The Benefits and Pitfalls of Artificial Intelligence - AI

The Best Star-Wars Scenario for the Artificial Intelligence (AI) Revolution

AI and the Importance of Regulation from a Star-Wars Perspective

By Carlos Scartascini

While the uses and capabilities of artificial intelligence (AI) continue to grow at a fast pace, the head-long rush into new frontiers could have significant drawbacks.  As Anton Korinek, an AI expert at the University of Virginia, described in a recent blog, AI systems could soon replace relatively unskilled cognitive workers, like people who work in call centers or low-level accountants.  More disruptively, such systems could eventually learn to do more complex tasks, take over robotics and manufacturing, and displace manual laborers and highly skilled cognitive workers, causing wages to crash and inequality and hardship to deepen.

Such a dystopia would not be far from some of the scenarios depicted in Star Wars, that futuristic saga of events in a galaxy far, far away, where worlds of oppression and injustice co-exist with others aiming for a more perfect order.  And as Korinek indicates, a more perfect order is possible.  Indeed, the extent to which AI disrupts the labor market and how much it affects people, may well depend on the degree of regulation governments establish.  Consider as analogies, three different cases from the Star Wars universe.

Anarchic State: The Outer Rim Territories

In the Star Wars galaxy, the Outer Rim Territories often represent a rugged, lawless or less regulated area where the central government’s influence is weak and predators roam.  This can be likened to countries that don’t regulate AI, leading to a kind of anarchy where innovation is unbridled and the risks associated with unchecked AI development abound.  A lack of regulation can spur rapid technological advances.  But it can also lead to ethical dilemmas, misuses of technology, and harm to society, as happens in planets like Tatooine, which is controlled by wealthy and powerful crime lords, but where most inhabitants, including small-town residents and farmers, live in poverty or just scrape by.  Such an imbalance creates a stark contrast between the powerful few and the impoverished majority.  Unfortunately, many countries in Latin America and the Caribbean may end up in a similar equilibrium.  AI in such a scenario would grow, as would productivity and wealth.  But its fruits would benefit only those with access to the means of production, rather than the populace as a whole.

Authoritarian Regulation: The Galactic Empire

The Galactic Empire represents a highly centralized and authoritarian regime where control is exercised over many aspects of life, including technology and scientific advancement.  In this analogy, the Empire’s approach to regulation might create rents — privileges granted by the government in response to lobbying or other manipulation — in the same way that poorly implemented AI regulations could favor certain industries or companies.  This can stifle innovation in other sectors.  It can concentrate power and wealth, leading to inequality and potential abuses of power, akin to how the Empire benefits a select few while suppressing the majority.  Some countries in our region will try to prevent the negative effects of AI.  They will regulate what can and can’t be done with it.  For example, AI may be used to check legal documents, but a lawyer may still need to sign off.  It could be used to diagnose patients, but a doctor would still need to sign the prescriptions.  In other words, to preserve certain jobs, many tasks that could be done independently and unburdened by bureaucracy may still have to pass through physical hands.  Some people will benefit from these rents created by the government.  But those not so lucky to be part of a guild or pressure group may lack access both to the benefits of AI and the government-protected rents.

Balanced Regulation: The Galactic Republic

Before its fall, the Galactic Republic was a democratic union that governed a large portion of the galaxy.  It represents a more balanced and fair approach, striving to benefit all.  This would be akin to well-thought-out policies and regulations that aim to tax excess profits and ensure that the benefits of AI advancements are broadly shared across society.  Such regulation would ideally mitigate risks.  It would promote innovation and fairness, ensuring that AI serves the public good and doesn’t lead to significant societal disparities.  Governments would let AI flourish and achieve its massive potential for increasing prosperity and wealth.  But they would also find ways to redistribute the benefits in ways that maximize welfare.

Choosing the Best Star-Wars Scenario for the AI Revolution

Government decisions will be crucial in determining which of these scenarios characterize countries in Latin America and the Caribbean.  Anarchy and the Empire are not difficult to achieve.  Governments in the region, which have traditionally been known for introducing bad and distorting regulation could easily facilitate one of those two realities.  Becoming the Galactic Republic is much harder.  To reach that more enlightened state, governments have to invest resources to understand the benefits and pitfalls of AI, generate the conditions for its development, and control its excesses.  They also have to develop a strong social safety net, improve the way they levy taxes — when, where and on what — and make significant investments in public goods and infrastructure. Individuals, in the meantime, will have to find alternative ways of working so they can flourish individually and as a group.  Investing in government capabilities to deal with the new realities created by AI is long overdue.  Unfortunately, many governments may be too passive, delaying till it’s too late.  At that stage, there may be only two choices: that of the anarchic state or the state that benefits only the powerful few.

