Will AI destroy the economy?

Fresh biscuits. Okay, welcome back to Gary's Economics. This week we are going to explain whether AI will drive wages up or down. Okay, so this is a question which I keep getting asked. So fans of the channel will know I was on tour in Australia and New Zealand uh about a month ago and every single tour that I went I got asked what say I going to do to the economy to inequality to wages. Um and I was hesitant to do a video on it because initially it seemed so obvious to me that AI was going to displace jobs and drive wages down. But the more I sat and read about it and thought about it and talked about it, the more I realized that this answer is not so unbelievably obvious as I initially thought. So there are a lot of people putting out the idea that AI might actually drive wages up. I've got a couple of quotes here. There's a there's an article in Fox Business uh saying AI is going to drive substantially reduce wage inequality and drive up wages for lowwage workers. Uh, Fortune magazine has a piece here from the IMF, the International Monetary Fund, saying that it's going to raise lower paid wages. Uh, I was reading The Economist this week and they strongly implied that there's no evidence that AI is displacing jobs. So, I saw that a lot of people seem to think or at least saying they think AI will not drive wages down. And this got me thinking about how economists think about technology and wages. So when we start thinking about what is the level of wages as we are taught in our economics degrees, first thing to say is most economists really don't study this much at all. There is a field of economics called labor economics which talks about like how the economy like affects workers. Um it does include sections on what determines the wage level. Um but this is basically an optional field of study. I didn't do it until my master's degree. So, I didn't do any labor economics up until my fifth year of economics. And even then, uh we actually didn't do much about the relationship really between wages and technology or wages and the distribution. Until you get into that sort of advanced level economics, you will be basically given one idea about wages, which is that wages are driven by what economists call marginal productivity. So this idea that wages are driven by marginal productivity is just a very simple idea which is that if I hire if hiring one new worker will get me 100 of new product say I'm making biscuits one new worker can make a 100 pound of biscuits a day then I had better pay that worker something close to 100 otherwise some other business owner some other capitalist is going to snatch up that worker and he's going to pay them £100 and he's going to make the profit from it. And this idea which is taught to basically everybody who studies economics from like a young age from your first year basically implies that wages are quite closely connected to worker productivity. And if we view AI from this perspective, this would strongly imply that AI should drive wages up for the very simple and obvious reason that AI it is an improvement whether you like it or not. I don't love it. It is an improvement on previously existing tools. Um, most of us are using it quite frequently now. Um, I use it pretty much every day when I'm doing my research. AI has improved worker productivity. Economists tend to believe that at least in the long run, worker productivity is the key driver of wages. So I think it's fair to say that amongst economists generally they would say that any improved technology including AI should drive workers wages up. So what we have here is like an interesting disagreement in a sense between the the instinctive response which is well AI is going to mean companies hire fewer workers. It's going to mean workers get laid off and that's going to drive wages down. And the more common answer from economists which is AI is going to improve worker productivity and that should drive wages up. So we're going to discuss in this video which of those answers is correct. All right. So first we need to basically make the two cases in a little bit more clarity. So I'm going to start with the case that AI will reduce workers wages. And I'm not going to spend too much time on it because I think this is a very instinctive and intuitive case. Um I think most of you especially people who are younger in the job market will have kind of seen it with your eyes which is AI means that we don't need as much staff to do the same things. So you know I for example am using AI to do my research um in many cases um I'm aware that often is bit and the answers it provides are a bit rubbish um but it is much quicker than previous research tools I might have used. So whereas in the past I might have been thinking more actively about maybe we should hire a researcher. I don't need that researcher now. Um and I'm not hiring as many workers and people it seems are making these decisions all across the economy. A lot of businesses are have less need for especially junior staff at the moment. AI seems to be quite good at doing things like pretty badly but incredibly easily which means which is basically playing like replacing low-level junior staff. We're not hiring the staff. That means there's loads of unemployed people and especially young people there's higher unemployment and it's driving wages down. Like it's a really obvious intuitive instinctive argument. So that's that's the case for AI is going to drive wages down. What is the case which is more of a economic theoretical case for why AI might drive wages up. So this this goes down to basically two things. First we're going to cover the theoretical case and then afterwards we're going to move on to the kind of like historical basis for why why people and economists believe this. So the the theoretical case is based on this idea that that workers should be paid their marginal product. This is an economics term maybe we'll flash it up I'm writing here marginal product and that means marginal means like at the margin. So it means if me, a company