This essay explores 3 ideas:
- the near-term impacts of AI and automation,
- their economic and social consequences, and
- a proposal to address these challenges.
AI and robotics have advanced at a staggering rate. In the last three months, we’ve entered what I call the “pure flywheel” phase. This is where AI is now capable of independently improving and creating new AI models. Soon, robotics will reach a similar milestone, where machines can build more machines. Once these two forces intersect, the implications for global economics will be immense.
Historically, wealth was tied to human labor. More resources meant more workers, leading to greater productivity. Industrialization shifted this equation, making per-worker efficiency the key driver of economic growth. Now, AI and robotics reconnect wealth directly to labor—physical and intellectual—without human involvement. This fundamentally reshapes the economy. According to the Open Philanthropy Project, this shift aligns with historical economic phase transitions. For most of history, global GDP grew at 0.03% per year. Around 1,000 years ago, changes in trade and governance increased that to 0.3%. The Industrial Revolution brought 3% annual growth. If AI and automation trigger another phase shift, extrapolating past trends suggests 30% annual growth—equivalent to a century of economic progress every 12 years.
The problem? Labor and intelligence are becoming commodities. When industries rely on commodities, wealth concentrates among those who control them. This exacerbates inequality. The first job losses will hit those with the least social power, but as AI capabilities expand, white-collar and service jobs will follow—likely much faster than expected. Without intervention, we could end up in a dystopia where a handful of trillionaires and billions of AI models control the economy, leaving most humans disenfranchised. A universal basic income (UBI) is often suggested as a solution, but inflation would likely erode its effectiveness. Instead, I propose a targeted AI value-added tax (VAT) combined with a sovereign wealth fund (SWF) to distribute AI-driven wealth more equitably.
A VAT on AI productivity gains is a pragmatic way to capture value. In Europe, VAT is applied to the value a company adds to a product. Similarly, an AI VAT would tax only the new economic gains created by AI and robotics. Since automation will drastically lower input costs, corporate profits will soar, making it possible to tax this surplus without discouraging investment.
A sovereign wealth fund would then invest these tax revenues, generating sustainable dividends. Rather than a static payout, UBI would grow exponentially alongside AI-driven economic expansion. This model mirrors Norway’s oil-based SWF, but instead of oil, we’d invest in “AI oil.” Initial payouts might be small—$15 per person per month—but as AI-driven GDP accelerates, so would these dividends, aligning public prosperity with technological progress.
Politicians should support this to maintain economic stability and prevent corporations from becoming unchallengeable. Companies, too, have an incentive: a 15% AI VAT could be paired with legal immunity for past data-scraping practices, legitimizing AI development while ensuring broad societal benefit.
This is not a perfect solution, but it offers a viable path to balance technological advancement with economic fairness and political stability.