How AI Will Exacerbate Global Inequality

AI will make rich counties richer and deprive 3rd world states of an opportunity to evolve

Sukhayl Niyazov
Sep 29 · 4 min read

lobalization, according to conventional wisdom, has reduced global inequality and in general, helped make the world a better place. In spite of its clear positive reverberations, there still remains a high level of international inequality between rich and poor states.

The major component of the world’s income inequality is the result of differing levels of development of two groups of countries (called the “twin peaks” by Quah).

The first group (the United States, Japan, Germany, the United Kingdom, France, Australia and Canada with an annual income above $25,000) constitutes only 13% of the world’s population yet receives 45% of the world’s income.

The second group (India, Indonesia and rural China, and other nations which comprises of 2.1 billion people with an income level under $1,000 ) has 42% of the world’s population but receives only 9% of the world’s income.

Source: Wikipedia

In fact, the richest 1% owns half the global wealth — more than 6 billion people at the bottom (99%).

What is worse, however, is that the advent of AI, machine learning, robotics, and other novel technologies will likely exacerbate this trend in the coming decades.

It is known that as a result of globalization, Western companies have been moving their productions in countries with cheap labour, like China, South Korea, Singapore, Taiwan, India and many others. This has allowed these countries to kick-start export-driven economic growth and eventually turn into economic and technological powerhouses.

However, revolutions in manufacturing technologies, like robotics and 3D printing, are nullifying the advantages of low-cost labour countries, because American robots work as effectively as Chinese and they do not demand higher wages and join labour unions. Therefore, manufacturing is already beginning to return from low-wage countries to the developed states and, coupled with governmental subsidies, high-skilled workforce required for automated manufacturing, and robust consumer demand, more and more companies are already returning to the West (the US-China trade war has accelerated this trend, with tens of American companies moving their productions out of China).

This shift will deprive other poor countries of the opportunity to boost economic growth while making their huge unemployed population a source of instability. Dictators will seek “splendid little wars” with neighbours that will help them overcome domestic problems by acquiring strategically important resources like oil, thereby returning the era of instability and interstate competition. We already witnessed how authoritarian states tried to use military force to that end — Iraq during the Gulf War in 1991 and Rwanda in the Congo Wars in 1990s.

Large young population used to be low-cost labour countries’ greatest advantage. However, in the age of AI, this social group will turn from an engine of growth into a burden and a potentially explosive one if their governments will be unable to satisfy people’s demands for a better life.

Young people from these poor countries will then migrate into developed states in North America and Europe. Already there is a xenophobic and nationalist backlash there is in developed countries, directly contributing to the rise of populism in the West.

As a technology and an industry, AI has a natural tendency towards monopolization due to positive feedback loop generated by its reliance on data (more data — better algorithms — more users — more data — better algorithms — more users, etc.). When a company gains an early lead, it is hard for its competitors to overtake it. Because American and Chinese companies dominate the field of AI, these two countries will gain the most from new technologies.

Credit: Author

According to the research by PwC, out of $15.7 trillion of value added up to the global GDP thanks to AI by 2030, and 70% of gains will be in China and the US.

Two AI superpowers — the US and China — will reap enormous profits from AI, thanks to their large populations, fledged AI giants, vibrant entrepreneurial and venture-capital ecosystem. As Kai-Fu Lee has put it,

Other countries will be left to pick up the scraps, while these AI superpowers will boost productivity at home and harvest profits from markets around the globe.

Global inequality will likely signal the end of “peaceful” period in international relations, create the bipolar world order dominated by the United States and China, and worsen instability in regions like the Middle East and Africa. AI will completely change the way we think about global politics, economics, international relations, the balance of power and will pave the way to a completely new type of global (dis)order. Whether or not mankind will be able to address the challenged posed by the advent of new technologies is a matter of time.

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Sukhayl Niyazov

Written by

I write about economics, politics, and artificial intelligence.

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