What is the most profound change AI is bringing to economics and the humanities? It is the fact that AI is eliminating the “laborer.”
AI is exerting immense pressure on the “worker”—the supposed sovereign of the modern democratic welfare state—to pivot and become a “Producer.” AI cannot yet produce “top-tier” original or professional output in fields like coding, research, or medicine. This has nothing to do with raw cognitive capacity. Such output is only born in realms where high-level risk-taking, embodied pain from experience, problem consciousness, and the absence of ethical censorship are at play. At our current level, we lack the computational hardware and power resources to replicate this.
However, in fields where the rules of the game are fixed and “average” output suffices, AI has already leveled the playing field. Translation, insurance underwriting, consulting research, and accounting all fall into this category. Furthermore, in areas where “speed and yield” are paramount, AI demonstrates overwhelming productivity. This trend will only intensify. The problem is that the vast majority of workers are employed exactly in these sectors.
Therefore, we must examine four key points:
- The fundamental difference between a Producer and a Worker.
- How AI forces the Worker to become a Producer.
- The consequences of the Welfare State attempting to solve tech-driven unemployment through monetary expansion (printing money).
- How we, as seekers of Producer Sovereignty, should respond.
1. The Difference Between a Producer and a Worker: The Producer is the One Who Creates Value
(1) Workers Do Not Create Value
There is a widespread, fallacious common sense rooted in the Marxist moral dogma that labor creates value. If you do not discard this notion, AI will look like a demon destroying “labor sovereignty.” You will inevitably arrive at the democratic conclusion that we must levy “robot taxes” and provide “Universal Basic Income (UBI).”
But labor has never created value. No one looks at coal being converted into oil and says, “Poor coal, I’m sorry,” and taxes the oil to give more money back to the coal. Value is “Subjective Use Value.” It is the alchemy of turning $10 into $1,000. Value stems from the risk-taking of the Producer and the means of production they hold, not from labor itself.
Put simply, labor is a cost. Does anyone buy gasoline at twice the price just because a truck’s fuel efficiency improved? Gasoline is merely a raw material in the process of creating the value of “transportation.” Labor is no different—it is just another input, like coal or oil. There is no reason to share created value with a worker simply because production increased. Once the agreed-upon price for the “raw material” (labor) is paid, the contract is fulfilled.
Workers do not create value. When they use “labor rights” to demand nominal wage hikes, corporations simply pass those costs onto the product price. This creates massive inflationary pressure across the economy. Conversely, technological innovation allows the same product to be made at a lower cost, creating massive deflationary pressure. To improve the real purchasing power of the entire economy, the standard move is to suppress worker sovereignty and encourage Producer sovereignty to stimulate innovation. Real purchasing power cannot rise without a productivity revolution.
When I explained this, many of my friends reacted with emotional outbursts. So, I created an easy-to-understand allegory.
Allegory: The Primal Fire and the Woodcutters
Once upon a time, in a certain tribe, there was an Explorer (the Producer) who knew how to start a fire. He risked his life climbing to the top of a volcano to bring back a spark. He then built the means of production—a system to manage and keep that fire from going out. The tribesmen (the Workers) would go into the forest to gather firewood (labor) to maintain the flame. In exchange, they received the right to sleep by the fire and warm meat.
The Woodcutters thought: “I gathered 100 bundles of wood today, so I made this fire! This system won’t run without me!” But even if you stack 10,000 bundles, without the spark, it is just a rotting pile of wood. The act of gathering wood is a cost to keep the fire going; it is not the birth of the fire itself.
The Explorer increased his investment and improved the system so the fire would burn larger and longer. But he did not give the Woodcutters more meat. “I was the one who took the risk and built a system that stays lit even in the rain. Why should I give you more meat?”
As their numbers grew, the Woodcutters began to think: “That Explorer eats too much meat alone. We do all the work; all he did was bring a spark. This is unfair. Tax the rich to increase welfare and create an equal society!”
