When I returned from the recent World Economic Forum in Davos, I was repeatedly asked about my main impressions and conclusions. One of the most discussed topics this year was artificial intelligence (AI), and especially generative AI. The introduction of large language models (on which ChatGPT is based) has created great hope (and excitement) that AI will be able to do much to improve productivity and economic growth in the future.
To address this question, we must first remember that today's world is dominated by human stupidity, not artificial intelligence. The rapid growth of megathreats (each of them an element of a wider "polycrisis") confirms that our policies have stopped functioning normally, and that the measures taken are wrong. This does not allow us to eliminate even the most serious and obvious threats to our future. These include climate change, which will lead to huge economic costs; state failure, which will significantly increase the wave of climate refugees; recurring, dangerous pandemics that can cause even greater economic damage than covid-19 did.
To make matters worse, dangerous geopolitical rivalries are beginning to escalate into new cold wars (for example, between the US and China) and potentially explosive ongoing wars (for example, in Ukraine and the Middle East). In many countries around the world, growing income and wealth inequality, driven in part by hyperglobalization and labor-saving technologies, has fueled discontent with liberal democracy, opening new opportunities for populist, authoritarian, aggressive political movements.
Unsustainable levels of private and public debt threaten to lead to a debt and financial crisis. And we may also see a return to high inflation, as well as negative stagflationary shocks on the aggregate supply side. The general trend in the world is protectionism, deglobalization, severance of ties, dedollarization.
In addition, those wondrous new AI technologies, which have the potential to aid economic growth and human prosperity, also have enormous destructive potential. They are already being used for the greater spread of misinformation, deep falsification and manipulation of elections, and they also increase the fear of the beginning of permanent technological unemployment and the further spread of inequality. No less ominous is the development of autonomous weapons and artificial intelligence-enhanced cyber weapons.
Dazzled by the glare of artificial intelligence, Davos attendees paid little attention to these megathreats, which was not particularly surprising. Experience tells me that the mood in Davos serves as a contraindication to the direction in which the world is really moving. Politicians and business leaders go there to promote their books and share platitudes. They express a generally accepted opinion, which is often based on a picture of global and macroeconomic events - from the rearview mirror.
When I warned in Davos in 2006 that a global financial crisis was coming, I was ignored as a gloomy pessimist. And when I predicted in 2007 that many Eurozone governments would soon face debt problems, I was simply cursed by the Italian finance minister. In 2016, when everyone was asking me if China's stock market crash meant a "hard landing" was in the offing, leading to a repeat of the global financial crisis, I assumed (correctly) that China would have a hard but doable landing. Between 2019 and 2021, the hot topic at Davos was the crypto bubble, which began to deflate in 2022. After that, attention turned to clean and green hydrogen, another fad that was already falling out of favor. When it comes to AI, chances are that this technology will really change the world in the coming decades. However, VEF's focus on generative artificial intelligence already seems misplaced, as future AI technologies and AI industries will go far beyond these models. For example, there is currently a revolution in the field of robotics and automation, which will soon lead to the creation of robots with human characteristics, able to learn and perform many tasks - just like us. Or, think about what AI could do for biotechnology, medicine, and ultimately human health and longevity. Equally intriguing is the development of quantum computing, which will eventually combine with AI developments to create advanced cryptography and cybersecurity programs.
The climate debate should also be approached from a long-term perspective. Today, it is increasingly likely that the climate problem will not be solved by renewable energy (which is developing too slowly to bring about major changes) or by expensive technologies such as carbon capture and sequestration, green hydrogen. We may be in for a thermonuclear energy revolution, but only if a commercial reactor is built in the next 15 years. This abundant source of cheap, clean energy, combined with low-cost water desalination technologies and new agricultural technologies, would allow us to feed the ten billion people who will live on the planet by the end of the century.
In the financial services sector, the center of the revolution will not be cryptocurrencies and decentralized blockchain. No, it will be based on centralized AI-based financial technologies, which are already improving the quality of payment systems, lending, asset distribution, insurance services and asset management. Materials science will lead the revolution in the field of new components, 3D manufacturing, nanotechnology, synthetic biology. Conquering and exploring space will help us save the planet and find ways to create extra-planetary life.
These and many other technologies can change the world for the better, but only if we manage to deal with their negative side effects, and if they are used to eliminate all the major threats we face. We can hope that one day artificial intelligence will be able to defeat human stupidity. But she won't have that chance if we destroy ourselves first.
The author is professor emeritus of economics at New York University's Stern School of Business; was senior economist for international affairs at the White House Council of Economic Advisers during the Clinton administration; he worked for the IMF, the US Federal Reserve and the World Bank
Copyright: Project Syndicate, 2024. (translation: NR)
Bonus video:
