Robots mess up cheap labour model
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.