[Answered] An ‘Engels’ pause’ due to AI may be shorter if policy aligns with innovation. Critically analyze the policy interventions needed to ensure the economic gains of Artificial Intelligence are broadly shared.

Introduction

AI could add $15.7 trillion to global GDP by 2030 (PwC), yet IMF (2024) warns 40% of jobs are AI-exposed, raising fears of a modern ‘Engels’ pause’.

What is an Engels’ Pause in AI context?

1. Coined by Robert Allen after Friedrich Engels, it refers to rising productivity without commensurate wage gains.
2. In AI era, job displacement, inequality and high cost of complements (cloud, data, retraining) mirror early industrial Britain.
3. Examples:

• Philippines’ call centres: AI copilots raised productivity 30–50% but wages stagnated.
• Indian IT sector: 12,000 layoffs during AI pivot (2024).

Why AI poses risk of a modern Engels’ pause?

1. Productivity-wage disconnect: Gains accrue to firms, not workers.
2. Skills mismatch: Younger, low/mid-skilled workers most vulnerable (Stanford “Canaries in the Coal Mine”, 2023).
3. Concentration of benefits: AI rents captured by U.S., China, Big Tech (PwC, IMF).
4. Cost of digital survival: Continuous reskilling burdens workers (coding bootcamps, certifications).
5. Inequality deepening: Case of India: stronger IPR laws → widened wage inequality (Journal of Development Economics, 2022).

Policy Interventions Needed

1. Skilling and Human Capital Development: Singapore’s SkillsFuture, lifelong learning credits for reskilling. Abu Dhabi’s MBZUAI, world’s first AI University. India’s Skill India Mission 2.0 must integrate AI-focused curricula, apprenticeship models, and NEP 2020 flexibility.
2.            Redistributive Mechanisms: Robot taxes, proposed by Bill Gates to redistribute productivity rents. Universal Basic Income (UBI), pilots in Finland, UK; ensures baseline security. India could experiment via DBT-linked AI dividend schemes.
3. AI as a Public Good: Compute and Data Infrastructure treated like electricity. UAE’s K2Think.ai and Switzerland’s Apertus – public open AI reasoning models ensuring access beyond monopolies. India’s IndiaAI Mission (₹10,300 crore) aims for compute infrastructure, datasets, and AI innovation hubs.
4. Labour Market Institutions and Social Protection: Strengthen collective bargaining, gig worker protection, and expand social security nets. OECD (2023) suggests portable benefits for gig/AI-displaced workers. India’s Code on Social Security, 2020 must be operationalised to cover AI-affected gig workforce.
5. Ethical AI Governance: National AI ethics frameworks aligned with UNESCO/OECD principles. Encourage responsible AI deployment in health, education, agriculture — sectors that directly impact inclusive growth.

Critical View

1. Unlike 19th century, today’s welfare systems and rapid diffusion may shorten the pause.
2. AI can reduce costs in healthcare, education, and energy → immediate welfare benefits if governance accelerates.
3. However, risks of techno-feudalism (where few firms own AI models) could prolong inequality unless policy aligns with innovation.

Conclusion

As Amartya Sen argued in Development as Freedom, true progress lies in expanding human capabilities, AI’s promise will shorten the Engels’ pause only if policy ensures equity with efficiency.”