Social disorder, political collapse and mass unemployment

 

States whose goal is to create jobs for their population, or attract the mobile forces of private capital, internal or external, to their territory, must first create the conditions for this to happen. They must be very clear that the measures they apply today will already be placing them somewhere in the ranking for the future establishment of job-creating companies.

 

The job losses could be immeasurable, perhaps comparable only, and to a lesser extent, to the unemployment rates reached at the height of the fight against COVID-19 during 2020 in several countries.

 

Uber currently allocates 75% of its revenue from rides to its drivers, who must pay for insurance, fuel, food, and living expenses. Uber is already one of the most valuable companies in the world. Imagine how valuable the company could be when it can replace every human driver with an autonomous car. Now imagine banks replacing their mortgage analysts with algorithms that grant loans more intelligently and with lower default rates. In the Netherlands, for example, the number of bank branches per 100,000 inhabitants fell by 56% between 2004 and 2014. In Denmark, during the same period, the number of ATMs per 100,000 inhabitants decreased by 44%[149]. Everything indicates that the trend will continue in this direction. From the bank shareholder’s perspective, their thought could be, why maintain open locations and the direct or indirect employees that entails? After all, society is shifting to a digital money model, which saves banks a whole series of costs, including money transportation, not to mention the indirect jobs it generates. The banking industry has reached its “Uber” moment. New digital banks like BruBank or Ualá are the new competition for Banco Galicia, BBVA, Santander, Citigroup, Wells Fargo, JP Morgan, and HSBC, among others. It is not surprising that locally, in Argentina, we see firms like Garbarino and Ribeiro, two major companies dedicated to retailing household appliances to the final consumer, closing their doors while Mercado Libre experiences meteoric growth.

 

We already know what will happen with autonomous trucks and drones or robots that will significantly reduce logistics costs. Yes, unions and politicians can oppose it, but when there is no one offering new jobs due to the more competitive conditions of other countries, the house of cards will eventually collapse under its own weight.

 

Perhaps as Marx suggested, instead of seeing a dispersion of profits across different industries with companies from different regions, we will increasingly see a concentration of astronomical sums in the hands of fewer actors, while unemployment figures rise. Or perhaps something different will happen, and mergers between national and foreign companies will have more impact than monopolistic and oligopolistic concentrations, maintaining local structures that better understand the culture and context of their markets. Whether the first or second option prevails, neither guarantees that the overall unemployment rate will not increase.

 

Factory automation will rob developing countries of the economic advantage they have always had, which was “cheap” labor. Furthermore, as production advances to tasks operated by robots, it is possible that factories will relocate closer to their main markets, diminishing the prominence of Mexican maquiladoras and countries like China and other Asian Tigers, unless countries impose a tax on “machines,” which contradicts the current postulate of many countries where companies can access tax benefits if they reinvest their profits to increase production. It is true that many factories are already full of robots, but these are not autonomous. They are machines that can repeat actions without stopping, but they cannot make decisions on their own or improvise a new solution in the face of an uncertain event.

 

Most economists bias themselves by professing that technology-induced unemployment is not possible. It was actually John Maynard Keynes himself who introduced the concept of technological unemployment in 1933. As far as we have seen, everything seems to indicate that the new algorithms not only copy what we do as humans but do so more efficiently and quickly. But suppose that is not the case. Suppose these algorithms are not better than us but are effectively equal to us in performing our tasks. Why would someone systematically pay us, knowing that there will be days when we get sick, days when we take vacations, and holidays that will benefit us by law, when one could buy a sort of digital twin or clone of us that could work 24/7 without requiring a salary in return? The theoretical accounts that say we cannot lose our jobs due to automation and AI advancement do not add up for me. The twins I am talking about are, of course, algorithms.

 

Unemployment generates discontent and social unrest. I think this will happen faster than we might believe, and it will not discriminate between those highly trained professionals in formal educational institutions and those who do not have such power, whether due to social injustice or personal choice. This is the real danger of AI: social disorder, political collapses, and mass unemployment.

 

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[149] Automated teller machines (ATMs) (per 100,000 adults) – Denmark, Netherlands | Data. (2023). Worldbank.org. Retrieved on February 10, 2023, from https://data.worldbank.org/indicator/FB.ATM.TOTL.P5?locations=DK-NL.