The end of the traditional promotion model
Historically, the path out of poverty for developing economies (such as South Korea and China) has been based on the so-called "development ladder". This mechanism is now threatened by automation driven by artificial intelligence (AI). There is a risk that AI will "cut off" the lower rungs of this ladder, preventing other countries (e.g. in Africa or South Asia) from repeating the success of the Asian tigers.
The "Development Ladder" mechanism and labour arbitration
The traditional model, which has lifted millions of people out of poverty over the past 70 years, was based on a simple sequence:
- Labour cost arbitrage: The country offers cheap labour, attracting production from abroad.
- Exports: Production of simple goods (textiles, simple assembly) for global markets.
- Learning by doing: Employees and companies acquire know-how, technology and capital by moving into more advanced sectors (electronics, services).
Threat: AI (especially Transformative AI – TAI) drastically reduces the value of cheap human labour. If AI systems can act as "remote workers" at a fraction of the cost of an employee from a developing country, the fundamental competitive advantage of these countries (cheap labour) ceases to exist.
Two fronts of the AI "onslaught"
Digital Services – the trap of leapfrogging
Many countries (India, the Philippines, Kenya, Rwanda) have attempted to "leapfrog" the industrialisation stage by focusing directly on digital services: BPO (business process outsourcing), call centres, and simple programming.
- Problem: These sectors are the most susceptible to automation by language models (LLMs). The cost of implementing AI is close to zero (API cost), which is cheaper than even the cheapest employee in India or Kenya.
- Impact: Jobs in BPO or content moderation may disappear before these economies have time to build lasting prosperity on them.
Industrial production – capital barrier
AI and robotics are making modern manufacturing increasingly capital-intensive and less labour-intensive.
- Problem: Today's textile factories and electronics assembly plants require advanced AI systems for management, quality control and optimisation.
- Result: Production may remain in developed countries (reshoring) or with current industrial giants, as new players (e.g. Bangladesh) will not be able to finance the expensive technological infrastructure required to be competitive. Cheap labour is no longer a decisive advantage.
The human capital crisis and the "brain drain"
This is probably the most interesting point from a strategic perspective. The elimination of entry-level jobs creates a gap in the vocational education system:
- Lack of a training ground: Without simple tasks at the beginning of their careers, employees do not gain the experience needed to advance to higher positions.
- Global parallel: This phenomenon affects both young workers in the US (automation of junior tasks) and entire nations (inability to enter the global value chain).
Geopolitical implications: The widening gap
Developed countries control the AI value chain (chips, data centres, fundamental models). They can capture productivity gains and possibly redistribute profits (e.g. social protection for their citizens). Developing countries:
- They are losing their export advantage.
- They do not have their own AI infrastructure.
- They may be deprived of the means for transformation, falling permanently behind.
The need to change strategy
The old economic development model (East Asian model) is becoming obsolete. Developing countries must:
- Look for local niches: Focus on areas that require physical presence, local knowledge, or specific cultural data that AI cannot easily replicate.
- Invest in sectors resilient to AI: Tourism, healthcare, specialised agriculture – areas where human labour is complementary rather than substitutive.
- Build digital infrastructure: To avoid being completely excluded from the global data flow.
Artificial intelligence is not only changing the labour market, but may also permanently cement the global development ladder, preventing poorer nations from advancing to the ranks of developed countries. This requires an immediate review of national strategies in the countries of the Global South.
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