Sorry to Burst the Bubble! Why AI’s Promise Won’t Deliver Without a New Economic Framework

by Kent O. Bhupathi

It began with headlines.

• “Amazon cuts 14,000 corporate jobs as spending on artificial intelligence accelerates.”

• “Salesforce CEO: ‘I need less heads.’”

• “Meta axes 600 roles amid AI expansion.”

Each announcement laced with brutal irony, revealing companies not in distress but actually flourishing through the very mechanisms that deemed their hires expendable. Fair is fair, though, right? Nothing illegal happened, and technically this is an expectation of the marketplace. So, one can only wish these families all the best… right?

Then came the tag: “AI and robots will replace all jobs,” making work essentially “optional, like growing your own vegetables.” Well, isn’t that just the most profound oversimplification, parading as an ode to freedom! Frankly, amid today’s labor market issues, I could not imagine a more optimistic take that is so cleanly stripped of its human cost. On that sarcastic front, well done!

But on another, to be clear, I won’t pretend to oppose the dream. And let’s not kid ourselves… who would? A vision of promised plenty is indeed compelling. Inspired even!

Unfortunately, progress is never neutral, and utopia does not arrive simply because technology improves. It ultimately depends on institutions that can keep pace.

And if we are being honest, what is being built today does not point toward that dream. It points to something far more fragile.

This tension between the promise and the reality drove me to this piece. Because even as AI evolves into something staggeringly capable, our economic infrastructure remains too outdated to guarantee a future of universal freedom. We’re laying futuristic track on a crumbling foundation.

To accept this degree of automation without confronting its tradeoffs and consequences is not progress. It’s just straight up negligence.

Why AI Alone Can't Guarantee Welfare

AI's promise of perpetual productivity has a beguiling allure. Robots and algorithms never sleep, never strike, never unionize. They operate with astonishing efficiency and consistency, giving rise to what some economists call an economic “singularity.” In this model, robots serve as productive capital capable of replacing all forms of human labor. As their capabilities reach or surpass human standards, output per capita explodes. The economy appears to enter a golden era of abundance.

And yet, the flaw is fundamental: output means nothing if no one can afford it. Traditional economies rely on wages as the main mechanism for distributing purchasing power. In a world where AI performs all labor, those wages vanish. Without work, there is no income; without income, there is no consumption. Remind me… 70% of the US GDP is what? From this, the result is a paradoxical crisis of abundance, where supply is plentiful but demand is weak.

The macroeconomic effects could be devastating. Analysts warn of long-term deflationary pressures, as prices fall due to hyper-efficient production but consumer demand collapses due to mass unemployment. This isn't just a theoretical concern. The very structure of market capitalism starts to break down when consumption is no longer broadly distributed across the population.

A System at War with Itself

We are already witnessing the early stages of this unraveling. Automation is no longer a distant possibility; it is already displacing workers. Previous technological revolutions, such as industrialization and the rise of computers, eventually generated new industries and roles. AI, however, represents a different kind of disruption. It threatens not only manual labor but cognitive work as well. Customer service, content creation, legal document review, and even parts of software development are all being reshaped by automation.

Since the 1980s, the U.S. labor market has followed a troubling pattern in which rising productivity no longer aligns with rising wages. This divergence revealed a chilling truth: technology is no longer designed to enhance labor but to replace it. In many cases, it does not make workers more effective, but rather unnecessary.

IMF research highlights this dynamic with chilling clarity. As robot labor scales up, wages fall. In the most extreme models, labor's share of national income approaches zero. Wealth accrues almost exclusively to the owners of the machines and the platforms. And those owners represent a thin, already-privileged sliver of society.

The economic implications are stark: nearly complete unemployment, mass downward mobility, and a permanently bifurcated society. And even in scenarios where some high-skilled labor remains in demand, the gains are distributed unevenly. The IMF estimates skilled workers might see income boosts of 160%, while unskilled wages plummet by 60%.

Waiting for new jobs to emerge is a luxury most people can't afford. Historical market corrections took decades, and in today’s rapidly accelerating technological environment, the displacement is happening faster than the economy or policy can adapt.

Where Ownership Is Destiny, Inequality is by Design

In a fully automated economy, the question of ownership becomes existential. Productivity will rise… of course. Wealth will expand… expected. But if the assets driving that expansion, including robots, algorithms and data, are owned by a tiny elite, the benefits will remain concentrated.

In the United States, ownership of productive capital is already deeply unequal: the wealthiest 1% of households own approximately 50% of all corporate equities and mutual fund shares, the vast majority of intellectual property is owned by businesses (not households), ownership of private businesses (i.e., non-publicly traded "business equity") is a major source of wealth for the top 1% but is negligible for the rest of the population. The implications are clear: unless this ownership structure changes, AI-driven automation is set to exacerbate inequality to unprecedented levels. We will have replaced human labor not with freedom, but with feudalism.

Economist Richard Freeman summarized the risk succinctly: "The ownership of robots is the prime determinant of how they affect most workers." If we allow only corporations and high-net-worth individuals to own AI, we are structurally condemning the rest of the population to economic dependency.

