SINGAPORE: The Singapore Food Agency (SFA) on Sunday (May 7) rejected a report by Indonesian media outlet Antara that said it was ready to sanction the import of pig carcasses from Indonesia’s Pulau Bulan, calling it “inaccurate”. The import of live pigs from the island has been suspended since last month afterContinue Reading
At the annual general meeting of DBS on March 31, chief executive Piyush Gupta expressed regret for the service disruption days earlier, and chairman & nbsp Peter Seah declared that a special board committee had been established to look into the matter with outside experts brought in to assist. TheContinue Reading
A month or so has passed since DBS ‘ online banking systems went offline for a day before the most recent gap occurred. The Monetary Authority of Singapore( MAS ) issued a statement in response to the Mar 29 incident stating that the disruption was” unacceptable” and the bank hadContinue Reading
Less than two months have passed since the last disruption to DBS ‘ online banking systems, which was a day-long interruption.
The Monetary Authority of Singapore( MAS ) issued a statement following the incident on March 29 stating that the disruption was” unacceptable” and the bank had not lived up to the regulator’s expectations.
After gathering the necessary information,” MAS will take the appropriate regulatory actions against DBS ,” it declared.
Piyush Gupta apologized for the service disruption at the company’s annual general meeting on March 31 and referred to the event as” sobering.”
Our top priority, he stated, has been to ensure uninterrupted digital banking services andnbsp, 24 / 7. ” Unfortunately, we fell short, and I sincerely apologize. & nbsp, Our clients and shareholders are entitled to better.
At the meeting, Chairman & nbsp Peter Seah declared that a special board committee had been established to look into the outage. The bank may hire outside experts to look into the situation, he continued.
DBS experienced a similar great disturbance in November 2021 that lasted two decades. In the midst of that affair, MAS imposed new funds requirements on DBS. For operating risk, the provider had to multiply its risk-weighted assets by 1.5 times, adding S$ 930 million in extra regulatory capital.
The bank reported a stronger-than-anticipated 43 % increase in first-quarter profit earlier this week, setting new records from the previous year thanks to higher net interest margins, continued business momentum, and resilient asset quality.
For a statement on the gap on Friday, CNA contacted MAS.
South Korea has been the target of Taiwanese financial pressure. The South Asian country, like Australia, is a significant member of the US empire in the Pacific. President Yoon Suk Yeol’s recent trip to the United States highlighted its role as an equal-minded adherent to rules-based purchase.
South Korea has been one of the most important goals of Beijing’s economic force strategies because it is a cousin of China and has an economy that complements some of its core corporate sectors. But there are precedents for this.
Following World War II, analyst Albert Hirschman and others argued that” seemingly safe” bilateral trade relations can lead to asymmetric dependence. Asymmetry breeds emphasis, which can lead to social dominance, especially by powerful nations.
The attempts of China to derive social and strategic benefit from its trade relations are a modern-day version of this. Hirschman, however, thought that the global network might” contain the seeds of its own destruction ,” despite what modern evidence would have us believe.
One group of researchers identified 123 instances of China imposing— or threatening to impose — unilateral sanctions on foreign entities between February 2010 and March 2022, including strikes, operational discrimination, defensive trade steps, trade restrictions, and travel restrictions.
Even though Chinese persuasion has had a negative impact on the North Korean economy, its unintended effects have forced South Korea to cut back on its ties to China, even though this comes at some significant costs.
North Korean businesses and decision-makers have worked to improve financial independence, sovereignty, and private resilience by reshoring and onshoRING. This is clear from the experience of two industries — retail and semiconductors — that had previously been heavily exposed to China.
The most obvious example of a South Korean company being subjected to Chinese force for non-economical reasons is the Lotte team and its string of department stores, which it again ran on mainland China.
Lotte is frequently referred to as” the biggest loser” in the 2016 Terminal High Altitude Area Defense ( THAAD ) incident, in which Beijing expressed outrage over Seoul’s choice to use a US-made anti-ballistic missile system. Lotte already sold the land required for THAAD.
