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It's (still) the economy, stupid

Global Consulting Director, BAE Systems Applied Intelligence Read time: 2 mins
Charles Newhouse examines how Artificial Intelligence is impacting the global economy
It's still the economy stupidI chanced upon the political documentary, The War Room, recently. It’s a behind the scenes look at the 1992 campaign for the US presidency and remains essential viewing for anyone interested in politics, the media and communication techniques.
 
It’s also eerily prescient for today’s debates.
 
As headlines mount over the fragility of the global economy, the Democratic campaign’s maxim – “It’s the economy, stupid” – seems just as relevant today as it did in ’92. One big difference between now and then, though, is the burgeoning impact of Artificial Intelligence (AI) on today’s economic landscape. 
 

Measurement matters
 

Plenty of us are rightly excited about how AI can strengthen an economy – productivity and efficiency gains, improved supply chains and reduced long-term costs all spring to mind. But it’s also important to recognise that economic impact and indeed value can be very difficult things to accurately measure. 
 
On the face of it, they should be simple but in reality the sorts of things we normally default to don't do a good job. Take GDP. If we assume that this is a proxy for how well things are going and how a population is benefiting, it could go up but not everyone necessarily benefits. Similarly, GDP might not increase but society could be benefiting significantly. 
 
Look at Wikipedia, for example. Its creation would be hard to attribute any effect on global GDP and yet society has certainly benefited. Furthermore, it's inconceivable that there won't have been an economic impact from making all of that information available; however, I challenge anyone to put a figure on it.
 

Identifying value

 
Whilst AI will undoubtedly drive growth in the economy and will result in delivering value to many within the economy, the risk is that this technology will not deliver value to everybody in the economy at the same time. 
 
As consumers of the services driven by these technologies we will undoubtedly benefit – just think of all of the things that will get cleverer, easier to use and more accessible. The companies driven by the evolution of this technology will also greatly benefit financially but we need to be careful about simply looking at things like GDP measures and whether AI is having an impact. 
 
GDP may not change despite significant changes going on in the economy. The last decade, I suspect, is an interesting indicator for this with modest growth in Western economies combined with wage growth stagnation. It is certainly true to say that the current GDP figures belie a significant concentration of wealth in a small number of firms, whilst many older incumbent businesses are in the process of decline; look at the effect on the high street for no better example.
 
However, there is also a risk that we fall into the mistake of trying to punish the companies that deploy AI simply for being successful. Whilst their rise may be rapid and meteoric, they are simply riding the wave of the latest disruptive technological change. There is a real risk that the public debate, driven by a disenfranchisement of people whose jobs and sense of purpose have been impacted by the technological change, results in reactionary decisions being made that are ultimately not in the overall interests of society. We could end up sabotaging our own economy whilst others chose not to and in turn end up leapfrogging us. 
 
It’s important not to confuse success with the market failure. The rise of companies driven by this technological change can appear monopolistic and their behaviours anti-competitive. However, we already have legislation to deal with this and I don't believe the new wave of tech doesn’t create any new problems requiring new laws around dominance.
 

Opportunity seized?

 
The 1992 election strategists were quite right – the state of the economy will always be of huge importance. The dramatic arrival of AI will do little to change this. But what it will do, however, is fundamentally transform how industries operate, the number of jobs they create and the markets they operate in. In fact, it’s already doing this.
 
The revolution has begun – the focus now must be to ensure that AI’s transformative power helps create a future that works for all of us, rather than the privileged elite. 
Few tasks in human history will be as important. 
 
About the author
 
Charles Newhouse is Global Consulting Director at BAE Systems Applied Intelligence
charles.newhouse@baesystems.com
 

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Charles Newhouse Global Consulting Director, BAE Systems Applied Intelligence 11 October 2019