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Robot Takeover and the Global South

Developing countries will likely lose the most from accelerated automation, a dynamic that will exacerbate our already enormous global inequalities.

Research & Commentary
March 23, 2017

by Martin Khor

Last year Uber started testing driverless cars, with humans inside to make corrections in case something goes wrong. If the tests go well, Uber will presumably replace its present army of drivers with fleets of the new cars.

Some personally owned cars can already do automatic parking. It seems only a matter of time before Uber, taxi, and personal vehicles will all be smart enough to bring us from A to B without our having to do anything ourselves. But in this application of “artificial intelligence,” in which machines can have human cognitive functions built into them, what will happen to jobs?

In the United States alone, an estimated four to five million drivers of trucks and taxis could be rendered unemployed.

The driverless vehicle offers just one example of the technological revolution that is going to drastically transform the world of work and living. Many observers feel that the march of automation tied with digital technology will cause workplace dislocations that will eventually lead to mass unemployment.

Just a day before he left office, former President Barack Obama warned in a farewell interview that “jobs are going away because of automation and that’s going to accelerate,” pointing to “driverless Uber” and the “displacement that’s going to take place in office buildings across the country.”

Also voicing concern about the social impact of automation, Microsoft founder Bill Gates recently proposed that governments should impose a tax on robots. Gates wants companies using robots to pay taxes on the earnings attributed to the use of robotics.

That proposal has caused an uproar, with mainstream economists like Lawrence Summers, a former U.S. Treasury secretary, condemning it for putting brakes on technological advancement. One critic has suggested that the first company to pay taxes for causing automation should be Microsoft.

The robot tax idea is one response to growing fears that the automation revolution will increase inequality, as many lose their jobs while a few reap the benefits of increased productivity and profitability. The deepening use of automation, recent studies are showing, will cause widespread disruption in many sectors and even whole economies. Developing countries stand to lose the most, and this will exacerbate our already enormous global inequalities.

Automation, according to one 2016 study by Oxford University’s Martin School and Citi, could cost developing countries 55 to 85 percent of their jobs. Major emerging economies will be at the highest risk for job loss, led by China (77 percent) and India (69 percent), figures much higher than the OECD developed nation average risk of 57 percent.

The Oxford-Citi report, The future is not what it used to be, offers many reasons why the automation revolution will be particularly disruptive in developing countries.

First, these nations are experiencing “premature de-industrialisation” as manufacturing is becoming less labour-intensive. Many developing countries have reached the peak of their manufacturing job totals.

Second, 20th-century technologies allowed companies to shift production abroad to take advantage of cheap labor. Recent developments in robotics and additive manufacturing now enable firms to locate production closer to domestic markets in automated factories. China, ASEAN, and Latin America have the most to lose from this relocation, while North America, Europe, and Japan figure to be the main winners.

The third reason automation will be more disruptive for developing countries: These nations have lower levels of consumer demand and limited social safety nets, as compared to the developed countries.

Developing countries may even have to rethink their overall development models. Plans that may have successfully generated growth in the past will not work anymore. Instead of export-led manufacturing growth, developing countries will need to search for new growth models, notes the Oxford-Citi report.

“Service-led growth constitutes one option,” the report adds, “but many low-skill services are now becoming equally automatable.”

Countries with lower levels of GDP per capita also typically have a higher share of their workforce “at risk” for dislocation.

“Thus there are reasons to be concerned about the future of income convergence, as low income countries are relatively vulnerable to automation,” concludes the report.

Another series of reports, from the McKinsey Global Institute, has found that 49 percent of present work activities can be automated with currently demonstrated technology, and this translates into US$15.8 trillion in wages and 1.1 billion jobs globally. About 60 percent of all occupations could see 30 percent or more of their activities automated and 5 percent of jobs could be entirely automated.

But, on the more reassuring side, one author of the report, James Manyika, notes that these changes will take decades.

How automation affects jobs will not be decided simply by what is technically feasible. Other factors include economics, labor markets, regulations, and social attitudes.

Which jobs are most susceptible to be affected? Most people see manufacturing as the sector in particular danger. In fact, many jobs in services will also be disrupted. The McKinsey study lists accommodations and food services as the most vulnerable sectors in the United States, followed by manufacturing and retail.

One technology specialist writer and consultant, Shelly Palmer, has also listed elite white-collar jobs at risk from “robots,” which she defines as technologies, such as machine learning algorithms running on purpose-built computer platforms, that have been trained to perform tasks that currently require humans to perform.

Those occupations that Palmer assesses as vulnerable include middle managers, salespersons, report writers, journalists, announcers, accountants, bookkeepers, and doctors.

What can be done to slow down automation or at least to cope with its adverse effects? The Bill Gates proposal to tax robots could slow down technological changes, and the funds generated by the tax could be used to mitigate the social impact.

Another radical idea generating a lot of debate would be to provide a “universal income” to everyone irrespective of whether they are working. High productivity in an automated society would allow everybody to be paid a comfortable income. Societies would have no need to worry that automation will displace jobs.

Governments can also take the attitude of “join them if you can’t beat them.” For example, China is seeing major opportunities in the technological revolution and has drawn up plans to invest in robotics and artificial intelligence.

Other more conventional proposals include upgrading the education of students and present employees to take on the new jobs required in working with automated production and training workers made redundant with the new skills needed to operate in the new environment.

As for the developing countries in general, we need more thinking about the implications of the new technologies for their immediate and long-term economic prospects as well as a major rethinking of economic and development strategies.

An earlier version of this piece was published by the Third World Network.

Martin Khor is the executive director of the South Centre, a think tank for developing countries based in Geneva.

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