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A Call on World Governments to Rapidly and Radically Reduce the Gap between the Super-rich and the Rest of Society

Billionaires of the world are $3.3 trillion richer than in 2020, and their wealth has grown three times faster than the rate of inflation 

Oxfam Report

Despite representing just 21 percent of the global population, rich countries in the Global North own 69 percent of global wealth and are home to 74 percent of the world’s billionaire wealth

The world’s five richest men have more than doubled their fortunes from $405 billion to $869 billion since 2020 —at a rate of $14 million per hour— while nearly five billion people have been made poorer, reveals a new Oxfam report on inequality and global corporate power.  If current trends continue, the world will have its first trillionaire within a decade but poverty won’t be eradicated for another 229 years.

“Inequality Inc.”, published today as business elites gather in the Swiss resort town of Davos, reveals that seven out of ten of the world’s biggest corporations have a billionaire as CEO or principal shareholder. These corporations are worth $10.2 trillion, equivalent to more than the combined GDPs of all countries in Africa and Latin America.

“We’re witnessing the beginnings of a decade of division, with billions of people shouldering the economic shockwaves of pandemic, inflation and war, while billionaires’ fortunes boom.  This inequality is no accident; the billionaire class is ensuring corporations deliver more wealth to them at the expense of everyone else,” said Oxfam International interim Executive Director Amitabh Behar.

“Runaway corporate and monopoly power is an inequality-generating machine: through squeezing workers, dodging tax, privatizing the state, and spurring climate breakdown, corporations are funneling endless wealth to their ultra-rich owners.  But they’re also funneling power, undermining our democracies and our rights.  No corporation or individual should have this much power over our economies and our lives —to be clear, nobody should have a billion dollars”.

The past three years’ supercharged surge in extreme wealth has solidified while global poverty remains mired at pre-pandemic levels.  Billionaires are $3.3 trillion richer than in 2020, and their wealth has grown three times faster than the rate of inflation. 

• Despite representing just 21 percent of the global population, rich countries in the Global North own 69 percent of global wealth and are home to 74 percent of the world’s billionaire wealth.
   
• Share ownership overwhelmingly benefits the richest.  The top 1 percent own 43 percent of all global financial assets.  They hold 48 percent of financial wealth in the Middle East, 50 percent in Asia and 47 percent in Europe. 

Mirroring the fortunes of the super-rich, large firms are set to smash their annual profit records in 2023.  148 of the world’s biggest corporations together raked in $1.8 trillion in total net profits in the year to June 2023, a 52 percent jump compared to average net profits in 2018-2021.  Their windfall profits surged to nearly $700 billion.  The report finds that for every $100 of profit made by 96 major corporations between July 2022 and June 2023, $82 was paid out to rich shareholders.

• Bernard Arnault is the world’s second richest man who presides over luxury goods empire LVMH, which has been fined by France‘s anti-trust body.  He also owns France’s biggest media outlet, Les Échos, as well as Le Parisien.
   
• Aliko Dangote, Africa’s richest person, holds a “near-monopoly” on cement in Nigeria.  His empire’s expansion into oil has raised concerns about a new private monopoly. 
   
• Jeff Bezos’s fortune of $167.4 billion increased by $32.7 billion since the beginning of the decade.  The US government has sued Amazon, the source of Bezos’ fortune, for wielding its “monopoly power” to hike prices, degrade service for shoppers and stifle competition.

“Monopolies harm innovation and crush workers and smaller businesses.  The world hasn’t forgotten how pharma monopolies deprived millions of people of COVID-19 vaccines, creating a racist vaccine apartheid, while minting a new club of billionaires,” said Behar.

People worldwide are working harder and longer hours, often for poverty wages in precarious and unsafe jobs.  The wages of nearly 800 million workers have failed to keep up with inflation and they have lost $1.5 trillion over the last two years, equivalent to nearly a month (25 days) of lost wages for each worker. 

New Oxfam analysis of World Benchmarking Alliance data on more than 1,600 of the largest corporations worldwide shows that 0.4 percent of them are publicly committed to paying workers a living wage and support a living wage in their value chains.  It would take 1,200 years for a woman working in the health and social sector to earn what the average CEO in the biggest 100 Fortune companies earns in a year. 

Oxfam's report also shows how a "war on taxation" by corporations has seen the effective corporate tax rate fall by roughly a third in recent decades, while corporations have relentlessly privatized the public sector and segregated services like education and water.

“We have the evidence.  We know the history.  Public power can rein in runaway corporate power and inequality —shaping the market to be fairer and free from billionaire control.  Governments must intervene to break up monopolies, empower workers, tax these massive corporate profits and, crucially, invest in a new era of public goods and services,” said Behar. 

“Every corporation has a responsibility to act but very few are.  Governments must step up.  There is action that lawmakers can learn from, from US anti-monopoly government enforcers suing Amazon in a landmark case, to the European Commission wanting Google to break up its online advertising business, and Africa’s historic fight to reshape international tax rules.”

