The impact of Artificial Intelligence (AI) is traversing the entire globe– impacting every field and sector. The impact has been quite profound till now, and there is no denying that much more development lies ahead. Seeping into various business sectors, Artificial Intelligence is altering the global economy in nuanced ways.
The McKinsey Global Institute recently analyzed economic data from the United Nations, the World Bank, and the World Economic Forum and presented a report which stated that by 2030, Artificial Intelligence has the potential to add 16% — or about $13 trillion — to the global economy.
It could also boost the global gross domestic product (GDP) by up to 26%.
McKinsey further reports that by the same year, at least 70% of companies are likely to have adopted at least one form of Artificial Intelligence technology — perhaps computer vision, advanced machine learning, natural language, robotic process automation, or virtual assistants.
However, before diving into these intricate workings, it is essential to develop a rudimentary understanding of Artificial Intelligence and its operations.
What is Artificial Intelligence?
A question that has been baffling scientific minds since the 1950s is what constitutes ‘thinking’ and ‘intelligence’ with regards to machines. The explanation is still quite tricky; however, it has been deduced that a machine is artificially intelligent if it can process queries the way humans generally do, with a certain level of intelligence.
Artificial Intelligence is often used interchangeably with Machine Learning (ML). That, however, is not entirely correct, as Machine Learning is a sub-field of Artificial Intelligence. Machine Learning generally refers to the ability of machines to learn new information from data and predict with accuracy. Both phenomena do go hand in hand, though, as intelligence requires considerable knowledge- knowledge that is attained through learning.
Generally, Artificial Intelligence is said to have three main aspects:
- Intentionality: This means that the system makes decisions instead of being programmed with predetermined responses.
- Intelligence: Artificial Intelligence can interact with Machine Learning algorithms and data analytics for intelligent decision making.
- Adaptability: This refers to the ability of Artificial Intelligence systems to adjust to new data, make decisions, and interpret the outcomes.
How It impacts the global economy
Now that we have brushed up on the basics of Artificial Intelligence, we are now better equipped to understand the role that it plays in the marketplace and how it can impact the global economy.
Artificial Intelligence has undoubtedly facilitated a global expansion in various ways:
- Digital Platforms: Artificial Intelligence automation via digital platforms provides companies with a convenient way to expand internationally. In the US, 97% of small businesses on eBay– which incorporates Artificial Intelligence– export at least some of their products to other countries.
- Translation Services: The main hindrance to global expansion is the lack of effective communication. Artificial Intelligence, with its multitude of benefits, effortlessly solves this concern by providing accurate translation services. These services improve dialog, decrease miscommunications, and streamlines the whole process of international cooperation. Using Artificial Intelligence translations in business has been shown to have a positive effect on trade revenues — an effect that’s equivalent to decreasing the distance between the countries by over 35%.
- Improving Negotiations: Artificial Intelligence not only improves communications but improves their outcomes as well. AI-powered tools can be used to analyze the economic paths of negotiating partners in various scenarios and predict which strategies would affect the outcome. Artificial Intelligence can also be used to predict the responses from countries that are not even involved in the negotiations directly- allowing the negotiators to make smart, informed decisions.
- Supply Chain Management: Artificial Intelligence can analyze data, detect patterns, and predict how and when the demand for a particular product or service will increase in the marketplace. Depending on the prediction, efficient Artificial Intelligence algorithms can also automatically increase or decrease production to cater to the demands.
- Automating Mundane Tasks: Routine tasks are redundant and often require a lot of time and effort to be carried out manually. Artificial Intelligence can solve this situation by automating these tasks, allowing the companies to focus on higher-level tasks required for expansion. Artificial Intelligence can also make the process of development easier by automating some tasks. For instance, by automating the exhaustive tasks like payrolls and benefits, Artificial Intelligence makes it easier for companies to hire new employees in different countries.
- Increased Efficiency: When it comes to efficiency and accuracy, Artificial Intelligence knows no bounds! Automated processes eliminate the prospect of human error while increasing speed and accuracy, which then allows companies to streamline different processes and produce better outcomes while saving time and resources.
The revolution instigated by Artificial Intelligence is not in its infancy, but it is predicted that most of its economic impact is still yet to come. Even now, it has dramatically altered the way companies operate and affects economic growth in various ways:
- Increased Productivity: Undoubtedly, Artificial Intelligence can increase the productivity of companies multi-fold. Since productivity and economic growth have a directly proportional relationship, the drastic increase in productivity also boosts economic growth. This macroeconomic effect of Artificial Intelligence also increases opportunities for companies to take part in international trade.
- Better Management: Artificial Intelligence can provide companies with an effective centralized management system that helps them better handle multiple production units, predict consumer demand, and improve the accuracy of delivery systems. If you are interested to know how to optimize your SEM with effective Artificial Intelligence tools- we can help.
Ramifications of the impact
The impact of Artificial Intelligence is unprecedented and traverses the entire globe; however, as it progresses, it will create disparities between countries, companies, and workers.
Developing countries have different focuses and mechanisms as compared to developed countries. While the developed countries are investing in Artificial Intelligence to enhance their productivity even further, the developing countries, on the other hand, have difficulty catering to citizens’ basic needs due to a scarcity of resources.
The priorities of the developing countries are different as their primary goal is to restructure their industries to catch up with the developed economies. Such countries then have a lesser incentive to deploy Artificial Intelligence because it offers them a relatively smaller economic benefit than it does to the more advanced economies.
Artificial Intelligence technologies will engender a massive performance gap between the companies that fully adopt AI tools and those that do not. The former group will benefit disproportionately by potentially doubling their cash flow in the next ten years. The latter group will lie at the other end of the spectrum and may experience a 20% decrease in profits, assuming they have the same cost and revenue model today.
These competitive dynamics among the companies will entail an unequal distribution of the benefits of Artificial Intelligence and will make the marketplace lopsided.
The disparity created by Artificial Intelligence affects economies, countries, and even workers on an individual level. The future of employment in the US is already quite uncertain, and the spread of Artificial Intelligence exacerbates this uncertainty.
As companies begin to adopt Artificial Intelligence tools to automate various processes, the demands for jobs could shift away from these repetitive tasks towards those that require a specific skill set or level of education.
Such instances will further enhance the disparity that already exists between the rich and the poor, the educated, and the illiterate. Educated people with advanced digital skills will see an increase in job positions available. On the other hand, workers that earned their living through repetitive, low skills jobs will experience around a 30-40% decrease in employment by 2030.
Artificial Intelligence is globally perceived as the driver of future development and productivity. While that is indeed true, the policymakers and business leaders need to remain vigilant and take measurable actions to address and minimize the negative ramifications engendered by the progression of Artificial Intelligence.
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