Money vs. Machine: How Artificial Intelligence Could Collapse the Global Economy

AI was built to boost productivity and innovation — but by replacing workers and destroying demand, it may be on course to dismantle the global economy itself.

Let’s decode how!

What is Money, and Why Was It Created?

Ever wondered why money was invented? Let’s start with the basics.

Money is a representation of human labor and time — essentially, it tokenizes the hours we work into purchasing power. When someone earns ₹9 for 9 hours of work, they’re converting their time and energy into a medium of exchange. However, this system faces fundamental challenges: inflation erodes the purchasing power of money over time. Money replaced the barter system to make trade easier, but it only works as long as it keeps circulating.

Why Does Money Circulation Matter for Everyone (Even Elites)?

When AI cuts jobs, it doesn’t just cost individuals their paychecks; it breaks the very loops of spending that drive economic growth, eventually hurting even the wealthiest. Here’s how:

Using the ₹9 example:

If a tech company earns ₹9 by selling software, that money pays staff, those staff buy goods (maybe even from the client, e.g., IKEA), and the cycle continues — each round of spending multiplies growth. When tech jobs disappear, these loops break and the economy slows for everyone.

The “Slow Poison”: India’s Recent Reality

IT SECTOR:

India’s information technology sector, long considered the backbone of the country’s economic growth, is experiencing unprecedented upheaval. TCS announced layoffs of 12,000 employees (2% of its workforce), marking one of the largest workforce reductions in Indian IT history. The unemployment rate in the IT sector has risen to 5.7% in January 2025, up from 3.9% in December. By the end of 2025, 12 to 18 million Indians may lose their jobs due to AI-led automation.

FINANCE SECTOR:

Banks have already announced major workforce reductions due to AI. For instance, JPMorgan Chase’s global headcount is being cut by 10% in operations roles as part of AI adoption, and Indian banks are following this trend.

FUTURE IMPACT:

The International Monetary Fund estimates that 60% of jobs in advanced countries may be impacted by AI. The Bank of Baroda projects that AI could displace 20–25 million jobs in India by 2030, predominantly in IT services, customer support, retail, and finance. With India’s labor force growing by 12 million annually, this creates an unprecedented employment crisis.

This could mark “the end of the middle class and the consumption story,” which has been the backbone of India’s economic growth.

The Demand Collapse Problem

This is the real problem: fewer jobs mean fewer buyers, leading to reduced sales and more layoffs — a self-reinforcing downward spiral. Economic modeling suggests that when the percentage of earners in a population drops below 70%, recession risk rises sharply; below 50%, depression becomes likely. Economists call this the “automation paradox”: AI increases productivity while destroying the very consumer base needed to buy what’s produced.

Even the elite class, currently benefiting from layoffs under the illusion that AI boosts profits, will eventually be affected. Without mass consumers, goods remain unsold and profits collapse — so today’s automation strategies become self-defeating, even for the capitalists.

The “Bright Side” of Collapse In just 10–15 years, maybe we’ll all finally be equal — equally screwed. 🙃

Serious Solutions for an AI-Dominated Future

Robot Taxation

Taxing robots and AI systems represents a new policy approach to make up for lost worker incomes. Proposals include:

• Imputed income taxes on AI, equivalent to the wages they replace
• **Productivity-based taxes **on companies using AI (0.5–1% of automation equipment value)
• **Revenue-sharing mechanisms **(workers gaining ownership stakes in AI they help train)

Revenue from robot taxes could fund UBI programs, reskilling, and infrastructure to support transition.

Universal Basic Income (UBI)

UBI is a bold (and often controversial) policy where the government gives everyone a fixed amount of money regularly, no strings attached. That means:

• You don’t have to work for it
• You don’t have to prove you’re poor
• You don’t have to spend it a certain way

Yes, getting paid to do nothing just got real! 😂

Conclusion

The fundamental question is not whether AI will transform the economy — the transformation is already underway. The real question is: will society shape this change to serve everyone, or let it create deeper inequality and exclusion?

So, that’s it…

Signing off!