DUBAI: The parallels between today’s economy and that of the 1920s was discussed by Christine Lagarde, president of the European Central Bank, in Davos on Wednesday.

The session compared the impact of artificial intelligence on today’s economy with technological breakthroughs in the 1920s which altered global trade and stock markets in the aftermath of the First World War.

Lagarde and other panelists discussed the parallels between the economy now and then in the wake of technological changes.

“The technological breakthroughs that took place in the 1920s, whether you look at the size and scope of the electrical grid, the combustion engine and its developments, the assembly line [manufacturing], those were technological breakthroughs that took place in those years. At the same time, you also had a stock market that was doing very well,” she said.

“What we're looking at now is galloping digitalization of our economies, with a particular focus on artificial intelligence. We’re seeing stock markets not doing extremely well. And we are seeing a fragmentation of geopolitics, which is accompanied by an increase of the tariff of the import and export restrictions in almost all categories of products.”

Lagarde said the significant difference between the 1920s and the present day, which makes the current situation “more unpredictable,” was that the breakthroughs of the 1920s “could diffuse within boundaries, within national territories.”

“You did not necessarily, back in those days, [need] the scale, the network that you need now,” she said. “Now, if you ask the big spenders on AI: What do they need? They will say access to data, as large as possible. They will say scale, in order to really amortize the investment cost of the development of models.

“That would be significantly jeopardized if we have limited access to data because of different privacy laws around the world. And more protectionist barriers that would prevent the scaling of these investments.”

Lagarde said she was not denying that investment in artificial intelligence “can be extremely net positive.”

“It will deliver productivity gains, the amount of which is questionable and you have a spectrum that is quite large as to how much it will deliver,” she said. “We have to consider that it’s capital intensive, energy intensive, and data intensive. And we have to be mindful of the three. In terms of energy intensity, what kind of energy is being used to manage data will matter. What the consequences will be on the people will matter as well.”

The session was moderated by Andrew R. Sorkin, editor and columnist at the New York Times.

It also hosted a select group of leading figures in finance, including Ken Griffin, founder and CEO of Citadel LLC; Laurence D. Fink, chair and CEO of BlackRock; and Adam Tooze, director of the European Institute at Columbia University.