Despite technology improving living standards, accelerating economic growth, and increasing productivity, angst about the corroding effect of automation on society has influenced people since the beginning of the Industrial Revolution. Still in the Western media today, a narrative persists that the widespread adoption of artificial intelligence (AI) and automation will destroy jobs in virtually every sector of the economy. However, for as much as people worry about the oncoming robot invasion, there seems to be little qualification of this narrative. In order to understand the impact of automation on the world economy, three main questions deserve to be evaluated: who is truly threatened by automation, how are they threatened, and what are the predicted political and economic implications.
Factually, according to the Bank of England, up to 50% of jobs in the US and UK economies are at risk of being fully automated in the next ten to twenty years. In contrast to previous bouts of technological progress, the adoption of AI threatens not just manual labour but also white-collar sectors of the economy; the factory worker and the Wall Street trader are equally threatened. It is no wonder then that over 70% of Americans are worried about a future economy centred on automation, and even more believe that automation will not bring with it higher-paying jobs, as was typical in previous eras of change.
Throughout history, the media has reflected these worries. Whether you were reading a piece on the introduction of ‘horseless carriages’, a new factory, or a personal computer, the theme remained the same: this new technology will cause unemployment to skyrocket and incite massive upheaval. The modern continuation of this narrative is perfectly encapsulated by a recent CBS News report titled “America is unprepared for the ‘jobs apocalypse’ automation will bring.” It seems, as the media would have you believe, that the Western world is yet again uniquely poised to be brought to its knees by technology.
However, what is missing from this CBS report and other similar pieces is a fundamental evaluation on who is truly threatened by automation. On this account, the reality may not fit what the media has been implying. Setting aside the historical record of technological progress and job creation, developed economies seem to be prepared for the oncoming challenges. Of the top ten countries on the “Automation Readiness Index”, all are developed economies and all but three are centred in Europe or North America, including the United States, the United Kingdom, France, and Germany. While there is substantial need for policies to ensure a smooth transition, for most developed nations it is well within their ability to adapt to the changing economy without major issues.
Furthermore, for countries like Germany and China, where population is projected to decline, the widespread adoption of automation may even serve to boost economic activity where there otherwise would have been a decline. In China, in particular, there will be a gap of 600 million workers needed to maintain projected growth rates. However, with the adoption of automation, that number is reduced by 100 million. China, despite having an economy in which over 77% of jobs are ‘threatened’ by automation, has designated automation as a key area to develop. In 2015, the Chinese government launched the “Made in China 2025” program that has channelled money to firms focused on AI. Similarly, in developed nations, given current demographic trends, “roughly half of the sources of economic growth from the past half century will evaporate as populations age”. However, automation can almost double productivity, offsetting much of the negative impact of declining populations. In contrast to the bleak picture painted by the media, automation may even offer a great benefit to the economy rather than an unmitigated danger.
Given that automation may not be as much of a risk as the media has made out, the question of who is actually threatened by automation now needs to be clarified. In the mainstream media, there is almost no discussion on how automation might affect other groups of countries, such as developing states. Given key differences in economic makeup (a higher relative importance of the agricultural and industrial sectors in developing countries), one can imagine that automation will affect these countries in more severe ways in comparison to developed economies. Indeed, according to the World Bank, developing countries are far more susceptible to the deleterious effects of automation. In countries like Ethiopia and Thailand, close to 80% of jobs are at risk of being replaced by automation; this number is far greater than the OECD average of 57% and the US figure of 50%.
Further, while developed countries have the resources and skills available to retool their labour force for a changing economy, developing countries are at a disadvantage in two ways. First, the rise of automation will prevent further growth in employment within the manufacturing sector, which has been the centrepiece of the path to higher economic growth and prosperity. Studies have shown that while European manufacturing peaked with an income per capita level of roughly $14,000, developing nations have already peaked at just $700. Automation will accelerate developing economies on a path of ‘premature de-industrialization’, which will prevent them from further growth.
Second, while developed countries can train citizens, who already have a high level of education, developing countries lack the governmental capacity to train workers for new types of jobs. These states also lack adequate consumer demand, diversity in the economy, and a social safety net to protect workers. These countries are faced with a declining relative size of manufacturing without a way to transfer the freed labour back into the economy. As Jim Yong Kim, the president of the World Bank, said, “automation means the traditional path to economic growth may close to all but a handful of developing countries.”
This situation for developing states has important political and security implications. The adoption of automation in the industrial sector has already begun to lead to a “hollowing” of the labour market, where middle-income jobs have disappeared. For many countries, an environment with worsening job prospects, a quickly growing population of young adults, and a history of civil conflict can be very dangerous. For example, one motivation for the Arab Spring was a high level of youth unemployment. Stagnating incomes and a youth unemployment level of 23% drove many young people to speak out against their governments and demand change. By 2025, sub-Saharan Africa will have a youth unemployment level close to 50%. Automation for developing countries represents not just a great economic change but a security risk of great magnitude.
A critical evaluation of the narrative on automation shows that the Western media obfuscates many important aspects of the looming upheaval. Developed economies are generally prepared to adapt to a production process focused on AI and automation that reverses negative effects of worrying demographic trends. In contrast, the people most at risk from automation are not those in America but those in developing countries like Thailand and Nigeria. While many countries developed on a steady path, automation threatens to end the process of development from an agricultural to a service-based economy by hollowing out employment in the industrial sector. The resulting decline in job prospects in countries with weak governments and histories of civil strife may result in severe security problems. While the media may generate viewership by releasing stories playing to natural fears about the future, those most impacted by automation, the developing world, are unknown to the citizens of developed nations, those set to profit from this new technology.