Why robots don't make the economy more productive
When efficient robots take over human work, productivity will increase. Right? Unfortunately, that is not the case. Despite enormous technological advances, productivity of the economy increases very slowly. Thought leader Lord Adair Turner explains this paradox here and at the GDI on 21 January, 2019.
Technological progress is developing exponentially. And yet, of the ten most booming occupations in the US, wages are below the US average in eight cases.
Economists call this apparent contradiction "the productivity paradox". Lord Adair Turner, former Chairman of the British Financial Services Authority and Chairman of the Institute for New Economic Thinking, explains how the paradox arises.
Turner asserts that whether productivity increases or decreases will depend on:
- who earns from innovations;
- what additional consumption is associated with the gained income;
- where the work is shifted to.
The problem: If automation leads to more productivity in a company, wages will rise there. But the higher the income, the more money is spent on services like domestic help, care or sales. And workers in these industries are paid poorly. Worse yet, these activities are difficult to automate. This restricts productivity.
According to Turner, the overall economic situation is that automation forces people into jobs with low productivity.
Turner's view of the future is gloomy: he predicts sluggish increase in overall productivity and widening financial inequality. Both increase dissatisfaction and ultimately endanger democracy. The result could be plutocracies, populist autocracies like Viktor Orbán's Hungary, or a combination.
At the GDI on 21 January 2019, Lord Adair Turner explains his view of the economy in the robot age. Along with US political expert Robert Kagan, Turner is a guest at the evening event "Robot Capitalism and The Coming World Disorder".