Automation and the reshaping of emerging economies The coming AI economic revolution

“AI is akin to an amoeba that is in a constant state of metamorphosis, forever changing its shape and adjusting to its surroundings. Rather than serving to flatten the degree of global equality, an AI-dominated future could well result in the greatest concentration of resources and power the world has ever known.”

We stand at the threshold of a remarkable technological revolution, one that holds immense promise in terms of boosting productivity, driving global growth, and increasing incomes worldwide. However, this revolution also brings the potential to disrupt job markets and exacerbate inequalities, Modern Diplomacy wrote in an article published on January 25

The advent of artificial intelligence has captured the imagination of people around the world, sparking both excitement and concern. This rapid advancement raises critical questions about the impact it might have on the global economy. Predicting the overall effect of AI is difficult to portend, as its influence will weave itself through economies in intricate and multifaceted ways.

It is estimated that AI could affect around 60 per cent of jobs in advanced economies. On a positive note, about half of these jobs are likely to benefit from integrating AI technologies, resulting in increased productivity and efficiency. However, AI applications could also assume certain tasks currently carried out by humans, leading to diminished demand for labor, potentially resulting in stagnant wage levels and reduced employment opportunities.

A recent analysis conducted by PwC, a leading auditing firm, suggests that the application of  AI has the potential to contribute a staggering $15.7 trillion to the global economy by 2030. This projection represents a notable 14% increase in value-added when compared to the current global GDP. PwC attributes this substantial growth to various factors, including enhanced labor productivity, the creation of new job opportunities, and improved optimization of production processes. Another influential consulting firm, McKinsey & Co., presents a similarly optimistic outlook. They estimate that, in the long run, AI could have the ability to contribute a noteworthy increase of around 0.8% to 1.4% to annual global GDP growth. These gains are primarily linked to the substitution of labor with AI technologies, further bolstering the positive economic impact of the technology.

In contrast, developing economies and countries with lower income levels are projected to have AI exposure rates of around 40 per cent and 26 per cent, respectively. These findings indicate that emerging markets and developing economies may experience fewer immediate disruptions as a result of AI. However, it is crucial to note that many of these countries lack the necessary infrastructure and skilled workforce to fully harness the potential benefits of AI. This raises concerns that, in the long run, the technology could contribute to widening inequalities between nations.

The implications of a small group of nations dominating the field of advanced AI in the future hold substantial consequences. On one hand, these technologically advanced countries could essentially take on the role of guardians, ensuring long-term investment and development of AI resources. This could lead to significant advancements and breakthroughs in the technology. Moreover, it is highly likely that companies from these nations will maintain a notable edge in the global economic landscape, giving them a significant competitive advantage. This could consolidate their position as leaders in various sectors, further solidifying their economic supremacy.

Another significant aspect to consider is the potential impact on military capabilities. These leading countries would very likely reap substantial benefits from the application of AI technologies in military contexts. The prospect of autonomous weaponry and the subsequent global race to develop superior military capabilities introduces new and concerning dimensions to warfare.

The rapid advancement of technology, particularly in the realm of digital silicon, is driving significant transformations in economies worldwide. These changes are causing profound disruptions, as online platforms are gaining increasing prominence, sometimes even surpassing the importance of physical products. A notable example of this shift can be seen in the world’s largest currency storage, where cryptocurrencies reign supreme. Interestingly, this repository has no physical buildings or traditional safes.

Instead, it relies entirely on software, operating through automation and encapsulating knowledge and processes within its digital realm. As we move forward, the global economy is likely to witness a shift from the currently prevalent globally optimized value chains to more integrated value chains that combine digital technologies with older, cost-effective methods. These evolving value chains will serve to bridge various products and services, taking advantage of independent global platforms to facilitate the exchange of goods and services.

The profound impact that AI possesses in reshaping our economies and societies is evident, yet its full implications on various aspects remain uncertain for the foreseeable future. As AI continues to evolve and adapt, much like a constantly changing amoeba, we are confronted with a dynamic and evolving technology. While we have only begun to scratch the surface of how the AI revolution may affect global dynamics, it is not difficult to imagine a future where power, resources, and technology become even more concentrated than they already are.

In this envisioned landscape, conflicts may extend beyond traditional battles for land, resources, and populations, potentially influencing the destiny of the entire human race. Rather than leading to a more equitable global distribution of resources and influence, a future dominated by AI could inadvertently consolidate resources and power to an unprecedented extent. While this potential scenario might raise concerns, it also highlights the importance of ethical considerations, forward-thinking governance, and international cooperation in ensuring an AI-powered world promotes fairness, equity, and positive societal outcomes.

The economic potential of AI is considerable and has the ability to rival the impact of past influential technologies. However, it is important to note that there is a genuine concern about the emergence of an AI divide. Rapid adopters of AI technology may reap significant advantages compared to those who are slower to embrace it. Additionally, there is a risk of a gap emerging between workers who possess the skills needed to thrive in the AI era and those who lack these skills.

It is crucial to acknowledge that the benefits of AI may not be evenly distributed. Without effective management of AI’s development and implementation, there is a possibility of deepening inequality, which has the potential to generate conflict within societies. To ensure a more equitable future, it is imperative to address these challenges head-on. Strategies must be implemented to promote inclusive adoption of AI technologies, provide opportunities for upskilling and reskilling of the workforce, and develop responsible policies that ensure the benefits of AI are shared across all members of society. By doing so, we can work towards harnessing the full economic potential of AI in a way that contributes to greater societal well-being and cohesion.