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Automation Changing Lives

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As the technologies of Artificial Intelligence and Automation improve, the concern of many people about the future of work grows. If millions of workers will not be able to get a job, the question looking to the future is: How will people and families meet their vital and non-vital needs and what changes might occur (or are they going to be necessary) so that Companies adapt to the new circumstances ?

Many economists say that there is not too much to worry about. They argue what happened in the great transformation already experienced in the tasks related to human labor and labor markets-specifically with the industrial revolution of the eighteenth and nineteenth centuries-that led neither to great convulsions, nor to greater personal suffering. One of these economists reasons that:

Since the dawn of the industrial age, the fear of mass unemployment has been reiterated due to changes in technology. Neoclassical economists predicted that this would not happen because people would find other jobs, though perhaps after a long period of painful adjustments. Generally, that prediction has been correct.

The aftermath of the Industrial Revolution meant two communist revolutions, whose toll in deaths approaches 100 million people. The stabilizing influence of the modern welfare state only emerged after the Second World War, almost 200 years after the beginnings of the Industrial Revolution in the eighteenth century.

Today, as globalization and automation increase the productivity of companies, many workers have seen their salaries stagnate. The increasing power of automation and artificial intelligence means that there can be more pain. Are these economists minimizing that historically recorded when they project the future to essentially tell us not to worry because in a century or two things will improve?

Reaching a turning point

In order to obtain a consequence of the Industrial Revolution, we must put it in the appropriate historical context. The Industrial Revolution was a turning point. For many thousands of years before, economic growth was practically insignificant, following, in general, the pace of population growth: farmers grew a little more food, blacksmiths built some more tools, etc., but the people who they lived in the first agrarian societies of Mesopotamia, Egypt, China and India would have recognized themselves in the world of seventeenth-century Europe.

However, when steam energy and industrial machines appeared in the 18th century, economic activity clearly took off. The growth that occurred in just a couple of centuries hundreds of years was on a scale very different from what had happened until then. It is possible that we are now at a similar turning point, which some call the Fourth Industrial Revolution, where everything that happened in the past may seem small compared to the potential for productivity and profitability that can occur from now on.

Making incorrect predictions

It is easy to underestimate in advance the impact of globalization and automation: I myself have made that mistake. In March 2000, the NASDAQ index peaked and then plummeted, eliminating 8 billion in market valuations in the following two years. Simultaneously, the global diffusion of the Internet allowed the external subcontracting of software production, which generated fears that the jobs in information technology would disappear massively from the US.

Today, as globalization and automation increase the productivity of companies, many workers have seen their salaries stagnate. The increasing power of automation and artificial intelligence means that there can be more pain. Are these economists minimizing that historically recorded when they project the future to essentially tell us not to worry because in a century or two things will improve?

Expanding manufacturing

Both in the first industrial revolution and in the current one, the first effects were experienced in the factories and factories of the developed world. By replacing workers with technology, US industrial productivity almost doubled between 1995 and 2015. As a result, while US industrial production is currently at its peak, employment peaked in 1980, and since 1995 it has been decreasing sensitively and continuously.

Unlike what happened during the nineteenth century, the effects of globalization and automation are spreading to most developing countries. The Elephant Curve by economist Branko Milanovic shows how people worldwide, classified by the income obtained in 1998, saw their income increase in 2008. While the incomes of the very poor in developed countries stagnated, the increase in income s in emerging economies brought hundreds of millions of people out of poverty.

On the other hand, people located at the top of the income scale also benefited from globalization and automation. On the contrary, the incomes of the working and middle class people of the developed world simultaneously stagnated. In the United States, for example, the incomes of the current workers in the industrial sector, adjusted for inflation, are practically at the level they had around 1970.

Now automation is also reaching the economies of the developing world. A recent report by the International Labor Organization found that more than two-thirds of the 9.2 million textile and footwear jobs in Southeast Asia are currently threatened by automation.

Waking up to the problems

In addition to spreading throughout the world, automation and artificial intelligence are beginning to impregnate entire economies. Accountants, lawyers, truck drivers and even construction workers – whose jobs were not largely modified by the first Industrial Revolution – are about to find that their work changes substantially, if not entirely absorbed by machines. digital

Until very recently, the world’s educated professional class did not recognize what was happening to working class and middle class people in developed countries. But now it’s about to happen to them.

The results will be surprising, damaging and potentially long-lasting. The political events of last year make it clear that the issue of shared prosperity can not be ignored. It is now evident that the Brexit vote in the United Kingdom and the election of President Donald Trump in the United States were driven largely by economic motives.

Our current economy and society will be transformed in a significant way, without guessing simple corrections or adaptations that can diminish their effects. But when trying to make economic predictions based on the past, it is worth remembering and exercising the precaution envisioned by the distinguished Israeli economist Ariel Rubinstein in his 2012 book, “Economic Fables”:

“I am obsessively busy denying any interpretation that holds that economic models produce conclusions of real value.”

The basic claim of Rubinstein, which is that economic theory tells us more about economic models than what it reveals about economic reality, is a warning: we should not listen to economists when it comes to predicting the future of work . It is also necessary to listen to historians, who often provide a deeper perspective than the predictions of economic models. Automation will significantly change the lives of many people in ways that can be painful and long-lasting.

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