Dambisa Moyo
LONDON, MARCH 22 (PS): There is little doubt that the United States remains at the forefront of technological innovation. The continued dominance of the “Magnificent Seven” – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla – has solidified America’s leadership in the tech sector, with other economies struggling to keep pace.
The European Union is a prime example. In 2023, the EU’s total gross domestic expenditure on research and development – by governments, businesses, higher-education institutions, and NGOs – amounted to €381 billion ($398 billion). To put this figure into perspective, it is roughly equivalent to the $350 billion that the seven leading US tech companies were expected to reinvest in 2024 alone.
Meanwhile, the tech boom continues to reshape global financial markets, with the sector now accounting for nearly 30% of the S&P 500 – more than the next two largest sectors combined. This extraordinary concentration, driven by the Magnificent Seven’s soaring valuations, has both fueled investor enthusiasm and raised concerns about potential risks.
Against this backdrop, the rapid development of artificial intelligence has sparked a heated debate over how to manage its potentially disruptive impact. On one hand, techno-optimists believe that AI will be net-positive for job creation. Like previous technological revolutions, they argue, automation may displace some workers but also give rise to new industries and professions, more than compensating for job losses while driving productivity and economic growth.
They may have a point. At the turn of the twentieth century, agriculture accounted for 40% of the US workforce; today, the share is less than 2%. As farming jobs disappeared, displaced workers moved to new industries that became the backbone of the modern economy. The most striking example is the services sector, which employs nearly 80% of the US workforce, while manufacturing and construction – once dominant – account for just 20%.
On the other side of the debate, techno-skeptics – particularly within policymaking circles – are increasingly concerned about the AI revolution’s employment implications. They fear that AI could usher in an era of jobless growth, whereby human workers will be permanently displaced, and the economic gains will flow primarily to capital owners.
The scale of potential disruption is staggering, with Goldman Sachs estimating that AI could eliminate 300 million full-time jobs worldwide. A World Economic Forum survey offers a more optimistic outlook, projecting that AI will eliminate 83 million jobs while creating 69 million new ones – resulting in a net loss of 14 million jobs, or just 2% of current employment in AI-affected industries.
But even if the direst predictions fail to materialize, AI is poised to transform labor markets around the world. Mass technological unemployment could exacerbate inequality, especially between capital owners and the millions of workers who might suddenly find themselves out of work.
The looming labor-market disruption raises a critical question: Do today’s AI-driven profits portend higher taxes in the future? To mitigate the effects of job displacement, prevent social unrest, and sustain essential public services like national security, education, health care, and infrastructure, policymakers must find new revenue sources. Faced with budget shortfalls, some governments may be forced to raise taxes on the most profitable sectors.
For businesses and investors, this could mean significantly higher taxes, as policymakers seek to redistribute the gains of automation. Two pressing concerns stand out: first, with tech-driven job losses shrinking the tax base, corporations could be the primary target of tax increases. Second, lower employment and declining disposable incomes could dampen consumer demand, impeding economic growth.
As a result, business leaders find themselves in a double bind. To avoid tax increases, they must sustain the tax base by maintaining a high level of employment. But to increase efficiency and boost profit margins, they need to embrace automation – at the risk of higher corporate taxes and weaker consumer demand.
In the short term, businesses may be tempted by the prospect of automation-driven efficiency gains and higher margins. But over time, those gains will likely be eroded by rising corporate and wealth taxes, as governments seek new revenue streams to fund programs like universal basic income to protect living standards and maintain economic and social stability.
If left unchecked, AI-driven unemployment and extreme inequality could unravel the social fabric that allows markets to function. To contain these risks, policymakers may have little choice but to raise taxes, ensuring that the benefits of automation do not come at the cost of long-term social cohesion.
Dambisa Moyo, an international economist, is the author of four New York Times bestselling books, including Edge of Chaos: Why Democracy Is Failing to Deliver Economic Growth – and How to Fix It (Basic Books, 2018).
Copyright: Project Syndicate, 2025.
