We Kept Growing. Most People Didn’t

One political camp warns that birth rates are collapsing and that the country needs more children and fewer immigrants to preserve its cultural identity. Another camp tells us AI will do most of the producing within a generation, that vast cognitive workforces will be displaced, and that the old jobs are not coming back. These arguments are made loudly and shape policy. The first assumes labor is becoming scarce. The second assumes labor scarcity is being eliminated. They cannot both be true. Yet both persist, because they are not really arguments about labor at all.

The same coalitions often hold both positions at once. Stop the immigrants, have more children, restore traditional family structures, get the manufacturing jobs back, and at the same time embrace AI. If AI does what its boosters claim, the manufacturing jobs are not coming back, and the children will not find work in the economy that emerges. If they do find work, AI has not delivered on its promises. That serious political programs rest on both halves tells you the discourse is doing something other than describing reality.

Both positions assume the underlying economy is intact. The pronatalists need a growth economy that wants more workers. The AI camp needs a growth economy that absorbs productivity gains and produces the new jobs that supposedly always emerge. If the growth model is not intact, then both sides are arguing about how to staff an economy that no longer works for most of the people in it. That is the question the discourse is built to avoid.

The short version of why the growth model is not intact: it stopped distributing its gains to typical workers around 1980,[1] and the appearance of growth has been kept up since then by a series of workarounds. Each substituted for wage growth in a different way: debt sustained consumption, asset inflation created paper wealth, and immigration expanded the worker base. Each is now used up. I have written at length about the debt and asset-inflation pieces in The Corporate Benevolence Fantasy. The piece I want to stay with here is the immigration piece because it connects to the pronatalist alarm.

Population decline became visible in the 1970s. Birth rates in most rich countries dropped below replacement and have stayed there.[2] The math for pension systems that depend on intergenerational transfer did not work without either more workers or more productivity shared with workers. Productivity arrived. Sharing did not. So the workforce had to be expanded some other way, or the math would eventually fail.

Immigration was the way. Germany imported Turkish workers starting in 1961, with the explicit assumption they would return home.[3] They did not. The structural need turned out to be permanent, and the workers built lives. A country that imports workers to solve its own problems takes on the commitment to keep them, whether it acknowledges that or not. The United States ran continuous immigration that kept the working-age population growing even as native birth rates fell. France, the UK, the Netherlands, Sweden, Canada, Australia: variations of the same policy. The political class understood what immigration was doing economically and mostly avoided saying so plainly. Saying so would have forced a conversation about whether the underlying model needed fixing or just propping up.

The propping worked for two generations. GDP kept rising. Pension systems kept paying. Labor markets stayed reasonably tight. None of it would have been possible without the demographic top-up, the addition of working-age people through immigration. That fact got buried under aggregate statistics. And because it stayed buried, the eventual reaction, when immigration became politically untenable in the 2010s, arrived without any of the preparation an honest discussion would have produced. Brexit, AfD, Le Pen, Trump, Meloni, Wilders. The cultural identity panic is the political consequence of decades of using migration to paper over a problem that was never named.

This is what the pronatalist alarm is, structurally. It is the political bill arriving for the un-naming. Have more children, send the immigrants home, restore the traditional family. None of those proposals fixes the underlying problem, because the problem was never about birth rates or borders. The problem was that the growth economy stopped distributing its gains, and the demographic top-up was the workaround that kept the appearance of growth going. Closing the border without rebuilding the distribution does not return the country to the state it was in before the workaround. It returns the country to the moment the workaround was instituted in the first place, when the underlying problem became urgent.

Then AI arrives, and the cover comes off.

If AI delivers the productivity gains its boosters promise, and those gains are not redistributed, you get a hyper-productive economy that cannot sell what it produces because the people who used to buy things do not have income. The arithmetic does not work. The 20th century solved this through mass employment plus mass consumption plus credit. The 21st-century version removes the employment leg, and the workarounds that kept the growth story going for forty years are now used up. There is no further political demographic top-up possible. There is no further debt capacity in the bottom half. Asset inflation has continued to reward existing owners and stopped reaching anyone trying to become one.