In retaliation, As & nbsp, the majority of its stores in China were subjected to regulatory suspensions, which led to declining sales and losses of up to AU$ 1.3 billion( US$ 875.7 million ). The Lotte ring had already left China by 2018.
The Lotte case shows the limitations of persuasion as a tool for international insurance even though it was the Chinese government’s use of unchecked power. China’s actions eliminated a significant source of purchase over South Korea by punishing Lotte and forcing it to close its shops.
A South Korean academic and political consultant noted that” very few foreign sellers” have ever” run fantastic services” in China, despite the fact that there were actual costs for the business.
Pertinently, the South Korean government encouraged Lotte’s move to Southeast Asia rather than trying to talk it out of leaving China. The incident already damaged North Koreans’ perception of China.
In the financial sector, China’s force was successful in harming South Korea economically, but in the semiconductor industry, it was less effective. South Korean chipmakers produce about & nbsp, 20 % of global production, including some of the most cutting-edge, upstream segments, and East Asia is the center for the multiphase creation of semiconductors.
Chinese businesses, in contrast, are active in upstream markets and heavily rely on imported parts from South Korea. Beijing is convinced that semiconductors are a” chokepoint concept,” which can limit the government’s ability to target foreign companies, including South Asian ones.
The largest companies in some counties are North Korean chipmakers, who have made sizeable investments in China. Any threat of retaliation against North Korean semiconductor producers may result in job losses and decreased Chinese semiconductor production.
In order to further thwart Chinese retaliation against the United States and its allies, significant players like the SK Group are expected to join the so-called” chip alliance” through & nbsp, increased investment in the US, and cooperation on supply chain restructuring.
South Korean businesses have clearly experienced economic disruption as a result of Taiwanese force, and South Korea and US-aligned economies will cover the costs of supply chain restructuring. However, it says a lot that South Korea, Australia, and other nations chose to accept these expenses rather than submit to Chinese pressure.
While China has used asymmetrical dependence to further its diplomacy, this strategy has only had limited performance. Through the Belt and Road Initiative & nbsp, China’s attempt to become a global financier and wield more power has also encountered obstacles. Hirschman’s analysis of the politicians of international trade is supported by how quickly targeted nations like South Korea have moved to lessen their reliance on Chinese force.
Although South Korea’s restrictions on economic force have been made clear, this type of statecraft won’t always be abandoned. While some adhere to Hirschman’s logic and believe that Chinese power can be” tamed” through interactions with other powers, which could result in the end of coercion or a decrease in its frequency, others believe China is failing to & nbsp, read the signals, and send them from other states.
This implies that ambitious Chinese leaders may continue to be tempted by force. As they look into the future, nations like Australia and South Korea would be good to make for both situations.
Dominic Simonelli is a Research Assistant in the School of Humanities and Social Sciences at Deakin University.David Hundt is Associate Professor of International Relations in the School of Humanities and Social Sciences at Deakin University.Baogang He is Alfred Deakin Professor and Personal Chair in International Relations in the School of Humanities and Social Sciences at Deakin University.
This document, which was originally published by the East Asia Forum, has been republished with a Creative Commons license.
Australia doesn’t need to rush ten or twenty years to launch effective military force against China with its original boats or long-range weapons. It is capable of using its digital forces to attack strategically important Chinese targets right away or to fend off that danger out of deterrence.
Cyberattacks are intended to break up or remove enemy military networks by breaking into their networks. They can be applied to a range of communication and weapon systems. Computer forces are now an essential component of a nation’s ability to strike during times of war. Even today, the United States is preparing to launch cyberattacks against China during a war, if necessary.
According to 2018 statistics, the Americans have a pressure of about 240, 000 protection personnel and contractors on hand to support both cyber defense and digital attack, with up to one-third of them probably available to do so.
These US attacks may be sustained across the complete range of Taiwanese war strength in the event of war. Gaining what is known as” decision dominance” would be the goal. If we can view Admiral Philip Davidson‘s remarks, which were made by the former chief of US Indo-Pacific Command, as a reference to China, this is the” disintegration” of Chinese systems and decision-making,” thereby defeating their offensive abilities.”
