Within just six months, AI-related investment has transformed from a niche topic to a primary focus in top-down cyclical discussions at major global finance conferences like the IMF/World Bank meetings. This rapid shift highlights its perceived impact on global growth and employment.

AI systems from companies like Meta and OpenAI rely on a vast, unseen workforce of data labelers in developing nations. These communities perform the crucial but low-paid labor that powers modern AI, yet they are often the most marginalized and least likely to benefit from the technology they help build.

Just as NAFTA brought cheap goods but eliminated manufacturing jobs, AI will create immense productivity via a new class of "digital immigrants" (AIs in data centers). This will generate abundance and cheap digital services but risks displacing vast swaths of cognitive labor and concentrating wealth.

The IMF assesses national AI readiness using a four-part index: digital infrastructure, labor market flexibility, innovation flow, and the most difficult component, regulation and ethics. This framework shows that technical capability is insufficient without adaptable labor policies and a strong ethical and regulatory foundation.

Contrary to popular belief, AI reduces inequality of output. Research shows that AI provides the biggest performance lift to lower-skilled workers, bringing their output closer to that of experts. This elevates the value of human judgment over rote implementation, narrowing the performance and wage gap between top and bottom performers.

For Chinese policymakers, AI is more than a productivity tool; it represents a crucial opportunity to escape the middle-income trap. They are betting that leadership in AI can fuel the innovation needed to transition from a labor-intensive economy to a developed one, avoiding the stagnation that has plagued other emerging markets.

The enormous market caps of leading AI companies can only be justified by finding trillions of dollars in efficiencies. This translates directly into a required labor destruction of roughly 10 million jobs, or 12.5% of the vulnerable workforce, suggesting market turmoil or mass unemployment is inevitable.

Frame AI not as a tool, but as a wave of "digital immigrants" with superhuman cognitive abilities. Similar to how the NAFTA trade agreement outsourced manufacturing, AI will outsource knowledge work. This will create abundance for some but risks hollowing out the middle class and social fabric.

The labor market faces a dual threat. Weak demand, linked to tariffs and deglobalization, has already pushed job growth to zero. As AI adoption accelerates productivity, it could further suppress labor demand, potentially tipping the economy into a state of net job decline.