When we mistake the real for the ideal world

In recent weeks I have blogged on multiple occasions (here, here, here, and here) about how  intellectuals, barring a few honourable exceptions like Dani Rodrik, have got completely wrong the interpretation of important global trends like free trade and globalisation, financial deregulation and capital account liberalisation, premature deindustrialization and automation, cross-border labor migration, and global citizenship.

It does not require too much exploration to realise that large numbers of people lose their jobs either due to premature industrialisation or automation or off-shoring or competition from migrants. Similarly, national businesses lose market share to multinationals and finally exit the market, and economies are ravaged at increasing frequency by the vagaries of cross-border capital floods and sudden-stops. And the corollary of global citizenship is most often an abdication of actual "citizenship" responsibilities. 

In all these cases, the intellectual argument is that market adjustments happen to mitigate these effects. This is despite ample evidence that such adjustments, like with most other market based adjustments, take an inordinately long time, long enough to cause irreversible pain and damage to people and their societies. And the fiction continues that public policy will somehow redistribute gains from the winners to compensate the losers despite not even a single instance of such explicitly targeted redistribution initiative in any country of note in recent times.

There are two explanations for such responses. The materialistic explanation is that these trends have limited adverse impact on those who call themselves middle class and above. It can even be said that these trends even enhance their economic and social prospects. In fact, the "global citizens" may be the biggest beneficiaries of all these trends. In contrast, the brunt of each of these trends is felt by those at the lower levels of the income ladder. 

There is also a deep psychological explanation. All of us who consider ourselves a liberal, feel compelled to be politically correct and be on the right side of the ideological orthodoxy, a view reinforced by intense peer pressure as well as an urge to be doing and supporting the 'good', which has become intimately linked with the liberal ethos. Therefore, in all these cases, we try to complicate and over-intellectualise trends whose proximate effects are egregiously disturbing for the vast majority of citizens. Sometimes, instead of searching for rigorous enough evidence, which is invariably elusive, we just need to put aside our ideological blinkers and be practical in observing and using judgement to draw conclusions about what is happening around us. 

Free trade, globalisation, automation, financial market liberalisation, open borders and liberal immigration, and global citizenships are unqualified positive ideas, intimately associated with the progressive ideal. Critics of these ideals are the antithetical straw-men, undesirable vestiges of a less progressive and anti-liberal bygone era. Accordingly, any scepticism about them is not only anti-liberal, but also a concession to, even appeasement of, the critics. As Rodrik has acknowledged himself, such political correctness is pervasive even at the highest levels of the academia.

Politicians, whose incentives are closely aligned towards responding to the concerns of actual people living in the real world, cannot be faulted if they perceive these trends and respond to the concerns. As intellectuals and opinion makers, with their largely unqualified and vocal support for these trends, have abdicated the debating space for an engagement on realistic terms, it is only natural that extremist opinions and forces gain traction and become platforms for political mobilisation. 

None of this is an argument to pitch our tents behind the critics of all these trends, but a plea to be more nuanced in our appreciation of them. We need to appreciate the world for what it actually is and likely to be so for the foreseeable future and not what the world ought to be in our ideologically coloured imagination. 

Weekend reading links

1. Times points to a new report that highlights the lack of dynamism in the US economy,

They cite federal data showing that in 1977, more than 16 percent of firms in the United States were less than a year old, a figure that had fallen to half that by 2014. New businesses have similarly done less to power new jobs than they once did, while the biggest, oldest firms account for a rising share of economic activity. Market concentration increased for two-thirds of industries between 1997 and 2012, the report found. That coincided with a steady rise in corporate profits as a share of gross domestic product, and in a decline in the share going to workers’ wages. The job market has become less fluid. The proportion of workers who change jobs in a given year has fallen from 12 percent in 2000 to 7 percent in 2015. Workers are also less likely to migrate within the country. In the 1970s, more than 3 percent of the population moved across state lines in a given year; since 2006, the number has hovered around 1.5 percent. Most startlingly, the creation of new companies has been concentrated in a small number of metropolitan areas: Dallas, Houston, Los Angeles, Miami and New York. From 2010 to 2014, those five regions created as many new businesses as the rest of the country combined. 