Australia has discussed digital act with much more caution than the US, but the two allies are closely allied. According to Project Redspice, which was unveiled last year, Canberra is currently tripling the size of its offensive cyber soldiers.
In the event of war, it was attack military command and control facilities whatsoever in China. Significant national equipment, like the energy network supporting the war effort, may be one of the softer targets.
Compared to the US, Australia’s computer force will continue to be modest. However, like the US, it can also request attack plans against China from corporate domestic or foreign corporations.
Australia wants to have cutting-edge net unpleasant options. Cyber services are carefully coordinated by the AUKUS supporters, and the new grouping places a lot of emphasis on this area of activity.
The National Cyber Force, an organization devoted to insulting fire operations, was established by the United Kingdom in 2020.
Australia’s cyber force will probably continue to be the most potent strike force against China for many years as a result of this” cyber three” alliance with the US and UK.
Of course, with cyberattacks, performance isn’t guaranteed. However, causing significant gap can be accomplished with a highly concentrated work across all stages of offensive cyber operations, particularly in collaboration with our allies.
The second phase, which involves ensuring up-to-date knowledge on the other side’s systems, is the most crucial. Even though the intelligence personnel aren’t considered to be playing an” offensive” role, the effort put into cyber intelligence against China’s armed forces serves as the basis for cyber offensive teams.
China is skilled at committing online crimes. Contrary to popular belief, China isn’t particularly strong in computer security, which makes it particularly vulnerable to attack during times of war. According to the International Institute for Strategic Studies, China has a number of fundamental flaws that may take years to address, such as those in its computer security sector, education system, and policy.
In terms of military computer capabilities, Chinese leaders have stated that they think they are far behind the US and its allies. Their decisions regarding starting a war over Taiwan will probably be constrained by this.
Australia shouldn’t be afraid of using this unpleasant power against China for political reasons because China intends to use it against us in the event of battle.
In advance of a serious issue, China is already conducting digital spying on Australia and other nations. It is almost certainly gaining the ability to, if necessary, remove foe military infrastructure and systems.
The long-held belief that Australia is contribute more to allied punishment of potential aggressors the more unpleasant capabilities it has, for example through submarines, was reportedly reiterated by Defense Minister Richard Marles.
In the unlikely event of war, American political leaders does give the military’s capacity to attack Chinese targets on a large scale priority. Additionally, leaders must make sure that private digital industries are more potent and that digital forces have more highly skilled personnel assigned to this task.
The Australian Defense Force will also need to reevaluate the defense balance of power in the Asia-Pacific to take into account the US and its allies’ digital superiority over China in order for military and political leaders to proceed down this path more forcefully.
Australians may also feel more secure about potential Chinese military challenges as a result. Foreign leaders’ decisions to incite a crisis may be influenced by their perception that their armed forces aren’t being aggressive in this area of US and military military power.
Greg Austin is Adjunct Professor, Australia-China Relations Institute, University of Technology Sydney. This article is republished from The Conversation under a Creative Commons license. Read the original article.
Greg Austin has disclosed no suitable affiliations outside of their educational appointment and does not play for, demand, individual shares in, or get funding from any businesses or organizations that might profit from this article.
In terms of sustainable development goals (SDG), business and investment have long and difficult journeys ahead. Sobering figures from a draft report published by the United Nations (UN) last month reveal that at the end of 2022, just 12% of the SDGs were on track to meet their 2030 targets.
“It’s time to sound the alarm,” the report warned.
“At the mid-way point on our way to 2030, the SDGs are in deep trouble. A preliminary assessment of the roughly 140 targets with data show only about 12% are on track.”
“Close to half, though showing progress, are moderately or severely off track and some 30% have either seen no movement or have regressed below the 2015 baseline.”
The audience at FinanceAsia’s recent Sustainable Finance Asia Forum on April 18 heard that although there is plenty of road to make up on the journey to net zero, so too is there substantial opportunity.
ESG imperatives are changing the way institutional investors approach decision-making, develop sustainable products and operate within new regulatory frameworks.
While the over-arching message of the forum underlined that sustainable goals and driving yield are not inimical, how exactly institutions approach sustainable finance will shape the future.
