Over the past few centuries there have been many periods of advancement, the most prominent of which would be referred to as industrial revolutions. These periods are characterised by major transitions within economies, transforming economic states.
The Fourth Industrial Revolution (4IR) is the current transformational shift taking place in economies around the world, and it is perhaps useful to deconstruct the endgame.
There is much evidence globally that technological advancement has had (and is currently having) a material impact on society. Whether we look at transport networks, energy security, food production, information technology or other sectors, most societies have experienced the underlying benefits of tech advancement.
Applying science and technical innovation alongside improved financial systems (enhancing capital flows) has been excellent for societal development.
We have similarly seen operating margin expansion as a function of better tech leading to increasing operational efficiencies – evidence of this impact on businesses. Within production, there are two primary inputs: labour and technology.
Technology has over time increased productivity, leading to greater availability of goods and services (increasing real supply), boding well for economic activity and job creation. This is also reducing scarcity of goods and services, which is overall positive for costs.
The productivity gains cannot be denied, but we are grappling with the question of how this period of technical innovation will unfold. Automation and regenerative AI can arguably, and to a certain extent, either create greater efficiency and/or replace human action in a process altogether. Trends in the agricultural sector, for example, have seen declining net employment figures over the past century with the introduction of technical advancement such as tractors and irrigation systems.
The concern is its impact on consumerism, given that automation and regenerative AI can influence future employment trends. The implied impact is lower consumption expenditures (ie demand) due to lower economically active citizens.
Who, then, will consume goods and services? Global population is slowing but is still at about 1% and will continue to grow through to somewhere between 2080 and 2090, according to UN projections, and thus jobs growth into the future is a necessity for people to have the capacity and propensity to consume.
Therefore, the crossroads we may find ourselves at is asking at what point does technological advancement lead to the erosion of jobs (and consumption).
This raises questions about the direction of global GDP growth. The concern is that consumption is the main driver of global economic activity, and affordability of goods and services would become an issue if 4IR results in job losses – unless governments can provide incomes to affected individuals/households in the form of social/societal support.
Africa is saddled with the dual problem of higher population growth than the rest of the world through to 2100, and tepid economic activity. Africa should become the production and consumption centre of the world. Therefore, the continent must aggressively pursue infrastructure and human capital development to take advantage of the opportunities of the future (which isn’t far away).
Work done by the International Monetary Fund in 2015 suggests that technology, while not replacing jobs, is displacing new jobs. South Africa should emphasise human capital and infrastructure development too, given that the country continues to battle structurally high unemployment which may be related to, inter alia, education levels and unequal economic opportunity.
Japan is one example of a country that has pursued aggressive technological advancement over the past century or so. It has done a relatively excellent job at ensuring the creation and development of a workforce that is fit for purpose (unemployment is currently at 2.6%).
Our political leaders should take heed of this point, creating future economic agents (labour) that are fit for purpose. This was potentially Japan’s salient achievement as its economy advanced.
That said, work done by Benjamin David in 2017 suggests that up to 55% of jobs in Japan could be at risk due to technological advancement and automation. This puts into context one important challenge of the future.
Industrial and industrialisation policy, while it must always be positive for tech, must be anchored around the protection of jobs. Policymakers should understand the implications of certain policy actions. Proposed interventions and policy positions would have to be continent-, country- and region-specific.
There are various societal risks if joblessness increases, but one may highlight the fiscal risks of joblessness. The government, in that environment, would have to find ways to fund social protection programmes. A nation that achieves a suitable mix of labour and technology may be able to find the balance that results in the collection of more taxes (through enhanced economic activity). What would need to be resolved is a more fair, equitable distribution to society which could solve any prevailing demand problem.
The future world of work may change so drastically that it is machines that do everything, and people consume and are at leisure. The risk is lower consumption (due to decreasing employment) and its impact on GDP growth, corporate profitability and tax revenue collection. It could be incrementally more difficult for governments to fund social support programmes as technological advancement increases and jobs decrease.
But there’s plenty of reasons that global economic activity may continue to grow uninterrupted. Evidence of the past shows that society has previously managed to readjust, and technology has resulted in increasing aggregate demand and supply.
We must acknowledge that with the winds of changes occurring in the tech space, change is not necessarily new, and that the world managed to reposition itself in the face of the industrial revolutions of the past.
Read more: Embracing AI’s transformative potential as a path to inclusive growth and social justice
The growing and changing availability of professions is evidence of how change brings new opportunities. That said, we should also remain cognisant of the prevailing risks.
One assertion is that trends may have a natural end or pause. For example, the electric vehicle (EV) market has seen growth over the past few years, given the global shift towards cleaner energy in the face of climate change.
One challenge that threatens its trajectory and penetration, in the short term, is energy generation and transmission infrastructure. Meaningful EV penetration requires a significant amount of power which may take time to develop. A comparable situation may unfold for technological advancement as a potential threat to global economic activity.
But, like the reliance of the EV on energy capacity, so is the case for broader automation in society and the evolution of generative AI. This reimposes the question on job losses. Is the next step of the evolution in the job market related to the creation of capacity in the energy market and related sectors?
Read more: Navigating the changing world of work in the Fourth Industrial Revolution
My senior colleague and professor emeritus at the University of Cape Town, Brian Kantor, posed the question to me on what had happened to the typists and administrators during the earlier wave of industrial evolution (the move to Microsoft Word, Excel and digital records).
Employment in the agricultural sector has shrunk, as posited earlier, but global unemployment is still low despite the technical innovations of the past century – the point being that individuals and societies pivot/adapt according to the needs of the day.
As the need for energy intensifies, I would like to reiterate that South Africa should position itself better for the Just Energy Transition, given that the country produces some of the key inputs for green energy. It wasn’t long ago that Eskom was rated the top public utility in the world.
If we can capacitate, coordinate and synchronise our natural resources, skills and technology, why can’t we be at the forefront of the next phase of the (green) energy evolution? That’s just one of the many ways to take advantage of the opportunities of the future, and of keeping people employed.
While tech and automation and regenerative AI may pose a risk and short-term disruption, new economic opportunities and areas may emerge, lending themselves to job creation.
In another few decades, we may find ourselves at the door of the next industrial revolution – and hopefully not asking the same questions. DM
The curious dynamics of the Fourth Industrial Revolution and the future of work
Industrial and industrialisation policy, while it must always be positive for tech, must be anchored around the protection of jobs. Policymakers should understand the implications of certain policy actions.
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