An AI Bust Could Accelerate Worker Replacement. Past Recessions Show the Pattern.
NPR's Planet Money newsletter poses an uncomfortable question: what if an AI bubble bursts, triggering a recession, and that recession ends up accelerating the replacement of workers with AI?
The financial backdrop for that scenario is concrete: AI-related companies are borrowing hundreds of billions of dollars to help finance data centers and the energy infrastructure to power them.
A study by economists Nir Jaimovich and Henry Siu found that jobs vulnerable to previous waves of automation saw most of their decline around recessions. Between 1990 and 2017, 88 per cent of the decline in the share of Americans employed in those jobs occurred during recessions or in the months immediately before or after them.
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The unsettling irony is that fierce price competition could keep AI companies from delivering the profits investors expect while making their technology cheaper for other businesses to use to replace workers. The crash and the layoffs need not be rivals — they could turn out to be the same story told twice.
None of this proves that what we are witnessing is a bubble, or that the associated debt is a ticking time bomb for the financial system. The newsletter itself says it has long been skeptical of sweeping claims about how AI will transform the world, and that we don't really know. Two whammies is a scenario, not a forecast.