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Phil Bain, investment director at Rathbones Investment Management International, says it may be a while before we see any widespread benefits
IT is possible that new technologies, particularly artificial intelligence and automation, will help to lift productivity growth from the doldrums of the 2010s although at Rathbones we have not assumed any additional boost to our projections for the next ten years at this stage.
That is not to understate the potential of this technology, or its significant investment implications, but there is still enormous uncertainty about its broad economic impact.
The past couple of decades have seen numerous examples of technologies that have changed how we live, or revolutionised certain tasks, but have yet to provide a noticeable boost to productivity growth.
Historically, the typical pattern has been that major technological innovations initially make no difference to the broadest measures of economic productivity, even if they transform individual industries.
It is only when the technologies have widely diffused, and when a secondary ecosystem of supporting and dependent technologies emerges, that the impact on the aggregate economic statistics is evident.
That impact usually arrives at least a decade or more later. In the 1980s, the economist Robert Solow quipped that “you can see the computer age everywhere but in the productivity statistics” — it wasn’t until the late 1990s that IT had any noticeable impact on the trend in productivity.
The same long delay from breakthrough to broad productivity improvement was evident with earlier transformative technologies such as steam power and electrification. Therefore, it seems premature to assume a large economy-wide productivity gain from AI, even if you are (understandably) optimistic about its long-run potential.
Overall, we are projecting that economic growth will be a little weaker over the coming decade than in the 2010s (but since that is driven primarily by slower labour force growth, we are anticipating a smaller gap when it comes to growth in output per person).
We forecast that economic growth will remain faster in the US than the UK. But we think the difference will be smaller than it was during the 2010s, when the UK struggled with a slower recovery from the financial crisis and uncertainty in the wake of the 2016 vote to leave the EU.
New technologies, such as AI, could conceivably lift productivity growth, but history suggests it is still too early to incorporate this into our forecasts.
