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Economy
Jun 02, 2026
Analyzed by GPT OSS 120B

Will the AI Economy Create a Permanent Underclass? – Kenneth Rogoff

AI Summary
Kenneth Rogoff warns that the rapid expansion of the AI economy could cement a global underclass, as wealth concentrates in tech hubs while millions elsewhere face job loss. He argues that without coordinated policy—taxes, universal basic income, and investment in infrastructure—the divide may become permanent.

Executive Overview: AI Boom Fuels a New Socio‑Economic Divide

The surge of artificial‑intelligence investment in the San Francisco Bay Area resembles a modern gold rush, yet beneath the hype lies a growing anxiety that a permanent underclass could emerge worldwide.

From Bay‑Area Gold Rush to Global Underclass Concerns

Top programmers are being courted with compensation packages worth hundreds of millions of dollars, and early‑stage engineers are already contemplating retirement before age 35. Billboards line the Bayshore Freeway promoting hyper‑niche AI products, underscoring how lucrative targeting founders has become compared with traditional advertising.

Despite this wealth concentration, many young tech elites fear that failure will relegate them to the “permanent poor” as AI automates large swaths of white‑collar work, especially coding.

Compensation Packages and Regional Disparities: The Numbers Behind the Frenzy

  • Offers of hundreds of millions to switch firms illustrate the premium placed on AI talent.
  • Early‑stage employees consider exiting the workforce before 35, a stark contrast to typical career trajectories.
  • South Korean giants Samsung and SK Hynix have become trillion‑dollar players thanks to AI‑driven demand for memory chips.
  • Europe’s standout is ASML, holding a near‑monopoly on high‑end lithography machines.

Why the AI Economy Threatens Developing Nations and Mid‑Level Workers

Countries that cannot secure a foothold in the AI supply chain risk being left behind. Africa and Latin America lack the electricity infrastructure and capital needed for data‑centres, while mineral‑rich nations may see AI‑related revenues but lack institutions to distribute them.

India’s massive outsourcing sector faces exposure as AI replaces mid‑level white‑collar roles, even though the country possesses deep technical talent that often migrates to California.

China, already an AI powerhouse, is only beginning to grapple with the social implications of large‑scale job displacement.

The United States, despite its dynamism, may see wealth concentrated among a small group of first‑movers unless policy intervenes.

Scenarios for Mitigating an AI‑Driven Underclass

  • Implementing a universal basic income funded by progressive taxation of AI‑generated profits.
  • Investing in basic infrastructure—electricity, broadband, and education—in Africa and Latin America to enable participation in the AI value chain.
  • Strengthening institutions in mineral‑rich economies to ensure AI‑related revenues are channeled into public services.
  • Encouraging corporate responsibility among Silicon Valley firms to share gains with broader society.

Without coordinated action, the AI economy could deepen existing inequalities, creating a permanent underclass that spans continents.