Snapshot
What Martin Ford predicts in his book, The Rise of the Robots, about the state of jobs in the future is far from bright. Are jobs getting away from us?
Winner of the FT & McKinsey & Company Business Book of the Year 2015 Award, Martin Ford’s The Rise of the Robots: Technology and the Threat of Mass Unemployment (2015) talks about how businesses are automating jobs in large numbers, causing unemployment in the millions. Another book deals with the same theme: the ebook Race Against the Machine (2011), written by professors Erik Brynjolfsson and Andrew McAfee of Massachusetts Institute of Technology.
Brynjolfsson and McAfee narrate the story of the inventor of chess.
On inventing chess, the inventor shows his creation to the emperor. The emperor, pleased with the game, asks him to name his reward. The clever inventor asks for one grain of rice for the first square of the chessboard, two grains for the second, four for the third and so on, with each square receiving twice as many grains as the previous square.
The emperor underestimates the size of the reward and agrees to it. The constant doubling results in very large numbers and, at the 64th square, the clever inventor stands to receive a pile of rice much bigger than Mount Everest – much more rice than ever existed on the planet.
Brynjolfsson and McAfee make the point that up to the 32nd square, the quantity of rice is not very large; at the 32nd square, the inventor stands to receive about four billion grains of rice, a reasonable number.
It is when they proceed to the second half of the chessboard that the compounding yields devastatingly large numbers. Brynjolfsson and McAfee use this chessboard scenario as an analogy to explain what’s happening with technology and jobs today.
The authors tell us that we are seeing a constant doubling in the technology domain.
Moore’s law predicts a doubling of computing power every 18 to 24 months. Are we in the second half of the chessboard yet?
More than 32 doublings have taken place since the computer was introduced in the 1950s, and Moore’s law still holds valid. This persistent doubling has resulted in some drastic changes to both society and business.
In the United States, in the first decade of the twenty-first century, the net job growth rate has been zero. Zilch.
This is not only because of the 2008 crisis, but also because several jobs are getting automated by technology and robots. In spite of this (towards the end of their ebook), Brynjolfsson and McAfee see an optimistic future where people will work harmoniously in tandem with robots, and the world will continue to hum along.
In The Rise of the Robots: Technology and the Threat of Mass Unemployment, Ford takes a more pessimistic view. Ford writes:
In general, computers are becoming very proficient at acquiring skills, especially when a large amount of training data is available. Entry-level jobs, in particular, are likely to be heavily affected, and there is evidence that this may already be occurring. Wages for new university graduates have actually been declining over the past decade, while up to 50 percent of new graduates are forced to take jobs that do not require a degree.
In the beginning of the Industrial Age, there were many cotton workers who lost their jobs due to automation of cotton spinning. But other sectors flourished, and many cotton workers secured employment elsewhere.
Now, we are seeing automation in virtually every sector and it raises the spectre of mass unemployment across sectors. The world, according to Ford, may be controlled by an elite minority who own automated industries – and inequality will be high and widespread.
Ford is an expert at tackling the technology part – he covers things like nanotechnology and 3D printing and deep learning – and he is no less adept at economics. He asks what the government can do when faced with the threat of mass unemployment.
We need a paradigm shift in economics, he says. Citing Austrian economist Friedrich Hayek, he recommends the provision of a basic, or guaranteed, income which would help people survive in times of adversity without killing off ambition or aspirations.
What does the future bode for us: the Pollyannaish picture painted by Brynjolfsson and McAfee, or the dismal doom depicted in Ford’s book? This is an important question since the outcome is going to affect us and our children
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Steve Ovett, the famous British middle-distance athlete, won the 800-metres gold medal at the Moscow Olympics of 1980. Just a few days later, he was about to win a 5,000-metres race at London’s Crystal Palace. Known for his burst of acceleration on the home stretch, he had supreme confidence in his ability to out-sprint rivals. With the final 100 metres remaining,
[wptelegram-join-channel link=”https://t.me/s/upsctree” text=”Join @upsctree on Telegram”]Ovett waved to the crowd and raised a hand in triumph. But he had celebrated a bit too early. At the finishing line, Ireland’s John Treacy edged past Ovett. For those few moments, Ovett had lost his sense of reality and ignored the possibility of a negative event.
