I remember the “dot-com bubble” in the late 1990s. Investors were greatly excited by the advent of the internet and all the opportunities it presented to make a buck. Many people put their money in website start-ups they hoped would make a killing.
Soon enough, people realised that these weren’t going anywhere. The bubble burst and the “venture capitalists” did their dough. But this, of course, didn’t stop the internet being the great change we now know it was, with a few tech giants – Google, Facebook/Meta etc – making a fortune.
In the present sharemarket boom, speculators have bought shares in those tech giants, hoping to make a motser from the development of AI. The companies probably will do well, but not as massively well – or as immediately – as the get-rich-quick brigade imagined.
So it’s safe to assume the present boom is a bubble that will burst. You can never tell when, but my guess is it won’t be long. When it happens, many smarties will do their dough, but it won’t be a great disaster for the economy. As I never tire of explaining, the sharemarket and the economy are two different animals. The sharemarket will take a hit; the boring “real” economy of production and consumption will steam on.
What the bursting of the AI sharemarket bubble will do, however, is kill off most of the hype. What I’ve concluded from years of watching these excitements wax and wane, is that they’re never as wonderful as the marketing department claimed, nor as terrible are their critics feared.
My third conclusion is that these world-changing technologies always take a lot longer to materialise that the advertising led us to expect. Often, the big firms jump onto the new technology, but the smaller firms take their time. This protracted dissemination stops the change being so overwhelming, giving firms and workers notice of what’s coming and time to adjust.
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So, I’m not saying there’s no substance beneath all the hype – there is. A significant change in the way businesses and other organisations use workers to do whatever it is the outfit does is coming. This will involve numerous workers losing their jobs and having to find other ones.
What I don’t believe are the predictions that AI will spread through the nation’s employers like a bushfire, making many thousands of people jobless at much the same time, so that the economy’s hit for six and new jobs are impossible to find.
So you can forget the fear that we’ll soon be beset by mass unemployment and depression. I say this with great confidence because people have been predicting that some new technology or other would cause mass unemployment on and off for at least the past five decades, without it coming to pass.
Last time I looked, the rate of unemployment was only up to 4 per cent of available workers. Add to that the 6 per cent of workers who have part-time jobs but would prefer to work more hours, and you’re only up to 10 per cent.
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Remember, businesses have been investing in labour-saving equipment – that is, using machines to get rid of workers – continuously since the Industrial Revolution. So why didn’t we hit an unemployment rate of 90 per cent decades ago?
Short answer: because having employers use better machines to cut the resources needed to produce all the goods and services we consume improves the nation’s productivity – the efficiency of the economic machine – and so leaves us better off.
Our higher real income – we’ve had to spend fewer resources to acquire the same quantity of the goods and services we want – means we can afford to pay the now unemployed workers to produce more, and often different, goods and services.
It’s because there’s no limit to our appetite for goods and services that the workers “displaced” by labour-saving technology shouldn’t have too much trouble finding other jobs to do. Some individuals may find themselves unsuited to the new jobs but, with a bit of retraining, most jobless workers won’t.
Find that hard to believe? Just look at the history of capitalist economies using machines to replace workers for the past two centuries. It’s worked pretty well so far.
Ross Gittins is the economics editor.
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