More evidence that the fundamental structure of the economy has changed significantly over the years and protectionist rhetoric that harp on returning manufacturing jobs may remain just that, rhetoric.

2. Yet more reminder that fixing complex challenges like improving farm incomes has to go far beyond elimination of middle-men through commodities exchanges and online trading platforms. This from the experience of Ethiopia Commodity Exchange (ECX), 

By connecting smallholder farmers to global markets, the exchange, launched with a fanfare in 2008, was supposed to help reduce hunger. The hope was it would reduce price volatility and incentivise farmers to plant crops. But staple foods such as haricot beans today account for less than 10% of its trade. Its annual turnover—worth about $1bn—is dominated instead by two export crops, coffee and sesame seeds. In 2015, despite a dire drought, Ethiopia did avoid famine, but the ECX played little role: its maize and wheat contracts had lapsed by then because of concerns that exports would jeopardise domestic food supplies. Cutting out middlemen seems not to have done much for smallholders: studies suggest that the share of international prices received by coffee farmers has barely budged over the past decade.

I had written earlier cautioning against excessive optimism with the electronic trading platform established in India with the objective of creating a unified national agricultural market.

3. Jayan Jose Thomas has a decomposition of the new entrants to India's work force,

They (NSSO and Census) suggest that between 2004-05 and 2011-12, the population in the age group of 15-59 increased at the rate of 16.2 million a year. During the same period, the population of students 15 years or older increased at the rate of 5.9 million a year. Students do not form part of the workforce. Therefore, if we subtract the growth of students from the growth of the working-age population, we obtain an estimate of the growth of the potential workforce. This is found to be 10.3 (that is 16.2–5.9) million a year for India between 2004-05 and 2011-12. During the same period, however, the workforce engaged in agriculture and allied activities declined at the rate of 4.4 million a year. Assume that the workers who shifted out of agriculture sought employment in industry and services. If so, the potential workforce in industry and services in India grew at the rate of 14.7 (that is, 10.3+4.4) million a year between 2004-05 and 2011-12.

4. Donald Trump is a master of shifting the frames of reference. He takes outrageous public positions with his tweets, be it abusing opponents, intimidating judges, maligning journalists, or indulging in naked nepotism. Once the dust settles down, he would have invariably shifted the terms of discussion on the issue the next time it crops up.

The first instance of such expressions (or tweets) would have shaken up the social conscience and aroused anger. But after two or three iterations of such abuse, intimidation, or nepotism, the moral indignation of the social collective becomes attenuated. They become the new normal!

The gradual social reconciliation with the massive conflicts of interest that is egregious is the perfect example. This is a teachable example of how public morals slip down the slope, most likely irreversibly.

5. Times has this story of Foxconn's largest factory in Zhengzhou which makes nearly half of all iPhones,

Zhengzhou, a city of six million people in an impoverished region of China. Running at full tilt, the factory here, owned and operated by Apple’s manufacturing partner Foxconn, can produce 500,000 iPhones a day. Locals now refer to Zhengzhou as “iPhone City.” The local government has proved instrumental, doling out more than $1.5 billion to Foxconn to build large sections of the factory and nearby employee housing. It paved roads and built power plants. It helps cover continuing energy and transportation costs for the operation. It recruits workers for the assembly line. It pays bonuses to the factory for meeting export targets...

Foxconn receives a bonus when it meets targets for exports. Those subsidies, according to the government records, totaled $56 million in the first two years of production, when the factory was exclusively dedicated to the iPhone. The bonus is small on each of the tens of millions of iPhones produced during that period. But the subsidies add up: The government records list more than a dozen other forms of financial aid at the Zhengzhou operation. The Zhengzhou government eliminated corporate taxes and value-added taxes that Foxconn pays for the first five years of production; they are half the usual rate for the next five. The city lowered Foxconn’s social insurance and other payments for workers, by up to $100 million a year. The customs operation is also in a so-called bonded zone, an area that China essentially considers foreign soil, subject to different import and export rules. This setup allows Apple to sell iPhones more easily to Chinese consumers.

