Progressive AI agenda required for a balance between winners, losers: Economist Joseph E Stiglitz at HT Leadership Summit

According to Stiglitz, the ongoing AI boom has generated two key challenges for the global economy: expected returns and balance in the global economy.

The lack of a macroeconomic model for Artificial Intelligence (AI) makes it a double-edged sword for nations, Nobel Prize winning economist Joseph Stiglitz said at the Hindustan Times Leadership summit on Saturday, while cautioning that countries like India should increase investments in education to mitigate the potential impact it could have on employment.

Joseph Stiglitz said India could continue growing at 7% if it limits income inequality and sustains domestic demand. (HT Photo)

According to Stiglitz, the ongoing AI boom has generated two key challenges for the global economy. The first is whether the investments in AI will lead to expected returns, which in turn would determine if it creates a financial sector bubble that would eventually burst. The second and more important challenge is striking a balance between the gainers and losers which AI will create in the global economy.

This is also going to be a key challenge for India, which has gained a lot from technology-intensive sectors, especially IT, in achieving its economic transformation, Stiglitz said, adding that the way forward has to be thinking about, and acting on, a “progressive AI agenda.”

One-third to two-third of the current growth in the US is related to the investment boom in AI-related ventures such as data centres, Stiglitz said. A bubble around AI does not mean that the technology which AI is creating will not be successful. But whether the expected return in investment will be realised is a big doubt, the American economist said, pointing to the competitive nature of the sector.

“There are American companies in Silicon Valley doing AI frontier (models) that are using Chinese models (DeepSeek) to train their models, because they’re so cheap. And so our AI infrastructure has become interdependent. But the point I want to make is, I think this is an area where there’s likely to be enough competition that they won’t get the profits that they hope,” he added.

The other dilemma is the lack of an economic model.

“You ask the question: if it’s destroying all jobs, who’s going to demand the goods that are going to be produced by the AI? And there’s a demand problem,” Sitglitz said.

“They (AI companies) say, oh, everyone will be an artist. And I say, well, first of all, artists aren’t very well paid, and they’re not going to buy a lot of goods. And secondly, not everybody’s an artist. They say, you’re going to be able to buy the best coffee in the world. The quality of your baristas will be unbelievable. And we say, are they going to be very happy being a barista rather than the high-quality jobs they have today?”

This is what makes it important to strike a balance between the winners and losers of AI, Stiglitz explained. In principle, he said, a tax on profits of AI companies in the US could be used to support a progressive agenda, with investments in people and society. “But across borders, where the winners are in the United States and the losers are in other countries, that kind of redistribution won’t be occurring. So that means you have to think more strategically,” he pointed out.

He warned that countries such as India have cause for concern about the outcomes of the AI boom, especially its impact on jobs.

“I hate to say this, but I think you (India) should be worried now. If you look at where AI has affected the labour force in the US most quickly, it’s been in the tech sector…And those are the kind of jobs it replaces. So a lot of that, which has been very supportive of the Indian transformation, the Indian miracle, has been really a lot based on those particular kinds of jobs. So the question is, where do you — how do you pivot? Where do you go? And that’s really an open question,” Stiglitz said.

“We obviously have to compete in some ways as humans with AI, and I think that means we have to get smarter and more educated,” he said and stressed that India should make more investments in education.

“A lot of these investments that are going to be needed are going to be public investments, in education, in health, and the green transition…you’re going to need government funding and taxation to push forward that green transition, that progressive AI agenda,” he added.

Sitglitz also warned while AI has the potential to solve long -standing problems, it also has the potential to create “a rogue AI, a dangerous AI, (which) could be a very dangerous thing.”