This year’s boom in artificial intelligence (AI) has created a lot of hype and anxiety about its potential impact on jobs, productivity, and profit margins. Bank of America’s strategists have even referred to the stock market craze around it as a “baby bubble”. McKinsey Global Institute’s study into the sustainability of two decades of debt-fueled asset-price gains suggests that accelerating productivity may be the only way to keep income and wealth growing over coming decades.
However, there are doubts about the potential of AI to lead to widespread job losses. Goldman Sachs estimates that 300 million jobs worldwide could be at risk from automation, while Deutsche Bank strategists are sceptical that this time is different and it will lead to widespread job losses.
Humans are ambitious and will always seek new opportunities when technology closes off previous areas. Governments and corporations should strive towards accelerated productivity growth, which is the only way to achieve strong growth in income and wealth over the long term. This requires productive capital allocation and investment, as well as rapid adoption of digital tools.