Foxconn is clearly able to have its way with national governments, even in China. No wonder its similar expectations from state governments in India.

6. The always excellent Dani Rodrik takes aim another holy cow among liberals, the "global citizen". He questions what global citizens do, 

Real citizenship entails interacting and deliberating with other citizens in a shared political community. It means holding decision-makers to account and participating in politics to shape the policy outcomes. In the process, my ideas about desirable ends and means are confronted with and tested against those of my fellow citizens. Global citizens do not have similar rights or responsibilities. No one is accountable to them, and there is no one to whom they must justify themselves. At best, they form communities with like-minded individuals from other countries. Their counterparts are not citizens everywhere but self-designated “global citizens” in other countries.

Despite its apparent simplicity, most intellectuals fail consistently to grasp this insight,

We have to live in the world we have, with all its political divisions, and not the world we wish we had. The best way to serve global interests is to live up to our responsibilities within the political institutions that matter: those that exist.

I cannot agree more and it is amazingly ubiquitous.  

7. Talking about Dani Rodrik, see this nice profile. And this captures the essence of the difference between conventional economists and people like Dani,

THERE ARE ECONOMISTS who teach the well-known postulate that free trade improves global well-being. There are other social scientists and popular critics who contend that laissez-faire trade can be bad for equality, for social stability, and even for economic efficiency, just as pure laissez-faire is not optimal at home.

And then there is Dani Rodrik.

This applies to not just free trade, but as I have blogged earlier automation, capital account liberalisation, migration, global citizenship etc.

8. Economist has a good article which once again highlights the implications of big data on privacy and why it has to be dealt with extreme care,

But critics fear too much data-crunching could actually increase financial exclusion. The riskiest customers, and those offline, might be priced out. The more the industry relies on complex—and proprietary—algorithms, feeding machines that keep learning, the harder it will be for customers, and regulators, to untangle why they were rejected. And algorithms can be wrong. A bilingual speaker’s search-engine entries could look erratic; a social-worker’s location-tracker could imply a risky lifestyle. And since it is unclear how judgments are made, says Frederike Kaltheuner, from Privacy International, “you could get stuck in a Kafkaesque situation where you’re put in a certain box and can’t find out why, and can’t get out.”... People give uninformed consent to all sorts of things online. But users can feel tricked and spied on if they learn their data have been sold or used in unexpected ways... 

Regulators have a role to play, particularly in dealing with questions of discrimination and exclusion. If using someone’s browsing history to exclude them from an offer for a cheap flight is OK, is it also reasonable to use those data to lock them out of health insurance (eg, by assuming that someone who Googles doughnut shops is a bad risk)? Now that Amazon sells loans, Alibaba has a payments business and Facebook has patented a credit-rating system, regulators should be at least as worried about non-traditional financiers and fintech startups, which sometimes escape regulation. 

9. On the increasingly relevant subject of whether internet companies, especially on e-commerce side, should be regulated like regular entities performing similar services. As the Economist writes, currently "they are not legally responsible, either for what their users do or for the harm that their services can cause in the real world". Accordingly, Airbnb and Uber have disclaimed any liability from their services and been spared the more rigorous standards followed by their brick-and-mortar counterparts. But as this market expands problems are emerging,

Airbnb’s inventory of 2.3m rooms makes it bigger than the three largest hotel chains—Hilton, Marriott and InterContinental—combined. Incumbents are demanding that online rivals obey rules that constrain everyone else... Airbnb stands accused of reducing the supply of affordable housing in big cities. Uber is said to worsen traffic problems and to weaken public-transport systems by luring away passengers. Facebook and Twitter are accused of enabling the spread of fake and biased news during America’s election. Such services have also become favourite hangouts for bullies and trolls...

