Jun 5, 2017 - Technology

Robots could hobble developing countries

Lazaro Gamio / Axios

The traditional exit from poverty for poor countries — followed over the decades by Japan, Taiwan and South Korea, among others -- is to be the cheap labor for rich nations. But the robotics revolution may be foreclosing that route to the middle class, MIT economist Daron Acemoglu tells Axios.

Among the potential losers: Vietnam, China and Indonesia, said Acemoglu, co-author of some of the world's most influential recent papers on the impact of robotics.

Speaking in his office, Acemoglu said that for seven decades, every fast-growing country has used export-focused manufacturing built on cheap labor to undercut foreign competition.

But, said Acemoglu: "If robotics makes labor uncompetitive in these lowest-skill and sometimes in the medium-skill occupations, this development path would be closed to the next group of developing countries and would make the further development of countries, such as China or Vietnam, also very difficult."

One of the crowning achievements of global capitalism has been a sharp reduction in global income inequality. The embrace of capitalism by populous Asian nations like China and India has prodded incomes up, even if it was paired with stagnant middle class incomes in the wealthy world. But robots make all that different, Acemoglu said. Here he is summing up the situation now.

Why it's bad for the West: The wealthy world has grown more so as a result of China's rise, even if that wealth has been mostly captured by the already rich. In fact, 80% of all global economic growth since the 2008 financial crisis has flowed from developing and emerging economies, meaning that an increasing number of U.S. jobs are dependent on exports to those countries. If these countries can no longer rely on manufacturing as a source of jobs and productivity growth, it could deal a serious blow to the U.S. economy, too.

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