owner, factory owner, biscuit factory owner, hires one more worker, if that worker is going to make me 100 biscuits, I'd better pay him the value of 100 biscuits. Otherwise, you know, I'm giving up profit because it's a competitive market. There's all these, you know, God knows the number of biscuit factories around here. If I don't hire that guy and pay him his 100 biscuits worth, someone else is going to come in under my nose and I'm going to lose like a big hot biscuit factory owner. Um, and if I don't pay him that much, some, you know, we live in a competitive market, someone's going to come in. So, if suddenly I, you know, I'm paying all my biscuit makers 100 biscuits, you know, the equivalent a day, and then suddenly I've got new technology and these guys are making 150 biscuits. Well, if I don't raise their wages, somebody else is going to poach them from me. And then they're going that he's going to pay him 120 biscuits. He's going to get 30 free biscuits for every worker, you know, and it's kind of based on this kind of, you know, Adam Smith like freehand idea that basically, you know, if I don't pay those workers what they're going to make me, they're going to leave, you know, and if if if not somebody's going to go out and make new factories. It's kind of based on this idea, you know, you have this thriving economy, you have this free market, if the workers are able to provide you that money, you should hire them. And, you know, it makes sense. you know, if I could if I could hire a worker at 20 grand a year or let's say 30 grand a year and he's going to increase my revenue by 50 grand a year, I should hire him, right? And you know, this is this basic free market ideas and there is no doubt I don't think anybody could could realistically suggest that AI has not at least to some degree increased the average productivity of a lot of workers. You know, I think anybody who's working a sort of any sort of office job will be using it to at least some degree and we'll consider it to have improved to some degree their productivity. So those are our two arguments, right? On the one hand, we don't need to hire so many workers. We're going to hire fewer workers. There's going to be more unemployed workers. That's going to drive wages down. On the other hand, this technology has increased worker productivity. So there's all these workers out there that are potentially more productive. So I should hire them and and it will make me profitable. So these are the two these are the two horses in the race you know it displaces workers drives wages down it increases worker productivity it drives wages up. So I think amongst economists the more popular view in general and obviously not all economists agree is probably this idea that in the vast majority of cases uh improved technology drives wages up. And I think perhaps a popular stance is is this idea that in the short run it can do this thing which I think we are kind of obviously seeing now of displacing workers and maybe causing a bit of like friction in the short term. But in the long run it's good for society to allow new technologies to come in. And if we do that if we just allow it to come in in the long run everything will sort itself out and wages will will go up. And I think this is like a broadly popular idea amongst economists. Not everybody will agree. Now let's talk about the historical reasons why this point of view has become so popular. So I think the popularity of this view is largely down to people looking back at the industrial revolution. Now the chance we talk about history on this channel. So for those who don't know the industrial revolution is a period in particularly British history but also world history where basically uh we I say we people at the time but it was largely focused in Britain invented a lot of new ways to make things that were more efficient. Uh in particular we mechanized manufacturing and we created basically the idea of the factory. So whereas before the industrial revolution most like manufactured goods would have been made by like expert artisans who you know they make everything like themselves from scratch using like skills that they got from their dad and their dad's dad and their dad's dad or whatever. In the industrial revolution, we basically invented like the factory, which means we we create specialized we split the role of making a thing into like a lot of very simple specialized roles and we create machinery that enables one person to do that specific role like a million times in a day and we create this sort of factory system. Uh we we split the rolls up, specialized rolls and you have this factory and you have this like assembly line process. Um and all of this new machinery is created and it enormously enormously like I mean it changed the world enormously increased the productivity of society of everyone. Um, it means that the amount of biscuits or for some reason often matchicks are used in the example. The amount of or pins or or needles or anything that could be made by what like 100 people in in a day or a month increased you know maybe 50 times massive massive massive increase in the ability of humans to create manufactured product quickly. So whenever we discuss how does technology affect living standards and affect affect wages, most economists minds will immediately go back to well what happened in the industrial revolution because this is you know probably the biggest example in you know human history of of rapid improvement in technology and human productivity. So how did that affect wages? How did that affect living standards? And I think the way that modern people and modern economists tend to think about this is probably best explained by talking about the the lites. So there's a group of people in um during the industrial revolution who are known as the lites. Um, and the way that these guys have entered popular consciousness is this term to be a lite has basically become shorthand to as to be somebody who kind of impotently and maybe kind of stupidly perhaps tries to like resist the inevitable path of human