Robots and algorithms are likely to automate workplaces at a frenzied pace

Believe it or not, a motion to the European parliament recommends that autonomous robots be deemed “electronic persons”. The motion for resolution suggests that self-learning robots, those that make independent decisions and interact freely, be held to have an “electronic personality”.

The proposals in the 2017 motion aren’t as bizarre as it might seem because companies are ‘legal persons’. Such a status means businesses can be held responsible for damages and can insure against such costs. Giving the same status to robots before they become ubiquitous in the workplace and elsewhere would allow likewise.

Even so, about 150 experts in science, law, ethics and other fields slammed the recommendations as “inappropriate”, “ideological” and “non sensical” in a petition to the European Commission. A core complaint was that deeming robots as ‘persons’ would absolve from liability the humans behind a malfunctioning robot.

The legal status accorded to robots is one of countless political issues policymakers must resolve ahead of an expected leap in automation driven by gains in artificial intelligence and robotics. The biggest political challenge would be if the automation likely during the ‘fourth industrial revolution’ were to cause massive unemployment – and a huge number of jobs are thought to be at risk. A just-released OECD study says that 46% of jobs in 32 developed countries are likely to be “significantly affected” by automation over the next 20 years. Other (but not all) studies offer similar forecasts.

Economically, automation will make sense, especially in ageing societies where shrinking workforces put upward pressure on wages. Boston Consulting Group, for instance, says that automation, once installed, cuts manufacturing costs by up to 20%. Robots and algorithms will thus boost productivity and, hence, long-term living standards.

At a political and social level, however, the ramifications of automation could be fraught.

Robots and algorithms are poised to destroy countless low- and semi-skilled jobs.

While they will create jobs, these jobs are likely to be of the type (higher- and lower-paying ones) that hollow out the middle class. The social safety nets in place to limit any populist backlash against automation and society’s ability to retain the displaced appear inadequate to cope with any lasting increase in unemployment and inequality. To stop political disgruntlement nullifying automation’s economic benefits, policymakers will need to find better solutions than those offered so far, such as taxes on robots, jobs for all or universal basic income. It could be this era’s defining political challenge.

Some caveats. A lasting rise in joblessness due to automation is just speculation – it may never happen. Warnings about automation are perennial. The mistake the pessimists usually make is to underestimate the number of jobs that advances create. Many service jobs are immune, even if robots might help these occupations.

The challenge for policymakers, though, is that the upcoming automation threatens to be unprecedented in terms of scale and speed. While the rise of robotics and artificial intelligence herald a more prosperous longer term, fewer opportunities and reduced financial security for voters could jolt politics in unpredicted ways in the nearer term.

Policymakers can see that the dangers of the ‘gig’ economy are likely to demand greater government intervention against market forces. They have time to find solutions.


By Michael Collins, Investment Specialist


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Magellan was formed in 2006 by Hamish Douglass and Chris Mackay, two of Australia’s leading investment professionals. The company specialises in global equity and listed infrastructure assets.

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