Computers, laptops and cell phones have become, in this age of the pandemic, indispensable tools of management and entrepreneurs, as without these modern devices, they would not be able to cope with their workload or transact business.
The Digital Revolution, including the rapid deployment of Artificial Intelligence, is disrupting economic life and has fundamentally altered the development of developing countries. From the 1960s onward, Southeast Asian countries, including China and South Korea, began to industrialize rapidly via labor-intensive export sectors such as apparel and electronics assembly operations. This has resulted in workers gaining skills and incomes. Export earnings also financed the importation of physical capital, including infrastructure and machinery.
As skills and infrastructure improved, manufacturing shifted from labor-intensive to skill-intensive sectors, and overall employment also shifted increasingly from manufacturing to services. The long-term shift from agriculture to industry to services resulted in the shift of population from rural areas to urban cities.
The digital revolution required a new development thrust in technologies that are not dependent on the exports of labor-intensive manufacturers. The basic economics of automation involves technologically advanced machines replacing workers in the production process. Thus, the demand for labor is lessened and while productivity increases, the workers’ income is reduced. A possible solution is for the workers to acquire new skills to obtain new higher-paying jobs.
Now what are the overall effects of “digital technologies”? These are as follows: In agriculture, a rapid increase in mechanization results in a rise in output and causing a decline in demand for low-skilled agriculture labor. This principle also applies to the mining, manufacturing, business services, trade, healthcare, education, finance, tourism, transportation, and governance sectors. In other words, digital technologies will result in a massive increase in productivity for a wide range of goods and services.
Another major effect will be the rapid shift of employment from provincial to the urban areas. While automation could lead to increasing poverty in underdeveloped countries, the risks of technology can in the long-term be beneficial to the poor sector of society provided that institutions such as the IMF, the development banks, the UN development agencies, and key private sector leaders undertake concerted efforts to transfer digital skills and technologies to the low income nations to enable them to build the digital-based industries, skills and jobs of the future.
The author is a risk management consultant and Editor of Insurance Philippines magazine.