progress towards improved technology. Um, and you know, you can go and read about the bloods if you want. I think this is probably perhaps a little bit of a simplification of what they did but the basic idea is technology was improving incredibly rapidly in this period of time in Britain 1700s 1800s and in a particular case of the lites these were a group of people who I believe were like making cloth so like in most of these other cases it used to be made by like artisans and now suddenly it's being made in factories by people who don't necessarily need that much skill in particular because they're just each individual step of the process has been separated. It has its specific machinery. And what this meant was all of these people who had these, you know, generations of expertise in making cloth are losing their jobs. They're suddenly being like paid much worse. And there was a resistance movement in England based on these lites where they would get together and they would secretly break into the factories and they would destroy this machinery basically and it's often looked back at as like well yeah you know these guys they're unhappy because their wages were going down but at the end of the day improved technology is is always good and we can obviously see now talking in the 21st century living standards here in the UK and much of the world are enormously more enormously better than they were, you know, 200 150 years ago. And we look back at these people and say like, you know, we understand that they were opposed to the way things was things were going at the time and things were tough for them, but basically improved technology is always good in the long run for everyone. So just sort of grin and bear it and stick it out. And I think this is often the way that economists, to be honest, not even just economists, like society in general looks at people who look at new technologies and and see that they're displacing workers and they see that it's maybe driving wages down for some big groups of people, very similar to what's happening in AI now. And they say, "Look, don't oppose it because if you look back at the industrial revolution, people opposed it then. And isn't it obvious now in hindsight that those improvements in technology benefited everyone? But I think this reading of the industrial revolution which was yeah you know it might have caused a bit of friction. Economists love this term friction in the short term but in the long run it was better for everyone is perhaps like a little bit misleading and a little bit oversimplified. Um so let's talk a little bit about you know the industrial revolution and what happened and how it happened. So the industrial revolution was like a massive massive massive change in the way that the world works and the way you know it started in Britain and the way that Britain works. Um and it it happens in the context of this enormous shift in the work that that people were doing in this country. So up until the industrial revolution, the majority I want to say vast majority of workers in this country and in the world were basically farmers. They're working in food production and they're spread across the country because you need to have farmers like wherever there is land and you know in a country like Britain which has fertile land almost everywhere, you need people everywhere. Everybody's farming, you know, different kinds of farming and they're making food. Um and just before the industrial revolution starts you have these laws of enclosure the enclosure laws which is a change in the way that farming is managed in this country. So up until then there was a system of there was common land which everybody could use to graze their animals and some laws have changed which benefits land owners hurts ordinary people which basically say you know you can't use this common land anymore that's owned by the land owner and it means that suddenly a lot of farmers don't have access to land and they have to leave their farms and they have to go and they have to go to the cities and it creates this massive pool of basically impoverished unemployed employed ex-farmers who don't have any work and they have to go to the cities. Um, in many ways it's a bit similar to what we've seen in some parts of de-industrializing Europe where you know people they used to live in these industrial towns those industrial industries have collapsed and those people especially young people are forced to move to like bigger cities to get work. So we we had this thing happening in the late 1700s in in England. So all of these workers flood to the towns and a lot of people suggest that this is one of the reasons why the industrial revolution happened because suddenly you have all of these unemployed workers which means that you can create a massive factory. you know, the factories that were being built during the industrial revolution, some of them were massive and you can easily hire, you know, however many people you need, 50, 100 people, um, because wages are incredibly low. There's a large amount of unemployed people looking for jobs and it creates the potential basically to build these factories. in the early stages of the industrial revolution. Um I think it is pretty much unanimously accepted that people were living lives in these factories in these cities which were pretty hellish. Um so not to like romanticize the lives these guys were previously living as farmers, you know, I'm sure they had their difficulties. You know, we're talking about 300 years ago now. It's before I was born. But these guys are flooding into cities. They're working incredibly long days, you know, 14 hour, 16 hour days, six days a week. Um, in cities which well in factories which have no safety restrictions, um, deaths are not uncommon. So, I used to live not far from here in Bow East London in what used to be the biggest matchick factory in the world. And the people who used to work there, they if they worked there for too long, their jaws would like slowly start to disappear because they were working with this dangerous