Ro­bots mess up cheap labour model

East African Business Week - - FEATURE - BY JOHN SAMBO

The in­creased use of ro­bots in de­vel­oped coun­tries risks erod­ing the tra­di­tional labour cost ad­van­tage of de­vel­op­ing coun­tries.

A re­cent brief­ing pa­per pub­lished by the United Na­tions Con­fer­ence on Trade and Devel­op­ment (UNCTAD) says if ro­bots are con­sid­ered a form of cap­i­tal that is a close sub­sti­tute for low-skilled work­ers, then their grow­ing use re­duces the share of hu­man labour in to­tal pro­duc­tion costs.

Ac­cord­ing to ‘Ro­bots and In­dus­tri­al­i­sa­tionin De­vel­op­ing Coun­tries’ In­dus­tri­al­iza­tion has his­tor­i­cally been syn­ony­mous with devel­op­ment, while dein­dus­tri­al­iza­tion is a well-es­tab­lished trend in ma­ture de­vel­oped economies as they move to­wards ser­vices-based economies.

Yet re­cent trends show that many de­vel­op­ing coun­tries – es­pe­cially in Africa and Latin Amer­ica – have wit­nessed their shares of man­u­fac­tur­ing em­ploy­ment and out­put shrink­ing long be­fore they have at­tained in­come lev­els com­pa­ra­ble to those in the de­vel­oped world.

Such pre­ma­ture dein­dus­tri­al­iza­tion be­gan dur­ing the ad­just­ment pro­grammes in the 1980s and 1990s, yet has con­tin­ued, as com­mod­ity booms and spec­u­la­tive fi­nan­cial in­flows have led to cur­rency ap­pre­ci­a­tion and a loss of man­u­fac­tur­ing com­pet­i­tive­ness, com­pounded by the rise of China’s man­u­fac­tur­ing ex­ports.

The cur­rent ques­tion is there­fore: now that the com­mod­ity bo­nanza is over, cap­i­tal flows are re­vers­ing and China is turn­ing to­wards a more bal­anced growth path driven more by do­mes­tic de­mand than ex­ports, how can Africa and Latin Amer­ica reignite in­dus­tri­al­iza­tion?

Much of the de­bate on the eco­nomic im­pacts of the use of ro­bots re­mains spec­u­la­tive, and dis­rup­tive tech­nolo­gies al­ways bring a mix of ben­e­fits and risks.

What­ever the im­pacts, fi­nal out­comes will be shaped by poli­cies. A com­pre­hen­sive ap­proach aimed at max­i­miz­ing the ben­e­fits of the use of ro­bots for in­dus­tri­al­iza­tion in de­vel- op­ing coun­tries in­cludes con­sid­er­a­tion of the fol­low­ing el­e­ments:

Any in­dus­tri­al­iza­tion strat­egy in de­vel­op­ing coun­tries will ben­e­fit from sta­ble but ex­pan­sion­ary global eco­nomic con­di­tions driven by sus­tained pro­duc­tive in­vest­ment and sup­ported by broad-based global in­come growth.

A pol­icy shift in de­vel­oped coun­tries to­wards com­bin­ing ex­pan­sion­ary mon­e­tary and credit poli­cies with a proac­tive fis­cal stance and a sus­tained in­crease in the share of wages in na­tional in­come could ig­nite a sus­tained ex­pan­sion of con­sump­tion and pro­duc­tive in­vest­ment, based on the favourable in­come ex­pec­ta­tions of con­sumers and pos­i­tive de­mand ex­pec­ta­tions of en­trepreneurs.

This could turn around slow­downs in pro­duc­tiv­ity and global de­mand growth, in the process boost­ing the op­por­tu­ni­ties of de­vel­op­ing coun­tries for in­dus­tri­al­iza­tion through man­u­fac­tured ex­ports.

To fully ben­e­fit from an ex­pand­ing global econ­omy, de­vel­op­ing coun­tries should em­brace the dig­i­tal rev­o­lu­tion. This re­quires re­design­ing ed­u­ca­tion sys­tems to cre­ate the man­age­rial and labour skills needed to op­er­ate new tech­nolo­gies and widely dif­fuse the ben­e­fits of their use, as well as to com­ple­ment them, as the com­bi­na­tion of skilled labour and au­to­ma­tion may be su­pe­rior to ei­ther on its own.

It also re­quires es­tab­lish­ing In­ter­net links be­tween mas­sive data stor­age and the com­put­ing de­vices that power the in­creased use of ro­bots, and de­vel­op­ing the as­so­ci­ated reg­u­la­tory frame­works.

In ad­di­tion to cre­at­ing ben­e­fits from au­to­ma­tion, dig­i­ti­za­tion could open up new devel­op­ment op­por­tu­ni­ties.

Com­bin­ing ro­bots and three-di­men­sional print­ing could cre­ate new pos­si­bil­i­ties for small en­ter­prises to over­come size lim­its in pro­duc­tion and to con­duct business – both cross-border and na­tional – on a much larger scale.

Ro­bots are not yet suit­able for a range of labour in­ten­sive in­dus­tries, leav­ing the door open for de­vel­op­ing coun­tries to en­ter in­dus­tri­al­iza­tion pro­cesses along tra­di­tional lines.

HI: They are not yet suit­able for a range of labour in­ten­sive in­dus­tries leav­ing the door open for de­vel­op­ing coun­tries.

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