China’s high investments on robotics and automation may bring a fundamental change to capitalism and put an end to old industrialization, according to analysts at global investment manager Bernstein.
Robots may demolish and replace manufacturing jobs globally as the “age of industrialization is coming to an end.” According to the analysts, capitalism will undergo a fundamental change with the introduction of robots and automation.
An article by Business Insider cited analysts as saying that the key foundation of economics as espoused by Adam Smith in his book, “Wealth of Nations,” may soon become irrelevant due to two trends: the rise of robotics and the modernization of the Chinese economy.
According to analysts Michael W. Parker and Alberto Moel, Smith’s book is becoming obsolete.
“Smartphones and online-to-offline apps give unskilled workers options for making a living that do not involve setting foot in developing market factories. Automation is making manufacturing activity cheaper and less labor intensive. Income inequality in developing markets will rise when work means competing against other unionizing,” the two said.
The analysts argued that robots will replace manufacturing jobs, which are gradually disappearing globally. This trend is happening globally, with China leading the way. Promises by politicians to bring back jobs, such as the pronouncement of Donald Trump, may not actually benefit the workers, the analysts said.
“If an individual, a company, or a country has an advantage in producing something, then that individual, company or country should specialize in producing that one thing, and trade for everything else,” Smith wrote in his book.
Specialization resulted in the industrialization of Asia, where manufacturing was outsourced due to cheaper labor in the region. Many countries in Asia became specialists in producing goods–from radios to t-shirts–which drove economic development in these areas.
However, this is coming to an end, according to Bernstein. “China is taking a different approach when it comes to how to deal with the mismatch between high-cost employees and low-cost manufacturing. Specifically, China is not getting rid of the work (or not all of it). It is just getting rid of the workers.”