The Democratic Welfare State operates on the support of these Woodcutters. It says: “Well done. As the monopolist of violence, I will act on your sovereignty. I’ll shake down the Explorer, take his meat, pay my bureaucrats’ salaries, and distribute the rest to you.”
The Explorer says: “If this is how it’s going to be, why should I bother maintaining the fire? I’ll just put it out and become a Woodcutter myself.”
The fire disappears from the village. The Woodcutters and the Welfare State remain, but no one is actually making anything. The Woodcutters say: “Let’s buy fire from abroad. Just print some money!” The Welfare State prints money, using the future as collateral. The fire appears to stay lit. But no value was created. It was merely an exchange of fire for money, backed by national credit. When that credit collapses, the village goes bankrupt instantly.
16th-century Spain is the perfect example. Armed with maritime hegemony, they brought gold and silver from the Americas and spent it only on war, imports, and consumption. They looked down on technological innovation and manufacturing.
The result? Skyrocketing internal prices and the total destruction of their production base. Meanwhile, the British and the Dutch, who took Spain’s gold while building technology and productivity, became the sovereigns of the next generation. This is similar to the threat the US feels from China today; the US has lost its capacity to build its own masks or ships.
Keynes argued that digging holes and filling them back up creates economic vitality and value. Citizens of the Welfare State believe this lie and demand deficit spending. But this is based on the false premise that labor creates value. As seen in the allegory, the moment the Producer puts out the “Fire,” the value vanishes.
There is only one conclusion: Labor does not create value. In a kingdom of workers where welfare overflows, human rights are abundant, and everyone is equal, there is no value.
(2) The Democratic Welfare State: A System Built to Punish Producers
In a democratic welfare state, sovereignty resides with the “masses”—the laborers. Consequently, the entire tax and regulatory framework is designed to penalize the Producer. While the following examples are based on the South Korean model, they apply to the global stage in principle.
Comprehensive Income Tax vs. Earned Income Tax: The Asymmetry of Deductions
On the surface, tax rates appear similar. However, the process of determining the “taxable base” is fundamentally rigged. Workers receive tax breaks for almost anything—dependents, credit card spending, medical bills, education, and even rent. They get a tax cut just for “breathing.”
Producers, on the other hand, are only allowed to deduct expenses directly related to business operations. The children a Producer raises or the parents they support are not considered “business costs.” Even with the same net profit of $50,000, the Producer’s tax burden is significantly heavier. In reality, about 45% of the South Korean population pays zero income tax.
Quasi-Taxes: The Burden of Social Insurance
When a Producer hires an employee, they are legally mandated to pay 50% of that employee’s national pension, health insurance, and unemployment insurance, in addition to their own 100%. While employees might lament the deductions from their paychecks, the Producer is forced to take responsibility for the retirement and health of others. In my experience, nearly 30% of net profit is siphoned away by these “quasi-taxes.” The state takes the credit for providing welfare, while the Producer foots the bill.
Asset Taxes: Penalizing the Means of Production
For a worker, a car is a consumer good. For a Producer, a vehicle or a machine is a “means of production” that creates value. Yet, simply for owning these tools, the Producer is hit with acquisition taxes, insurance premiums, registration fees, and annual automobile taxes. The “looting” of multi-home rental providers is particularly unprecedented. In some cases, double taxation (Comprehensive Real Estate Tax + Property Tax) exceeds the entire year’s rental income. Owners are forced to hike rents just to survive the legal risks. Even if they wish to sell, capital gains taxes as high as 80% act as a barrier. This is not a tax on crime; it is a fine on commercial activity itself.
Local Taxes and Administrative Levies
In a highly digitized, geographically small nation like Korea, local governments are largely redundant. Yet, every level of administration—from the city hall to the district office—demands a cut. From local income taxes to environmental levies, the moment you obtain a business license, you are expected to patch up every hole in the local budget. This leads to a common phenomenon in Korea: owners who earn less than their employees.