chemical white phosphorus. And you couldn't stay there for too long because your jaw would disappear. And you know, that's specific to the matstick factories, but these kinds of incredibly unsafe working environments in the factories were very common. Um because of this enormous movement of people to the cities and the enormous growth in industries and factories, the cities became incredibly crowded, incredibly dirty, incredibly polluted. Um yeah, disease and death were common. Um I wasn't around then but I think it's pretty much genu generally accepted that at the very least for the first sort of you know maybe a hundred years of the industrial revolution people were living in like pretty hellish environments. Um, you know, they've been moved from the kind of rural life that they would have lived for maybe thousands of years into living in incredibly crowded, dirty, polluted cities, working incredibly long days in incredibly dangerous environments. And that happens, you know, this is not we can look at it from the perspective and say, "Oh, well, you know, in the end it worked out all right." you know, that's, you know, that's the hundred years of people living like that and and you don't really start to see improvements in like broad living standards for ordinary people until sort of towards the end of the 1800s. But I've often told the story of my grandma who was born in I think possibly 1927 um so 100 years ago next year. Um she's living in the early 1900s. So even then sort of just off the back end of the industrial revolution my grandma was born and raised in London and I think three or four of her siblings died of tuberculosis which is a disease of of poverty. Um I think it's fair to say even in the 1920s you are seeing pretty extreme poverty being really pretty common for you know half if not more majority of people even right at the end of the industrial revolution. So you know even 150 years later you're still seeing really broad poverty being the norm in Britain in London. So in in the heart the very heart the capital city of the industrial revolution. Um so I think this idea that you look back and you say well you know things work out in the end is pretty naive right because we had you know 50 100red years of hell for workers that to be honest doesn't really get seriously resolved you know there's some questions about how the living were living standards seriously improving towards the end of the 1800s but I think it's fair to say you don't really start to see these serious living standard improvements ments filter through to ordinary working people until after the second world war which is you know nearly 200 years after the industrial revolution starts. So I think the idea that this is just going to resolve itself, you know, it took 200 years, you know, do you want, you know, 200 years of hell, you know, is it is it worth it? So I think this this rather naive assumption which um is often made by people who are benefiting from the status quo that things are just going to resolve themselves is not really at all borne out by history. And and if we look at the periods in time when living standards increased and when they didn't increase, the the big improvement happens after World War II. And when does that happen? when we see really really significant decrease in inequality and that comes at the culmination of really like 200 years of workers movements and I think this is the other part of the story um which is often neglected to be discussed right when we talk about does technology improve living standards will AI improve living standards um did the industrial revolution improve living standards so the industrial revolution creates this really unusual and particular world where because the method of manufacturing which was like pioneered here in Britain in the 1700s and 1800s was so much technically superior to previous methods in a relatively short period of time. These new factories basically displace and and replace not just the artisal workers of Britain but the artisal workers of the entire world. So I think what I've got the number I've got the number here. Yeah. Yeah. So, the the Matchick factory, which I was I briefly lived in up in Bow in East London, which is one of these enormous Victorian um industrial revolution factories, was producing 300 million matches a day. One single factory in East London. And you know, this is just one single factory. Like the story of Britain at the time is factories go up all over the country. You know, and it was happening also in places like the Netherlands and Belgium. But really initially Britain is the heart of this. These factories go up all over the country. They can produce manufactured goods cheaper than anyone else across the world. And you know combined with British colonialism, British imperialism, these guys spread across the world. They force basically everyone in the world to trade with them. Nobody can can compete with them. And what happens is artisans all over the world, all over the entire world lose their jobs. And it creates a very particular situation, right? Because if we have this situation where as we've discussed, human productivity has enormously increased and yet wages and living standards for the people who are working in the factories are still very low. There is this question of like where has all of that extra production gone? because we're obviously producing like enormously enormously enormously more now with the same number of workers, but the workers are still like having their jaws disappear and living in desperate poverty. Where has the production gone? Where has that excess gone? And the answer is it starts to create like an unbelievably wealthy British like elite industrialist class. And that creates like a pretty interesting power dynamic, right? So, you know, this is in the context of the British Empire which took over like half the world. You know, it's forcing other countries to trade with them even though other countries know that they can't compete because they don't have the factories. Um, the British workers are not