Social costs in the age of automation

Long before Bill Gates and Steve Jobs flooded the technology marketplace with their innovative products and became billionaires, there was Louis Gerstner of IBM, maker of typewriters and computers, and Jack Welch of General Electric (GE), maker of refrigerators and light bulbs.

As IBM’s CEO, Gerstner was responsible for the company abandoning personal computers in favour of network-centric software-driven enterprise systems so that the internet could be embedded into all aspects of business operations, a strategy largely copied by Microsoft’s Bill Gates in the 2000s.

His successes aside, Gerstner was singularly responsible for laying off over 100,000 employees after being appointed IBM’s CEO in 1993, the same year that the world wide web gained universal acceptance. Gerstner, a strong advocate of privatising public education, viewed education as just another business product, subject to the ups and downs of the global marketplace.

Starting in 1980, over his 20-year tenure as CEO of General Electric, Jack Welch instituted the ruthless ‘rank and yank’ policy which required ranking every employee in every division of the company based on job performance and firing the bottom 10 per cent every year. This, despite the company being profitable for 80 successive quarters, the ultimate winners being company shareholders, mostly large investment houses.

Welch also specialised in buying up companies, stripping them of their assets and laying off all the workers, a strategy which Big Tech has successfully copied over the past two decades. The AI algorithms of today can implement Welch’s obscene policy in a transparent manner without the managers having to have second thoughts about firing anyone under their chain of command.

Before the arrival of Gerstner and Welch, both IBM and GE were regarded as excellent companies to work for since they provided lifelong employment and generous employee benefits. Why is it that ruthless CEOs are lionised in the financial pages of major newspapers and held up as exemplars in business schools but the damage they have done or doing to society is never questioned?

Over the past 30 years, there have been persistent calls by western multinationals for privatising all public sector units, especially in the Global South. This narrative comes with the mistaken belief that privatisation leads to better services and that all government-run entities are necessarily slow and not cost-effective.

While their favourite themes have been water, electricity, gas, and public transport systems (trains, buses and taxis), their latest target is the medical sector – hospitals, medical devices, pharmaceuticals and care-giving – where enormous profits can be made through automation. The takeover of most of the non-profit community hospitals in the US by for-profits has resulted in patients confronting huge delays in obtaining basic medical care and being charged outrageous amounts of money for office visits and drugs.

Now that AI has entered the vocabulary of every company executive, public or private, it is only a matter of time before these executives deploy AI algorithms on an unprecedented scale to maximise profit and minimise costs using rank and yank techniques across their organisations, irrespective of social costs.

When companies such as GE, IBM, Microsoft, and Google that have a large presence in India are forced to bring jobs back to the US, the IT sector in cities like Bengaluru and Chennai will be hollowed out, leaving in its wake empty office buildings and tens of thousands of unemployed. If you think this cannot happen, think again. The famed IT corridor outside Boston collapsed in a spectacular manner when IT companies downsized and outsourced much of their work to South and Southeast Asia, resulting in Bengaluru being the biggest beneficiary of this financial bonanza. But how many of the employees at these facilities in cities like Bengaluru will outlast any cost-cutting measures?

China has managed to successfully insulate itself from the predatory practices of US multinationals, in specific IT companies. Has India done the same? Far from it. It has merely replaced one colonial master with another. Old habits die hard.