AI-Driven Economic Crisis: A 2028 Memo Warns of Devastating Consequences

What if Artificial Intelligence continues to prosper at a pace as exponential as witnessed today? What if the world is not able to change or disrupt to level up against the juggernaut in the next two years? Citrini Research, a widely followed independent financial research publication has released a fictional memo drafted in the year 2028 that imagines a near future in which artificial intelligence keeps improving and in doing so, weakens the foundations of the modern economy. In this memo, it is stated that for many years, India’s growth was driven by labour arbitrage. Indian software developers cost much less than American developers, and that cost advantage helped build over $200 billion IT services industry led by companies like Tata Consultancy Services , Infosys, and Wipro . The argument in this scenario is that AI removes that advantage. If an AI coding agent can do the same work for a very low cost, close to just the electricity needed to run it, then a low cost developer becomes expensive by comparison. “But the marginal cost of an AI coding agent had collapsed to, essentially, the cost of electricity. TCS, Infosys and Wipro saw contract cancellations accelerate through 2027,” it noted. The concern is not just about jobs, but about India’s overall economy. India imports more goods than it exports, especially oil, electronics, and gold. It has relied on strong IT services exports to bring in US dollars and balance this gap. If global companies start canceling outsourcing contracts and replace human developers with AI systems, that dollar inflow could shrink. It predicts an 18% crash, claiming the same would nudge the IMF had to begin “preliminary discussions” with New Delhi. However, it fails to mention the positives and the capabilities of Indian IT companies to remodel its strategies and make itself relevant in the times of AI. In the imagined year 2028, unemployment has risen above 10 percent and the S&P 500 has fallen almost 40 percent from its earlier peak. Policymakers are struggling to respond. If machines can do high-value work faster and cheaper than people, companies will hire fewer workers. If people earn less, they spend less. If spending falls, the economy slows down, and enters recession. This imagined crisis hits white-collar workers the hardest, forcing them to work take took lower-paying service sector and gig economy jobs which would be struggling with wage burdens. “They were (will be) working twice as hard (mostly with the help of AI) just to not get fired, hopes of promotion or raises were gone. Savings rates ticked higher and spending softened,” it predicts These workers make up about half of US employment but account for a large share of spending. When high earners lose jobs or worry about losing them, they reduce spending on homes, travel, cars, restaurants and shopping. Lower interest rates and other usual recession tools may not solve the main issue. The problem is not only tight credit. It is a structural change in how much companies need human workers. At the same time, tax revenue falls as high salaries disappear, while government spending needs rise. Political disagreement slows decision-making. The memo mentions ideas such as direct payments to displaced workers or new taxes on computing infrastructure. But it warns that technology may be changing faster than institutions can adapt. For centuries, human intelligence was scarce and highly valued. Wages, mortgages and tax systems were built around that fact. If machines can perform many thinking tasks cheaply and at scale, the value of human cognitive work may decline. The economy would need to adjust to this new reality. The transition, however, could be difficult and disruptive.