The displacement has begun. Amazon, Meta, Microsoft, and UPS each cut tens of thousands of jobs in 2025 to redirect spending toward AI infrastructure.[4] The U.S. labor share of income fell to its lowest level in the seventy-eight years that the Bureau of Labor Statistics has been tracking it.[5] The wealth held by the top one percent of American households reached 31.7 percent in late 2025, equal to that held by the entire bottom ninety percent.[6] None of that is projection. It is current. Each corporate cut is a direct swap: payroll budget redirected to AI, savings to shareholders. The mechanism that has been redistributing wealth upward for forty years now has a more efficient instrument.

So you get either redistribution at a level the current political system resists, or you get demand collapse. Pick one. There is no third path around this. The workarounds of previous decades allowed the question to be deferred. There is no further workaround available.

I grew up in the Ruhr. My father worked the mines at Gelsenkirchen-Horst and died of black lung a few years after I left for America. The mine closed in the 1990s. Most of what was around it followed over the next twenty-five years. I watched the displacement from California and then from Minnesota, and I watched the difference between how Germany handled it and how the American Rust Belt handled the same kind of shock at roughly the same time.

The German response was not graceful. Gelsenkirchen has a 38 percent poverty rate today against a 15 percent national average.[7] But the city did not collapse the way Youngstown or Detroit or Flint collapsed. The state treated displacement as a public obligation. Pensions were honored. Workers had institutional standing through codetermination. Federal transfers paid for the long transition. The American response treated the same shock as a market outcome and let the towns figure it out. Twenty-five years later, you can see the difference in life expectancy, suicide rates, civic infrastructure, and opioid deaths.

That is not to say that German institutions are better than American ones. The lesson is that what happens to a region after its economy ends depends on whether the displaced workers are included in sharing the wealth generated by the entire society. The capital that left the Ruhr and the capital that left Youngstown went to similar places: global financial markets, new industries elsewhere, returns to shareholders. The difference was that one country built a claim for the displaced on those returns, and the other did not.

The AI debate refuses to formulate this question. When commentators worry about AI displacement, they ask whether new jobs will appear to replace the displaced ones. It is the wrong question. The right question is who owns the productive capacity, and how output is distributed when wage labor is no longer the basis for distribution. The forty-year upward redistribution that the growth story has been hiding made that question urgent decades ago. AI is not creating it. AI is the moment the cover comes off.

The pronatalist alarm and the AI displacement alarm are arguing about the same problem from opposite sides. One says we are running out of workers. The other says we are running out of jobs. Both are true descriptions of the surface. Both miss what is breaking underneath, which is the connection between productive output and broad prosperity. That connection has been broken for forty years. The workarounds bought time. And time is running out.

Closing the border does not fix it. Having more children does not fix it. Embracing AI without changing how output is distributed accelerates it. Acknowledge that for forty years wealth was transferred from labor to ownership by deliberate choice. That naming is the moral basis for reversing it. The reversal is not a policy adjustment. It is a correction.

Sources

[1] Economic Policy Institute, The Productivity-Pay Gap, data series covering 1979–2020.

[2] United Nations, World Population Prospects; OECD Family Database, total fertility rates.

[3] German Federal Foreign Office, archive of bilateral labour recruitment agreements; Turkey–West Germany agreement, October 30, 1961.

[4] Reporting on 2025–2026 corporate layoffs at Amazon, Meta, Microsoft, and UPS via CNBC, Reuters, and the companies’ own filings and earnings calls.

[5] U.S. Bureau of Labor Statistics, Labor Share of Gross Domestic Income series.

[6] Federal Reserve Board, Distributional Financial Accounts, Q3 2025.

[7] Paritätischer Gesamtverband, Armutsbericht 2024 (Poverty Report 2024); city-level and national poverty rates for Germany.