Will Automation End Asia's 'Old' Development Path?

♠ Posted by Emmanuel in at 6/22/2017 12:33:00 PM
Is this an endangered scene for countries like Bangladesh? What would its consequences be?
There is much hand-wringing going on about automation lessening the need for human workers and the unemployment that may occur as a result. In the West, scare stories about robots making humans redundant in any number of industries are all the rage as even skilled work that relies on think power becomes vulnerable to the rise of machines. This may or may not occur in the future, but whatever it holds for us, it's a narrative that's helping sell scare stories in the meantime.

Now, a Bloomberg article argues that it's not just folks in rich countries who should be worried, but also those in developing countries such as those in Asia. Given the rate at which automation is progressing, it may not be very long until even those at the bottom of the wage ladder will become increasingly redundant too. That is, previous technological advances were not so great as to overturn what we will call the 'Asian development model' here of gradually progressing the value-added ladder by starting with the manufacture of the most labor-intensive goods. In short, machines (capital) could not compete with lowest-paid labor in generating cost efficiencies...until now.

Take, they say, the example of the newest Chinese factories relying more on automation than on sweat:
Jinsheng’s factory covers almost 15 million square feet, more than five times the floor area of the Empire State Building, but it needs only a few hundred production workers for each shift. “Textiles used to be a labor-intensive industry,” said Pan Xueping, the chairman and chief executive officer, in a September speech in Urumqi, Xinjiang’s capital. “We are at a turning point.” Instead of moving production to whatever nearby country has the lowest wages, he added in an interview a day after the speech, “the industry can achieve a human-free factory.”

Pan’s company is at the vanguard of a trend that could have devastating consequences for Asia’s poorest nations. Low-cost manufacturing of clothes, shoes, and the like was the first rung on the economic ladder that Japan, South Korea, China, and other countries used to climb out of poverty after World War II. For decades that process followed a familiar pattern...
Even the nuances of garment manufacture requiring a human eye and touch may no longer forestall the move to more automation, with potentially dire political-economic consequences for Asia's developing countries at the bottom rung of progress:
The transformation looks like it will happen fast. The International Labor Organization (ILO) estimates that mass replacement of less-skilled workers by robots could be only two years away. Overall, more than 80 percent of garment industry workers in Southeast Asia face a high risk of losing their jobs to automation, according to Chang Jaehee, an ILO researcher who studies advanced manufacturing. Chang recalls presenting her findings to a government official in a country in the region that she declines to name. The official’s response? If she’s right, the result could be civil unrest.
If this story is true, then why stop at setting up highly automated factories in Asia? Why not move them back to the West or 'reshore' in contemporary parlance if labor costs become an insignificant factor?
As automation accelerates, it’s not just Asia that could see its industrial trajectory affected. If the cost of labor is no longer a major factor, there’s no reason manufacturers can’t relocate production to where the bulk of their customers are: North America and Europe, where wages for decades have been too high to support textile production. Remove most of the workers from the equation, along with the costs and delays of round-the-world shipping, and making clothes or shoes in Dallas or D├╝sseldorf instead of Dhaka starts to look like a compelling idea.
I don't necessarily buy this story since automation has been in progress for centuries. Do we expect a quantum leap in the near future? The real (narrower) question here is whether technological advances can overcome advantages of low-cost labor combined with human intuition in garments manufacture.The answer will have significant implications, obviously.