THE LEADING cause of offshoring has always been the comparative advantage of countries that either have lower costs of labor, artificially lowered currencies or targeted subsidies for certain industries. These countries will always beat out those that believe in free markets when it comes to manufacturing costs.
Free marketers stupidly think this is a good thing, arguing that lower costs leads to more consumption, which leads to high Gross Domestic Product (GDP). The problem is that hollowing out one’s industries, because it offers cheaper goods, leads to security and logistics vulnerabilities, which we saw in the Covid era and which we are seeing as Great Power competition returns.
Enter AI (artificial intelligence). The industry is expected to be four times bigger than the internet, and will likely destroy a lot of industries.
On the low end is low value, labor-intensive industries, like assembly or low value manufacturing. AI, coupled with robotics, will greatly reduce the need for labor in producing goods.
But the same is also true for high value industries. AI can be asked to create code, edit and summarize large blocks of texts and even make a diagnosis of a patient’s illness.
The same is true for certain service industries. Depending on the need of the industries, I expect the number of call centers will decline, though not necessarily disappear entirely. Those will still around but they would have been greatly reduced, and their future will be uncertain.
The days when human labor are needed for mass production other than in specialized areas is passing, and that was one of the sources of outsourcing: Cheap Mass Labor. AI, though, renders that asset obsolete.
For those of us, here in the Philippines, this is bad news but only if we don’t adapt. Post-war, two of the Philippines’ economic niches were low-end offshoring. As the world changes and as the world adapts to AI, that niche may disappear or change to such an extent that they will no longer be a reliable source of capital.
AI will affect everybody, but only those that can’t cope are going to suffer./PN