Democracy is an expensive system to maintain. It is nearly impossible to sustain unless you are a superpower with a reserve currency like the US, China, or Russia. Yet, none of these powers, except the US, truly practices democracy. For a small, open economy to survive, it must keep politics “small,” block populism, and guarantee the freedom of the Producer. This is why nations like Singapore, Dubai, Georgia, and Ireland place the protection of property rights as the supreme constitutional value. Gori, Georgia, where I currently reside, maintains an annual growth rate of 8-10%. The politics may be a one-party system, but the citizens are satisfied because the economic engine is humming.
Democracy is a luxury only the US can afford—and even for them, the bill is coming due. The pie that Producers can create is simply too small compared to the unlimited desires of a “democratic citizenry.”
2. Why the Individual Entrepreneur Matters: The Vitality of Commercial Capitalism
When I voice these critiques, the response is always the same: “Who forced you to be an entrepreneur? Just leave.” But an economy cannot function on corporations and conglomerates alone. The history of Ancient Rome illustrates how vital the individual Producer’s role is to a community.
(1) The Serfdom of the Curiales
In the 3rd century, Rome ruled a vast territory. Lacking a massive civil service, they offloaded tax collection and administrative responsibility onto the Curiales—local producers and small business owners. If the taxes collected from a village fell short of the quota, the Curiales had to make up the difference with their personal assets. Predictably, they abandoned their businesses and fled to the Latifundia (large estates) to become serfs (Coloni). The local commercial landscape was obliterated. What problems did this cause?
The Vanishing of the Local Economy
Small business owners and self-employed individuals are scattered throughout a community. They provide local employment and purchase/process goods within the same neighborhood, creating an economic multiplier effect. $100 spent locally can create $1,000 or $10,000 in value for the national GDP. When the Curiales vanished, the goods available in the local economy disappeared. The wealth generated by large estates went only to the aristocrats, never circulating back into the community.
Modern Korea is facing the same crisis. With 60% of people in their 20s effectively unemployed, money does not circulate locally. Delivery trucks roam the streets, but that capital is immediately siphoned away by the owners of massive platforms like Coupang or big franchises. To stop this, the state implements “rationing” policies like local currency and basic income, but these only drive up prices with zero real effect. It is the exact same method Rome used when it continuously debased the silver content of the Denarius.
The Explosion of Bureaucratic Costs
The Curiales were the middle class responsible for tax collection, public services, and local administration. Today, they would be a blend of local business owners, self-employed providers, and community maintainers. When they disappeared into serfdom, the cost of maintaining the state bureaucracy skyrocketed. With these “unpaid tax agents” gone, the state had to increase the size of the army and hire more civil servants. As the bureaucracy expanded, the number of value-creators shrank, leading to even higher taxes. This drove even more people into serfdom. Eventually, the empire went bankrupt because it could no longer afford its own administration.
Korea is following this path. Tax revenue is falling, but welfare recipients are increasing. The growth of the civil service is among the fastest in the world. The payroll exploded by 130,000 new public servants in just one term (2017-2022). Currently, 10% of the economically active population lives off the public sector—a state of extreme inefficiency.
The Death of Social Mobility
In my Money Dysmorphia series, I discussed why inheriting the means of production is vital. A family that passes down a shop, a field, or livestock gives its descendants immense leverage. However, in a country like Korea that wipes this out with a 50% inheritance tax—or for children of bureaucrats and salarymen who have no productive assets to inherit—individuals are thrown into the market naked. In a welfare state where asset prices have skyrocketed due to inflation, they spend their entire salaries just on rent. With no capital accumulation possible, they can never become Producers. They are destined to be lifelong slaves.
The same happened in Rome. Once a person became a serf, they were legally tied to the land, and their children inherited that status. When even those with the talent to be Producers surrendered their sovereignty to become serfs, Rome’s dynamic commercial capitalism vanished. The fact that Medieval Europe became a feudal society of serfs was the inevitable result of a world where the Producer had disappeared.