It is also becoming exceedingly hard to maintain that platforms are—like telecoms networks—“neutral”. The argument that they do not interfere in the kind of content that is shown was a key rationale for exempting them from liability. But they are starting to resemble regulators themselves, which makes it odder still that they act outside legal limits. Facebook’s algorithms determine what members see in their news feeds. Uber’s software decides what drivers get paid. It is getting easier to police platforms, too, thanks to artificial-intelligence techniques which can recognise and predict patterns of bad user behaviour.

10. Finally, the popular narrative on migration is largely confined to the refugees and migrations from South to North. As the Economist writes, a much larger migration happens in Asia. Consider this, 

China has long been able to satisfy its demand for labour by moving rural citizens to cities. Over the past 30 years around 150m Chinese have left the countryside to staff factories, cook in restaurants and clean homes. But with China’s population ageing, foreign workers have begun filling the gap: as many as 50,000 Vietnamese illegally cross the border into the southern province of Guangxi each spring to help harvest sugar cane. In 2015 the provincial government started a programme to bring Vietnamese workers into local factories in one city. Off to a good start, it is being introduced in other parts of Guangxi.

China remains a net exporter of labour, but the balance is shifting quickly. Over the next 30 years its working-age population will shrink by 180m. How China handles this fall will play a large role in shaping Asian migration patterns. Manufacturers can move factories to labour-rich countries, or invest in automation. Other industries lack that option. The ILO forecasts that China will need 20m more domestic workers as it ages.

The impending collapse of the workforce is not an exclusively Chinese problem. To keep the share of its population at working age steady, East Asia would have to import 275m people between the ages of 15 and 64 by 2030. South-East Asia would have to attract 6m... South Asia, meanwhile, could afford to lose 134m workers—India alone could send more than 80m abroad—without worsening its dependency ratio. China’s projected shortfall in 2030 is equivalent to 24% of its current working-age population; in Bangladesh the likely surplus is 18%.

Jeff Sachs on foreign policy and international development

Ananth points to this fine, fine Jeff Sachs interview which should count as among the most prudent assessments of global geopolitics and international development. At a time when political correctness and ideological biases are commonplace among the intelligentsia, this comes out as a refreshing acknowledgement of the reality. 

He attributes populism to rising nationalism, weakening of US Foreign Policy, refugee crisis, and the crisis on the centre left. Sample this on immigration,

All of the Scandinavian countries, and their neighbors in northern Europe, have right-wing populist parties, with some approaching power... For me, the most pertinent fact is that populist Scandinavians are calling for a social-democratic order, but one for Danes or Swedes or Norwegians alone. They like their society; they just don’t want newcomers. So, it’s explicitly anti-migrant – essentially a demographic and cultural reflex... I think people really like their social order – again, I don’t think we know how to make economies work better than those countries do. What many of their people apparently don’t like is Muslims living in their country. They don’t want mosques in their neighborhoods. That’s not true of everybody, of course, but that’s what the backlash reflects. 

And on the challenge facing Africa,

Africa’s demographic trajectory is deeply worrisome because it is built on an extremely high fertility rate that will hinder its own sustainable development. In Sub-Saharan Africa, the average fertility rate remains more than five children per woman, and the resulting population trajectory is roughly a quadrupling of the continent’s population by the end of this century. That means about four billion people in Sub-Saharan Africa, compared to a European population that might be around 500 million at the end of the century... the bottom line is that Africa will never achieve successful development if it reaches four billion people at the end of this century. That trajectory would lead to unbearable environmental stress, hunger, war, water depletion, and destruction of remaining biodiversity. It would be a disaster first and foremost for Africa.

