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Article
Will AI Bring Another Gilded Age?

AI has the potential to make society better, but history has shown us the potential for these kinds of major economic transformations to cause society-wide upheaval and disruption as well. A lot will depend on the response of our governments in helping people make the transition to new skills and jobs.


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In doing research for our “Thinking Machines” paper, I read many articles, researched, and interviewed a host of people. In one article I read, the writer was negating the doomsday noise about AI taking away jobs.

His premise was history: As we moved from the agrarian society to the industrial revolution, more jobs were created. Thus, history, he tells us, says that all will be well. Of course, on one level this is true. But this author missed major elements of history: to wit, the displacement and poverty that industrialization caused. For example, if you were a weaver, you made a living enough to feed your family of 6. Then came automation. You lost your business, and your school-aged children needed to go to work in factories or mines with abysmal wages and working conditions.  

And here is a key. Although we were, ultimately, the beneficiaries of the Industrial Revolution, the author completely missed the social and economic upheaval, the literal overturning of governments. Socialism and communism began to take hold due to the horrible working conditions and poverty. With the loss of a primarily agrarian society, any economic swing (up or down) and, especially, the Depression, caused mass starvation, since people no longer grew their own food. The Progressive movement in the U.S. (1890–1920), as well as the rise of labor unions, helped to begin to counteract some of economic and social ills of the time, but that was not enough. It took over 40 years, a major international depression (as well as the fear of a communist revolution), and two world wars to create more equitable pay scales and a sharing of the economic “goodies” in Western nations.


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Massive government intervention was required to meet the challenges of a hugely stratified society of the ultra-rich, an anemic middle class, and a huge population of poor. The powerful influence of the robber barons had to be countered to create a more democratic society. 

If one looks at the current economies of, say, the U.S. and China, one can understand the huge challenges automation is bringing. We are in the midst of a long-term trend of various technologies contributing to highly automated environments. The current veneer of “good news” in these economies masks staggering government and personal debt amounting to trillions of dollars in the U.S., high-risk personal investments/debt in China, and an existing large population of poor in both nations.

Already, in China, automation is taking off, with the growing number of highly automated factories and the laying off of workers. This is happening in the important manufacturing labor sector of their economy that is highly dependent on factory jobs. China, in fact, has deemed AI and robotics part of their “Made in China 2025” goal of being the world leader in these technologies and “comprehensively upgrade Chinese industry.” Their method of cheaper pricing could make automation more accessible and accelerate the move to more worldwide automation.

Examples where automation is already displacing workers in impoverished societies are high tech, where Asian manufacturers are being more automated; and the apparel industry, which is already beginning to change in spite of the cheap labor pools. Bangladesh and China, as examples of countries with a huge populace of factory workers, are already being impacted, with a future of significant technological disruption still to come. And this is part of the reason for the Chinese government tightening political control under Xi. They are worried about civil unrest by the poor who have not benefitted from China’s economic growth or by those who will be displaced.


To paraphrase a speech given by Yanis Varoufakis, the former Greek Finance Minister,

The problem for the West is that jobs that have been migrated (outsourced) have left behind in part of the West… joblessness and lack of prospects. But that was always the problem with capitalism; it generates immense wealth but, at the same time, new forms of deprivations.

Wherever there is technological innovation that creates economies of scale, there is a tendency that the owners of this technology are going to use it to monopolize power over the rest of us and to deny us the benefits of that technology. It happened with the Industrial Revolution and it is happening a lot more now with Google, Facebook, and the other artificial intelligence, internet-based technologies.

It is crucial that instead of losing this fantastic opportunity (that technology created), we find ways to democratize benefits that we, effectively, created jointly.

(This was edited for brevity.)



Similarly, in the U.S., those who have been displaced by automation and other factors recently overturned politics “as we know it.”1 For the U.S., however, the answer is not in returning to industries or products that are rapidly becoming obsolete, but investing in high-demand products such as those used in the production of green energy, or robotics, instead of importing them from others.

The Chinese, for their part, have closely studied U.S. history from the Gilded Age to the present to try to avoid making the U.S.’ mistakes and are researching ways to maintain economic stability and growth.

History does indeed repeat itself if we fail to learn lessons. A positive future will depend on having wise leadership to understand and harness the forces of technology that are growing across the world. And that part—wise leadership—history teaches us we tend not to have.

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References:

Kapner, Suzanne, “Levi’s Wants Lasers, Not People.” Wall Street Journal 30 May 2018 [U.S. Edition].  

For some interesting discussions on China and automation go to: hare and here.

See Jason Bellini’s Wall Street Journal video series, Moving Upstream: The Robot Revolution: The New Age of Manufacturing and How Sewing Robots May Put Human Hands out of Work

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1 This trend really began in the mid-1990s with major outsourcing of jobs and the decline of factory jobs in sectors such as automotive, steel, high tech, and so on. -- Return to article text above


To view other articles from this issue of the brief, click here.




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