(2) The Vitality of Commercial Capitalism Springs from the “Sovereign Decision” to Sell One’s Own
Global consumers, regardless of location, detest rebranded white-label (OEM) products. Even for a simple Goulash or Schnitzel, they crave the “human touch” unique to a specific owner. A commercial district filled with such establishments becomes a spectacle in its own right—and naturally, it prospers.
This is the phenomenon that occurs when a Producer makes the sovereign decision to “sell something of my own.” However, when Producers are forced by cost pressures to abandon their own narratives—their recipes, interiors, and unique experiences—that district loses its “exploratory value” for the consumer. With nothing to see or experience, consumers close their wallets and flee toward overseas travel or online shopping.
This explains why South Korea’s domestic consumption has recorded negative growth for years, yet airports are perpetually crowded. As the commercial vitality of the domestic market vanishes, consumers develop an even more intense craving for “differentiated experiences.” What they fail to realize, however, is that it is their own democratic pressure—shifting the burden of costs onto Producers—that stifles the very creation of those experiences.
Every conglomerate begins as a small business or a sole proprietorship. But once the fear of being looted by taxes, crushed by regulations, or swallowed by giants is “learned,” talent stops taking risks. Instead, they risk their lives to become civil servants or corporate cogs. If even that fails, they find it more “profitable” to remain unemployed, surviving on minimum wage, unemployment benefits, or basic income.
3. AI Eviscerates the Welfare State’s Basic Model: The Worker=Consumer
Technology can be divided into two categories: Technologies of Distribution (Innovation in Dissemination) and Technologies of Production (Innovation in Creation). Distributive technologies possess an institutional affinity with Democracy, while productive technologies align with Republicanism.
(1) Distributive Tech: The Printing Press / Internet Model
These technologies specialize in replicating existing knowledge, scriptures, news, and information faster and wider. When information becomes abundant, it becomes easier for the “masses” (the Demos) to find their voice. It is a perfect match for Democracy, which justifies “power in numbers” by breaking the information monopoly of traditional elites. However, this does not create new value. It merely dilutes value once monopolized by a few and distributes it to the many. Consequently, the price of the outputs—books, newspapers—falls toward zero. They act as “platforms” that create new demand by exploding accessibility.
(2) Productive Tech: The Steam Engine Model
On the other hand, AI itself is an intelligent steam engine (Steam Model) that yields final goods, as well as a capital good that enables advanced roundabout production. By leveraging AI, we can create utility that was previously unimaginable.
However, a defining characteristic of AI as a capital good is that it delivers responses proportional to the user’s own intellectual capacity. In practice, even when asking the exact same question, the output can vary significantly based solely on the difference in the accumulated context. While conventional machines are expected to yield similar results regardless of who operates them, AI operates differently.
Consequently, every worker must utilize AI to personally demonstrate a level of labor productivity that was previously unattainable. This marks the demise of the ‘risk-free worker-as-consumer’ model maintained by modern capitalism, signaling a paradigm shift toward the ‘sovereign producer-as-consumer’ who takes full responsibility for their own outcomes. Of course, even if one’s legal status remains that of an employee, economically speaking, one must become a producer who maintains a complete ‘skin in the game’ regarding their own value added.
(3) Private Property Rights and Freedom of Expression
If AI technology leads to an economy populated not by ‘risk-free workers’ but by ‘producers who must personally prove their outcomes,’ how can we generate national wealth and make human life more prosperous? The most critical requirements are safeguarding private property rights for tangible goods and guaranteeing freedom of expression for intangible goods.
- Protection of Private Property Rights: When people are assured that the state will not expropriate their factories and earnings under the guise of welfare or morality, they will no longer feel the need to hide behind intangible assets (IP) or digital platforms. Consequently, massive investments will pour into physical capital that truly changes the world—such as energy plants, high-speed transit networks, and hardware robotics factories. If private property rights are protected, people will think harder and innovate more to lower the costs of producing tangible assets and maximize utility using AI. This will drive down the prices of all daily necessities, automobiles, home appliances, and groceries, thereby increasing disposable income and making society as a whole materially prosperous.