The following are FA’s top five takeaways from a forum focussed on these frameworks.
***
1. Creativity is key
While sufficient capital may be out there to bootstrap transitional finance in Asia – a region that is bearing the physical brunt of climate change – getting it where it needs to go in emerging markets (EMs) is not working at the scale and speed necessary to effect change.
Emily Woodland, head of sustainable and transition solutions for APAC at BlackRock, told a forum panel exploring the state of play of Asia’s SDG commitments that, as well as climate and transition risks, investors also face the common-or-garden risks that come from operating in EMs.
“There are the general risks of operating in these markets as well – that’s everything from legal, to political, to regulatory to currency considerations,” she said.
“Where finance can help develop new approaches, is around alleviating risks to attract more private capital into these innovation markets, and this is where elements like blended finance come into play.”
To make emerging market projects bankable, de-risking tools are urgently needed.
“That means guarantees, insurance, first loss arrangements, technical assistance which can help bring these projects from being marginally bankable into the bankable space, offering the opportunity to set up a whole ecosystem in a particular market.”
2. Regulation drives change
As investment in sustainable development goals moves from the fringe to the mainstream, institutions are bringing with them experience and learnings that are accompanied by policy, regulation and clear frameworks from regional governments.
Institutions are being asked to lead mainstream investment in the space as increasingly, investment in ESG becomes a viable funding choice.
“The next phase, which is the forever phase, will be when sustainability becomes mandatory rather than just a choice,” Andrew Pidden, Global head of sustainable investments at DWS Group told the forum.
“In the future, you will not be able to make an investment that has not been subject to due diligence with a view to doing no harm – or at least to doing a lot less harm than it is going to supply.”
“People may think this is never going to happen, but people thought this phase (of ESG investment becoming mainstream) was never going to happen 10 or 15 years ago.”
3. China is an ESG bond behemoth
Make no mistake, China is an ESG debt giant. Assets in China’s ESG funds have doubled since 2021, lifted by Beijing’s growing emphasis on poverty alleviation, renewable power and energy security.
According to Zixiao (Alex) Cui, managing director CCX Green Finance International, in 2022, green bond issuance volume alone totalled about RMB 800 billion ($115.72 billion), marking a 44% increase year-on-year (YoY). In the first quarter of 2023, there were 113 green bond issuances worth almost RMB 20 billion.
“Actually, this number decreased compared to last year because right now in the mainland, the interest rate for lending loans from banks is very low so there’s really not much incentive to issue bonds,” he told the audience during a panel on the latest developments in Chinese ESG bonds and cross-border opportunities.
“But over the long term, I think we are on target to achieve a number no less than last year.”
At the heart of this momentum is China’s increasingly ESG positive regulation.
“Policy making is very critical because in the mainland, we have a top-down governance model mechanism which has proven effective in terms of scaling up the market – especially on the supply side.”
4. Greenwashing depends on your definition
When is greenwashing – the overstating of a company’s or product’s green credentials – technically measurable, and when is it a matter of opinion?
Gabriel Wilson-Otto, head of sustainable investing strategy at Fidelity International, told a panel addressing greenwashing and ESG hypocrisy issues, that these transparency and greenwashing concerns are often problems of definition.
“There is a bit of a disconnect between how these terms are used by different stakeholders in different scenarios,” he says.
On one side, is the argument around whether an organisation is doing what it says it is, which involves questions of transparency and taxonomy.
“In the other camp there’s the question of whether the organisation is doing what’s expected of it. And this is where it can get incredibly vague,” he explained.
Problems arise when interests and values begin to overlap.
“Should you, for instance, be investing in a tobacco company that’s aligned to a good decarbonisation objective? Should you pursue high ESG scores across the entire portfolio?” he queried.
“Depending on where you are in the world, you can get very different expectations from different stakeholders around what the answer to these sub-questions should be.”
5. Climate is overtaking compliance as a risk
While increased ESG regulation means that companies must take compliance more seriously, this is not the only driver. According to Penelope Shen, partner at Stephenson Harwood, there is a growing understanding that climate risks are real.
