More and more people are beginning to see chaos coming to the markets, destruction on the stock exchanges, and a crash in major companies that simply will not be bailed out this time.
The first and second wave of job losses and the destruction of the middle class
The recent midterm elections in the US highlighted growing dissatisfaction among Americans regarding the development of Artificial Intelligence. Above all, there are mounting fears that artificial intelligence will displace people from the workforce. For America and the West as a whole, this will constitute a second wave of job losses. The first wave was triggered by globalization, when traditional sectors of the economy, essentially the real sector, were relocated to developing countries with cheaper labor. Subsequently, new industries failed to offset the job losses, and the process affected not only industrial workers, but also led to the destruction of the middle class, which had served as the pillar of socioeconomic and political stability in the postwar period. The prospect of further employment contraction is perceived as a threat to creating a critical mass of marginalized segments of the population dependent on government social support, the further atomization of society, and the rise of totalitarian tendencies in government policy in response to the evolving situation.
The second wave of Artificial Intelligence
In reality, this manifests differently in the policies of both the Democrats and the Republicans in the US. While the Biden administration emphasized the destruction of historically established identities and reliance on marginalized segments of the population, including recent undocumented immigrants, the risk of the social consequences of Artificial Intelligence is linked exclusively to the current Trump administration and its tough policy on illegal immigration. At the same time, over the past two years, the rapid development of Artificial Intelligence, the race for which has also become a key geopolitical factor, has sparked a debate regarding the social and other consequences of its implementation. Beyond concerns that superintelligence, surpassing human capabilities, will lead to the dehumanization of society, which will cease to be anthropocentric, there is also the threat that it will escape human control and self-improve, with catastrophic consequences. Even the programmers themselves are unable to explain how its algorithms operate. Traits such as a tendency toward hallucinations, deception, and pursuing goals at all costs, as well as a lack of genuinely human qualities, not only moral ones, but also positive creativity and critical thinking, which can be attributed to the concept of moderation, have already emerged. There are already examples of companies, for these very reasons, rehiring previously laid-off employees who had been replaced by Artificial Intelligence. In other words, Artificial Intelligence has already demonstrated quite destructive tendencies. Whether all of this embodies the worldview of Western civilization according to Goethe's Faust and the culture of rigid rationalism, stripped of moral inhibitions, remains a subject of philosophical debate, as the training of large-scale language models was based on the very big data of Americans. This also poses a threat to the established system of human capital reproduction, including high-quality education and healthcare systems, which have clearly deteriorated in America over the past 40 years.
Trump's gamble
Yet the development of Artificial Intelligence in the United States is tied to Trump's gamble to solve the country's very practical economic problems. For four years, IT companies developing Artificial Intelligence have accounted for a large share of US stock market capitalization, preventing an overdue correction that could plunge the country into a deep economic crisis on the scale of the Great Depression of the last century. Moreover, looking at the results of the American elections, the burden of responsibility for this crisis will fall on the Democrats, relieving Trump of the need to curb the inevitable.
A massive bubble consuming massive energy
The first signs of such a bubble appeared on the eve of the midterm elections, and shares of these companies fell further after the elections, as the development of artificial intelligence is tied to the Trump administration. It is difficult to say what will happen next, but the negative impact of this sector on Washington's economy and foreign policy is already evident, including its complete dependence on a stable energy supply. Electricity consumption is rising rapidly, and the construction of necessary generating capacity is not keeping pace with the construction of data centers, not to mention the enormous freshwater consumption required to cool their servers (nearly on par with nuclear power). Hence Elon Musk's idea to place them in cold space, with solar panels providing electricity.
Artificial Intelligence... as a cornerstone
In any case, regardless of how the big questions surrounding the development of Artificial Intelligence are resolved, such as whether this game is worth the candle for humanity when human bioenergy is orders of magnitude more efficient than traditional electricity generation and far less costly in terms of natural resource use and environmental impact, its purely economic consequences are currently at center stage.
Economists estimate that Artificial Intelligence has not yet established itself as a major driving force for productivity growth. The relevant companies are growing through mixed equity and debt financing, a departure from the dot-com crisis of 2000, when participants in that race were heavily indebted.
However, a similar bubble-forming trend is evident, even as the Artificial Intelligence revolution breaks all previous records in capital expenditures. Time will tell how extensive the collapse will be, given the sharply elevated global debt (roughly $350 trillion, with global GDP standing at one-third of that amount). At the very least, governments will not have the resources, as they did during the 2008-2009 mortgage crisis and subsequently the coronavirus pandemic, to bail out the same banks as "too big to fail." The US Federal Reserve's interest rate is already quite high, with inflation significantly higher than officially reported (the falsification of these figures began under the Biden administration).
Foreign Affairs sees an epic catastrophe
The authoritative American magazine Foreign Affairs estimates that a large-scale correction in stock markets is approaching.
First, the debt burden of empires (in this case, the global hegemony of the United States) has always been a sure sign of their decline. One indicator is that the cost of servicing the national debt exceeds the military budget (which has already reached the same level).
Second, there is the so-called trilemma: it is impossible to simultaneously bear the cost of maintaining an empire, ensure continuous technological supremacy, and sustain the burden of the welfare state (60% of federal budget spending).
Third, history shows that every subsequent financial bubble since the Great Depression of 1929 is larger than the previous one.
Fourth, the financialization of the economy will act as an amplifier, including the fact that the average American household holds 30% of its savings in stocks.
Fifth, the artificial intelligence mania has spread to a significant part of the world, mainly in industrialized nations (with the possible exception of Europe): foreign investments in relevant American companies have increased tenfold over the past four years (to $20 trillion). This significantly restricts financial resources for all other industries. And based on common sense: excessive expectations were dashed, yet the world was left with an internet that fits perfectly into a technology-driven culture, yet one still controlled by humans.
Will Artificial Intelligence be... a new Industrial Revolution?
We can hope that something similar will happen with the role of Artificial Intelligence in global development: illusions and threats will clear up, a reaction reminiscent of the Industrial Revolution will not occur, the wave will recede, leaving behind something decisive for humanity, which by then will have matured enough to manage it. This has always happened with innovation, and nobody yet knows how long it will take in this case. Sooner or later, it will become clear that any technology is a double-edged sword, as it never guarantees absolute superiority and is always fraught with offsetting vulnerabilities. Another factor that will play a role is the link between the requirement for absolute stability of Artificial Intelligence's energy supply and the need for equally absolute political stability, which can only be ensured through totalitarian control, on the level of the dystopia successfully predicted by Orwell.
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