- Guarantee of Freedom of Expression: Intangible assets (ideas, designs, source codes) should be treated under the framework of ‘freedom of expression’ rather than through artificially inflated patents or copyright laws enforced by the state. Naturally, this freedom of expression encompasses all forms of imitation and parody. Because ideas and technologies do not diminish in essence when copied by others (non-rivalry), they lack physical scarcity. Forcing state-mandated monopolies on non-scarce goods does not protect private property; rather, it infringes upon “the rights of others to freely process and dispose of their own physical private property (raw materials, factories).”
Does it make any sense to grant a ‘legal monopoly’ in the market just because someone thought of it first? How contradictory is it for the state to do this? Isn’t it strange that they give the power to sue and censor simply because someone thought of a name first (trademark), made a demo first (patent), or created content first (copyright)—all while plundering profit and physical capital, which are actual rivalrous resources, under all kinds of excuses like welfare, employment, and morality? In fact, a certain businessman in Korea holds hundreds of food and shop names as trademarks and does nothing but file lawsuits! This practically drives many creators and inventors who want to use AI as a means of production out of the market and hinders wealth creation. Wasn’t capitalism supposed to be about competing to make better consumer goods?
If the intellectual property cartel is dismantled, paving the way for an ecosystem where competition is driven solely by ‘genuine intangible assets’—such as tacit knowledge, technical/knowledge archives, practical know-how, and brand credibility—rent-seeking producers who rely on lawsuits instead of innovation will vanish instantly, and the market will embrace true abundance.
(4) Republican Sovereignty as the Successor to Democracy
The conclusion is inescapable: democratic states that exploit high-income Producers through taxes, regulations, and censorship effectively extinguish the vitality of commercial capitalism. Consequently, in such nations, it is nearly impossible to increase national wealth through AI—a production technology that can truly function as a higher-order good only when property rights and freedom of expression are absolutely protected, because it is a machine that relies strictly on the user’s individual intellectual capacity.
Is there a solution? The answer may lie in “American Republicanism,” a concept I am exploring in my [The 51% Legal Tyranny] series. American Republicanism was originally a system designed to protect Producers by blocking populist pressures, such as direct elections for all offices and the progressive income tax.
What about South Korea? I am skeptical. If you are a talented Producer, it is far more efficient to leave than to wait for the country to change. Korea is a nation with a feverish passion for political participation. Therefore, there is zero probability that the populace will accept the cold conclusion that they must abandon “welfare-for-all” and learn to survive as independent Producers.
Comparison: Democracy vs. Republican Principles
| Category | Democracy (The 51% Tyranny) | Republican Principles (Producer Sovereignty) |
| Basis of Power | Headcount — Tyranny of the Masses | Property Rights & Rule of Law — Defense of Sovereignty |
| Economic Outcome | Looting Producer profits for consumption | Civilizational progress via accumulation & reinvestment |
| Archetype | Hypocrites demanding rights without risk | Producers creating value under self-responsibility |
| Cold Conclusion | Downward equalization and self-destruction | Unequal but advancing civilization |
4. Historical Case Study: The Fate of Nations that Print Money to Stop Tech-Induced Unemployment
In principle, technology enhances the productivity of the entire market, including workers as well as entrepreneurs. However, there are also labors that fail to adapt to such technological changes or become obsolete. If this leads to lower wages, workers can be redeployed to other industries or processes without facing unemployment. They can even further increase their productivity using advanced technology. The problem, however, is that in a democratic society, a drop in wages or temporary layoffs are perceived as a violation of human rights. This, in turn, leads to demands that the government must address unemployment. What happens when a state responds by printing money because it cannot endure this pain?
(1) Britain’s Maintenance of the Gold Standard during the Industrial Revolution
In 19th-century Britain, a massive “Technological Chasm” opened as the hand-weaving industry transitioned to a mechanized factory system. Workers, fearing for their livelihoods, systematically destroyed machines (Luddism).
