Why in News: Nobel Laureate Geoffrey Hinton warned that AI may make a few people rich while leaving the majority poorer, echoing the historical phenomenon of Engels’ Pause.
Concept
- Engels’ Pause: Term by Robert Allen (after Friedrich Engels).
- 19th c. Britain → Industrial output rose, but wages stagnated, food prices dominated budgets, inequality deepened.
- Welfare gains reached masses only decades later.
AI Context
- Nobel Laureate Geoffrey Hinton warns: AI will enrich a few, impoverish many.
- AI as General Purpose Technology (GPT): like steam power, electricity, Internet.
- Productivity gains possible, but widespread welfare delayed unless institutions adapt.
Indicators of a Modern Engels’ Pause
1. Productivity without wage growth
- Eg: Call centres in Philippines – AI copilots ↑ productivity (30–50%) but wages stagnate.
2. Rising cost of complements
- Cloud computing, retraining, certifications → higher survival costs.
3. Unequal distribution of gains
- PwC: AI may add $15.7 trillion to GDP by 2030.
- Gains concentrated in US, China, few model-owning firms; global inequality likely to deepen.
4. Job displacement/task transformation
- AI hospitals in China, AI-powered public management, education, finance.
Historical Lessons
- US Gilded Age: inequality & unrest; relief came only with trade unions, welfare states, public schooling.
- Caution: macro productivity ≠ micro welfare.
Policy Prescriptions
- Skill transitions: Singapore’s SkillsFuture, AI University in Abu Dhabi.
- Redistribution of AI rents: Robot taxes, Universal Basic Income (UBI).
- Treat AI infrastructure as public good: affordable compute, open models (e.g., K2Think.ai).
Conclusion
Engels’ pause is not destiny. With governance, redistribution, and inclusive innovation → AI can become a human welfare revolution rather than just a productivity revolution.
UPSC Relevance
GS Paper III – Economy & Science-Tech
- General Purpose Technologies (AI, automation) and their impact on growth, employment, inequality.
Mains Practice Question
Q. “The rise of Artificial Intelligence has revived fears of a modern-day Engels’ Pause, where productivity increases but welfare gains stagnate. Critically examine this statement in light of India’s challenges of employment, skilling, and inclusive growth. (250 words)”