Wealth Disparity & AI's Effects on Emerging Markets
By Swayam Tripathy and Riya Mathur, 8/18/2020
Sprinting Ahead: Effects on Developed Markets
Artificial intelligence holds the potential to completely revolutionize the way the global economy functions. By some, it's seen as a godsend - increasing efficiency in day to day functions and improving decision making processes by analysing and interpreting unfathomable amounts of data in a way humans never could. However, AI may completely disrupt the world order as we know it as well. With the emergence of AI, concerns such as the accumulation of our data, perhaps our most valuable possession in the 21st century, in the hands of big tech, as well as the further widening of the gap between the developed and developing world and the rendering of entire sections of the labour market are brought to light.
The economic impact of AI will be tremendous. Research launched by consulting company Accenture covering 12 developed economies, which together generate more than 0.5 % of the world's economic output, forecasts that by 2035, AI could double annual global economic growth rates.
AI can drive growth in three important ways. Primarily, it will lead to a strong increase in labour productivity by up to 40 % due to innovative technologies enabling more efficient workforce-related time management. Secondly, AI will create a new virtual workforce – capable of solving problems and self-learning. Third, the economy will also benefit from the diffusion of innovation, which will affect different sectors and create new revenue streams and create new revenue streams (EU Report on the Impact of AI).
The developed world is at the forefront of developing artificial intelligence technologies and increasingly helps them overcome the small size of their workforce and the need to outsource to the developing world. Being early adopters compared to less-developed nations, they will benefit disproportionately. Narrow AI technologies, such as translation services and chatbots have already taken thousands of jobs away from packed call centers in Bangladesh and India, saving millions for companies. Big tech companies have continued to replace human jobs with AI technologies and increase profit margins, the amount of federal tax they pay doesn't increase with it. Big tech has a knack for trying to avoid paying taxes, which the government can use to mitigate the job losses due to AI. A Fortune Magazine article reported that Amazon paid no federal income in the 2017 and 2018 year- even though domestic profits double to more than 11 billion USD during that time. This issue was at the forefront of 2020 Presidential candidate Andrew Yang's Election Campaign. He proposed a Universal Basic Income of a 1000 dollars a month to be paid to every American to make up for job losses, funded by tax money from big tech.
To conclude, it can be said that like a coin, AI too has two sides to it. The positive side, which brings along tremendous leaps in technology for the developed world, and the negative side, which threatens to throw the world in disarray. Keeping this in mind, the governments of developed countries will need to further policies that promote the development of AI while at the same time accounting for the risks and actively mitigating against the damages caused by AI.
Artificial intelligence holds the potential to completely revolutionize the way the global economy functions. By some, it's seen as a godsend - increasing efficiency in day to day functions and improving decision making processes by analysing and interpreting unfathomable amounts of data in a way humans never could. However, AI may completely disrupt the world order as we know it as well. With the emergence of AI, concerns such as the accumulation of our data, perhaps our most valuable possession in the 21st century, in the hands of big tech, as well as the further widening of the gap between the developed and developing world and the rendering of entire sections of the labour market are brought to light.
The economic impact of AI will be tremendous. Research launched by consulting company Accenture covering 12 developed economies, which together generate more than 0.5 % of the world's economic output, forecasts that by 2035, AI could double annual global economic growth rates.
AI can drive growth in three important ways. Primarily, it will lead to a strong increase in labour productivity by up to 40 % due to innovative technologies enabling more efficient workforce-related time management. Secondly, AI will create a new virtual workforce – capable of solving problems and self-learning. Third, the economy will also benefit from the diffusion of innovation, which will affect different sectors and create new revenue streams and create new revenue streams (EU Report on the Impact of AI).
The developed world is at the forefront of developing artificial intelligence technologies and increasingly helps them overcome the small size of their workforce and the need to outsource to the developing world. Being early adopters compared to less-developed nations, they will benefit disproportionately. Narrow AI technologies, such as translation services and chatbots have already taken thousands of jobs away from packed call centers in Bangladesh and India, saving millions for companies. Big tech companies have continued to replace human jobs with AI technologies and increase profit margins, the amount of federal tax they pay doesn't increase with it. Big tech has a knack for trying to avoid paying taxes, which the government can use to mitigate the job losses due to AI. A Fortune Magazine article reported that Amazon paid no federal income in the 2017 and 2018 year- even though domestic profits double to more than 11 billion USD during that time. This issue was at the forefront of 2020 Presidential candidate Andrew Yang's Election Campaign. He proposed a Universal Basic Income of a 1000 dollars a month to be paid to every American to make up for job losses, funded by tax money from big tech.
To conclude, it can be said that like a coin, AI too has two sides to it. The positive side, which brings along tremendous leaps in technology for the developed world, and the negative side, which threatens to throw the world in disarray. Keeping this in mind, the governments of developed countries will need to further policies that promote the development of AI while at the same time accounting for the risks and actively mitigating against the damages caused by AI.
Emerging Markets & Decrease in Labor Demand
Artificial intelligence is the newest kid in the block; and it isn’t difficult to see why it’s proved to be the lucky receiver of global attention. AI can potentially boost productivity growth, lower barriers to entry for businesses, and expand markets to underserved populations. From mimicking the human brain to enhancing job productivity, from imitating how we converse to analysing behaviour for assessing credit risk, AI brings with it the hope of a revamped future. . It isn’t shocking then that major economies like the US and China have already invested heavily in the promise of AI (IFC, 2019). In such a case, albeit difficult, cashing in on the advantages of successful AI implementation can prove to be a rather lucrative opportunity even for emerging economies.
