AI and the Great Decoupling

Artificial intelligence is fast snapping our work-based social contract and populous countries like India will feel the strain first.

For more than two centuries, modern societies have rested on a deceptively simple bargain. In exchange for labour, citizens received wages, dignity and a stake in the future. Work was not merely a means of survival but the organising principle of economic life, social status and political legitimacy. Governments taxed it and democracies were built around it.

That bargain is now fraying. Artificial intelligence (AI) and robotics are beginning to sever the link between human effort and economic value. Productivity is rising, but the need for people is not. This is not a temporary shock but a structural rupture that strikes at the foundation of the industrial-era social contract.

For India, the implications are unusually stark. No large country has relied as heavily on human numbers as a source of national advantage. A vast population powered growth, underwrote democracy and promised prosperity through sheer scale. If technology renders that scale economically redundant, what replaces the contract that held the republic together?

To answer that question, it helps to step back two centuries before looking forward a hundred years.

For most of human history, work was not employment. Until the late eighteenth century, fewer than 0.1 percent of people worldwide were engaged in what would today be recognised as salaried jobs or formal trade. The overwhelming majority were farmers, artisans and craftsmen. Work was seasonal, family-based and rarely performed under a permanent employer. One worked to live, not to earn a wage.

Economic historian Karl Polanyi, in The Great Transformation, noted that pre-industrial societies were not organised around labour markets at all. E. P. Thompson and Friedrich Engels similarly described agrarian Europe as a world where productivity was constrained by land and muscle, not by efficiency or scale. People worked constantly, but they were not “employed” in the modern sense. Labour was embedded in social life, not priced by markets.

Factory Age

The Industrial Revolution rewired this ancient arrangement. Between 1750 and 1900 Britain’s urban population rose from about 15 percent to more than 75 percent. Millions migrated from farms to factories. Work became centralised, timed, supervised and permanent.

Factories demanded predictable labour. In return, workers received wages, a measure of stability and, after long struggles, political rights. From this bargain emerged what now looks like the modern social contract. For the first time there was a linear relationship between employer, employee and productivity. More people meant more output; more output meant more growth. This equation powered capitalism, nation-states, trade unions, welfare systems and mass education. Countries such as India and China entered the modern world assuming this relationship was permanent.

They built schools to supply workers, cities to house them and policies to keep them productive. Population was not a problem but a “demographic dividend.”

Broken Linearity

AI and robotics threaten to snap this line clean in two. With AI, productivity no longer scales with people. With humanoid robots, physical labour no longer requires humans at all. This is not a cyclical disruption like mechanisation or outsourcing. It is a structural break.

One skilled AI engineer can now perform the work of dozens. A fleet of robots can replace thousands of workers without fatigue or protest. While output will soar, employment will not follow. When productivity decouples from human participation, the social contract that tied dignity, income and relevance to work begins to fracture.

In the industrial era, labour was the primary source of value. In the emerging order, capital-owned silicon increasingly replaces carbon-based labour. Education once led to specialised credentials; AI systems now erode the scarcity that made those credentials valuable. Population, long celebrated as a dividend, now risks becoming a service burden.

Populous countries are most exposed to this shift. For decades, their growth models rested on a simple formula: more people meant more labour, which meant more growth. China grasped earlier than most that this would not hold forever. By becoming the world’s factory, it absorbed labour at scale, but it also used that window to dominate manufacturing ecosystems, batteries, rare-earth processing and, increasingly, AI hardware.

Today, China controls large parts of the physical and digital foundations of the AI–robotics era. India does not yet possess comparable leverage. Its manufacturing sector has failed to absorb labour at Chinese scale, and its information-technology industry is among the first targets of automation.

Indian Faultlines

India’s vulnerability is not merely economic. It is cultural and institutional as well. A growing share of young Indians is drawn towards activities that generate online attention rather than ownership of productive assets. The country produces oceans of data and a vast pool of users, but owns relatively little of the underlying platforms, models or supply chains.

In a world where value accrues to those who control algorithms, energy and hardware, consumption without ownership is a losing position. Data alone is not power if the rules governing its use are written elsewhere. The risk is of becoming indispensable as a market but dispensable as a producer.

The long-term danger is of mass irrelevance. Work once anchored citizenship because it made people economically necessary. If that necessity disappears and nothing replaces it, abundance will not translate into dignity. It will produce dependency.

India’s challenge is to imagine a new contract before the old one collapses. That means shifting from supplying labour to owning systems: investing in AI models, robotics, energy infrastructure and manufacturing depth. It means rethinking education away from narrow credentialism towards adaptability and ownership.

The future will not wait for India to be ready. But it will judge whether the country understood the nature of the break and acted before the line snapped.

(The writer is a strategy and transformation leader who writes extensively on technology and the future of work. Views personal.)