The Impact of AI on Work and Society
Technological – Like the Industrial Revolution around the turn of the previous century with its capacity to employ great numbers of people in urban ghettos, the new revolution is AI. Correspondingly, it has the capacity to destroy the need for human labour at an equivalent negative rate. It’s been a buzzword for many years but only now is being integrated into all walks of life at increasing speed—from military tactics, to reading digital X-rays, to impersonating call centre agents.
The quality of silicon chips to deliver the CPU needed to match the human brain, known as ‘the singularity’, is not there yet, but it’s getting close. It has achieved the point where smart warehouse robots or driverless transport have become at least equivalent or better than a human in terms of performance, cost and efficiency gains. These gains are increasing at a rate so attractive, that capitalism will embrace AI at a speed that dwarfs previous technology integration.
Unlike manual labour replacement inventions of the past, this time white-collar workers are just as much at risk as blue-collar ones. Legal, medical, and many service sector roles are likely to be as vulnerable as truckers and warehouse staff. The narrative that this revolution will enhance productivity rather than replace humans does not hold sway when the clear financial advantage is replacing expensive labour with a cheaper, 24/7 alternative. The lack of job security is likely to increase unpredictability as workers under threat fight for survival.
Changing Demographics and Political Shifts
Demographic – Again, we see a direct contrast with the explosion of population in the late 19th and early 20th centuries, which spurred the need to colonize or fight for more land, food, and materials.
It is strange to mention something that is so “known” as a statistical certainty many years in advance. However, even in demographics, things are changing faster than previously assumed. There has been step change lower in birthrates globally since the pandemic, such that the odds of the world’s population peaking this century has increased from 30 to 80% and then shrinking at a rate faster than models predicted just five years ago.
This has major political implications. The “boomers”—the cohort born between 1946 and 1964—have shaped policy to suit their needs at every stage of their lives. Their political dominance is about to wane as their numbers decline. Millennials already outnumber boomers in the USA, but lower voting turnout (50% vs 70%) in the recent election still favoured the older generation.
Going forward the electoral spectrum is going to be much flatter across demographics, increasing volatility of results.
Economic Challenges and Financial Pressures
Financialisation – Money is the final sector undergoing radical change. Debt overhang, which crushed economies of victorious nations like the UK and France while sowing resentment in defeated Germany after WWI, had huge ramifications for the world in the 1930s and 40s, and is now again a growing issue for many developed nations.
More recent financial crises have shifted debt from corporate (1987) to household (2008) and now to governments (2020+), with overall leverage increasing at each stage. Governments are passing the debt burden onto the next generation of a shrinking working population in ways that are increasingly being challenged as sustainable.
Radical monetary policies such as Quantitative Easing (QE) and Negative Interest Rate Policies (NIRP) have become mainstream tools for central banks adding to the sense that the system is being stretched. Political pressure on those same institutions to avoid even mild recessions has disrupted natural economic cycles, preventing inefficient businesses from failing and denying more competitive firms to thrive. This is upsetting the fundamental principle of efficiency of capital investment.
With little political will to cut deficits and debt ceilings being repeatedly raised, fiscal prudence is becoming increasingly ignored. The markets are showing their fears with cheapening of long dated sovereign bonds, and fiat money being eroded in favour of alternatives such as crypto, rare vintage assets or gold. Fiat money relies on trust, and that trust is shrinking.
Preparing for What’s Ahead
Each of these forces—technological, demographic, and financial—has the power to cause disruption. Together, they create a level of uncertainty that will test even the most cautious investment strategies.