Oxfam is calling on governments to rapidly and radically reduce the gap between the super-rich and the rest of society by:
 

• Revitalizing the state.  A dynamic and effective state is the best bulwark against extreme corporate power.  Governments should ensure universal provision of healthcare and education, and explore publicly-delivered goods and public options in sectors from energy to transportation.
   
• Reining in corporate power, including by breaking up monopolies and democratizing patent rules.  This also means legislating for living wages, capping CEO pay, and new taxes on the super-rich and corporations, including permanent wealth and excess profit taxes.  Oxfam estimates that a wealth tax on the world’s millionaires and billionaires could generate $1.8 trillion a year. 
   
• Reinventing business. Competitive and profitable businesses don’t have to be shackled by shareholder greed.  Democratically-owned businesses better equalize the proceeds of business.  If just 10 percent of US businesses were employee-owned, this could double the wealth share of the poorest half of the US population, including doubling the average wealth of Black households.

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The Poverty Pandemic

Correcting course to accelerate poverty reduction

By MARI ELKA PANGESTU

On End Poverty Day we must respond to current challenges in ways that do not further impoverish the poor today and focus on creating opportunities that they can enjoy tomorrow.

On End Poverty Day this year, it’s hard to find cause for celebration.  The COVID19 pandemic triggered a historic setback, pushing 70 million people into extreme poverty in 2020 – the largest one-year increase in three decades.  

The war in Ukraine deepened the global economic slowdown, which is now in its steepest decline following a post-recession recovery since 1970.  At this rate, nearly 7 percent of the world’s population – almost 600 million people – will still be struggling in extreme poverty in 2030.   

Whilst the picture is sobering, it is a wake-up call for us to think and act to correct course. It’s important to remember that many of the development challenges we face today did not start with the pandemic.  Riding on the momentum to build back better, it’s a good time to review deficiencies of past policies and underinvestment.  

We must correct course now across a comprehensive range of policies and step-up global cooperation for a lasting recovery to move towards green, resilient, and inclusive development.  

In any crisis, it is the poor that are hit hardest.  According to the latest World Bank analysis, the poorest people bore the steepest costs of the COVID19 pandemic: income losses averaged 4% for the poorest 40%, double the losses of the wealthiest 20% of the income distribution.  

It is the poor who do not have the resources to cope.  During the pandemic, strong fiscal policy measures did help to protect poor and vulnerable people, but poor countries were less successful than rich countries.  With less to spend, low- and lower-middle income economies offset barely a quarter of the impact on poverty.

What may be even more worrying are the long-term consequences of multiple overlapping crises, which could worsen poverty in the near future if we do not accelerate action.  Losses in learning and human capital, as well as climate change are among the most critical.

Losses in Learning and human capital: As a result of prolonged school closures and shocks to household incomes during the pandemic, learning poverty has increased by a third in low- and middle-income countries.  This means that an estimated 70% of 10-year-olds are unable to understand a simple written text. 

Today’s students could lose 10 percent of their future average annual earnings as a result.  Youth have also suffered a loss in human capital, in terms of both skills and jobs. 

Short-term declines in youth employment can lead to more frequent unemployment spells, lower future wages, and increased social unrest.  Beyond reducing incomes, the decline in human capital will lead to lower productivity and less inclusion for decades to come, hindering growth, increasing poverty and inequality.

These trends can be reversed if countries act quickly and decisively, guided by evidence on what works.  We must keep schools open, assess students and match instruction to their levels, streamline the curriculum and focus on foundations  - especially literacy, numeracy, and core socioemotional skills.  And we need to create a national political commitment for learning recovery, guided by credible measurement of learning.  We must not forget to invest in girls’ education – which may well be the highest-return investment available in the developing world.

Climate change: The climate crisis is already here, and it could push an additional 132 million people into poverty by 2030.  The adverse consequences of climate change—water scarcity, crop failure, food insecurity, economic shocks, migration, and displacement— can multiply threats by exacerbating conflict, reducing economic opportunities and social cohesion, as well as straining public institutions.

We need to make sure that climate is integrated into development and ensure a well-managed ‘just’ transition towards clean energy sources in a way that protects people, communities, and the environment.  

Developing countries face a triple penalty – they pay more to provide electricity services; they are locked out of economical clean energy projects; and they are locked-in to fossil fuel projects with high and volatile variable costs.  We will need impactful programs and projects, adequate public policies, and significantly increased funding from multiple sources. Countries need to also invest in adaptation and resilience.

A resilient recovery will depend on a wide range of policies, including fiscal reforms that reorient spending away from subsidies toward support targeted to poor and vulnerable groups, and improvements in efficiency and efficacy.  Prioritizing long-term growth requires appropriate investments in crisis readiness, too. 

COVID19 showed us how progress achieved over decades can vanish overnight when such readiness is lacking.  Public investments that support long-run development, such as investments in human capital of young people or investments in infrastructure as well as research and development can have a positive impact on growth, inequality and poverty decades later.

We must respond to current challenges in ways that do not further impoverish the poor today and focus on creating opportunities that they can enjoy tomorrow.

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