“The rural economic forum global risk survey shows that the top three risks are all related to financial failure directly attributable to climate risk and bio-diversity loss,” she highlighted during a panel called ‘ESG as a component of investment DNA and beyond?’
“In fact, if you look at the top 10 risks, eight of them are climate related.”
The prominence of climate as a risk factor has consistently ranked top of the survey over the past 10 years, she explained.
“Other more socially related factors such as cost of living and erosion of social cohesion and societal polarisation are also risks that have consistently ranked highly,” she noted.
What’s your view on the outlook for green, social and sustainable debt in 2023? We invite investors and issuers across APAC to have your say in the 6th annual Sustainable Finance Poll by FinanceAsia and ANZ.
¬ Haymarket Media Limited. All rights reserved.
It was the ultimate chip war that never was: German officials denied that Berlin planned to stop exporting specialty chemicals for chip fabrication, Reuters reported on April 27 – a day after Bloomberg News claimed that the government of Olaf Scholz “was in talks” on the subject, presumably under prodding from Washington.
The stock prices of BASF and Solvay, the largest makers of the specialty products, plunged on Thursday after the Bloomberg report appeared but recovered sharply on Friday after the government’s denial.
More than a dozen chemicals including acids, bases and solvents are indispensable to etching microcircuits onto silicon wafers, and an interruption of supplies would cripple China’s fabrication capacity. Restricting these chemicals would escalate the chip war far beyond the scope of the Biden Administration’s October 7 controls on semiconductor equipment and design software for the most advanced chips, used in high-end smartphones, servers and artificial intelligence applications. The target would include all chips including so-called mature processes.
In related news, US Commerce Secretary Gina Raimondo announced on April 26 that the US will consider banning exports to Chinese cloud-computing companies, including Alibaba as well as Huawei. Raimondo responded to a letter from a group of Senators led by Bill Hagerty (R-TN) warning that Chinese cloud computing threatens US “national security and economic security.”
The Biden Administration is also expected to ban US investments in yet-to-be-announced high-tech industries in China.
Republicans on the House Foreign Affairs Committee meanwhile are wrapping up a three-month investigation of the Commerce Department’s enforcement of chip controls and have offered legislation that would give the Defense Department responsibility for enforcing the ban. Gregory Allen of the Center for Strategic and International Studies argued in congressional testimony April 13 that “China’s export control evasion activities are significant and growing. My primary recommendation is that Congress focus on concrete strategies to tighten this enforcement and shore up remaining gaps that risk allowing China to close the AI gap.”
Washington is scrambling to restore credibility to its effort to contain China after a streak of Chinese diplomatic victories, including the Beijing-mediated restoration of diplomatic relations between Iran and Saudi Arabia, French President Emmanuel Macron’s visit to Beijing in a show of independence from Washington and the visits of Brazilian President Lula and Malaysian President Anwar Ibrahim.
Ukraine President Zelensky’s telephone call with Xi Jinping and the dispatch of a special Chinese envoy to Ukraine, moreover, raise the prospect that China will pick up the pieces in Ukraine, after a drumbeat of damaging Pentagon leaks revealed how badly America stumbled.
In the advent of the 2024 presidential election, the Democratic administration is sensitive to Republican claims that it is too easygoing towards China.
China’s economic success in the Global South threatens to lure key countries out of the American orbit. As of March, China’s exports to ASEAN countries rose 35% year-on-year and exports to Central Asia (including Turkey and Iran) rose 55%, Asia Times reported April 25. China now exports more to the Global South than it does to developed markets.
Washington’s controls on the export of high-end chips and chip-making technology to China, announced October 7, 2022, were intended to deny China access to cutting-edge hardware that supported the most advanced AI applications. By contrast, the Commerce Department has shown flexibility in allowing semiconductor equipment manufacturers to ship machines that produce mature chips.
The Biden Administration adapted its strategy from a September 2022 report by the Special Competitive Studies Project, chaired by former Google CEO Eric Schmidt. This offered a response to China’s growing military power as imagined by Silicon Valley software venture capitalists: An “Offset-X strategy” including “distributed and networked operations, human-machine collaboration, human-machine teaming, primacy in software-centric warfare, resilience and greater technological interoperability and interchangeability and partners.”
