Artificial intelligence could deepen inequality in developing countries and create “AI poverty traps.”
Sundalam, an associate professor at the University of Auckland Business School, and Wesselbaum, an associate professor at the University of Otago, say developing countries don't have the infrastructure and skilled labor needed to exploit the possibilities of AI.
“The downside is that some countries lack much capacity when it comes to digital infrastructure, the internet and mobile phones,” Sundaram says.
“Many of the technology is managed by companies like Google and Openai, which can increase the risk of overreliance on foreign technologies and curb local innovation.”
Without strategic intervention, Wesselbaum says AI could create AI poverty traps. It will trap developing countries in technology dependence and widen the gap between the global economy.
“For developing countries, AI can be a game changer, increasing productivity, expanding access to essential services, and promoting local innovation.
Research shows that financial support from developed countries and international organizations like the UN could help cover up advance payments through grants, loans and investment incentives.
“We also need a robust legal and regulatory framework to support responsible AI by addressing data privacy, ethics and transparency concerns,” Sundaram says.
Economists argue that in developing AI policies, the international community must learn from the successes and failures of foreign aid.
“Aidance often failed to promote permanent growth in developing countries,” Sundaram says. “Because it can create dependencies and reduce independence and domestic initiatives.”
She highlights the need for policies to mitigate the shortcomings of AI in both developed and developing countries.
Such policies may include international tax systems that allow tax revenues to be acquired from the economic activities promoted by AI within the borders.
Sundalam is involved in one such project in Ethiopia, with artificial intelligence being utilized by the government and the country's largest telecom providers, supporting small and medium-sized businesses that have been excluded from formal banks due to lack of collateral.
By analyzing the mobile money transactions and the amounts these companies pay and receive, the algorithm estimates the credits they can safely offer, enables small loans, and helps to integrate marginalized companies into a formal economy.
While artificial intelligence retains the power to transform the development trajectory, without targeted investments and comprehensive policies, there is a risk that deepens digital disparities and establishes global inequality.