getting a very good deal, but the British elite are starting to make like just unbelievably unbelievably enormous amounts of money. And this creates an environment where the British workers, in particular the British factory workers, start to become quite powerful even though they're being or perhaps specifically because they're being kind of horrifically underpaid because you have a situation where the elites are making enormous amounts of money on the basis of these factories that are producing manufactured goods. for the entire world. But the only people who are able to work in those factories are British people. You know, this is before mass immigration towards Europe, towards Britain. So, you have a situation where basically the workers in these factories, they're much more concentrated than they've ever been historically. They're no longer like spread across the British countryside. They're being squashed together in these cities, squashed together in these factories. They're being horrifically underpaid. their bosses are making like absolutely billions and billions and billions and they have this like power leverage which is if they like go on strike they can shut the factories down and those factories are making an absolute fortune for the owners and it creates this situation where basically you see the birth I would say like the birth of the first really serious labor movement and it isn't really until these labor movements movements that decides, you know, we're going to fight together. We're going to use strikes. We're going to force higher pay from our workers. It isn't until those labor movements start to become established, like toward later on, towards the end of the industrial revolution, that you start to see any improvements in living standards at all. And it isn't until you see the really significant redistribution of wealth in and in the immediate aftermath of World War II that you see like the really significant improvements. So I think that this reading which is like just don't worry everything works out well in the end is incredibly naive to be honest and fails to recognize the fact that were it not for these worker movements. I think it's very very possible that living standards would never have increased. And I think when we take this idea that oh don't worry technology always works out fine in the end. I think there is a worry that that this idea is based a little bit on a particularly eurosentric reading of the industrial revolution because Europe plays a very specific role in the industrial revolution which is that is where the factories are right but the European factories don't just displace British and European workers they replace workers all over the world and you know if you look at what happened in India at this time there's this explosion absolute explosion inclusion in unemployment in India because the Indian workers are being displaced by the British factories and if we look at that you know you can do your own research on it but you know there's f terrible famines where millions of people die and not just one of them you know this happens this happens in India you obviously happens in Ireland you know from the perspective of the British worker okay it took 150 years but eventually living standards got But you know India is still an incredibly poor country from the average from the perspective of an average person even today. You know obviously living standards have improved to some degree in the last 20 30 years but you know the average Indian worker even to this day is living in like by western standards pretty extreme poverty. So I think that this view that you don't need to worry things will just get better is phenomenally naive. Um I think it fails to recognize how living standards have remained bad pretty much permanently in most of the world and also that really there were no improvements in broad living standards until and unless we saw serious redistribution or serious workers movements. Um, so when we look at AI today, I think if you want to see whether it'll improve wages or not, the question is basically how are we going to deal with distribution and are there going to be workers movements to protect your share of the pie? But if this is the case I'm making that improved technologies like AI don't necessarily improve living standards um and can reduce wages and living standards in a really long-term sustained basis. We do need to challenge that by going back to what we discussed at the beginning and trying to understand how can that be true when it's paired up against the theory, the economic theory that improved productivity should in general always improve living standards. So this idea that if productivity increases and I don't pay my workers more that some other factory owner is going to come in build a factory um hire my workers you know outbid me for and out bid me for worker pay and take a load of take a load of profit off of out of my company is basically based on this idea that you can just come in and and massively increase your production And the reason this doesn't necessarily work is because you you cannot rush in and massively increase production unless you have a strong consumer that you can sell to. So if we look back at the industrial revolution, the only reason that this really worked, the only reason that one small country was able to build factories so much that it created essentially all of the manufactured goods for the entire world is because it had this entire world to expand into. And obviously it's tied into, you know, British expansionism and British colonialism and the British army and in many cases the British Navy was forcing other countries to trade with it. This worked because Britain was basically able to take over the world. Like the the owners of the factories, they can only rapidly build more and more factories if they have somebody to sell to. And in the case of the initial industrial revolution, this effectively creates colonialism and it creates that rush of Britain to take over the entire world. And if we look at the more recent