This assessment of "regime change" foreign policy is spot on,

In my opinion, it is a US-Saudi-Turkish war of regime change that is essentially stupid and against international law. The reason we have a refugee crisis is not because of Syrian President Bashar al-Assad, but because the US, the Saudis, and the Turks said in 2011 that Assad should be overthrown. It was a stupid idea – just as stupid as the idea of overthrowing Libya’s Muammar el-Qaddafi in 2011 and Iraq’s Saddam Hussein in 2003... Assad wasn’t such a danger from 2000 to 2010. Syria was a normal country with autocratic rule. It wasn’t a global humanitarian disaster. It became a disaster in the spring of 2011, and especially on August 18, 2011, when Barack Obama said that Assad must go. That was Obama’s worst foreign-policy blunder, and we’re still living with the consequences. Why would a US president say that another country’s president must go? The idea that the US can choose who should lead other countries has been a complete failure.

And on the surprisingly less discussed concern that Russia rightfully harbours with the presence of NATO in its "near abroad",

SS: Then why did Russia invade Ukraine, annex Crimea, and back the separatists in Donbas?

JS: I think that the US made a huge mistake in trying to flip Ukraine to NATO.

SS: Ukrainians wanted to join NATO.

JS: I know, but the US should say: “No way.”

SS: Why?

JS: Because that’s geopolitics.

SS: What should these countries do? Must they be subordinate to Russia?

JS: Imagine that Mexico’s leaders, having decided that Trump poses a grave threat to their country’s security, formed a military alliance with China. As far as I’m concerned, it would be their choice to make. But US policymakers – Republicans and Democrats alike – wouldn’t see it that way. I don’t know what would happen the next day, but I wouldn’t want to be in Mexico City, or perhaps anywhere in the world (which would all be threatened). This is reality. And it’s why a sensible US leader would say to the Ukrainians: we care for you, we love you, but we don’t want you in NATO, because we don’t want to provoke a conflict with the major power on your border.

Standardizing "citizen feedback services"

Another example of "crossing the river by feeling the stones" comes from China's experiment with collecting citizen feedback on public services delivered by local governments. Since the early eighties, Beijing has allowed local governments to experiment with feedback systems. This had resulted in the proliferation of large numbers of such systems, with most local government departments having their own dedicated feedback channels. 

The Economist has a nice article on the feedback systems,

There are mayor’s mailboxes on the websites of every municipal government, usually indicated by a button next to a biography of the official with an exhortation to “write me a letter” (or, in practice, send an e-mail). The hotlines allow people to be put through to a local bureaucrat. The first one was set up in 1983. Since then they have proliferated, creating an unco-ordinated tangle. But the past few years have seen rounds of consolidation. Shanghai announced a single hotline in 2013. Guangzhou, in the south, did so in 2015. The unified ones all use the same number, 12345... A survey last year by Dataway Horizon, a consultancy in Beijing, found wide variations in the quality of service. In Beijing, Shanghai and Chongqing, which are among the richest cities, all hotline calls were put through right away. In Yunnan, Tibet, Shaanxi and Qinghai—less-developed provinces in the west—only a fifth of calls were even answered on the first attempt.

Once these "million flowers" bloomed, positive deviances emerged and Beijing then stepped in to facilitate more orderly development, 

In recent months state media have been promoting what they call a model example—the 12345 hotline in Jinan, capital of the coastal province of Shandong. It was launched in 2008, has about 60 operators on duty and gets nearly 5,000 calls a day, rising to 20,000 on busy ones... Before it was set up, the city had 38 hotline numbers for contacting different departments. That was “chaos”, the administration said... In an attempt to improve widely varying levels of service, the central government recently laid down rules for running 12345 hotlines. Starting in July, calls must be answered within 15 seconds, at least one person on duty should be able to speak a language other than Mandarin and the line should be open 24 hours a day.

The contrast with India is stark. Such feedback or "grievance redressal" systems have been functioning in districts and cities for decades. There is very little standardisation of process protocols, service levels, and reporting formats among the tens of hundreds of software applications, online and offline, that are used across the country. 

The vast majority of these software are leaky and inefficient variants, developed on shoe-string budgets by the local officials of the National Informatics Centre. Further, most often, incoming officials tinker ad nauseam whimsically with these systems, preventing the institutionalisation of any one software. To the best of my knowledge, even today, no state government has a unified "grievance redressal" mechanism that covers all its agencies. 

