Abu Dhabi, UAEMonday 18 June 2018

The risks and rewards of automation

Robot revolution may be a double-edged sword 

Amazon's Alexa AI. Robots have the potential to both enrich human society and polarise wealth distribution. Rick Wilking : Reuters
Amazon's Alexa AI. Robots have the potential to both enrich human society and polarise wealth distribution. Rick Wilking : Reuters

As robots and automated services increase in number globally, scholars have been quick to point to the potential threat such developments pose to a harmonious society.

Are these concerns reasonable and do Arabian Gulf economies' unique features generate distinct dynamics?

Before discussing the threats, one must first acknowledge that labour-saving and productivity-enhancing technological innovations are fundamentally beneficial. If you are concerned about discoveries that diminish the need for human hands then recall that once upon a time, in the days of hunter-gatherer societies, including the Gulf Bedouin civilisation, unemployment was zero, because everyone spent all day eking out a living. Labour-saving technology is a key reason why you can consume so much today, starting with farming, which allows society to feed itself while only dedicating a small percentage of the population to the task. The labour hours “saved” by replacing hunting and gathering with farming have ended up being used to produce more advanced commodities, such as clothes, cars and mobile telephones.

Therefore, when a fast-food restaurant introduces automated order-delivery stations, your first impulse should be: “Great! Society can now produce more in total, as the people previously taking customer orders can now perform other jobs.” A good illustration is ATMs. Prior to their invention, most bank employees were cashiers, leading to big restrictions on the speed and availability of cash withdrawal services. Today, most bank employees are able to deliver advanced services at a low cost, such as investment advice or help with managing a small business, precisely because technology has freed them up to perform such tasks.

However, technological progress is not unambiguously desirable and it carries two risks.

The first is unfavourable changes in the distribution of wealth and income. While innovation increases the total size of the economic pie, it may also modify the sizes of the slices that people earn and, in particular, certain groups may lose even if society as a whole gains, or inequality might become very acute. For example, when Japan developed cultured pearls in the early 20th century, the world instantly became able to produce more pearls but pearl divers in Bahrain lost their livelihoods. The younger ones may have been mentally nimble enough to pursue alternative professions but the older ones were essentially doomed to a lower standard of living.

Why not just compensate those losing out, possibly by taxing those benefiting from the improvement? Many people think that is the best way to deal with technological progress, including the rise of robots, but practical implementation can be challenging. In particular, correctly identifying winners and losers in a dynamic economy is nearly impossible and so any rule will inevitably encourage fictitious claims of being a loser rather than a beneficiary, in an attempt to secure handouts and avoid taxes. This is why some favour restrictions on a the roll out of a technology, most famously the Luddites of the British Industrial Revolution, who destroyed the textile weaving machines that threatened their livelihoods.

The second risk associated with technological progress is that it might change our culture and norms in an undesirable way, independently of concerns relating to inequity. For example, many Gulf citizens today complain that smartphones have stunted people’s ability to engage in sustained, meaningful conversations, be they at the dinner table or in the majlises that constitute the backbone of social relations. In the case of robots, there is a fear that society's more modestly skilled workers will suffer a crisis of self-esteem if technology leaves them unable to hold down a regular job, even if they are compensated financially. Most would agree it would be unhealthy to have 20 per cent of a labour force catatonically staring at the TV out of sheer boredom.

In the case of the GCC, I recently asked my University of Bahrain students (MA public policy) to predict any GCC-specific threats or opportunities relating to robots and automation. A popular response reflected the uneasy relationship that Gulf nationals sometimes have with migrant workers. While the economic benefits accruing to citizens and migrants from the abundance of foreign workers are evident to most observers, Gulf citizens tend to fixate on the fact that they have become minorities in their own countries and feel that their cultural norms are threatened. For example, in The Dubai Mall, the operator of the establishment has arranged for signs reminding patrons to refrain from wearing revealing clothing or physical displays of affection because nationals are too small in number to set an effective example.

Since migrant workers in the Gulf are concentrated in low-skilled jobs, some Gulf citizens welcome the opportunity to “displace” these workers with robots, perceiving it as an opportunity to reaffirm traditional Islamic and Gulf values.

Whatever one’s inclination, it is worth bearing in mind two maxims regarding technological progress. First, as the Luddite example indicates, people have been fearing innovation for centuries. Yet, the world is a better place and so we should ease our concerns. Second, since the middle of the 18th century, nobody has had much success stopping progress.

We welcome economics questions from our readers through email on omar@omar.ec or on twitter via @omareconomics