Capitalism, Class Relations, and the Role of the State in the AI Era: A Kaleckian View

Srinivas Raghavendra ()
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Srinivas Raghavendra: University of Galway, Ireland

No 178, ICAE Working Papers from Johannes Kepler University, Institute for Comprehensive Analysis of the Economy

Abstract: This paper examines how the financialization of advanced capitalist economies in the 1990s relates to the rise of artificial intelligence (AI) as the dominant technological framework in the 21st century. Using insights from political economy and Kaleckian theory, it suggests that AI is not a break from previous trends but a continuation and intensification of the computational rationality developed during the late 20th century's shift toward finance-led capitalism. The study highlights three structural limits that AI introduces to capitalist reproduction: the zero-slack labor constraint, the full-employment constraint, and resource limitations. These limits and their interactions threaten to destabilize the class relationship between capital and labor, the territorial basis of the state, and the legitimacy of democratic capitalism. The paper proposes that the emerging oligarchic state faces a legitimacy crisis that might be alleviated by universal basic income (UBI), which could serve as a political tool to maintain democratic support amid automation and inequality. It concludes by reflecting on how capitalism, much like an adaptive biological system, sustains itself through ongoing structural transformations, reshaping its institutions and practices to enable it to deflect existential threats while preserving its core logic of private appropriation.

Date: 2026-03
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