industrial revolution which we have seen in the last say 30 years in China, the only reason that industrial revolution has worked is because it has happened in the context of a large wealthy wealthing western middle class that has been willing and able to buy all of these cheaply produced Chinese goods. So you can only really rapidly expand and rapidly hire all of these workers if you have a customer that is willing to basically give you its wealth. So in the case of the first industrial revolution that the British or the European industrial revolution, what you see there is the British and European elites rapidly take possession of basically all of the wealth in the entire world. And what you see in the second industrial revolution or the Chinese industrial revolution is industrialists rapidly taking the wealth of the western middle class. So you can only do this rapid expansion that drives wages up in the context of there being a big customer that is able and willing to to give up its wealth and and spend its money. But do you have that now? Do we have a group of people somewhere that is willing and able to respond to this massive increase or this potential? Obviously, at this point, we don't know how big AI is going to be, but you know, let's assume it it does create a huge increase in productivity. Is there a group of people in our society that is able and willing willing and able to respond to that by massively increasing its spending? And the answer is basically no. You know, we we are existing in in very slowly growing economies um where governments are increasingly incredibly cashstrapped. Uh the working class has effectively no excess money to spend. The middle class is struggling even to buy things like well the middle class is struggling to buy things like property which means you have increasingly cashstrapped society where all of the excess spending is this very very very wealthy class and they are unlikely to massively increase their spending which means this technological boom if it becomes a technological boom I can't see how that leads to like an enormous splurge in economic growth because I don't see where the customer is. Yeah. And this reminds me of the very famous but possibly apocryphal madeup um conversation that Henry Ford, the big American car making industrialist had when he when he introduced um machines into his factories. So this is probably not true story, but he's he's Henry Ford, this incredibly wealthy the guy who founded Ford cars, obviously. Um he's got his car factory and he's filled it with all these amazing machines and he's showing the union representative like around the factory and he's basically saying well you know good luck getting these machines to pay your union dues and he's basically saying well you know like I don't need your workers and the union rep turns around and says well good luck getting these machines to buy your cars which is basically making the point that if you do not have a wealthy the cash owning middle class and working class who are able to spend money. You you cannot grow economically because you do not have a customer for the things that you create. And in the context of the inability to rapidly grow economically, what happens when you significantly improve technology? Well, I think the the obvious healthy response is okay, we've improved our technology, but we cannot rapidly impro increase our production because we don't have like a customer there who is who is there willing and able to buy it. So what we could do instead of using that technology to massively increase our production, massively increase our output is we could use that improved technology to simply reduce our working hours. And then okay, we don't have enormously more output, but we have more leisure time and we can spend more time with our friends and our families and you know on our hobbies and doing the things that we want to do. And this is the the kind of thinking which was popular with one of my favorite historical economists and and perhaps the most famous well maybe the second most famous economist of all time uh the British economist John Maynard Kees Kanes um who he lived in the 1900s and when he was seeing you know the rapid improvements in technology the rapid improvements in production which definitely continued, you know, into the 1900s, he he could see how great this was for the economy. And he said that our our grandchildren would work 15-hour weeks, which is basically saying, you know, our our grandchildren would only have to work two days a week. And what what he's seeing there and what he's saying there is exactly true, which is in the context of rapidly improving technology, that means humans are more productive. Um, one way that we can respond to that is by basically like giving all humans more leisure time. And um, like Kings was exactly right that that was possible, that is possible. But he said that quote you know probably something like 100 years ago you know and here in 2026 we can clearly see that actually the amount of time that humans spend working has probably significantly increased especially in the last 50 60 70 years. You know when you factor in the fact that there's been a big increase in female labor force participation. So now you have you know all pretty much all adults working rather than just half of adults working in paid work. But obviously the child care and the housework still needs to be done by somebody. I think despite the fact that we've had massive increase in technology, Keen's prediction that his grandkids would work 15 hour weeks has been massively wrong. So why is it that despite increasing technology we see in many cases neither improved living standards nor reduced working hours? The answer is because of inequality. So let's talk about how improved technology works in an equal society. And I think it's important to recognize that when economists talk about technology and and how it affects an economy, it's important to recognize that the vast majority of economic models used by economists um implicitly assume a perfectly equal