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The last big fall in the price of bitcoin, in December '22 was caused by a shift in the dynamics of mining where it became more expensive to mine new btc than what the coin was actually worth. Not only did this plunge the price of crypto it also demolished demand for expensive graphics chips which are repurposed to run the process-heavy complex math used in mining. Cheaper chips, cascading demand and server space that was dedicated to mining related activities threatened to wipe out profit margins in multiple tech sectors.
6 months later, Chat GPT is tolled out by Open AI. The previous limitations on processing capabilities were gone, server space was cheap and the tech was abundant. So all these tech sectors at risk of losing their ass in an overproduction driven recession, now had a way to pump the price of their services and this was to pump AI.
Additionally around this time the world was recovering from covid lockdowns. Increased demand for online services was dwindling (exacerbating the other crisis outlined above) as people were returning to work and spending more time being social IRL rather than using services. Companies had hired lots of new workers: programmers, tech infrastructure workers, etc., yo meet the exploding demand during covid. Now they had too many workers and their profits were being threatened.
The Federal reserve had raised interest rates to stifle continued hiring of new employees. The solution that the fed had come up with in order to stifle inflation was to encourage laying off workers end masse -- what Marxists might call restoring the reserve army of labor, or relative surplus population -- which was substantially depleted during the pandemic. But business owners were reluctant to do this, the tight labor market of the last few years had made business owners and managers skittish about letting people go.
A basic principle at play here, is that new technology is introduced for two reasons only: to sell as a new commodity and (what we are principally concerned with) replacing workers with machines. Another basic principle is that the capitalist system has to have a certain percentage of its population unemployed and hyper exploited in order to keep wages low.
So there was a confluence of incentives here. 1. Inexpensive server space and chips which producers were eager to restore to profitability (or else face drastic consequences) 2. A need to lay off workers in order to stop inflation 3. Incentives for businesses to do so.
Laying off relatively highly paid technical/intellectual labor is a low hanging fruit in this whole equation, and the roll out of AI did just that. Hundreds of thousands of highly paid workers were laid off across a variety of sectors, assured that AI would create so much more efficiency and cut out the need for so many of these workers. So they rolled out this garbage tech that doesn't work, but everyone in the industry, the media, the government needs it to work, or else they face a massive economic crisis, which had already started with inflation.
At the end of the day its just a massive grift, pushed out to compensate for excessive overproduction driven by another massive grift (cryptocurrency) combined with economic troubles that arose from an insufficient government response to a pandemic that killed millions of people; and rather than take other measures to stifle inflation our leaders in global finance decided to shunt the consequences onto workers, as always. The excuse given was AI, which is nothing more than a predictive text algorithm attached to a massive database created by exploited workers overseas and stolen IPs, and a fuck load of processing power.
Very nice writeup. My only critique is the need to "lay off workers to stop inflation." I have no doubt that some (many?) managers etc... believed that to be the case, but there's rampant evidence that the spike of inflation we've seen over this period was largely due to corporate greed hiking prices, not due to increased costs from hiring too many workers.
Exactly! the two things are the same phenomenon expressing in two different ways! This is exactly why this is such a mindfuck.
Follow my logic: in the usa by 2022, covid19 had killed over a million people. When you compare this to the total unemployed in the US, that's not just the governments padded numbers but adding together all the people in prisons, people who stopped looking for work, etc., those covid deaths were about 12% of that unemployed "surplus" population. Again, the system needs a certain number of people to be unemployed, over a million people died, which means over a million "jobs" (this includes employed and unemployed positions within the entire workforce.) At the time the media was calling it "the great resignation," where employees were just going out and getting better jobs. But where did these jobs come from? Can you really just go out and get a better job any time you want? Of course not. Try searching for a job now, good fucking luck.
Seriously, google "reserve army of labor" if you haven't already, it explains everything. So as the labor market tightens, consumption increases. People got a better job and can fix their credit up in a few months and get a loan on a car maybe for the first time. People are walking out of the grocery store with more food, or going out to eat more. Retailers notice this and raise prices in response to increased spending. this is a phenomena that Marx wrote about in value price and profit, which I might mention again.
So why were prices going up? Larry Summers gets in front of Jon Stewart and says that increase in spending equals increase in demand, when demand challenges supply then prices go up! Which is what we are generally taught. Except Marx proved that this was not the case, that inflation really was just retailers raising prices due to increase in consumer spending. Its a bit of economic slight of hand that I could explain if you want but for now I'm already long.
The federal reserve says that inflation (which is like you said, mostly driven by companies raising prices to squeeze consumers, and this is proven by the way the fed responds) is out of control, so therefore they are raising interest rates. The way this will control inflation is by making it harder and more expensive for companies to get money for large capital investments. This is all to squeeze the companies to stop hiring (since their p&l is negatively affected) and eliminate excess staff. But the companies are reluctant to let people go/stop hiring because of what they just experienced with a "tight" labor market. They have the incentives or pressures, but they need an excuse, they need a justification. Enter automation with ai. Finally the automation revolution that the media has been threatening workers with for decades is here and sorry can't halt progress you see (Ned Ludd did nothing wrong.)
Except it isnt all that. In the mean time the economy has adjusted to the depleted reserve population, the corpos were given everything they wanted or needed in order to continue to profit after the death of millions, and a new grift industry has grown up and attracted all this funding and following and clout. Didn't even have to lose that many jobs, just a bunch of high paid ones. Except interest rates are still elevated so the fed is continuing to keep that pressure on the labor market. Anyway, there's all of these cascading effects, from systems interacting with each other; therefore its more useful to understand the relation between phenomenon than it often is to try and understand that phenomena on its own.
So you're right, it was corporate policy, but it isn't greed necessarily. Definitely greed adjacent though, its like systematic greed. There are incentives and disincentives present within the system. Karl Marx was able to write about the causes of inflation 150 years ago, and they were using the same faulty excuses then. That's also why the fed decided to raise interest rates, they understood what the problem was, and the fix is and always has been to throw people into unemployment. The system is predictable, but it isn't rational.