LDCs and the technological revolution

August 30, 2017. When you’re next driving the clogged streets of Kinshasa, Democratic Republic of Congo, don’t be surprised if you run into an eight-foot high solar-powered traffic robot. Five locally-designed automatons stationed throughout the capital each do the job of four traffic lights. Fitted with camera eyes that monitor and record drivers, they play pre-recorded messages to pedestrians, letting them know when it’s safe to cross the road.

The Robocops are welcomed by local people – not only because they improve safety but because they never get tired and they don’t take bribes. The next logical step, speculates the New York Times, would be to give them artificial intelligence and to send the technology to other jammed African streets.

Kinshasa’s robots are proof that even the world’s 47 least developed countries (LDCs) aren’t immune from the so-called fourth industrial revolution under which artificial intelligence, robots and new manufacturing techniques are transforming production worldwide.

The timely launch of a new international support measure in late 2016, a UN Technology Bank for LDCs, aims to ensure that LDCs take advantage of these new technologies and that they don’t get left behind in the march of the machines.

The Bank aims to strengthen the science, technology and innovation capacity of LDCs, giving them better access to intellectual property. The Bank will help attract outside technology and to generate homegrown research, innovation and marketing. It will act as a conduit between intellectual property holders and LDCs to help them use desired technologies, particularly those no longer protected by intellectual property rights.

The Bank will open during 2017 with a staff of 10 to 15. The host country Turkey has pledged US$ 1 million, and it is hoped that the private sector and foundations will contribute up to US$ 30-40 million over 3-5 years.

What’s clear is that – for better or worse – new technologies are affecting a range of economic activities in LDCs. Agriculture, where 60% of LDC employees work, is the sector in which new technologies could have the greatest impact. Drones have the potential to scout crops and to reduce the work involved in seed planting and fertilization, raising yields. Automated irrigation systems can enhance precision and reduce manual labour. The genetic modification of seeds, although controversial, can increase disease-resilience and yields.

It’s not just agriculture: the biggest economic challenge confronting LDCs is structural transformation, or the move from low- to high-productivity activities, the process by which East Asian and developed countries industrialised through technological catch-up. In recent decades most LDCs have been excluded from this traditional route to development, experiencing a shrinkage of manufacturing and a rise in underemployment as people moved from the countryside to towns and took up semi-formal services jobs.

Additive or 3D manufacturing has the potential to address many of the problems of industrialisation in LDCs, namely isolation, distance from major markets and low economies of scale. Flexible manufacturing processes require lower investment than old, specialised machines. The absence of tooling costs reduces fixed outlays and facilitates small production runs.

Technological know-how, training and open-source designs can be found for free online. Even the cost of importing inputs may not be insurmountable. Some products can be 3D printed using recycled plastics rather than expensive foreign polymers.

Yet the very labour-saving and productivity benefits of the robot revolution also represent a threat. Alongside the creation; destruction.

Just at a time when rising Chinese labour costs presented an opportunity for LDCs to industrialise by attracting low-wage manufacturing, many of those jobs may be mechanised. China is the world’s biggest market for industrial robots, while some previously outsourced jobs are beginning to be ‘reshored’ to developed countries. Economists Frey and Osborne estimate that as many as 85% of Ethiopian manufacturing may be subject to automation. Although this estimate may be excessive, lots of jobs are at risk.

Even if LDCs stand to benefit from the productivity gains associated with the fourth industrial revolution, it isn’t productivity per se that they need; it’s jobs. Youth unemployment in LDCs is over 10% on average, according to the World Bank, having gradually worsened since 1980. Informal or part-time work is much higher. These high rates of joblessness are not only undesirable in themselves but bring associated social problems, crime and political instability.

Lant Pritchett of Harvard University argues that tech entrepreneurs shouldn’t be aggravating this jobless growth. The latest technological revolution isn’t an inevitable process, driven by market forces. It’s a political choice based on the labour market distortions that arise from immigration restrictions in developed nations. The resulting artificially high wages in the technology sector over-incentivise research and investment in labour-saving techniques and automation.

“The technologies pioneered and developed in the US and Europe and Japan then blow back into poor countries,” says Pritchett. “We cannot continue to ignore the obvious that technological progress is being driven in rich countries by distorted prices and availability of labour and is then inefficiently and uneconomically destroying jobs all over the world.”

The obvious, but politically difficult, international policy implication would be for developed countries to improve inward labour mobility in order to rebalance labour costs. Governments and international agencies should promote technologies in LDCs which involve net job creation and which have health, safety or environmental benefits. They should try to mitigate the impact on the worst-off and those who stand to lose most from the adoption of new technologies.

Many LDCs do not yet possess the required skills, energy infrastructure, broadband or transport networks to take advantage of the new production techniques. That is why the UN Technology Bank can play such an important role. Investment rates in LDCs also remain lower on average than in developing countries – and below the rate required to spark structural transformation. Just as in previous waves of technological advance, many peripheral nations will miss out. Global economic development is a combined and uneven process which creates winners and losers.

Ultimately, although the Technology Bank is a step in the right direction, it can only do so much. Not many LDCs are at a point where a robot, with its significant electricity and maintenance costs, will replace a traffic policeman on a few dollars a month. Many potential workers are waiting to take those jobs — indeed this ‘reserve army of labour’ phenomenon has been critical to capitalist development. Ultimately it may be the very defining characteristics of LDCs which insulate them from the full impact of the fourth industrial revolution for good or ill: their cheap wages, lack of infrastructure and weak human resources.