Persistent poverty in the AI ​​economy

The San Francisco Bay Area is currently experiencing an artificial intelligence (AI) fever that makes the California Gold Rush of the mid-19th century seem like a harmless treasure hunt. Top programmers and software engineers are being offered hundreds of millions of dollars to move from one company to another, while young engineers who were lucky enough to land early jobs at leading AI startups are already thinking about retiring before the age of 35.

As you drive down Bayshore Highway from San Francisco International Airport into the city, you pass highly specific billboards advertising obscure AI applications, seemingly aimed at an absurdly narrow group of users. How can that possibly be profitable? The thing is, in a city full of startups, it’s much more profitable to pitch a real software product to the founder of a company that could soon be worth billions of dollars than to use a billboard to sell hamburgers or laundry detergent.

Yet behind the fever lies a palpable concern: members of the young super-elite fear that their startups might not win the AI ​​lottery. In their eyes, failure means standing on the sidelines as AI automates vast segments of office work (especially programming jobs, which until now have been practically money-printing machines) and ending up in the ranks of the permanently poor.

While economists continue to debate whether AI will destroy or create jobs, the prevailing sentiment in Silicon Valley is much more pessimistic. The conventional wisdom is that either your startup will succeed in the next five to ten years, or you can only hope that the government will provide a generous universal basic income.

Despite US President Donald Trump's efforts to draw Silicon Valley into the orbit of the MAGA movement, American-style progressivism still dominates Bay Area culture. Most young California tech entrepreneurs still see themselves as staunch progressives - ardent advocates of taxing the rich, at least until they become rich themselves.

Yet, for all this display of social awareness, Silicon Valley elites seem oblivious to one obvious fact: The vast majority of people who will be left behind by the rise of AI will not live in the United States. Nor will they live in countries that have already secured their place in the supply chain for AI technologies, like South Korea, Japan, and Taiwan.

While South Korean companies like Samsung and SK Hynix have grown into trillion-dollar corporate giants, fueled by the insatiable demand for advanced memory chips driven by artificial intelligence, Europe has produced far fewer success stories. The rare exception is ASML, a Dutch company that has a virtual monopoly on the state-of-the-art lithography machines needed to produce the world’s most advanced semiconductors. The picture is even bleaker in Africa and Latin America, which have yet to produce anything remotely comparable.

Countries that fail to find their place in the emerging AI economy risk finding themselves on the losing side of the most significant economic transformation of this century. Without windfall profits to redistribute and without a surge in tax revenues to finance a universal basic income, they could find themselves with no way to mitigate the consequences of massive job losses.

This is not just a story of political incompetence or a lack of ambition. How can African companies compete when hundreds of millions of people across the continent still lack access to electricity—the most basic prerequisite for developing AI infrastructure? And how can Latin American countries finance massive investments in data centers when savings rates remain low and a history of repeated debt crises continues to deter foreign capital?

Of course, some African and Latin American countries could benefit enormously from AI’s voracious demand for minerals like copper, rare earths, lithium, nickel, cobalt, gallium, and germanium. Obvious candidates include Chile, Peru, and Mexico, but even the Democratic Republic of Congo could reap significant benefits if its brutal civil war one day subsides.

Natural resource wealth, however, has often proven to be both a curse and a blessing. Mineral-rich countries could find themselves flooded with the revenues generated by the AI ​​revolution, while still lacking the political and economic institutions needed to distribute those benefits more evenly across society.

India, meanwhile, faces a very different kind of risk. If artificial intelligence gobbles up mid-level office jobs like whales gobble up plankton, India’s vast outsourcing industry could be among the hardest hit. With its vast reserves of creative and technical talent, India still has the potential to become one of the biggest winners in the current technology race, alongside the United States and China. But the country has long struggled to harness that potential at home, allowing many of its most talented professionals to move to California. Trump’s tightening of immigration policies could slow the brain drain, though whether it would ultimately benefit India remains an open question.

As for China, it is already a powerhouse in the field of artificial intelligence. But even there, the authorities are only just beginning to seriously address the consequences that automation could have on employment. Even if China wins the AI ​​race, maintaining social stability could prove difficult without further expansion of the social safety net.

The United States may be more dynamic, but it is not much better prepared for the likely consequences that artificial intelligence will have on the labor market. To avoid further deepening social divisions, it will be necessary to find ways to distribute the benefits of AI technologies much more widely, rather than remaining concentrated in the hands of a small number of pioneers and tech billionaires.

The danger does not stop at national borders. Artificial intelligence threatens to further widen the gap between technological winners and losers, allowing rich countries to reap the greatest benefits while billions of people across the developing world could be doomed to further lag behind.

No one really knows what such a world would look like, and even less does anyone know how to prevent it from one day falling apart under the weight of these inequalities.

The author is a professor of economics and public policy at Harvard University; he is the winner of the Deutsche Bank Prize for Financial Economics 2011; he was the chief economist of the IMF (2001 - 2003)

Copyright: Project Syndicate, 2026.