The rise of ChatGPT and other popular AI technologies is driving a wave of change across nearly every industry. The push for widespread automation and replacing human labor with energy-intensive, costly technologies is now a survival game for businesses. Automating tasks that once took months and replacing jobs to stay competitive reflect the harsh realities of today. Although AI has already cut costs for repetitive chores like data entry and compliance checks, new capabilities threaten the roles of highly skilled professionals, including lawyers and doctors. It can be argued that no one’s job is completely safe from this shift. AI definitely aims to lower costs and speed up access to healthcare and other essential goods, making them available to more people. Yet, it’s uncertain whether the free market for these products will still exist in 10 years.
Let me clarify: as everyone hops on the AI labor-replacement bandwagon and technology advances faster than the labor force can be reskilled, the gap in structural unemployment will likely grow. Considering how the government measures unemployment, where people unemployed for more than 18 months are no longer counted as part of the workforce, it’s very possible that unemployment stats can be kept artificially low, even as market demand for goods drops significantly and productivity stays high due to the ability to produce large quantities of output at minimal cost.
But how does this relate to the end of capitalism and the potential decline of democracy? To be blunt, capitalism, which supports democratic systems, promotes freedom of choice through a meritocracy driven by access to labor and consumption. We vote by buying goods and services we support. However, the flow of consumer dollars toward AI platforms encourages the rise of a technocracy, rather than a consumer-driven democracy. In this scenario, a significant amount of money (resources) is directed toward one or a few platforms (Meta, Google, Nvidia, Amazon Web Services, ChatGPT, etc.), ultimately resembling an oligarchy as information and resources become monopolized. This trend is gradually emerging in the US, especially as President Trump prepares to take office, surrounded by wealthy technocrat allies.
Further evidence of the subtle erosion of freedoms already occurring, especially economic access, is reflected in the rise of extreme far-right ideologies across advanced European economies. Professor Michael Cox (LSE) attributes the growth of extreme right-wing movements disguising themselves as populism to increasing economic inequality and lack of opportunity. Protectionism, extreme nationalism, and ultimately autocracy are symptoms of a much larger issue: growing structural unemployment. The free market is further threatened by projected retiree-to-worker ratios driven by rising life expectancy. In 2015, the US Immigration Policy Center estimated that this ratio would shift from 7:1 (in 1950) to just 2.8 workers per retiree by 2050. Of course, this was before the AI race to replace labor was launched. As we know, taxes from workers fund retirees’ pensions. With fewer workers, tax burdens will need to be higher on those still employed, or pensions will have to be reduced unless AI agents are taxed. Either way, this points to a smaller market for consumption and increased competition in a shrinking economy.
Don’t get me wrong, I am not suggesting that we should go back to the dark ages to protect capitalism and democracy. Instead, I am saying that big companies, the same ones that benefit from automation, need to start thinking about what the future of consumption will look like when enough people lose their jobs to automation. If you think competition is tough now, imagine what will happen when the number of paying customers keeps shrinking every year. And why should big corporations consider this? Because their survival depends on it. Governments are too busy regulating interest rates and applying 1970s economic theories to notice the significant shift at the heart of our financial system.
It’s ironic to see that the push for cost efficiency has reached a point where its application threatens the very system it is meant to protect. Maybe it is time to imagine what our institutions and norms around consumption and democracy will look like when we can produce more than we can consume through traditional employment. Could this mean the end of capitalism? It’s hard to say, but it will be tough to keep promoting ideas of resource distribution based on hard work when there’s not enough work to go around.
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