Effect of artificial intelligence on the pattern of foreign direct investment in the Third World: a possible reversal of trend.

• Author: Duong, Wendy

1. INTRODUCTORY REMARKS

   My paper presents a hypothesis about the future trends of outbound foreign direct investment (FDI) to Third World countries, brought about by large-scaled industrial applications of optimum Artificial Intelligence (AI) in the 21st century.

   To many, the term AI may suggest a vision of the future. If it is, then the topic is indeed an ambitious venture for any international business transactions (IBT) lawyer who chooses to branch out of her specialty to deal with technology, applied mathematics, and economics in exploring the impact of AI. Some may think that I have boldly chosen to turn myself into a futurist.

   Yet, I do not view my paper as being overly futuristic. I want to clarify that this is not a scientific or economic paper. The paper is written for a general audience of lawyers, and the language that I use is that of a lawyer, not of an economist or a scientist. FDI and the pattern of global economic development are my core specialties and the concentration of my scholarship interests.

   The hypothesis I present here is based on past and present events and data:

   First, AI is not something new. It has been used in military and commercial applications since the time of the two World Wars. Then, during war-time, it was called "Operational Research."

   Second, AI has also frequently been used in past and present industrial applications to change factory outputs and production system designs, with substantial macroeconomic impact already felt by society. What I look at now is the role and impact of optimum AI in the New Economy--an economy where Information and Knowledge are considered production factors.

   Third, as of the beginning of the millennium, there have already been changes in FDI patterns, as well as in corporate behaviors, which lend support to this paper's hypothesis. I will explore this evidence in the later part of my presentation.

2. THE THESIS

   Let me first summarize my thesis:

   My paper predicts that AI can stop the outbound flow of FDI from the developed world to the Third World by changing investor behaviors and eliminating the Third World's comparative advantages. I use the term "Third World" for convenience only, to refer to the least and/or lesser developed Asia, the Americas, and Africa collectively, without indulging in any value system that rates these cultures prejudicially. Quite to the contrary, I consider myself an advocate for Third World inhabitants because their voice is often not heard.

   Contradictory to the common belief and conventional wisdom that high tech will better humankind and create new jobs and skills, large-scaled industrial applications of optimum AI can do just the opposite--AI can "ghetto" the already disadvantaged Third World workers and make Third World countries poorer, turning them into producers of cheap raw materials and agricultural products, while eliminating them from the "Information or Knowledge-Based Society" that characterizes market competition in the 21st century. Thus, in this modern age, AI can facilitate and bring about the return of 19th century colonialism, all over again. The vision I see may be counter-intuitive to the traditional legal thinking by international trade and FDI experts.

3. EXPLORING THE THESIS AND BACKGROUND INFORMATION

   The topic came to me when I read an article by the Science editor of MSNBC on the internet this past month (March 2007): "Someday you could be taking orders from a robot, but in a nice way ..." The article talked about human-robot interaction and the work of the American Association for the Advancement of Science. The article also discussed the work of an MIT scientist on robotic technology. Robotic technology is but one application of AI.

   The article also mentioned "fear" as a factor in this new robot-assisted society. So, my vision today--the impact of AI on the Third World--may sound an alarm, foretelling a rather gloomy picture for tomorrow's unskilled workers: that AI can "ghetto" them.

   The problem is not confined to the Third World. The "ghettoing" of unskilled workers can also take place in a developed economy like America. That adds to the notion of "fear."

   To begin with, based on the data released by UNCTAD (United Nations Conference on Trade and Development), (1) you can see that US-based multinationals dominate the FDI scene--their foreign assets, foreign affiliates, and foreign employees, both in Financial Services and Manufacturing and Production of Consumer Products. For example, a diversified giant like GE appears under both categories of the UNCTAD report. The picture is obvious: big American businesses bring their capital and technology abroad. They are the businesses most financially capable to fund and develop AI.

   But what is AI? Here is an IBT lawyer's simplified definition: it's the simulation of the human brain by a computer. In AI research, scientific efforts are made to identify those superior functions of the brain that can be simulated--for example, what an engineer will do to come up with the system design for factory production. Then, mathematical models, especially algorithm, are used to express, memorialize, and document these human brain functions. The models are then fed into a computer, such that when a standardized instruction or an inquiry is given, the computer will generate the result exactly like the work product of the engineer. This enables the computer software to replace the engineer.

   Thus, AI is the modelization of the human brain and its various functions. For example, one of the most spectacular results in AI research has been the "recognition of form," i.e., the capture of visual information by an artificial retina.

   But one thing remains, or at least I believe and hope that you agree: AI cannot replace human aesthetic and moral expressions and choices, or decisions that require emotions, passion, imagination, the judgmental process of weighing consequences, or the human wisdom of predicting the future with nuances. AI cannot and should not compete with Homer or Shakespeare; nor should it replace the decision by the White House on whether, or where, to drop a bomb.

   AI is just one aspect of an...