A simple but robust web-enabled application that collects grievances from multiple sources, networks officials from different agencies, consolidates action taken, and analyses and renders appropriate reports to officials at different levels can be a very strong systemic effort to improve state capacity. A few state governments could initiate efforts to develop and stabilize such an application over a 2-3 year period.

In a separate context, such feedback systems are a very useful entry point to being the inculcation of accountability in countries with very weak state capacity.

Competition and Chinese Capitalism

A feature of the tech industry in the US has been the prolonged dominance of industry leaders like Microsoft and Intel earlier, and Google and Apple or Facebook and Twitter or Amazon and Uber now.

As Marianna Mazuccato has shown, all these companies ride on products built on pre-existing innovations, with largely incremental innovations. Once they become entrenched, despite the much-vaunted market promoting institutions, competitors struggle to make a mark. The incumbents accumulate massive cash surpluses, preferring to payout dividends or buy up firms instead of re-investing in product development. The Economist reports that for "every dollar of cash the tech industry makes, it reinvests 24 cents; that compares with 50 cents for other non-financial firms." 

Commentators rationalise these apparent contradictions with free market principles on aspirational values, network effects, intellectual property rights, and the nature of modern internet economy itself. Apple has positioned itself as an aspirational symbol and is therefore able to steer consumers towards its suit of products. Google and Amazon benefit from vertical and horizontal network effects. And in any case, all these firms have to fight the inevitable forces of Schumpeterian creative destruction. So why should we be worried?

Only that this argument is being upended in product after product in China. The entry barriers that are blamed for market concentration appear less applicable. Even without the Schumpeterian dynamics of new market creation, firm turnover in the same product market is surprisingly high. 

There is something about China that brings out the competitive juices of capitalism. The latest example comes from the rise of new competitors to the likes of Apple in the smart phones market in China,

OPPO, and its sister firm, Vivo, also a child of BBK, started out in 2004 and 2009 respectively, making cheap and cheerful phones like plenty of other obscure Chinese manufacturers. They probably didn’t even register on Apple’s radar. Xiaomi was the Chinese handset-maker to watch; urban sophisticates, enticed by viral marketing, flocked to its slick devices. But in June 2016 OPPO’s R9, which costs around $400, overtook the iPhone, which is priced at twice that, as China’s best-selling handset. Vivo, which targets younger consumers with lower prices, is also surging... Two years ago they were struggling to join China’s top five smartphone-makers; now they are among the biggest five globally. One out of every three smartphones sold in China in the third quarter of 2016 carried one of their brands; in 2012 their combined share was below 3%.

Apart from developing excellent products, their success has owed to very insightful appreciation of the market,

It took discipline not to be waylaid by the striking (though short-lived) success of Xiaomi’s hype-fuelled internet strategy. Many other companies tried to copy it. From 2011 to 2013, insiders say, OPPO looked hard at expanding its online sales channels, but decided against it... Instead, OPPO became still more expert at incentivising its physical retailers. It has shown itself willing to share some of its profits with local stores. It uses a sophisticated system of subsidies that vary by model and season. One retailer in a small town in Sichuan says that although he sells many brands of smartphones, OPPO’s generous subsidies make him extra-eager to peddle its wares.

And the result, 

Fat profits are hard to come by in China’s giant smartphone market. Because it is simple for firms to outsource almost every aspect of phonemaking, from designing components and chipsets to contract manufacturing, the barrier to entry is low (the physical networks that OPPO and Vivo have built will be far harder to replicate than an online presence). Teeming firms means vicious price competition, especially for cheaper phones. The price of a Chinese smartphone may drop to as little as $50, analysts reckon.

Competition has encouraged firms to share a greater part of profits with their retailers, spawned a large and vibrant eco-system of suppliers, lowered entry barriers, and dramatically reduced prices for consumers. 