What’s more is that the emerging economies know what’s at stake already. Even in developing economies, the penetration of smartphones is noteworthy. As a consequence, it is imperative to note how well AI can assist these economies in their most critical concerns, like educational attainment, microlending, health diagnosis, prompt communication by bypassing language barriers etc. Countries in Eastern Africa (e.g. Kenya, Madagascar, Tanzania) have started adopting the technological prowess of AI as well, with one of the most prevalent applications seen in the financial sector (points in reference: M-Shwari in Kenya, M-Kajy in Madagascar, MoMo Kash in Côte d’Ivoire). Consider as an example, Kenya with its ingenious M-Shwari service allowing users to access their banking accounts virtually which also enjoying added benefits of costless transactions. The USP of M-Shwari lies somewhere else though; its Machine Learning system that predicts the probability of new loan defaults, thereby helping the country reach out to millions of Kenyans.
To get a greater feel of just how AI can penetrate an economy to solve its most pressing concerns, take the case of agriculture. Nuru, a free farming app which aids farmers in predicting near term crop productivity as well as allows them to plan better when it comes to the production of staple crops like maize and wheat. In countries like Mozambique, Kenya and Tanzania where the vicissitudes of climate change can wreak havoc, the project aims at cushioning crops against damage while also diagnosing crop diseases, if any. With data support from UN bodies, this form of technology adoption brings these countries closer together in the network of local (reaching concerned authorities through the app) and international relations while also fighting against issues common to everyone.
Naturally, when emerging economies are concerned, prevailing market conditions, investment and infrastructure are always matters of key importance. Despite the widely known benefits of AI adoption, investments in these countries has remained relatively low (IFC, 2019). Added to this, the tendency to view AI adoption as something that may trigger societal backlash leads many to scepticism (Forbes,2019).
Such adoption can only be successful through the capability of adopting technology without compromising the quality of life of the millions of people whose livelihoods may be threatened. Furthermore, concerns relating to privacy, accountability, transparency have started cropping up already and will require swift policy making and efficient implementation.
However, there’s certain advantages for these economies as well. Identified by PWC, emerging economies have the greater room to adapt to such disruptive technologies due to the absence of ‘legacy infrastructure’. They are expected to leapfrog traditional technologies and become a way of life for most people rather smoothly.
After all, the opportunities offered by AI integration in the wake of technological advancement can not be ignored, especially for emerging economies which could make do with the economic and social transformations that follow.
Artificial intelligence is the newest kid in the block; and it isn’t difficult to see why it’s proved to be the lucky receiver of global attention. AI can potentially boost productivity growth, lower barriers to entry for businesses, and expand markets to underserved populations. From mimicking the human brain to enhancing job productivity, from imitating how we converse to analysing behaviour for assessing credit risk, AI brings with it the hope of a revamped future. . It isn’t shocking then that major economies like the US and China have already invested heavily in the promise of AI (IFC, 2019). In such a case, albeit difficult, cashing in on the advantages of successful AI implementation can prove to be a rather lucrative opportunity even for emerging economies.
What’s more is that the emerging economies know what’s at stake already. Even in developing economies, the penetration of smartphones is noteworthy. As a consequence, it is imperative to note how well AI can assist these economies in their most critical concerns, like educational attainment, microlending, health diagnosis, prompt communication by bypassing language barriers etc. Countries in Eastern Africa (e.g. Kenya, Madagascar, Tanzania) have started adopting the technological prowess of AI as well, with one of the most prevalent applications seen in the financial sector (points in reference: M-Shwari in Kenya, M-Kajy in Madagascar, MoMo Kash in Côte d’Ivoire). Consider as an example, Kenya with its ingenious M-Shwari service allowing users to access their banking accounts virtually which also enjoying added benefits of costless transactions. The USP of M-Shwari lies somewhere else though; its Machine Learning system that predicts the probability of new loan defaults, thereby helping the country reach out to millions of Kenyans.
To get a greater feel of just how AI can penetrate an economy to solve its most pressing concerns, take the case of agriculture. Nuru, a free farming app which aids farmers in predicting near term crop productivity as well as allows them to plan better when it comes to the production of staple crops like maize and wheat. In countries like Mozambique, Kenya and Tanzania where the vicissitudes of climate change can wreak havoc, the project aims at cushioning crops against damage while also diagnosing crop diseases, if any. With data support from UN bodies, this form of technology adoption brings these countries closer together in the network of local (reaching concerned authorities through the app) and international relations while also fighting against issues common to everyone.
Naturally, when emerging economies are concerned, prevailing market conditions, investment and infrastructure are always matters of key importance. Despite the widely known benefits of AI adoption, investments in these countries has remained relatively low (IFC, 2019). Added to this, the tendency to view AI adoption as something that may trigger societal backlash leads many to scepticism (Forbes,2019).
Such adoption can only be successful through the capability of adopting technology without compromising the quality of life of the millions of people whose livelihoods may be threatened. Furthermore, concerns relating to privacy, accountability, transparency have started cropping up already and will require swift policy making and efficient implementation.
However, there’s certain advantages for these economies as well. Identified by PWC, emerging economies have the greater room to adapt to such disruptive technologies due to the absence of ‘legacy infrastructure’. They are expected to leapfrog traditional technologies and become a way of life for most people rather smoothly.
After all, the opportunities offered by AI integration in the wake of technological advancement can not be ignored, especially for emerging economies which could make do with the economic and social transformations that follow.