Despite this crisis, the British government did not attempt to soothe the pain by printing massive amounts of currency. On the contrary, following the Napoleonic Wars, they adhered to a strict monetary policy through the 1819 Resumption Act, anchoring the value of the currency to gold.
In the short term, this intensified the depression and the suffering of the unemployed. However, in the long term, it forced capital to flow into the most productive sectors. As mechanization caused the price of cotton textiles to plummet from 30 shillings to 3 shillings, the real purchasing power of the masses surged, leading to demand for entirely new industries. The result was the world’s greatest industrial power and the Pound Sterling’s status as the global reserve currency. At the time, Britain’s per capita GDP was over 30% higher than that of the United States.
(2) The Welfare State’s Response to AI-Induced Mass Unemployment
When AI is fully integrated into production and causes mass unemployment, democratic welfare states will inevitably print money. Monetary debasement is equivalent to throwing sand into the engine of technological innovation, yet the tragedy is that they have no other choice.
The mechanism unfolds as follows:
- The Tech Chasm: AI and robotics lower the value of traditional labor, restructuring the industrial core.
- Fiscal Intervention: To suppress social unrest, the state issues massive amounts of currency to provide subsidies and prop up the dying system.
- Asset Bubbles & Barriers: Liquidity pours into real assets like real estate. The cost of entry and production for new Producers skyrockets (The Cantillon Effect).
- Distortion of Rewards: Unearned income from asset inflation eclipses profits from innovative production, driving human capital into speculation (Crypto, Futures).
- Moral Hazard & Dependence: The masses, tamed by state support, choose to be parasitic beneficiaries rather than Producers. Even if AI is convenient, it doesn’t mean everyone produces the same value; better creation requires high-level risk-taking. However, in a welfare state, it is more “rational” to wait and then “eat” the person who achieves excellence.
- Death of the Deflationary Effect: When AI increases productivity to lower prices by 5%, but the state prints 7% more money to raise prices by 2%, the public is robbed of the 5% reduction in living costs they should have enjoyed from technological progress.
- Stagnation & Decline: A society whose self-sustaining production capacity has vanished collapses from within. Small democratic open economies (like Korea) will issue national debt they cannot sustain, eventually becoming economically dependent on large, non-democratic open economies (China/Russia) that can absorb that debt.
6. Conclusion
The new technology of AI is uprooting the myth of “Worker = Consumer = King” that the welfare state has maintained for decades. The idea that labor creates value is a hollow myth. Labor is merely an input, no different from coal or oil. Value is, and always has been, created only by the Producer.
Elon Musk fired 80% of Twitter’s staff and aggressively integrated AI. The result? The platform functioned better than ever.
(1) The Choice of Tech: Return to Republicanism
AI is not the Printing Press for spreading information. It is the Second Steam Engine that makes previously impossible production possible. In a democracy ruled by the “51% Tyranny,” AI is wasted as a mere “psychological counselor.” But in the soil of a Republic that defends property rights and the rule of law, AI becomes an overwhelming weapon that allows one Producer to create the value of 100 million people. Prosperity in the AI era does not depend on the technology itself, but on how thoroughly the Sovereignty of the Producer who wields that technology is protected.
(2) Predestined Collapse: The Pit of Debasement and Dependency
Faced with the structural Chasm of new technology, the democratic welfare state will invariably choose the “narcotic painkiller” of monetary debasement. Buying off the anger of the masses by printing money without real productivity growth is a suicidal act. Korea will eventually lose its national strength in a swamp of inflation and meet its end by becoming dependent on non-democratic giants like Russia or China.
(3) Sovereign Exit: The Fortress of Archives
What, then, must we do? We must become Producers who ignite our own sparks and Exit from the predatory system. It will not be easy, but we must never stop challenging ourselves. To become a “Digital Serf” leashed to the state’s distribution network is a fate worse than death. I choose to live as a Producer building my own hip-hop and philosophy archives. I do not want to hold the firewood; I want to hold the Spark.
If you enjoyed this article, you can support the project – thank you!