‘The pace of disruptive technological innovation has gone from linear to parabolic,’ says Bank of America
Robots will take over 45pc of all jobs in manufacturing and shave $9 trillion off labour costs within a decade, leaving great swathes of the global society on the historical scrap heap.
In a sweeping 300-page report, Bank of America predicts that robots and other forms of artificial intelligence will transform the world beyond recognition as soon as 2025, shattering old business models in a whirlwind of “creative disruption”, with transformation effects ultimately amounting to $30 trillion or more each year.
Manufacturing wages in China have jumped ninefold since 2000, and the country’s workforce is shrinking . China is already the world’s biggest buyer of robots, making up a quarter of the global market.
The costs of robots, “care-bots” for the elderly, “agribots” to plants seeds or pick fruit, commercial drones and artificial intelligence have, on average, dropped by 27pc over the past 10 years, and are expected to fall a further 22pc by 2005.
The price of an advance robotic welder fell from $182,000 in 2005 to $133,000 last year, and its sophistication is increasing all the time. The standard Baxter collaborative “cobot” that works side by side with people on the factory floor – fixing bolts on a conveyor belt, for example – costs just $22,000.
We are coming close to the crucial “inflexion point” when it is 15pc cheaper to use a robot than to employ a human worker.
The workforce will split yet further into the “haves” at the top of education scale and the “have-nots” with just high school qualifications, not to mention the 800m illiterates in the world. It is easy to imagine the explosive political consequences if governments fail to take action to mitigate the effects, yet this may be almost impossible in a borderless, globalised world.
Nor are the middle classes invulnerable. Bank of America said “robo-advisors” using algorithm-based systems will “disrupt” 25m workers in financial and legal services. The Millennial generation – now 18-34 years old – will be the first to switch en masse to these post-human services. This rising cohort already holds $7 trillion of liquid assets and is likely to inherit another $30-$40 trillion from Baby Boom parents.
Not everybody accepts this overall hypothesis. Professor Charles Goodhart, from the London School of Economics, wrote a paper recently for Morgan Stanley making the opposite argument, contending that the demographic crunch across the Northern hemisphere will overwhelm the effects of technology and lead to an acute labour shortage.
There is nowhere to go. Labour-saving devices are sweeping everything, everywhere
Under his scenario, workers will take their revenge and claw back the lost share of income as wages rise. The return on capital will fall, and the global deflationary supercyle will end in a bloodbath for the bond markets.
There have always been fears of mass destitution with each sudden shift in technology, whether it was the 18th century wool weavers of Yorkshire and the West Country displaced by cotton, or the machine-breaking Luddites in the 19th century threatened by the power loom, or dozens of other such episodes across the world throughout history.
The losers – or their children, at least – are eventually absorbed back into new industries. Human ingenuity has always prevailed. Larry Summers, the former US Treasury Secretary, warns that history is non-linear and it may be different this time.
The proportion of those in the US aged 25-54 and not working has tripled since 1965, suggesting that a chronic effect is already taking hold.
They cannot migrate to textile mills and the manufacturing hubs of the cities, as they did in the 18th and 19th centuries to escape the effects of the agricultural revolution.
There is nowhere to go. Labour-saving devices are sweeping everything, everywhere. A single professor can teach a course to 150,000 students through digital technology.
We may achieve the dream of prosperity without toil as robots take over, but find ourselves living in a jobless dystopia.
This article was written by Ambrose Evans-Pritchard from The Daily Telegraph and was legally licensed through the NewsCred publisher network.