[JJ Column] The Reason for Revisiting the Unsettling Books Written by Engels... The Political Economy of the AI Transition

[Block Media Reporter James Jung] When Yoo Si-min mentioned the inevitable failure of the Lee Jae-myung government, a Bloomberg column title caught my eye: 'The AI Doomsday Scenario Nobody Talks About.'

This column mentions the term "Engels' pause." Yes, that Engels, the friend of Marx. Engels wrote a book in 1845 titled "The Condition of the Working Class in England." It dealt with the plight of the working class in early industrial revolution England, predating Marx's revolutionary book "Capital."

In this book, Engels argued that workers are the historical subjects and key class that will overthrow the capitalist system and build socialism. I never thought I would revisit those blood-boiling books I read in school.

Engels' pause is a concept created by modern economic historians, originating from 'unsettling books' written in the 19th century, but it also helps in addressing the problems arising from the AI revolution occurring in 2026. The two events, separated by 200 years, are strikingly similar.

Productivity Increase and Wage Growth

The 19th-century industrial revolution in England raised productivity per worker by 46%. At that time, the real wages of workers only increased by 12%. The fruits of technological advancement were concentrated in the hands of capitalists and industrialists. The share of capital in national income expanded from 17% to over 31%, and the profit rate grew from the 10% range to over 20%.

In contrast, workers in England at that time were subjected to long working hours of 16 hours a day, living in unsanitary and overcrowded housing, and facing dire conditions such as child labor. The novel "Les Misérables" vividly depicts how unprotected children like Cosette and Gavroche fall into the ranks of street laborers.

But why the pause? The horrors observed by Engels in the early industrial revolution were a pause for a brilliant upward phase. Extreme wage stagnation and inequality were not eternal. The 'capitalists' began massive investments in factories, machinery, and infrastructure based on enormous profits.

Engels' Pause

Capital accumulation caught up with the demands of technology, and machines began to grow larger and more complex. Skilled laborers were needed to operate these machines. This marked the beginning of high-tech engineers receiving treatment comparable to capitalists despite lacking capital. From 1840 to 1900, productivity per worker increased by 90%, and real wages rose by 123%. Finally, a phase arrived where the increase in wages and productivity matched.

Progressive thinkers of the time, including Marx and Engels, argued that by utilizing this upward phase, they could reach revolution and end capitalism to achieve socialism. We know history. The revolution they envisioned did not occur in England but in the periphery of Europe, Russia.

Engels' pause is ironic. The revolution did not occur in the strongest places but in the weakest. So why should we revisit Engels' pause now?

During the industrial revolution, Engels' pause was 'naturally' overcome due to the reinvestment of capitalists. The decisions made by capitalists were not for the sake of workers but to earn more money through investment. However, it cannot be denied that the passion of revolutionaries resisting inequality and striving for democracy played a decisive role in bringing about change. Revolution and investment have different missions. The history of blood implements justice, while the history of money addresses problems.

Today, the challenges posed by AI are far more extensive than in the 19th century. The political and social repercussions are unprecedented. Once again, revolution and investment have been assigned different missions.

AI Doomsday

While past technologies primarily replaced simple repetitive labor, AI threatens cognitive and creative tasks that were considered the unique domain of humans, such as software engineering and other white-collar jobs.

The extreme income inequality and reduction of white-collar jobs caused by AI could collapse the national tax base and provoke uncontrollable political and social backlash. The essence of the Bloomberg column is that the AI doomsday will not be due to T-3000 robots but because of national financial collapse.

The challenges posed by AI cannot be left solely to the market, as the pause during this transition is too significant. Therefore, intentional rules for distribution and adaptation are necessary. Signs of intensified political disputes are already emerging in our country. Questions like "Why is one of the three mega projects in a specific region?" and "Who planned this and with what intention?" are causing a stir. It is very difficult to break through this debate with partisan logic.

Returning to Engels' pause, the key is to align the pace of productivity with real wages. The fruits of productivity increases must lead to wage growth to prevent disaster. If AI takes away jobs and even white-collar workers become unemployed, then in the 21st century, Cosette will still have to beg on the streets.

Experts say that technology should not simply 'automate' labor but should be developed in a way that 'augments' labor through systems and policies. Nobel laureate Daron Acemoglu points out that current tax policies impose taxes on employment while providing subsidies for capital and investment, leading companies to focus on blind automation.

'Structural Majority' Solves Problems

To prevent AI doomsday and to compensate for the government's declining tax revenue, various methodologies have begun to be discussed. These include introducing a wealth tax, increasing general consumption tax, raising corporate taxes, and implementing an AI token tax. Since these proposals involve raising taxes, there is significant resistance from the wealthy. Even revolutionary France failed to pass the wealth tax. Since problems cannot be solved with 'voluntary investment,' state intervention is unavoidable. Without convincing this, neither a progressive nor a conservative government can avoid doomsday.

AI demands a political and economic transformation. The 19th-century industrial revolution created a path for socialist revolutionary struggles. The progressive political elite in our country were also under its influence, with Yoo Si-min being a representative commentator.

The times have changed. While the nature of the problems may seem the same, the essence of technology has changed, so the solutions must also change. The AI revolution can only be driven by a 'structural majority.' Investments must be made not at the level of individual companies but at the national level, and distributions must consider not just the current generation but future generations as well. This is not a problem that can be solved through division. It must encompass all stakeholders.

The government, businesses, and individuals must play their roles in a multi-dimensional way. It will not be resolved by trampling on others, siding with one group, or discriminating between regions. It is time to create a massive structural majority, regardless of party affiliation.

"The Toys of Those Who Know How to Use Computers"

I have thought about the role of the government. It must initiate new rules for distribution and innovate social services. The government should rigorously and without prejudice consider new tax and distribution rules, such as robot taxes, data taxes, and basic income. Like the Swedish example, rather than providing cash welfare, it should expand subsidies for childcare, healthcare, and education (social services) to enhance the efficiency of government finances. It must support unemployed individuals to quickly receive retraining and return to the labor market.

Businesses should adopt an open attitude towards the use of technology for labor augmentation and labor-management cooperation. They should not solely focus on 'so-so technology' for reducing labor costs but should seek ways to use AI to expand human capabilities and create new value. Like Singapore's labor-management cooperation model, they should seek social compromises that maintain employment while adjusting wages instead of destroying jobs.

The role of individuals is the most important. A cold recognition of reality and flexibility are essential. An individual's hard-earned career can become zero in an instant. Professions like doctors, lawyers, and accountants are not safe havens. One must acknowledge that past achievements can become weaknesses. Creative thinking remains a precious and valuable asset, even in the age of AI.