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We may be exactly wrong about technology and inequality

Worries about technological advances destroying jobs have been around for centuries.
Image: Bloomberg

One perennial concern about new technology is that it will create a more unequal world, reducing wages and widening the divide between the haves and have-nots. Those fears have acquired a more panicked urgency with the rapid adoption of robotics and artificial intelligence.

It’s easy for this kind of apprehension to lead to a sort of neo-Luddism in which technology is viewed as the enemy. So I want to talk about another possibility: That new technology could actually help reduce inequality.  The world should be ready for both outcomes.

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Worries about technological advances destroying jobs have been around for centuries, but gained greater prominence in the 1980s and 1990s, when some economists blamed rising inequality on a gap between people who had the skills to use computers and those who didn’t. In fact, there’s evidence that some of this did happen in the 80s, but by the 90s, the computer-skills gap had basically run its course. Increased inequality since then has been due to other factors.

Nowadays, the fears have shifted to automation, with AI set to permeate nearly every industry:

In a series of recent papers, economists Daron Acemoglu and Pascual Restrepo have argued that robots reduce hiring and hold down wages. Their main point is that while the physical technologies of the past — electricity, internal combustion engines, and so on — complemented human brainpower, new AI technologies will replace human brainpower instead. That would concentrate income in the hands of the lucky humans who built or owned the robots, while hanging everyone else out to dry. This has led some politicians like Bill DeBlasio, and even some technology industry figures like Bill Gates, to suggest taxing automation.

Another possibility is  that technology will create more inequality between nations. The International Monetary Fund recently released a working paper arguing that AI and robot technology could be monopolised by a few countries, making it hard for countries with cheap labor and lower technology levels to catch up. That goes along with the scary idea that labor-intensive manufacturing might no longer work as a development strategy, resulting in a freezing of gaps between rich and poor nations.
But while these negative scenarios are certainly possible, there are also good reasons to think that new technology could end up boosting wages for regular people.

First of all, AI and robotics themselves might empower regular workers instead of replacing them. As economists Ajay Agrawal, Joshua Gans and Avi Goldfarb argue in their book “Prediction Machines: The Simple Economics of Artificial Intelligence,” it’s possible that AI will mainly replace tasks instead of whole jobs. Just as assembly lines and machine tools allowed blue-collar workers to be more productive, AI might allow white-collar office workers to get more done. That would raise their value and their wages.

In fact, there’s already some evidence that the economic impact of AI is benign. A 2018 paper by economists Katja Mann and Lukas Puttmann found that the introduction of automation technology tended to make an industry add jobs instead of shedding them. That suggests robots and algorithms are complementing humans so far, rather than replacing them.

As for the potential for  automation to make labor-intensive manufacturing obsolete, there’s little evidence that this is happening so far. Vietnam, Bangladesh, and a number of other developing countries are growing rapidly, thanks to the same kind of labor-intensive manufacturing that allowed China to kick-start its own development. And they show no sign of slowing down as automation spreads around the world.

Nor are AI and robots the only kind of technology now being widely adopted. The revolution in energy technology — solar and wind power, combined with batteries and other forms of energy storage — may be even more consequential.

Cheap, plentiful energy is a very different beast from automation. It’s far more akin to the type of technology that drove the Industrial Revolution. Cheap coal and oil allowed us to electrify society, mechanise factories, and build cheap housing, roads and other infrastructure. Inequality rose in the early stages of this process, but then fell, as unions and government protections for workers became stronger.

And while human institutions were critical to reducing industrial inequality, it was the nature of physical technology that made it possible. Energy is a complement to human intelligence and ingenuity — it multiplies the physical power of a factory worker many times over, allowing manufacturing jobs to be good jobs.

So new technology’s impact on inequality may turn out to be fairly neutral, or it may be that the kind of innovation prevailing in the 2020s will actually work to make the economy more equitable — provided that it’s assisted by unions and wise government policy. It’s important to keep this positive possibility in mind, and not fall victim to knee-jerk suspicion of innovation.

© 2020 Bloomberg

COMMENTS   11

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The world would have been better off if we were half of the current population.

Which half?

Those with IQs above 90.

The root cause of inequality stems from disparity in intelligence.

The more intelligent will progress quicker and further than the less intelligent.

The bigger this gap, the more stark the outcome.

While AI will certainly aid the less intelligent to do work they previously could not do, that same AI will ALSO be put to even MORE productive use for their own more advantageous benefit by the more intelligent.

At the end of the day, AI does NOT save the less intelligent from their penchant for making the more stupid decisions they habitually make.

In a competitive environment, the outcome will always be that the more clever will triumph over the less clever. AI will not change this general rule one bit!

BAD decisions have CONSEQUENCES. A lifetime making BAD choices creates a downward trend difficult, if not impossible, to escape from.

