Globalisation 4.0 and proliferation of AI: Are we ready for this?

New Delhi | Published: March 14, 2019 2:02:10 AM

In the last two centuries, globalisation has been interpreted as being about the things that we make and send across borders via air, land and sea.

globalisation, iit googleAs the numbers of buyers and suppliers rise, the network becomes more attractive to the new traders.

By Soumyatanu Mukherjee

In the last two centuries, globalisation has been interpreted as being about the things that we make and send across borders via air, land and sea. Without reducing the importance of this usual notion of trade, future globalisation is also going to be concerned about the stuff that we do (services), not just the stuff that we make (goods). Specifically, globalisation 4.0 is the globalisation of automation and digitalisation.

The key trends in digital technology and its impact on globalisation can be categorised into four aspects: growth of efficiency in computing, growth in the process of data transmission, and growth in the effectiveness of networks. These four aspects are bringing automation and globalisation to the service sector at a much faster rate than what people could realise.

The first one implies that computers are constantly improving—and will continue to do so for the foreseeable future (which is five to ten years in this business). This rapid progress turns the impossibility into the obvious. As an outcome, Amazon Alexa becomes a reality. Machine-learning has become commonplace, which may soon take away the tasks traditionally performed by skilled professionals. Translation software is even exacerbating the scenario by eroding the language barriers for foreign workers. MOOC is now replacing the need for traditional classroom lectures!

The second one, on the other hand, brings in the fact that today, fibre that is buried in the ground across the developed world carries data fast enough that we can watch Amazon Prime Video, Hotstar, Netflix, and YouTube. Computing and storage would shift to what we today call the Dropbox, Google Drive & Cloud. Faster transmission and desire to reach out more drive today’s virtual globalisation.

The third aspect relates to how important is a network like the telephone network, Internet Facebook, WhatsApp, etc., in the process of globalisation 4.0? Here comes the law of Robert Metcalfe, which states that “the value of a communication network is proportional to the square of its size”. Metcalfe’s Law will be a key driver of the automation of the service sector, which will result in its opening up to global wage competition. There are millions of workers in developing nations who would like to provide those services. As the numbers of buyers and suppliers rise, the network becomes more attractive to the new traders.

The last, but perhaps the most important aspect of globalisation 4.0, refers to the proposition by Google’s chief economist and a very renowned academician, Hal Varian. The present set of new technological components are free and digitised, so they can be shared around the world cost-free, perfectly, and instantaneously. Consequently, the new management practices and innovations rarely suffer from manufacturing delay, shipping costs, or inventory problems. Software thus allows (unless server goes down) to lower fixed costs. Now-a-days the new entrepreneurs have access to a greater variety of modern resources, thanks to cloud storage and computing.

What would be the implication of all of these on India? India can leverage its English-speaking techies from the IIMs and the IITs to specialise more in services outsourcing. But the globotics upheaval will result in recurring reduction in employment shares and sharpening income-inequality between high-income groups and middle-income groups, along with frustration against multinationals and big tech companies.

However, in the long-run, displaced middle-skilled workers can find the jobs that “globotics” cannot take away. The government may think about initiating the Danish system of “flexicurity”, that can support the frictionally unemployed workers to promote their search for better jobs than being engaged in “informal sectors”.

The writer is assistant professor, Economics Area, IIM Kozhikode

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