation and accounting, which were earlier delegated to secretaries. Further, machine learning of action sequences in projects has enabled robots to replace highly paid consultants.

Quantitative estimates and projections from International Federation of Robotics, Boston Consulting Group and studies by eminent economists and futurists illustrate the significant changes sweeping the world economy. Robot employment grew annually at an average of 10.4% in 1993-2007 and reached a level of 1.5-1.75 million in the US and Western Europe in 2015, which should increase to 4-6 million by 2025. The use of industrial robots by Chinese factories increased by 54% in 2013-14 to account for 25% of the world’s army of industrial robots.

Evidence for the Indian case reveals negative employment growth in the recent past and at least a two-decade-long history of computerized automation. Large-scale robotization, a precursor of which is the recent introduction of humanoids in the healthcare sector, is logically the next step. Even Africa, which at last seemed to be ripe for industrialization, has evidently embarked on a robotized route.

Job destruction in traditional areas would, however, be accompanied by employment creation in others. By raising human productivity, AI should provide impetus to continuing legislative and corporate actions to shorten the work week. This will in turn bolster consumption of time-intensive services such as hospitality, care-giving and tourism, which involve the use of soft and fuzzy human skills scarce in present-day robots and their likely immediate successors. For example, emoting, reading human expressions and responding appropriately, engaging in varied and sophisticated conversation, and tackling unforeseen contingencies. As these occupations are labour intensive, it is highly likely that job augmentation would overwhelm the mentioned job destruction, enhancing consumption demand and leading to a boom.

Yet this rosy picture may be marred by the lack of timely regulations. The highly variable and random pace of innovation points to the possibility of a bulge in search unemployment of those seeking new jobs in a scenario of job destruction accompanying creation. Such people need to be supported by a basic income scheme to prevent significant recessionary tendencies.

An obvious solution is a national tax on robotized production to fund basic incomes for people rendered unemployed by it. The effectiveness of this instrument is questionable. A significant tax can lead to capital flight and would do nothing to solve the problem of cheaper goods produced by foreign robots destroying markets for domestically produced goods and, thus, domestic jobs.

A better alternative would be the creation of a global fund for basic incomes financed by a uniform global robot tax. It is very likely that governments of affluent countries, the hubs of robotic activity, would insist on basic incomes that are indexed to national per capita incomes. India needs to play a significant role in arriving at this compact, given possible major and adverse impact of robotization in the West and China on Indian market shares and employment; and its history as a savvy negotiator at the World Trade Organization (WTO).

The international community of national leaders has often been slow to arrive at global agreements and lax in their implementation. A break from previous inertia and sloppiness is highly desirable in the context of the AI revolution.

Siddhartha Mitra is a professor of economics at Jadavpur University.

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