An Engels’ pause in an AI-shaped world
Engels’ Pause:
Concept: Coined by economist Robert Allen (after Friedrich Engels).
19th-century Britain:
Industrial output surged.
Wages stagnated, cost of living stayed high.
Inequality widened; benefits of industrialization took decades to reach the masses.
Technological revolutions create growth, but mass welfare may lag.
AI and a Modern Engels’ Pause
AI is seen as a General Purpose Technology (GPT) (like steam, electricity, internet).
Potential: Boosts productivity, lowers prediction costs (Agrawal, Gans, Goldfarb, 2018).
Risk: Gains concentrated among few firms/nations; broad-based welfare delayed.
Markers of a Modern Engels’ Pause
Productivity rise, stagnant wages
Example: Call centres in Philippines → 30–50% productivity gains with AI copilots, but wages stagnant.
Workers face inflation, higher cost of living.
Rising cost of complements
AI requires cloud, retraining, data, cybersecurity.
Workers pay high costs for coding bootcamps, certifications → digital survival expensive.
Unequal global distribution
AI could add $15.7 trillion to GDP by 2030.
Benefits concentrated in US, China, few firms with foundational models.
IMF (2024): 40% jobs exposed to AI; inequality may deepen.
Job displacement and task transformation
Doctors, educators, finance workers see tasks reshaped by AI.
Example: Tsinghua University’s AI hospital, Albania appointing world’s first AI Minister.
Policy Lessons from History
U.S. Gilded Age: inequality and unrest, followed by reforms (trade unions, schooling, welfare).
Without governance, Engels’ pause persists.
Pathways to Avoid an AI-Induced Engels’ Pause
Skill transitions & education
Singapore’s SkillsFuture: continuous education credits.
MBZUAI (Abu Dhabi): world’s first AI university.
Redistribution of AI rents
Robot taxes, Universal Basic Income (UBI).
Philanthropic efforts (e.g., Chan-Zuckerberg Initiative).
Treat AI infrastructure as a public good
Compute and data must be affordable.
Open AI reasoning models like K2Think.ai (UAE), Apertus (Switzerland).
The Challenge Ahead
Optimistic view:
Stronger welfare systems, faster diffusion (smartphones, healthcare AI).
AI may deliver quicker welfare benefits than 19th-century industry.
Caution:
Risk of “macro gains but micro stagnation.”
Requires strong political will, equitable governance, and redistribution policies.