society. So in a perfectly equal society, we all own our share of the productive resources. So you own a big chunk of the AI and you own a big chunk of the factories and you own your own home and you own some of the farmland and you own some of the energy production facilities and you're relatively self-sufficient in like your ownership of resources and new technology comes out. Fantastic. You're more productive and you have a choice of like, well, how do I respond to my increased productivity? Do I work more because now I can make more money with my increased work or do I work less because I don't need to work so much? You know, have a choice like how do I use this like windfall like do I use it to get more money or do I use to get more leisure time? But when we have a very unequal society which you know um we are moving into what that means is the resources the natural resources like the food and the energy and the the productive facilities that that turn these things into energy that you need but also most obviously that the buildings and the houses are all owned by a small superw wealthy elite. You know that's the case in very unequal societies. you know, we're not quite there yet, but we're going in that direction. In this situation, work plays like a very important role, which is when you have a small group of people that own all the assets. Um, and also they own the debt. So, your government is in debt to them. You maybe are in debt to them with your mortgage or your student debt. Every week, every month, every year, you need to pay them a significant amount of money because you need to access those resources. You need to eat food. You need to live in a house, so you've got to pay rent or mortgage. Your government is in debt to them. Maybe you're in debt to them. So, you've got to pay interest. You've got to pay them for access to energy. You've got to pay them for access to transport because they own all of these things. When you have a very unequal society, the majority of people have to pay every week, every month, money to the rich. And how are you able to pay them that money when you do not have any resources yourself? The answer is the way this system is balanced is work. Work plays a very crucial function in an unequal society. Work is how you balance your basically like from birth debt to the rich. You're born where you own nothing. They're born everything. The only way for you to get access to the resources that you need and they own is you have to work for them. And what this means is if you have a sudden increase in technology, especially if that technology is owned by them, you cannot respond by working less. Because if you choose to work less, how do you pay your mortgage? How do you pay your rent? How do you buy food? These guys own these things. And they need you to work for them. Well, you need to work for them. Otherwise, they're not going to give you access to these things. And I think really when we want to discuss the question of will improved technology, will AI liberate us like John Maynard Kane's wanted it to like to some degree I think it did and it has since World War II or will it enslave us uh like it did for those workers in the early industrial revolution, you know, here in Britain who are forced to work in terrible conditions, you know, in in factories in in terrible unsafe cities um like it did to the people in India who lost their jobs and staff to death and the people in Ireland and in many countries around the world really is quite simply a question of who owns the technology is a it's a simple question of that um and I think history any real close look at history will show us that this naive reading of don't worry about it it's going to be fine like time heals all wounds is incredibly incredibly incredibly naive because that first industrial revolution caused a 100red years of you know 150 years of desperate poverty in this country and you know arguably two 250 years of desperate poverty all around the world. Um, and it wasn't really resolved in a way that provided living standards for ordinary workers until these labor movements were built over generations. And it wasn't really until wealth was redistributed after World War II that it ever provided decent living standards to ordinary people. So once once again, that is that might seem like another depressing message from Gary's economics. Um but I don't think it is and I'll tell you why. Right. The first thing is like it is very important that you recognize improved technology has the capacity to hurt you as much has as much as it has the capacity to help you. And it's very important that you recognize that in the past improved technologies have caused enormous damage to many people around the world whilst making a small number of elites incredibly rich. It's very important that you recognize that because if you don't recognize that, you will allow it to happen again. But I also think when we go back and we look at what happened last time, what happened in the industrial revolution, um, and the terrible poverty that was endured by my grandparents and my great-grandparents and your great-grandparents and all of our great-grandparents, um, it doesn't need to be a depressing story. And the reason I say that is when I look back at the terrible poverty that was in endured by the people who lived in the 1800s and the early 1900s across the world. Um what really amazes me most is that they were able to go from those situations of incredible poverty. And you have to remember right these people lived at a time the poverty which these people endured during and immediately after the industrial revolution and the world wars and all the the terrible things that happened you know all around the world as part of colonialism and all of this stuff. Um that happened in a context of people having lived for thousands of years in incredibly unequal economies. Um, and you know, we had in this country like a a class system which really told people, you know, okay, yeah, you're poor and you live like and and they're rich and and they have more than