Exploring the Potential Impact of Artificial Intelligence on the Economy: Examining Historical Evidence

Europe’s peasants remained impoverished despite the progress made in plough technology during the medieval era, primarily due to their rulers diverting the wealth generated from increased productivity towards constructing cathedrals.

Economists say something similar could happen with artificial intelligence (AI) if it enters our lives in such a way that the touted benefits are enjoyed by the few rather than the many.

“Artificial intelligence has a lot of potential – but the potential to go either way,” argues Simon Johnson, professor of global economics and management at the MIT Sloan School of Management.

“We are at a fork in the road.”

Proponents of artificial intelligence predict an increase in productivity that will create wealth and improve living standards. Consulting firm McKinsey estimated in June that it could add $14 trillion to $22 trillion in value annually — the upper figure is roughly the current size of the U.S. economy.

Some techno-optimists go further and suggest that AI, along with robots, is the technology that will eventually liberate humanity from arduous tasks and launch us into more creative and leisure time.

Yet concerns about its impact on livelihoods, including its potential to destroy jobs in all kinds of industries, are rife – witness the Hollywood actors’ strike in July over fears of being fired by artificial intelligence-generated doppelgangers.

WHAT DESIRE FOR PRODUCTIVITY?

Such concerns are not unwarranted. History has shown that the economic impact of technological progress is generally uncertain, unequal, and sometimes downright malignant.

A book published this year by Johnson and MIT economist Daron Acemoglu surveyed a thousand years of technology – from plows to automated checkout kiosks – in terms of their success in creating jobs and spreading wealth.

Although the spinning jenny was key to the automation of the 18th century textile industry, they found that it led to longer working hours under harsher conditions. Mechanical cotton gins facilitated the expansion of 19th century slavery in the American South.

The history of the Internet is complicated: it has created many new jobs, although much of the wealth created has gone to a handful of billionaires. Productivity growth, for which it was once praised, has slowed in many economies.

According to a research note published in June by the French bank Natixis, this was because even a technology as widespread as the Internet left many sectors untouched, while many of the jobs it created were low-skilled – think the online shopping supply chain.

“Conclusion: We should be cautious in assessing the effects of artificial intelligence on labor productivity,” Natixis warned.

In a globalized economy, there are other reasons to doubt whether the potential benefits of artificial intelligence are evenly felt.

On the other hand, there is the risk of a “race to the bottom” as governments compete for AI investments with increasingly lax regulation. On the other hand, the barriers to attracting investment can be so high that many poorer countries are left behind.

“You have to have the right infrastructure — massive computing capacity,” said Stefano Scarpetta, head of employment, labor and social affairs at the Paris-based Organization for Economic Co-operation and Development (OECD).

“We have the G7-Hiroshima process, we need to go further to the G20 countries and the UN,” he said, advocating for an extension of the agreement at the Group of Seven (G7) summit in May to work together to understand the opportunities and challenges. about generative artificial intelligence.

MANPOWER

Innovation has proven to be easy. Making it work for everyone is harder – this is where politics comes in.

For MIT’s Johnson, the arrival of railroads in 19th-century England at a time of rapid democratic reform allowed the wider society to enjoy those advances, whether it was the faster delivery of fresh food or the first taste of leisure travel.

Similar democratic achievements elsewhere helped millions enjoy the fruits of technological progress well into the 20th century. But Johnson argues that this began to change with the aggressive shareholder capitalism that has marked the past four decades.

He claims that the automated self-checkout is an example. Daily goods will not become cheaper, buyers’ lives will not change and no new task will be created – only profit from reducing labor costs.

Labor groups, which have lost much of their influence before the 1980s, see AI as a potential threat to workers’ rights and employment, for example if there is no human oversight of AI-driven hiring and firing decisions.

Mary Towers, the UK Trade Union Congress’ employment rights policy officer, mentioned that unions have “statutory consultation rights and the ability to collectively bargain about technology at work”.

This is just one of many factors that will help determine how AI will shape our economic lives—from antitrust measures that ensure healthy competition between AI suppliers to retraining the workforce.

An OECD study of around 5,300 workers published in July suggested that AI could boost job satisfaction, health and wages, but it was also seen as creating risks to privacy, reinforcing workplace biases and forcing people to work overtime.

“The question is: will artificial intelligence worsen existing inequality, or could it actually help us return to something much fairer?” said Johnson.