Reimagining Economic Structures as a Floor, Not a Ceiling

To manage this transformation, we must build new systems to distribute income and ensure broad economic participation. The most discussed approach is Universal Basic Income (UBI).

UBI proposes a flat payment to all adults, providing a baseline of security independent of employment. This breaks the centuries-old link between labor and livelihood. In theory, it allows people to pursue education, caregiving, creativity, or leisure without facing poverty.

But scale matters. A most modest UBI of $10,000 per year per adult, for example, would cost the U.S. about $2.5 trillion annually, which is more than one-third the current federal outlays. A slight adjustment to that amount, such as $12,000, would raise that total to roughly $3 trillion. Funding a program of that size would require either entirely new revenue sources or a major structural overhaul.

One option is a national value-added tax (VAT), which taxes consumption rather than income. This would ensure that even automated firms with no human payroll still contribute to the public good. Other proposals include taxes on corporate profits, financial transactions, and the data that fuels AI systems.

Public ownership models also show promise. If governments or social funds hold stakes in AI companies or automated infrastructure, the profits can be distributed as dividends to citizens. Alaska's oil-based Permanent Fund Dividend offers a precedent, albeit on a small scale. In an AI economy, data could be the new oil, and sovereign wealth funds could channel its value back to the people.

Negative income tax systems, universal basic services (free healthcare, housing, education), and cooperative ownership of AI platforms all contribute to this broader vision: a society where access to economic life is not determined by job status.

Why the Market Can’t (and Won’t) Solve This

There is a persistent myth that markets will naturally correct for disruption. That new jobs will emerge as old ones vanish. But this assumption fails to account for the scale and speed of today’s technological shifts.

In previous eras, market adjustments took decades. The Industrial Revolution produced widespread social unrest before labor protections caught up. The Great Depression demanded a New Deal. What we are facing now is deeper: not just unemployment, but unemployability. There may not be enough meaningful work left to distribute across a population of hundreds of millions…

Even if new roles do appear, they may be niche, temporary, or low-wage. The dream that everyone can become an AI engineer or prompt designer is neither realistic nor inclusive. And even Meta just relieved themselves of such professionals!

What’s more, allowing markets alone to govern such a transition leads, as history shows, to under-consumption, overproduction, and long-term stagnation. Without mass income, there is no mass demand. The system implodes under the weight of its own efficiency.

Choosing Between Collapse or Collective Adaptation

We are not passive observers of the AI age; we are its architects. And never, ever forget that!

The next two decades will decide whether this technology becomes a force for mass emancipation or a mechanism of elite entrenchment. After all, AI can build the factories, write the code, and even diagnose diseases; but it cannot rewrite the social contract. That responsibility remains ours.

Phrased a little differently… a world of shared prosperity will not emerge through innovation alone. It will require deliberate design.

So, if this is to be the technological road ahead, it demands public policy that prioritizes inclusion over efficiency, along with collective ownership, tax reform, public investment, and redistribution of capital. Sorry to burst the bubble!

Allowing automation to replace labor without restructuring income distribution is not simply unsustainable; it is reckless. It risks economic collapse, political backlash, and social fragmentation. Progress here, therefore, requires an economic philosophy centered on human welfare and collective stability… not just code.

Using conservative estimates from the MIT Living Wage Calculator, the annual cost of a minimally decent life in America, defined as the ability to afford food, shelter, healthcare, and a small degree of dignity, exceeds $13 trillion per year (between 55 and 60% of current GDP). Remember, I am not talking about luxury. This is subsistence.

The bar for a just society begins there. Without reimagining income systems and social infrastructure, we risk creating a world where machines do everything and humans have nothing, not because we lacked the means but because we lacked the will.

In essence, real progress requires intention and a plan to move people forward, not just technology. That means rejecting magical thinking, confronting tradeoffs, and demanding that elected leaders treat AI’s disruptions as a public policy priority. Contact your representatives. Ask not only what they think about AI, but what they will do about the displacement it is bringing and will continue to bring. And, if they are truly gung-ho about our current direction, that is great! But then you get to demand investment in social infrastructure, income policy, and cooperative ownership.

The future is not optional. What it becomes still is.

Additional Considerations: The Moral and Psychological Vacuum:

While this discussion has focused primarily on the economic and political dimensions, I would be remiss not to acknowledge a deeper layer that falls outside the main analytical scope. The following reflection is included as an endnote rather than in the main body to avoid diluting the economic argument, yet it bears significant relevance to the broader human implications of technological change.

Work has long provided structure, purpose, and belonging. Framing it as “optional” risks not liberation but loss, encompassing identity, routine, and community. Sociologists describe this as symbolic violence: when technological progress promises inclusion but delivers exclusion. To lose one’s livelihood while being told one has gained freedom is a recipe for resentment.

Income sustains life, but purpose sustains dignity. A future where AI performs all routine labour could indeed be extraordinary, yet only if society reinvests in the cultural, creative, and communal foundations that give life meaning beyond work.

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