AI's Economic Lie
Shock horror! AI added 'basically zero' to the US economy in 2025.
AI is a new economic revolution! It will separate economic growth from labour, enable unlimited growth, and lead to a new age of prosperity. This narrative has been used to justify a truly gargantuan investment in the technology. Last year, Big Tech spent $400 billion on AI. That is enough to eradicate world hunger for a decade! But this year, they are poised to spend $700 billion on AI. Indeed, economists have said these investments have boosted the US economy. Deutsche Bank found that almost all of US GDP growth was from AI investment, and without it, the country would be in a functional recession. Harvard economics professor Jason Furman has backed this up, saying that AI drive 92% of US GDP growth in the first half of 2025. So, is AI the economic miracle it promised to be? Well, no. Economists are starting to actually dig a little deeper past the AI propaganda and have found that this biblical investment has driven ‘basically zero’ economic growth.
This comes from Goldman Sachs Chief Economist Jan Hatzius. In an interview with the Atlantic Council, Hatzius said that AI spending had ‘basically zero’ contribution to the US GDP growth in 2025. He even said “We don’t actually view AI investment as strongly growth positive” and that “there’s a lot of misreporting, actually, of the impact AI investment had on U.S. GDP growth in 2025, and it’s much smaller than is often perceived.”
So, why does Hatzius have such a different opinion from many of his peers?
Well, unlike them, he actually looks at where all that cash is going. You see, all these billions of dollars are mostly being used to import computer chips. So, Hatzius argues that these investments are adding to the Korean and Taiwanese GDP, not the US GDP. So, in fact, these investments are draining the US of capital it really should be using to grow its own economy!
But Hatzius had a, quite frankly, odd omission. You see, AI is meant to increase productivity through augmentation and automation, right? And, increasing productivity creates GDP growth. So, surely, if AI investment itself isn’t increasing GDP, the AIs created by this investment, and deployed into the US economy, will be driving economic growth. So, why didn’t Hatzius take this into account?
Well, because AI isn’t increasing productivity, and so its deployment isn’t increasing GDP.
Analysts have known this for quite a while.