That was a Silicon Valley futurist’s view of warfare, unrelated to military technology that will prevail for the foreseeable future. Both the US and Chinese military use older-generation chips for sensing, targeting and processing information. The older chips are more robust and easier to harden, as a February 2022 Rand Corporation study explained.
The Biden Administration gravely underestimated the power and importance of mature chip technologies (14 nanometers and higher), which comprise 95% of the global chips market and power 5G infrastructure, industrial productivity applications, and other so-called Fourth Industrial Revolution technologies. Semiconductor fabricators depend on mature chips for most of their revenues, and China’s massive investment in a domestic supply chain threatens to erode the financial base of the whole Western chip industry, as Dimitri Alperovitch of Silverado Incubator has observed.
One problem is that cutting off the Chinese market may have devastating consequences for the revenues of Western high-tech companies. The Atlantic Council warned in a March 2023 report, “While the steps taken by the Biden administration to constrain China’s progress in producing cutting-edge semiconductors appear calibrated to avoid widespread industry disruption, the policy has painful consequences that cannot be downplayed….the bottom-line impact may be felt in terms of what the industry terms a ‘significant loss of scale’ that could yield fewer resources for R&D and new investments…. It is essential that the semiconductor industry – and US allies, as discussed below – have a voice in assessing the potential impact of additional proposed constraints. Communication is essential to avoid unintended consequences.”
To make matters worse, American sanctions on the sale of high-end chips to China are extremely difficult to enforce. To comply with sanctions Nvidia reduced the clock speed on a variant of its GPUs, the standard for high-end servers, while selling substantially the same product to China.
In addition, the global market in chips is so complex and opaque that Chinese companies can buy whatever they want on the gray market, and the enforcement capacity of the Commerce Department is woefully inadequate to prevent this, Allen stated. Chinese sources say that high-end GPUs are freely available at a 10% premium to the going price.
Chinese commentators compare the chip war to China’s civil war. By concentrating on low-end chips, and undercutting the prices of Western manufacturers, “Observer” columnist Chen Feng says, China will “encircle the cities from the countryside,” a reference to Mao’s successful military strategy during the Civil War of the 1940s. The United States “can only go to Menglainggu [the site of a decisive 1947 Communist victory) by relying on high-end chips.” As noted, analysts like Alperovitch have already flagged the danger.
On March 27, Huawei announced that it had developed its own chip design software for 14 nanometer and wider mature nodes; if true, that would represent a major step towards Chinese independence from US design firms Cadence and Synopsis, which have had a near monopoly on the technology.
As the Atlantic Council suggested, the Biden Administration appears to have given US firms considerable leeway in exports to China. LAM Research, a leading US manufacturer of semiconductor equipment, predicted an increase in sales to China during the remainder of 2023, after receiving “clarification” of export rules from the Biden Administration. The Dutch chip lithography giant ASML also projected an increase in Chinese sales this year, and its CEO Peter Wennink stated that “the mature semiconductor space is very important and needs to grow. And this is where China is very strong.”
The reported Berlin ban on semiconductor chemicals might have misfired, but it was the first salvo of what will be a long tech war of attrition.
On November 30, 2022, OpenAI launched the AI chatbot ChatGTP, making the latest generation of AI technologies widely available.
In the few months since then, we have seen Italy ban ChatGTP over privacy concerns, leading technology luminaries calling for a pause on AI systems development, and even prominent researchers saying we should be prepared to launch airstrikes on data centers associated with rogue AI.
The rapid deployment of AI and its potential impacts on human society and economies is now clearly in the spotlight.
What will AI mean for productivity and economic growth? Will it usher in an age of automated luxury for all, or simply intensify existing inequalities? And what does it mean for the role of humans?
Economists have been studying these questions for many years. My colleague Yixiao Zhou and I surveyed their results in 2021, and found we are still a long way from definitive answers.
Over the past half-century or so, workers around the world have been getting a smaller fraction of their country’s total income.
