Washington, July 16: Federal Reserve Chairman Kevin Warsh has said that the United States is witnessing the biggest wave of business investment in a generation, driven largely by artificial intelligence (AI), and predicted that the technology would ultimately create jobs, lift productivity and strengthen the American economy despite short-term disruption.
Appearing before the Senate Banking Committee on Wednesday (local time) for his first semiannual monetary policy hearing since taking office seven weeks ago, Warsh repeatedly argued that AI should be viewed as a long-term economic opportunity rather than merely a source of labour market anxiety.
"I can't think... of a more consequential change to the US and global economy in my adult lifetime than the surge of investment and the potential in and around AI," Warsh told lawmakers. He added that the technology would affect both sides of the Federal Reserve's dual mandate of stable prices and maximum employment.
Warsh said business investment, particularly in AI infrastructure, data centres and related equipment, had become the most striking feature of the US economy.
"The rapid pace of CapEx... reflects in large part -- the construction of infrastructure, including in and around AI and the immense demand for AI-related equipment and software," he said, noting that high-tech investment grew about 25 per cent in the first quarter. "What is now called AI investment will soon just be called investment."
He acknowledged that AI would bring disruption but rejected suggestions that it would permanently destroy jobs.
"My best guess is that this will improve American productivity and will improve the real wages, and will help us on full employment," he said. "But between the short term and the long term, it can have a disruptive effect."
Pressed later on whether AI could eliminate jobs at a catastrophic rate, Warsh replied: "Over the long term absolutely not. I believe that this is a long-term job creator. But will it be disruptive, and will some people have their jobs at jeopardy because of the new technologies? On that, I can't offer any sort of guarantee or comfort."
Warsh defended the panel, saying its members were advisors rather than policymakers.
"We haven't outsourced this decision," he said. "You're talking to one of the deciders." He added that the Federal Open Market Committee would ultimately determine monetary policy after considering the task force's recommendations.
The Fed chairman also stressed that the United States was well positioned to lead the global AI race.
"I think the United States is extremely well positioned to be at the cutting edge and extract more productivity... than any other country in the world," he said. "The United States will be a winner."
Warsh said the Federal Reserve had established one of five new internal task forces specifically to study AI's effect on productivity, employment and inflation. He said the groups had been given six months to deliver recommendations and that early findings could begin reaching policymakers as soon as September.
Artificial intelligence has emerged as one of the defining issues for US economic policymakers as technology companies invest hundreds of billions of dollars in data centres, semiconductor manufacturing and advanced computing infrastructure.
The investment boom has become a key driver of US economic growth, while also raising questions about electricity demand, labour markets and inflation.
--IANS
