USA 
United Kingdom
At the AI for Good Global Summit, Gita Gopinath, the IMF's First Deputy Managing Director, delivered a stark warning about the potential economic risks posed by artificial intelligence.
While AI promises significant benefits, including improved health outcomes and scientific advancements, Gopinath emphasized that its widespread adoption could also exacerbate economic crises, particularly by disrupting labor markets.
AI's impact on jobs
Gopinath highlighted that during economic downturns, companies may accelerate automation to cut costs, leading to job losses.
"Nearly 90% of automation-related job losses in the U.S. have occurred in the first year of recessions," she stated, referencing research by Jaimovic and Siu.
In the next downturn, AI could threaten a broader range of jobs, including higher-skilled positions. "An estimated 30% of jobs in advanced economies are at risk of being replaced by AI," Gopinath added.
This could result in unprecedented job losses and long-term unemployment, as many displaced workers may lack the necessary skills in an AI-driven economy.
Financial system disruptions
The financial sector is also at risk. Gopinath noted that AI's complexity could lead to challenges during economic crises.
AI models might not perform well when faced with novel events, potentially causing a "self-confirming spiral of fire-sales and collapsing asset prices." The "black box" nature of AI could make managing such crises particularly difficult.
Supply chain vulnerabilities
AI's role in global supply chains could further worsen economic downturns. Widespread adoption of AI for production decisions might lead to forecasting errors during crises, causing delays and shortages of critical supplies.
Gopinath pointed out that the recent Covid-19 crisis showed how costly supply chain disruptions can be.
Policy recommendations
To mitigate these risks, Gopinath outlined three key policy actions:
Reconsider tax incentives: Gopinath urged policymakers to ensure tax systems do not inefficiently favor automation over human labor. "This is a call to reconsider existing corporate tax incentives that may be making AI ‘special’ and encouraging labor-substituting investments," she said.
Invest in education and training: To protect workers, Gopinath emphasized the need for heavier investments in education and training, especially in emerging markets. "Almost a quarter of young people in emerging market and middle-income countries are not in employment, education, or training," she noted.
Strengthen financial regulation: Financial regulators need to enhance supervision and regulation of AI. "Disclosures by financial institutions may need to be strengthened to provide visibility on how they use AI," Gopinath advised.
While AI holds immense potential for societal benefits, Gopinath stressed that its risks must be managed to prevent it from worsening future economic downturns.
"AI has the power to change our lives and the global economy. We have the power to shape that change for the better," she concluded.
