Doctorow warns AI's $1.4T bubble sets up austerity backlash

Cory Doctorow spent this week's Pluralistic column chaining together three arguments that usually live in separate rooms: that the AI capex boom is a bubble, that bubbles pop, and that the political fallout from a big pop looks less like a recession and more like the rise of the far right. It is not a comfortable read for anyone whose business assumes the current spend keeps going.

His numbers on the bubble are the ones worth staring at. He puts current AI investment at $1.4T on what he calls 'the money-losingest technology in the history of the human race', and he describes 'the seven companies that comprise a third of the S&P 500' as effectively 'trading the same $100b IOU around while pretending it's in all of their bank accounts at once'. If that unwinds, he argues, roughly a third of the US stock market gets vaporised with it. He then flags that the median US worker has $955 saved for retirement, so the losses do not land where the paper wealth sits.

The political half of the argument leans on a paper by four LSE and Bocconi economists, 'Public Service Decline and Support for the Populist Right', which tracked UK voters through the loss of 1,700 GP practices since 2013. Doctorow says the researchers found that people who saw the services they rely on degrade switched their votes to UKIP, the Brexit Party and Reform. The chain he draws is direct: bubble pops, tax base craters, governments turn to austerity, hollowed-out services push voters toward the far right.

The honest caveat is that this is one columnist's synthesis, not a peer-reviewed forecast. The $1.4T figure and the 'third of the S&P 500' framing are his characterisation of a market whose real losses will only be visible in retrospect, and the cited paper is about British GP closures, not the US AI trade. What the reporting does not give you is a probability, a timeline, or a map of which specific holdings are most exposed if the unwind happens.

The forward-looking read is that leaders sitting on AI budgets have a second exposure most decks do not model. If Doctorow's chain even partly holds, the winners on the other side of a crash are less likely to be the people promising superintelligence and more likely to be the ones running the boring, visible work of government, the kind he gestures at with NYC's Zohran Mamdani fixing 100,000 potholes in his first 100 days.