Post Human Services: Could Robots Really Shatter the Global Economic Order Within a Decade?

Bank of America has issued a 300 page report predicting doom for those mere humans who are not hedge fund managers, tech geniuses - or robots.

What does BofA know that the rest of us don't? The only safe bet is that financial institutions always talk up the prospects in which they have already invested. JL

Ambrose Evans-Pritchard reports in The Telegraph:

The pace of disruptive technological innovation has gone from linear to parabolic. 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.

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.

“The pace of disruptive technological innovation has gone from linear to parabolic,” it said. Any country that fails to embrace the robot revolution will slip rapidly down the rankings of competiveness, and will be left behind.

South Korea is currently in the lead with 440 industrial robots per 10,000 employees in the manufacturing industry, followed by Japan and Germany. Britain is languishing far behind at 75, one of lowest levels in the developed world, the dark side of the UK’s low-productivity labour policies.

The report said the demand for automation is “skyrocketing” as the world’s population ages – with the number of people over 60 expected to rise from 841m to more than 2bn by the middle of the century – and as the once limitless supply of cheap labour dries up in Asia.

The price of an advance robotic welder fell from $182,000 in 2005 to $133,000 last 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.

This threshold has already been crossed in the American, European and Japanese car industries, where it costs $8 an hour to employ a robot for spot welding, compared to $25 for a worker. Hence the eerie post-human feel of the most up-to-date car plants. “We are facing a paradigm shift, which will change the way we live and work,” said the report's author, Beijia Ma.
The social effect is to squeeze out those at the bottom of the employment ladder, rendering them almost unemployable without re-education. Bank of America describes this as the “displacement of human labour”, estimating that almost half of US jobs could be at risk.

Productivity will soar but wages will not rise at the same pace, if at all. The owners of capital will take an even bigger slice of global income, pushing inequality to yet greater extremes. Labour’s share of the pie peaked at 65pc in 1975 in the rich countries and has already dropped to 58pc.

The workforce will split yet further into the "haves" at the top of education scale and the "have-nots" with just high school qualifications

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.