If AI can be brought to assist the less clever to bring up their progeny more wisely, and more lovingly (VERY important and underrated characteristic that!) … THEN… there will be SOME hope to close the inequality-gap.

Great comment. Thank you.

I assume you believe you are one of the ‘intelligent’, the evidence of your comment to the contrary.

There are a multitude of reasons why inequality has been growing, none of them attributable to intelligence differentials.

These include a trend towards reducing taxes for the rich and corporations since the disaster of ‘trickle-down economics’. They also include the natural effects of capital concentration in a capitalist system, unequal access to quality education, and reduction of government controls on financial markets to name just a few.

As for you your ‘penchant for making the more stupid decisions’, it seems AI doesn’t help with idiotic comments on articles like this either based on your completely flawed, and bigoted contribution.

I’ll agree bad decisions have consequences, like electing governments that cater to the rich, corporations, and oligarchs without concern for the ordinary citizens or the limitations of our natural resources and environment.

Do us all a favour and restrict your comments to subjects on which you have a clue (if there are any). Your prejudices and bigotry are showing.

“Do us all a favour and restrict your comments to subjects on which you have a clue (if there are any). Your prejudices and bigotry are showing.”

Dear Self-Absorbed,

You have absolutely NO IDEA that YOUR inane “advice” exhibits – in yourself – EXACTLY what you criticise others for, huh?

I have no problem being called out – by anyone – when my logic is shaky, or my facts are incorrect or mistaken. I have learnt much from the better instruction of others here when this has been so. And everyone benefits from this free education.

But if you want to do so, then present PROPER facts that irrefutably back up your contentions, and undeniably demolish mine!

This you have not done. At all.

Being a lazy slob that thinks bringing respectful debate with proper facts and a well-reasoned argument into a debate are way beneath your self-important, arrogant station, and instead descending into ad hominem attacks with wild, unsupported generalization as your ONLY contribution to a debate that you chose to enter (with only sulphorous hot air, it seems), speaks only to the inadequacy of your own position.

The real problem is that the world does not have a Sound Money Supply.
When the Governments established the central banks and then started to collude with them by Expropriating Value Without Compensation and thus creating a global debt bubble of US$270 Trillion.
The year 2020 saw over 20% of all new US$ notes ever being created. This idea that we can spend our way out of trouble has witnessed the creation of useless and wasteful value spending on items that would otherwise not have been created over the last 50 years. Many of today’s items also made very poorly and that is why a items like Car’s that were produced in the 1940 are so highly valued. Global Additional money printing stands are 5% per year.
The Value of Companies are largely valued by their size as oppose to the ability to generate profit. These speculating companies’ drive away competition by taking on more debt with almost Zero Interest loans, creating uncompetitive industries and hindering product development. Banks are seen as Too Big To Fail they expand their businesses presence by employee new employees to do more inefficient tasks. Bailouts are the new norm because of the Poor Money Supply and creating of money not value.

Prior to the World going off a Gold Standard, any country wanting to wage war would have to do so by using the savings of their population. There were never any winners as the gains would have to be offset by the attainment of the losers resources.

Whilst certain industries have technology have benefitted the world, Inequality has and will continue to grow with higher number of joblessness people. Prior to 1975 Joblessness Rate in Switzerland was below 1% since leaving the gold standard this has jumped to 4.65%

The solution is having a Sound Money Supply and fewer price controls.
Read The Bitcoin Standard book.
https://saifedean.com/book/

This comment is so flawed that I don’t have the time or the energy to debunk it all.

Suffice to say cars made in the 1940s were rubbish, and to the extent that they are valuable, it’s primarily attributable to their rarity, and the appeal of some of the classic designs to collectors. Modern vehicles are infinitely better by a number of objective measures.

Moving off the gold standard has nothing to do with it. Inequality would be much worse if a country’s wealth was tied to it’s ability to acquire and hoard gold.

And finally, dept for an individual or company is not the same as debt for a country. The latter can spend itself out of a problem if taxation is appropriate, and the money is spent on the right things (like infrastructure, education and other common good areas).

“The latter can spend itself out of a problem” that is Keynesian Economics, which is the reason we are having more frequent and larger economic booms and busts.

Then in your opinion why can we not simply give a Universal Basic Income of US$427 grant to every person which in itself would rid the world of poverty?

Why then can the SA government simply not print enough to bailout Eskom, SAA and all the other SOE? Surely if they could print the money out of thin air then we would not have an electricity crisis, state airline crisis, inequality crisis or does someone not know where the printing room is ?

https://www.in2013dollars.com/us/inflation/1912

I am excited about the possibilities of AI and perhaps AGI, however there are draw backs. One not mentioned is the possibility for evil, something Elon Musk has pointed out. One thing to always keep in mind is that we will always need human interaction, something that robots cannot provide, well for now at least and perhaps always. Working behind computers all day, I can say from my perspective, that I really value being served coffee by a human.

End of comments.

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