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The frightful and fascinating future of AI and the global economy

The impact of Artificial Intelligence (AI) is a hot topic of debate. But does it get too much of a bad rap?

Like every significant technology development in the past - be it the invention of electricity, the railways, or the automobile – there are concerns about its ultimate impact on how we live our lives.

Yet we take the more optimistic view and believe AI can seriously ignite economic growth in New Zealand and beyond.

Accenture, in collaboration with Frontier Economics, studied 12 developing economies that are responsible for more than 50 percent of the world’s economic output.

The results were staggering. AI is projected to boost labour productivity by up to 40 percent, and double annual economic growth rates by 2035 by changing the nature of work, according to the research paper Why Artificial Intelligence Is The Future Of Growth.

To explain how this will take place, it’s worth winding things back, to show what we mean by Artificial Intelligence.

There are certain aspects of AI that are already in use, and which are familiar to most people, such as digital personal assistants like Siri, Alexa and Google Now. Driverless cars are another AI led technology that is getting plenty of exposure.

These are some examples, but AI is already being used in a number of ways across a range of industries.

As we see it, AI is a collection of multiple technologies that enable machines to sense, comprehend, act and learn, either on their own or through augmenting human activities.

Where we believe AI will differ from previous technology developments such as the desktop computer, is in the crucial role it will play in the development of a country’s economy.

The key finding from our research is that AI will be an entirely new factor of production, and herald the creation of new workforces, that can produce things much more efficiently.

Developed countries can’t rely on just labour and capital to propel their economies forward anymore.  Across the globe, rates of gross domestic product are shrinking.

This downward spiral of production isn’t new, it’s been happening for the past three decades, while labour force growth across the developed world is stagnant.

AI can replicate labour activities at much greater scale and speed, and even perform some tasks beyond the capabilities of humans.  Undoubtedly, this will have profound impacts on the workforce.

It can take the form of physical capital such as robots and intelligent machines. And unlike conventional capital, such as machines and buildings, it can actually improve over time, thanks to its self-learning capabilities.

A significant part of the economic growth from AI will come not from replacing existing labour and capital, but in enabling them to be used more effectively.

For example, Praedicat, a company providing risk modeling services to property and casualty insurers, is improving underwriters’ risk-pricing abilities.

Using machine learning and big data processing technologies, its AI platform reads more than 22 million peer-reviewed scientific papers to identify serious emerging risks.

As a result, underwriters can not only price risk more accurately, but also create new insurance products.

And the potential of driverless cars could extend well beyond the automotive industry. Mobile service providers could see more demand from subscribers as drivers, now free to enjoy leisure activities while traveling spend more time on the internet.

Like other previous technologies, AI can drive innovations in the economy.

Over time, this becomes a catalyst for broad structural transformation as economies using AI not only do things differently, they will also do different things.

The research shows that AI was found to yield the highest economic benefits for the United States, increasing its annual growth rate from 2.6 percent to 4.6 percent by 2035, translating to an additional US$8.3 trillion in gross value added (GVA).

In the United Kingdom, AI could add an additional US$814 billion to the economy by 2035, increasing the annual growth rate of GVA from 2.5 to 3.9 percent.

While New Zealand was not part of the research sample size, we can assume that any economic gain made by these economies will have a positive impact here.

Geography does give the likes of the US, China and the UK an advantage over New Zealand because the size of the consumer population means you can bring a new business model to scale easily.

Yet there are other factors that are important, and which New Zealand can help boost to prepare for AI - such as technological maturity, public investment, a strong entrepreneurial climate, strong regulatory frameworks and research and development capacity.

To understand the complexities of the issues, we recommend the following:

  • Prepare the next generation – integrate human intelligence with machine intelligence so they can successfully co-exist in a two-way learning relationship and re-evaluate the type of knowledge and skills required for the future.
  • Encourage AI-powered regulation – update and create adaptive, self-improving laws to close the gap between the pace of technological change and the pace of regulatory response.
  • Advocate a code of ethics for AI – ethical debates should be supplemented by tangible standards and best practices in the development and use of intelligent machines.
  • Address the redistribution effects – policymakers should highlight how AI can result in tangible benefits and pre-emptively address any perceived downsides of AI, helping groups disproportionately affected by changes of employment and incomes.

AI is poised to transform business in ways we’ve not seen since the impact of computer technology in the late 20th century. It’s up to New Zealand to grasp the opportunity and run with it.

Mary-Anne McCarthy leads Accenture’s Technology practice within New Zealand.

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