KARACHI: Political and business leaders from across the globe congregated at Davos, the beautiful ski resort in the Swiss Alps, for their annual rendezvous in January this year to discuss the challenges being posed by what they call the fourth industrial revolution.
The event was organised by the World Economic Forum (WEF), which has been the host of this event for more than four decades.
The first industrial revolution came with the development of steam engines in 1760 which revolutionised the production methods by using the power of steam to run machine tools for enhancing productivity and output.
The second industrial revolution gave further impetus to the process with the discovery of electricity in 1870 and its proliferation in every segment of human life. It not only facilitated the development of tools and implements for mass production but also revolutionised communications with the development of telegraph lines.
Then came the IT revolution where information became central to economic, social and technological spheres. The development of semiconductors and increasing powers of computers linked with the internet created a situation that made the physical distance out of context and communication across the globe became instantaneous.
WEF founder Klaus Schwab circulated a working paper for participants of the summit where he emphasised that the speed at which current breakthroughs are happening is unprecedented in the history.
He compared the previous industrial revolutions with the current environment and highlighted that the pace at which technology was evolving was exponential, unlike the linear progression of previous revolutions.
This has been due to billions of people on smart devices connected through wireless networks, which has facilitated instant access to knowledge and information. He wanted the global leaders to discuss the challenges in mastering this unprecedented transformation.
The conference brought consensus that the fourth industrial revolution like its predecessors will improve the quality of life and raise incomes. However, there was concern that this benefit would not reach all segments and may in fact further perpetuate global inequality.
One thing was, however, certain that those who will have access to the digital world will be its main beneficiaries.
Prime Minister Nawaz Sharif was there and attended a number of events with its advisers. The delegation must have brought some food for thought for policy formulation for this emerging scenario in the global landscape.
Robots to replace human workforce
One of the most challenging aspects for the public policy process with the advent of this revolution will be the shift in global patterns of employment. Business leaders foresee an increasing use of robots that would replace human workforce in the manufacturing process.
Foxconn, a Taiwanese firm that assembles iPhones for Apple in its manufacturing facilities in China, has announced that it will introduce two million robots in its manufacturing process. Foxconn is one of the world’s largest electronics contractors/manufacturers that assembles products for Apple, Sony, Microsoft and Nokia.
It would obviously have implications for developing countries like Pakistan that has been pitching the investment potential based on advantages of cheap workforce. India, China and other developing countries in the Asia-Pacific region have already reaped considerable economic dividends by attracting foreign direct investment (FDI) in the labour-intensive sectors where global firms fragmented their manufacturing process across various geographical locations to gain benefits of cheap labour.
This disruption would logically enhance the gap between returns on labour and capital. The future job market will foresee more premium for high-skilled workers and less demand for those who are at the bottom of the skills ladder.
In anticipation of the emerging revolution, a large number of developing countries have joined the WTO’s initiative on eliminating tariffs on information technology products.
Pakistan is one of the few exceptions amongst developing countries that is not part of the WTO IT Agreement. It could not develop consensus as it relies heavily on taxes on international trade for revenue generation.
The WEF was unanimous that the fourth industrial revolution will perpetuate inequality and increase income gaps globally. The beneficiaries will remain confined to the economies that are open and well integrated with the global value chains.
For policymakers, the time is running out to take some painful decisions to liberalise trade that would provide greater economic benefits at the cost of short-term revenue losses and prepare Pakistan for the future.
The writer is a development professional with over 20 years of experience in public and development sectors
Published in The Express Tribune, March 14th, 2016.