China, India in Bulls-Eye

It may be time to consider a non-proliferation treaty on robotics in manufacturing.


THIS should have been a moment for triumphalism after the remarkable success of his re-election campaign. The housing market has picked up, the benchmark Dow index is at hailing distance of its record high, corporate profits are strong and companies are investing again in equipment and software. The United States economy, the world's biggest, is back on its feet after the 2007-2009 recession.

Yet, anyone who watched US President Barack Obama's State of the Union address last week could not have missed the deep emphasis on reviving manufacturing, job creation, 3-D printing technology and the proposal for an enhanced minimum wage.

Beyond the soaring rhetoric, the leader of the free world is clearly a man who is not only conscious of the structural shifts in his own economy and its workplaces, but is deeply troubled by its implications.

That worry, in a word, is jobs.

The recovery isn't helping much with hiring because start-ups are going for a higher level of computerisation and automation. Last Thursday, the US Labour Department's latest figures offered more evidence that while companies were not firing workers, they were in no hurry to add to their headcounts. Indeed, the jobless rate rose 0.1 percentage point to 7.9 per cent last month.

In the last 10 years, the US economy has seen no net job creation, the first decade since the depths of the Great Depression that this has happened.

Ordinarily, we could ignore all this. But what's going on in the US is part of a wider trend that must trouble every nation's leaders, particularly those in the great population centres of the world. The world is seeing mounting evidence that jobs, particularly good ones, are disappearing in the wake of the rapid advance of robotics and digital technology.

Jobless future

THE implications for the economy - and society - are profound. Indeed, for many countries it may turn out to be a national security issue.

Take two recent developments at big manufacturing companies in Asia's largest nations, China and India. Both have populations with rising aspirations predicated on gainful employment and rising wages.

Last September, India's biggest carmaker, Maruti Suzuki, announced a new factory in the state of Gujarat, with plans for an installed capacity of 250,000 cars per year. Chairman Osamu Suzuki agreed to the plant only after he got the state government to agree that he would install 800 robots on the pressing and welding floors, meaning 95 per cent of the car-building work would be automated - and free from labour issues.

Likewise, Foxconn, the Taiwanese company that does contract manufacturing for Apple and Nokia, is installing a million robots in its facilities on the mainland. Its current staff strength on the mainland - about one million.

Already, some 25 million fewer Chinese are working in manufacturing than a decade ago. The euro zone has shed 7.6 million manufacturing jobs and the US, 3.75 million.

What if this trend accelerated?

"What you are seeing is a world where even talent can be replicated," Professor Erik Brynjolfsson, a Massachusetts Institute of Technology (MIT) professor and co-author of the recent book Race Against The Machine, told me recently. "The technologies in the pipeline are even more astonishing. China and India are in the bull's eye of these developments."

And it's not all in the world of machines and manufacturing. Advanced software and IT are eating into white-collar jobs as well, from translation services to law firms, says Prof Brynjolfsson. In one case, moving from human to digital labour during the so-called discovery process of document review has let one lawyer do the work of 500.

Or take TurboTax, a US$99 (S$122) software now owned by Intuit Inc that helps Americans prepare their cumbersome tax declarations. TurboTax, which uses advanced algorithms, may have put 100,000 US tax preparers out of work, according to some estimates.

Such software and others like GeoFluent, a technology developed jointly by translation services company Lionbridge and IBM, could spell disaster for the service sectors of economies like India and the Philippines. Their thriving back-office businesses employ thousands of people whose earnings are vital, not only as a key source of foreign exchange for the national exchequer, but because their spending on cars, holidays and homes is a vital driver of the domestic economy.

Rise of the machines

THE alarm over machines posing a real risk to jobs has been around since at least 1995, when economist Jeremy Rifkin published The End Of Work: The Decline Of The Global Labour Force And The Dawn Of The Post-Market Era.

He argued then that we had arrived at a crossroads in human progress where machines and information technology were displacing huge sections of the workforce. "All sectors of the economy," he said, "are experiencing technological displacement, forcing millions onto the unemployment rolls."

At the time, most conventional economists were sceptical of the thesis. Indeed, many remain so. However, an array of recent developments show that he was on the right track, and that is prompting a torrent of work on the subject.

Last September, Prof Brynjolfsson and his MIT colleague Andrew McAfee released Race Against The Machine. In mid- December, brilliant young writer and researcher Federico Pistono published his work, Robots Will Steal Your Job, But That's OK.

How swift are the changes taking place around us?

Here's an example. In 2004, a competition was held to build a driverless vehicle that could navigate a 240km route through the unpeopled Mojave Desert. That vehicle barely went more than 12km. Yet, six years later, Google announced that it had modified a fleet of Toyotas that had driven more than 1,600km on American roads without human involvement. Its only accident was when the driverless car was bumped at a traffic light by the vehicle behind it - driven by a man.

Of course, it will take a while for passengers to agree to fly in a pilotless plane. But as satellite and navigation technology improves, you could easily envisage a world in which at least public buses and transport aircraft have no human presence in the cockpit.

Less than a week ago, scientists at the University of Madrid unveiled a satellite-navigation device that is accurate to an amazing 2m, works even inside tunnels, and is cheap enough to be installed in most cars.

Creative redistribution

SOME governments are preparing for the day. The state legislature of Nevada has directed its vehicles department to frame regulations for autonomous vehicles on the state's roads.

Humankind has adapted to the march of technology for the past 150 years, creating new jobs to meet new needs. The worry is that we are now at a turning point, where it may be counterproductive.

At some point in the future, technological advances may cause demand to dry up - how do you sell that car if consumers don't have the jobs that give them the means to purchase it? But at the current point on the curve, the most visible distortion is in the wealth-creation process.

Science is changing the way wealth is created, and inequality is rising as a consequence. For instance, in the past decade, two-thirds of US gross domestic product growth has gone to fewer than 1 per cent of the people, and the average American family earns less today than it did a decade ago. It's this awareness that probably prompted Mr Obama to propose an enhanced manufacturing minimum wage of US$9 an hour.

But raising wages at a time of accelerating automation is a tough call to make.

The operating cost of the Baxter robot, a machine tailored for manufacturing environments and capable of behaviour based on "common sense", is currently about US$4 an hour. And, as the robotic equivalent of a Moore's Law kicks in, that cost will dip rapidly in the future.

How does human labour compete against those dynamics?

The consequences of all this can only be guessed. What, for instance, will happen in China if technology displaces millions more from the workplace even as wealth concentrates in fewer hands? Already, its Gini coefficient, a measure of inequality, is estimated at 0.46, on a scale where zero denotes perfect equality and one, complete inequality.

Any measure above 0.4 is generally considered a recipe for social unrest.

New leisure class

OF COURSE, the utopian view of robotics and automation is that all this may be a good thing.

"What's happening now will make the Industrial Revolution look like a minor event, but resistance is futile," Mr Pistono wrote to me last week in an e-mail message. "The problem is that we prefer to invent new jobs rather than trying harder and inventing a new system that wouldn't require everybody to have a job. The same technologies that are displacing human labour - and hence creating the problem of technological unemployment - can also be the liberating factor that allows us to escape the prison of working for survival."

Unfortunately, the real world does not work that way. The benchmarks of success, whether in communities or between nations, are built around the rapid and efficient accumulation of wealth and power, not distributing it. The problems will come if the disappointments of the losers turn into a wider despair. In a flat world of few economic silos, there are few places to hide.

Perhaps it is time for world leaders to ponder all this, and work out agreed steps to calibrate the proliferation of these machines until diplomacy and statesmanship work out solutions for mankind to share the fruits of science, rather than live in fear of it.