Artificial Intelligence, the Collapse of Consumer Society, and Oligarchy

This paper examines the potential for automation and artificial intelligence (AI) to induce a broader economic decline, impacting not only labor but also the owners of capital and advanced technology. While automation has traditionally favored skilled over unskilled workers, recent advancements in AI suggest that it could replace skilled labor as well, raising concerns over a diminishing middle class and the viability of mass consumption society. This study proposes a model with non-homothetic preferences and increasing returns technology, positing that in a world where AI eliminates skilled labor, demand for mass-produced goods may fall, destabilizing the very capitalist class reliant on consumer society. Within this framework, political power lies with the "oligarchs," or owners of proprietary technology, who may adopt policies such as Universal Basic Income (UBI) or Post-Fordism to sustain consumer demand and profitability. The analysis explores how oligarchs might use different policy mechanisms, including decisive control or lobbying-based menu auctions, to influence economic outcomes. Findings suggest that policy preferences vary among oligarchs based on their market focus, with luxury producers favoring policies that sustain a middle class and necessity producers inclined to support AI-driven automation under minimal redistribution. The paper provides insights into the complex interactions between technology, income distribution, and political economy under advanced automation.