As the year ended, I was invited to an opening of Imaginarium/Aligunjan, a research and blue-skies thinking facility set up by Nishith Desai Associates in Alibag.
As the year ended, I was invited to an opening of Imaginarium/Aligunjan, a research and blue-skies thinking facility set up by Nishith Desai Associates in Alibag. It is a state of the art facility for people to create, innovate, ideate and just converse with similar people. It was during the discussion that Mohammad Yunus, Nobel-Prize winner and founder of the Grameen Bank, raised his concern about the state of the world. He cited the oft-quoted statistic that the eight wealthiest persons in the world owned more wealth than 80% of the world's population. He was also worried about climate change and about population growth. He wanted a world of three zeros-zero poverty, zero emissions and zero population growth. I find utopian idealism difficult to sustain as I get older. But I also wanted to question the desirability of these goals. I would champion zero poverty, but I fail to see that the concentration of wealth has any causal relationship with the persistence of poverty. I remarked that the eight people who had all this wealth were remarkable for one thing in common. Most of them had just become wealthy within the last quarter century. If wealth had always been concentrated, here was an example of a turnover in the personnel at the top.
The big fortunes to day are of the owners of Apple, Amazon, Facebook, Google and Microsoft. Remarkably, these are the innovations which have transformed modern living. None of them is a complex manufacturing process. The owners are first-generation innovators rather than inheritors of fortune. The old fortunes made in car manufacturing, or shipping, or oil, are no longer the big ones. Fortunes are made from ideas which catch on. Only a young person could have thought of the Facebook idea, and only because their generation used the internet as easily as writing with pen and ink for an earlier generation.
This is what Schumpeter meant by the entrepreneur and creative destruction. Amazon has made a lot of high-street retail shops redundant. It has changed the very idea of shopping separate from the physical activity of window shopping. Innovations also come in clusters as these four or five innovations all connected with the internet have done. It is also remarkable, in a long-run context, that only 50 years ago, people still thought the Soviet model of industrial development would surpass American capitalism. Americans themselves took it seriously; John F Kennedy campaigned for presidency on the ground that America had a missile gap relative to Russia. The Soviets had pioneered space travel. America had to catch up.
In the event, the Soviet model failed to innovate. It could convert input into output, but could not raise productivity. Americans invented the internet as a by-product of their defence preparations. It was meant to provide a fool-proof communications network in case of a nuclear attack. It became the seedbed of the next industrial revolution. The strength of capitalism came from the power of turning ideas into applications. In that citadel of private capitalism, the US, it was government research which financed the internet and then turned it over to widespread use. This demonstrated the versatility of the capitalist mode of production; it had no dogmatic dislike of public sector financing of innovations. The Soviet model could not accommodate private enterprise. China understood this and adopted a flexible mode of combining public and private capital successfully.
The set of innovations associated with the internet sustained a long boom which spanned a period from the 1980s till the 2008 financial crisis. There was fear of automation and the "end of work" back in the 1970s. As it happened, the new technology eliminated many jobs, but also created new ones. They made the financial revolution possible with new products like options and derivatives and techniques like programme trading.
Now, we have had a decade of downward movement in economic activity around the world, especially in the OECD countries. There is talk of another wave of technologies, of AI and robotics-and once again, there is a fear of mass unemployment. It is said that machines will take over human work in manufacturing. There will be self-driving cars. What will people do to earn a living?
The question of the impact of AI and robotics on the future of work is being widely debated. One way forward would be to replace human labour with robotics for repetitive physical work. Human labour can then specialise in tasks which can vary as the requirements change, where the next turn cannot be programmed and where imagination needs to be used constantly. Personal care is one such work. Teaching is often also best done in small personal groups. Healthcare will become a big source of demand for human labour as ageing becomes a problem.
People will always stay ahead of machines, even those with AI. This is because it requires imagination to see solutions before someone else does. Only human beings can create AI. It is only human imagination that can cause revolutions.
Source: Financial Express