Is technology increasing or exchanging more jobs? This has been a long-standing discussion. However, recent academic research suggests that technology has been a net destroyer of work for decades.
Artificial intelligence and robotics could accelerate this trend rapidly, with a major impact on inflation and the scale of government-US-China relations.
Through a long arc of history, advances in technological advances allowed industries to emerge as workers who were freed from the “old” work of machines could move to the new.
In fact, 60% of today's workers are employed in occupations that did not exist in 1940. Or, if you consider only the professional categories that added the most workers in the last 80 years, you employ 74%.
However, recent academic research suggests that it may have reached the US inflection point. David Autoll, an economist at MIT and winner of the 2005 John Clark Bates Medal, claims that since 1980, employment replaced by automation has not been completely offset by new jobs created. This reflects the pace of technological change and the fact that advances are increasingly focused on “specialists, technology, and managers.” He found that machines that are stronger than the average human (for example, tractors) are usually about increasing labor and productivity, while machines that are smarter than the average human tend to represent labor.
And AI is paced to get far smarter than most people.
The form of AI has been around since the 1940s, but the immeasurable computing power caused by advances in semiconductor technology has enabled machines to achieve multidimensional intelligence.
So, even if the best AI is less creative or imaginative than the smartest humans, it is reasonable to assume that many workers will replace it with automation in the coming decades. In fact, the 2019 OECE report and the 2018 paper by Pricewaterhousecoopers argue that around 15-30% of all jobs in the developed market are at risk of being automated.
meaning
What is the biggest meaning if AI turns out to be a purely work destroyer?
First of all, it could be deflation. In theory, a high and rising unemployment rate due to cheaper and more capable machines should lead to structural deflation. Technologies that can rapidly increase the supply of goods and services should reduce demand when they cause large-scale unemployment.
Secondly, the US government will probably be even bigger. In a massive unemployment scenario, the government will likely be forced to intervene to promote the transfer of income and wealth from owners of robotic and technology companies to the unemployed.
And which country will be at the top? The economic winners and losers for the next few years may be determined by who creates and is available to the technology.
Therefore, the US and China, both dominant in brain technology, appear to be suitable to thrive in this environment. These economic and technological superpowers have adopted muscle industrial policies, but the powers of Europe – other large regions have not yet.
What this suggests is that even if the trade war between the US and China is short, the technological war between these two countries can be prolonged and is much more consequential in the end.
Unlike trade wars, technology wars are dynamic and not challenging the benefits of static comparisons of nations, they are rather constantly evolving and evolving.
It would be wise to keep this distinction in mind, as the dynamic aspects of the high-tech war tend to be much more important than, for example, Vietnam is allowed to sell cheap running shoes in the US.
Exponential change
My view here is clearly speculative. But so is the discussion of why AI and robotics can ultimately work.
Furthermore, these arguments are often obscure by sloppy references to labour productivity, a simple ratio between output and labour input.
When calculating this, there is often little explanation for what the output portion is attributable to labor input. For example, should subway train drivers consider the value of the entire subway system? Predictions based on such suspicious assumptions should be looked at carefully.
Finally, with the ageing of populations in many developed markets, massive use of automation could simply offset the contraction of the workforce.
However, like in general natural evolution, aging is gradual, and computational and technological evolution accelerates at an exponential pace. Due to the convexity of technological advances, it is difficult not to bet on technology rather than workers.
(The views expressed here are those of Stephen Jen, CEO and co-CIO of Eurizon SLJ Asset Management).
