Brynjolfson, McAfee, and Spence: "New World Order" (2014)

In this article, two MIT management researchers and the economist Michael Spence argue that the increasing use of automation in production is for the benefit of capital, consumers, and the top of the economic pyramid, but tends to leave the vast majority with stagnating wages.

Here are some quotes:

Turn over your iPhone and you can read an eight-word business plan that has served Apple well: "Designed by Apple in California. Assembled in China." … More and more companies have been riding the two great forces of our era—technology and globalization—to profits. (p. 45)

Even as the globalization story continues, however, an even bigger one is starting to unfold: the story of automation, including artificial intelligence, robotics, 3-D printing, and so on. And this second story is surpassing the first, with some of its greatest effects destined to hit relatively unskilled workers in developing nations.

Visit a factory in China's Guangdong Province, for example, and you will see thousands of young people working day in and day out on routine, repetitive tasks, such as connecting two parts of a keyboard. Such jobs are rarely, if ever, seen anymore in the United States or the rest of the rich world. But they may not exist for long in China and the rest of the developing world either, for they involve exactly the type of tasks that are easy for robots to do. As intelligent machines become cheaper and more capable, they will increasingly replace human labor, especially in relatively structured environments such as factories and especially for the most routine and repetitive tasks. To put it another way, offshoring is often only a way station on the road to automation. (p. 46)

The growing capabilities of automation threaten one of the most reliable strategies that poor countries have used to attract outside investment: offering low wages to compensate for low productivity and skill levels. And the trend will extend beyond manufacturing. Interactive voice response systems, for example, are reducing the requirements for direct person-to-person interaction, spelling trouble for call centers in the developing world. Similarly, increasingly reliable computer programs will cut into transcription work now often done in the developing world. In more and more domains, the most cost-effective source of "labor" is becoming intelligent and flexible machines as opposed to low-wage humans in other countries. (pp. 46–47)

Network effects, whereby a product becomes more valuable the more users it has, can also generate these kinds of winner-take-all or winner-take-most markets. Consider Instagram, the photo-sharing platform, as an example of the economics of the digital, networked economy. The 14 people who created the company didn't need a lot of unskilled human helpers to do so, nor did they need much physical capital. They built a digital product that benefited from network effects, and when it caught on quickly, they were able to sell it after only a year and a half for nearly three-quarters of a billion dollars—ironically, months after the bankruptcy of another photography company, Kodak, that at its peak had employed some 145,000 people and held billions of dollars in capital assets. (p. 50)

But as research by one of us (Brynjolfson) and Heekyung Kim has shown, a portion of the growth [in wages for top executives] is linked to the greater use of information technology. Technology expands the potential reach, scale, and monitoring capacity of a decision-maker by magnifying the potential consequences of his or her choices. Direct management via digital technologies makes a good manager more valuable than in earlier times, when executives had to share control with long chains of subordinates and could affect only a smaller range of activities. (pp. 50–51)