This analogy works well for the India story and our policy failures , including during the ongoing covid pandemic. While we have never been as well prepared or had significant successes in terms of growth stability as Ovett did in his illustrious running career, we tend to celebrate too early. Indeed, we have done so many times before.
It is as if we’re convinced that India is destined for greater heights, come what may, and so we never run through the finish line. Do we and our policymakers suffer from a collective optimism bias, which, as the Nobel Prize winner Daniel Kahneman once wrote, “may well be the most significant of the cognitive biases”? The optimism bias arises from mistaken beliefs which form expectations that are better than the reality. It makes us underestimate chances of a negative outcome and ignore warnings repeatedly.
The Indian economy had a dream run for five years from 2003-04 to 2007-08, with an average annual growth rate of around 9%. Many believed that India was on its way to clocking consistent double-digit growth and comparisons with China were rife. It was conveniently overlooked that this output expansion had come mainly came from a few sectors: automobiles, telecom and business services.
Indians were made to believe that we could sprint without high-quality education, healthcare, infrastructure or banking sectors, which form the backbone of any stable economy. The plan was to build them as we went along, but then in the euphoria of short-term success, it got lost.
India’s exports of goods grew from $20 billion in 1990-91 to over $310 billion in 2019-20. Looking at these absolute figures it would seem as if India has arrived on the world stage. However, India’s share of global trade has moved up only marginally. Even now, the country accounts for less than 2% of the world’s goods exports.
More importantly, hidden behind this performance was the role played by one sector that should have never made it to India’s list of exports—refined petroleum. The share of refined petroleum exports in India’s goods exports increased from 1.4% in 1996-97 to over 18% in 2011-12.
An import-intensive sector with low labour intensity, exports of refined petroleum zoomed because of the then policy regime of a retail price ceiling on petroleum products in the domestic market. While we have done well in the export of services, our share is still less than 4% of world exports.
India seemed to emerge from the 2008 global financial crisis relatively unscathed. But, a temporary demand push had played a role in the revival—the incomes of many households, both rural and urban, had shot up. Fiscal stimulus to the rural economy and implementation of the Sixth Pay Commission scales had led to the salaries of around 20% of organized-sector employees jumping up. We celebrated, but once again, neither did we resolve the crisis brewing elsewhere in India’s banking sector, nor did we improve our capacity for healthcare or quality education.
Employment saw little economy-wide growth in our boom years. Manufacturing jobs, if anything, shrank. But we continued to celebrate. Youth flocked to low-productivity service-sector jobs, such as those in hotels and restaurants, security and other services. The dependence on such jobs on one hand and high-skilled services on the other was bound to make Indian society more unequal.
And then, there is agriculture, an elephant in the room. If and when farm-sector reforms get implemented, celebrations would once again be premature. The vast majority of India’s farmers have small plots of land, and though these farms are at least as productive as larger ones, net absolute incomes from small plots can only be meagre.
A further rise in farm productivity and consequent increase in supply, if not matched by a demand rise, especially with access to export markets, would result in downward pressure on market prices for farm produce and a further decline in the net incomes of small farmers.
We should learn from what John Treacy did right. He didn’t give up, and pushed for the finish line like it was his only chance at winning. Treacy had years of long-distance practice. The same goes for our economy. A long grind is required to build up its base before we can win and celebrate. And Ovett did not blame anyone for his loss. We play the blame game. Everyone else, right from China and the US to ‘greedy corporates’, seems to be responsible for our failures.
We have lowered absolute poverty levels and had technology-based successes like Aadhaar and digital access to public services. But there are no short cuts to good quality and adequate healthcare and education services. We must remain optimistic but stay firmly away from the optimism bias.
In the end, it is not about how we start, but how we finish. The disastrous second wave of covid and our inability to manage it is a ghastly reminder of this fact.