At the same time, growth in productivity – how much output can be produced with a given amount of inputs such as labor and materials – has slowed down. This period has also seen huge developments in the creation and implementation of information technologies and automation.
Better technology is supposed to increase productivity. The apparent failure of the computer revolution to deliver these gains is a puzzle economists call the Solow paradox.
Will AI rescue global productivity from its long slump? And if so, who will reap the gains? Many people are curious about these questions.
While consulting firms have often painted AI as an economic panacea, policymakers are more concerned about potential job losses. Economists, perhaps unsurprisingly, take a more cautious view.
Perhaps the single greatest source of caution is the huge uncertainty around the future trajectory of AI technology.
Compared to previous technological leaps – such as railways, motorized transport and, more recently, the gradual integration of computers into all aspects of our lives – AI can spread much faster. And it can do this with much lower capital investment.
This is because the application of AI is largely a revolution in software. Much of the infrastructure it requires, such as computing devices, networks and cloud services, is already in place.
There is no need for the slow process of building out a physical railway or broadband network – you can use ChatGPT and the rapidly proliferating horde of similar software right now from your phone.
It is also relatively cheap to make use of AI, which greatly decreases the barriers to entry. This links to another major uncertainty around AI: the scope and domain of the impacts.
AI seems likely to radically change the way we do things in many areas, from education and privacy to the structure of global trade. AI may not just change discrete elements of the economy but rather its broader structure.
Adequate modeling of such complex and radical change would be challenging in the extreme, and nobody has yet done it. Yet without such modeling, economists cannot provide clear statements about likely impacts on the economy overall.
Although economists have different opinions on the impact of AI, there is general agreement among economic studies that AI will increase inequality.
One possible example of this could be a further shift in the advantage from labor to capital, weakening labour institutions along the way. At the same time, it may also reduce tax bases, weakening the government’s capacity for redistribution.
Most empirical studies find that AI technology will not reduce overall employment. However, it is likely to reduce the relative amount of income going to low-skilled labor, which will increase inequality across society.
Moreover, AI-induced productivity growth would cause employment redistribution and trade restructuring, which would tend to further increase inequality both within countries and between them.
As a consequence, controlling the rate at which AI technology is adopted is likely to slow down the pace of societal and economic restructuring. This will provide a longer window for adjustment between relative losers and beneficiaries.
In the face of the rise of robotics and AI, there is a possibility for governments to alleviate income inequality and its negative impacts with policies that aim to reduce inequality of opportunity.
The famous economist Jeffrey Sachs once said
What humans can do in the AI era is just to be human beings, because this is what robots or AI cannot do.
But what does that mean, exactly? At least in economic terms?
In traditional economic modeling, humans are often synonymous with “labor”, and also being an optimizing agent at the same time. If machines can not only perform labor, but also make decisions and even create ideas, what’s left for humans?
The rise of AI challenges economists to develop more complex representations of humans and the “economic agents” which inhabit their models.
As American economists David Parkes and Michael Wellman have noted, a world of AI agents may actually behave more like economic theory than the human world does.
Compared to humans, AIs “better respect idealized assumptions of rationality than people, interacting through novel rules and incentive systems quite distinct from those tailored for people.”
Importantly, having a better concept of what is “human” in economics should also help us think through what new characteristics AI will bring into an economy.
Will AI bring us some kind of fundamentally new production technology, or will it tinker with existing production technologies? Is AI simply a substitute for labor or human capital, or is it an independent economic agent in the economic system?
Answering these questions is vital for economists – and for understanding how the world will change in the coming years.
Yingying Lu is Research Associate, Center for Applied Macroeconomic Analysis, Crawford School of Public Policy, and Economic Modeller, CSIRO
This article is republished from The Conversation under a Creative Commons license. Read the original article.
SINGAPORE: The prosecution and defence both turned to the High Court to appeal in the case of a Singapore Armed Forces (SAF) captain, whose rash act caused a full-time national serviceman (NSF) to be crushed to death by a Bionix vehicle. The prosecution found the five-month jail term meted outContinue Reading