you, but that's the way that it's supposed to be because they're up there and you're down here and they're better than you and you should know your place. Um, and these people had never seen, not just in their lifetimes, but for generations and generations and centuries before them. These people had never really seen societies in which people are broadly equal and which the average worker got a decent share and where the average worker got security and stability. and the idea of of an economy and a world where your average man or woman and their kids could have good quality health care, education, housing, food, they'd never seen it. They'd never never they'd never seen they'd never seen it happen. And yet from that situation they built the world which which my parents and maybe your parents lived in where an average person, an average man or woman get an average job and get a decent quality house and decent quality education and decent quality healthcare. And I find it so amazing that they found from that poverty somehow the ability to fight for a world which they'd never seen. And you know sometimes sometimes in the course of the work that I do well very often to be honest I have to encounter a lot of naysayers that when I say listen life is getting worse but we can fix it if we tax the rich more fairly. People turn around to me and they say, "Oh, what are you what are you talking about? You know, you're being idiotic. You're being unrealistic. There's no way we could tax the rich at higher rates. If we tax them, they'll just leave. Like, forget it. There's no way. It's just the way things are." Um, and they say that from a position where you and I can sit now and, you know, we can read our history books and we can read Wikipedia and we can go and read Charles Dickens, you know, we can talk to our parents and grandparents and we can see what life was like in this country and your country wherever you're from 100 years ago, 200 years ago. We can see the desperate poverty that people lived in and we can see the enormous improvements that were made in living standards over the course of the 20th century. And we can see, you know, I know I know most of us were not alive back then when these changes were made, but we can see in, you know, within the last 100 years, the enormous improvements that were achieved in living standards. And yet even in that context, many people will believe and will try to convince you to believe that better is not possible. Even though we can see just by looking in many cases at our own parents and grandparents that better is possible that an economy where ordinary people get security and safety and dignity and respect and education and healthcare and food and housing, we can see that it was possible just 50 years ago. And um when I see how hard it is often to convince people that better is possible now, even in the context of it it being there in living memory. When I look back at the struggles that my grandparents, our great-grandparents, wherever you're watching from, that they went through in the context of this like terrible poverty, terrible living conditions, the fact that despite that, they were willing to to to get together and put their heads together for for for no payment and work hard to to create this labor movement, to fight for a fair share to to demand things like better pay and and health care and education and and housing and living conditions. The fact that they were able to do that despite at the time it never having been done before. They had nothing to look back on. When people told them this is impossible, you can't get more. You're at the bottom of the barrel here. You don't deserve better. They couldn't look back like we can and say, "Look, it was done. It was done less than a hundred years ago. Living standards were changed. Inequality was decreased. Things were made better. They were they were going out there with nothing in desperate poverty and fighting for that despite the fact that they could never see it having been done before anywhere. And they fought anyway. And when I see that not only did they do that, but eventually they won, what that shows me is that we are capable of amazing things. And you are capable of amazing things. If we are willing and able to put for a moment our grievances down and work together for a share of the pie, what the struggle of history and the industrial revolution and of our ancestors and our our grandparents and great-grandparents shows us is that it is possible. Is that we can win. is that you can come from a situation much much worse than where we are now and you can make something better for your kids and grandkids. Um, and if I'm honest, I don't think it's a depressing story at all. I think it's unbelievably inspirational. Um, but I think what history also shows us is that it can go both ways. You know, it can go both ways. You know, it can make living standards much worse. But if you build those labor movements, if you build those political movements, if you make sure that you get your fair share of the pie, that improved productivity, that improved technology, it is there for you, for us to make life better. So to go back to the beginning to answer the question, is AI going to make wages higher or is AI going to make wages lower? Is AI going to make life better or is AI going to make life worse? The answer is quite simply that it depends on what you do. It depends on what we do and it depends on what we build. Um but history shows us if the ordinary working people don't fight for their share of the pie, then they will get nothing. Um and I know it's not easy. I know it's not easy to fight. God knows I find it difficult sometimes. But you know the fact is your granddad fought and your great-granddad fought and your great great granddad fought before him and that is why your dad was able to live the life of comfort that he did. So now it's our turn. What are we going to do? Are we going to fight? I definitely am. Thank you very much. Tax wealth work. Send it to your mom. Send it to your friends. Take care. Have a good week.