The Future of Economics is not Bright at All with The Rise of Inventions, Such as Robotics and Artificial Intelligence

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The Future of Economics is not Bright at All with The Rise of Inventions, Such as Robotics and Artificial Intelligence (AI)

Over the years as a society, we have managed to evolve our values, norms, and languages. However, one thing that has remained the same is our fear of machines. At the same time, while it may seem unlikely for one not to fathom the idea of the digital revolution in this era, there is a need for each one of us to be concerned with their impacts. Currently, the world is bracing for the effects of the coronavirus pandemic. The pandemic has not only raved havoc in almost everyone’s life but also, everyone has to live with the reality that it is going to be with us for a long time just like HIV. If this was not enough, you should also brace yourselves for the impacts of inventions in our economic future. This is a blog piece, and it is aimed at informing the public on what are some of the impacts of the current inventions such as robotics and artificial intelligence on the world’s economy.

Machine translation, google assistant, image, and speech recognition are just some of the AI technologies that have been developed over the years. Artificial intelligence in many electronic devices has been progressing gradually, and the same applies to robotics in the field of medicine and manufacturing. The number of machines being developed every day is a threat to the number of job opportunities already available. Considering the fact that many countries are currently facing the epidemic of unemployment, this creates a considerable risk for disaster (Susskind, 2020). Now, the unemployment rate in the U.S stands at 14.7%, although the country is highly developed (Lambert, 2020). These show that the risk of unemployment is not immune to developed countries

On the other hand, in a continent such as Africa, whose 75% of its population are youth, in some of its countries, the unemployment rate is more than 25% (Ighobor, 2017). Also, in other regions, employment growth does not paint a rosy picture. For example, a country like India has posted a decline in employment growth throughout three consecutive five-year gaps. They posted a decrease of 4% to 0.2% According to a forecast by Bruegel; their prediction showed that the European Union is likely to face a 54% loss of jobs with the rise of computerization in the next twenty years (European Union, 2019). Loss of employment leads to a decrease in citizens’ standards of living, and this may have a direct or indirect impact on the economy.

In terms of direct impact, it refers to the reduction in consumer demand on products and services offered by various companies. While robotics and AI are likely to increase the quality of goods and services being offered in the market, the irony is that there is a risk of loss of demand due to their existence (Mitra, 2018). When one becomes unemployed, he or she has less amount of disposable income, which means he or she would have to cut down on some spending. This budget cuts, in turn, affect these companies since profit margins would decrease, and this may bankrupt certain companies while at the same time, reducing the amount of taxes that governments earn. On the same note, a lack of disposable income would make individuals cut spending on luxurious services such as travel, and this would have a significant impact on tourism. Given that most African countries’ primary source of income is tourism, this would have a toll on their economies.

Also, digitization may lead to the need for reskilling, which might have a significant impact on the economy (European Union, 2019). The use of artificial intelligence and robots do replace people’s jobs, and this means that they would have to seek other employment. Well, the reality is these other jobs would likely be those that machines would not be able to do, and this may require people to learn new skills. Moreover, these inventions would have an impact on income distribution, which would, in turn, lead to income inequality. Most companies would have to favor employing employees who know about controlling these machines, and this would force them to demand high payments (European Union, 2019). On the other hand, those with no much knowledge would be paid poorly. Given that the number of the latter employees would be higher compared with the former, there would be a high-income inequality in society. Given that most countries are trying hard to cut down income inequalities to improve their economies, this would prove to be a significant impediment.

While most economists do feel that these inventions are unlikely to replace all our jobs, for instance, in sectors that require sensor motor skills, it would be a lie not to acknowledge that a huge percentage of us do not work in the given field. Therefore, countries should brace themselves for the disruptive effects of these inventions in their economies by taking precautions and, for example, adopting policies that would manage their impacts.

References

Abraham, V. (2017). Stagnant employment growth: Last 3 years have been the worst. Economic and Political Weekly, 52(38), 13-17.

European Union. (2019). Briefing: Economic impacts of artificial intelligence (AI). Retrieved from https://www.europarl.europa.eu/RegData/etudes/BRIE/2019/637967/EPRS_BRI(2019)637967_EN.pdf

Ighobor, K. (2017). Africa’s jobless youth cast a shadow over economic growth. Africa News. Retrieved from https://www.un.org/africarenewal/magazine/special-edition-youth-2017/africas-jobless-youth-cast-shadow-over-economic-growth

Lambert,L. (2020). Real unemployment in the United States has likely hit 14.7%, the highest level since 1940. Fortune. Retrieved from https://fortune.com/2020/04/09/ureal-unemployment-rate-jobless-claims-this-week/

Mitra, S. (2018). The impact of robotisation on the world economy: A forward-looking review. Ideas for India. Retrieved from https://www.ideasforindia.in/topics/productivity-innovation/the-impact-of-robotisation-on-the-world-economy-a-forward-looking-review.html

Susskind, D. (2020). Robots may well take your job—eventually. The Economist. Retrieved from https://www.economist.com/books-and-arts/2020/01/23/robots-may-well-take-your-job-eventually