Isn't it ironical that Chinese capitalism has generated outcomes similar to those taught in Econ 101, whereas American tech industry has spawned monopolistic behemoths? 

Labor markets and automation

1. The Executive Office of the US President has an excellent report on how technological changes affect the labor market, “Artificial Intelligence, Automation, and the Economy”.

It has recommended a slew of policies - raising the minimum wage, strengthening union bargaining power, providing cheaper housing to improve labour mobility, shifting taxes from labour to capital, and massively increasing funding for job training and re-education. It identifies three broad categories of policies to address this - invest in and develop AI for its many benefits; educate and train Americans for jobs of the future; and aid workers in the transition and empower workers to ensure broadly shared growth.

Its broad findings,

Because AI is not a single technology, but rather a collection of technologies that are applied to specific tasks, the effects of AI will be felt unevenly through the economy. Some tasks will be more easily automated than others, and some jobs will be affected more than others—both negatively and positively. Some jobs may be automated away, while for others, AI-driven automation will make many workers more productive and increase demand for certain skills. Finally, new jobs are likely to be directly created in areas such as the development and supervision of AI as well as indirectly created in a range of areas throughout the economy as higher incomes lead to expanded demand... Research consistently finds that the jobs that are threatened by automation are highly concentrated among lower-paid, lower-skilled, and less-educated workers. This means that automation will continue to put downward pressure on demand for this group, putting downward pressure on wages and upward pressure on inequality.

2. Carl Benedikt Frey and Michael Osborne have an assessment of the total share of jobs in different countries which are at "high risk" from automation. They find that the share of jobs at risk increases with decreasing per capita incomes, and the share for India and China stood at 69% and 77% respectively.

Techno-optimists like Erik Brynjolfsson and Andrew Mcafee argue that such automation will be accompanied by the creation of newer categories of jobs. While that is entirely likely, the concern is that those newer jobs may be only a small proportion of the jobs that have been destroyed or displaced. The concern arises from the fact that manufacturing - which has been the single biggest category of productive jobs, with clear pathway of gradual labor market mobility, across countries which have traversed the development trajectory - would be the worst affected by automation.

In any case, automation is not the only challenge facing labor today. In the years ahead, labor markets across the world, including developed economies, will have to navigate four headwinds in the years ahead - premature de-industrialization, stagnating global trade, rising automation, and the declining influence of the multinational corporation. None of the current thinking provides a satisfactory enough answer to addressing them. 

Another headwind for EMs - end of age of multinationals?

From an article in The Economist which predicts that the age of the multinational corporations may be over and the "infatuation with global companies will come to be seen as a passing episode in business history", 

In 2016 multinationals’ cross-border investment probably fell by 10-15%. Impressive as the share of trade accounted for by cross-border supply chains is, it has stagnated since 2007 (see chart 2). The proportion of sales that Western firms make outside their home region has shrunk. Multinationals’ profits are falling and the flow of new multinational investment has been declining relative to GDP. The global firm is in retreat... In 2000 every billion dollars of the stock of worldwide foreign investment represented 7,000 jobs and $600m of annual exports. Today $1bn supports 3,000 jobs and $300m of exports.

As to why is this happening,

That is because a 30-year window of arbitrage is closing. Firms’ tax bills have been massaged down as low as they can go; in China factory workers’ wages are rising. Local firms have become more sophisticated. They can steal, copy or displace global firms’ innovations without building costly offices and factories abroad. From America’s shale industry to Brazilian banking, from Chinese e-commerce to Indian telecoms, the companies at the cutting edge are local, not global. The changing political landscape is making things even harder for the giants.

This is yet more disturbing news for countries like India that are seeking to emulate China's growth path, which rode on manufacturing and foreign direct investment (FDI). Not only is manufacturing, the largest source of commoditized middle-skill jobs, on the decline, now FDI too seems on the wane.   

It may be time to move from courting foreign firms to "make in India" to encouraging local firms to "make in India". Improving the ease of doing business assumes critical significance.