Krugman Warns AI-Driven Growth Sparks Inequality, Systemic Economic Divide

Nobel Prize-winning economist Paul Krugman has issued a stark assessment of the U.S. economy, describing it as "in an abnormal state in many respects" amid growing polarization, employment stagnation, and deepening inequality, according to a Bitcoinsistemi article. In a recent post on his Substack blog, Krugman highlighted how the interplay of artificial intelligence (AI) advancements and structural economic shifts is creating a landscape of "rapid growth in the age of artificial intelligence but deepening inequality." His comments come as policymakers grapple with delayed data releases, including the September employment report, which he attributes to the recent government shutdown.

Krugman outlined three key issues shaping the current economic climate. First, he noted a sharp polarization between sectors: while AI-driven industries surge ahead, other parts of the economy remain stagnant. This divergence, he argues, exacerbates regional and occupational divides, leaving many workers without clear pathways to adapt. Second, he described an "employment freeze," where job seekers face persistent difficulties in finding opportunities despite the absence of large-scale layoffs. Third, Krugman pointed to a "K-shaped growth" pattern, where AI-fueled investments benefit high-income earners and corporations, while middle- and low-income consumers struggle with rising costs and limited access to economic gains.

The economist emphasized that these trends are not merely statistical anomalies but signals of systemic imbalances. "The U.S. economy is moving away from normal functioning on many levels," he wrote, cautioning that policymakers risk operating with "partial blindness" without timely data. His remarks align with broader concerns about AI-driven inequality, as highlighted in recent analyses, including a Business Standard editorial, which noted that global AI investments far outpace current revenues.

Krugman's warnings come amid a backdrop of global economic turbulence, including U.S.-China trade tensions, Argentina's polarized elections, and Trump-era tariff policies that have reshaped international trade dynamics. However, his focus remains on domestic structural challenges, urging a reevaluation of policies that fail to address the uneven distribution of AI-driven growth.

As debates over economic strategy intensify, Krugman's analysis underscores the need for targeted interventions to bridge the widening gap between technological progress and inclusive prosperity.