The document explores the anticipated AI crisis of 2027, drawing parallels to past economic crises while highlighting the regulatory challenges posed by the rapid evolution of technology. It emphasizes the need for effective auditing and regulation of the AI industry to prevent systemic failures reminiscent of historical financial downturns. The author, Chris Marsden, provides a detailed analysis of digital platforms, capitalism, and the implications of AI on society and governance.

1. Analyzing the
AI Crisis of
2027
BROOKINGS RECSAI 17 SEPTEMBER 2024
CHRIS MARSDEN @PROF_MARSDEN

2. Chris Marsden: 30 years’ regulating digital platform use of algorithms
Worked On Internet Law, Platform Law, AI Law, Disinformation Law, Net Neutrality
• Consulted For Govts & IGOs: EUCommission/Parliament, OECD, Council of Europe
• Ran Pan-European Research Networks With Computer Scientists
• Turing, Cambridge, Oxford II, VUB Brussels, Munster, Berlin, Bologna, EUI
• Typically Write With Computer Scientists & Political Scientists
• Joined Monash April 2022; Founder Digital Law Group; Data Futures Institute
• Seminar series for Warwick (2023) and Penn State (2024) Alliances
• Conference Chair: Clayton, Chambers, Prato, Brussels, Warwick, Washington
• Australian Research Council: College of Experts member 2024-6
• Research Fellow: Harvard KSG, Melbourne, UNSW, USC, Glocom Tokyo
• LLB, LLM London School of Economics, PhD Essex
• Professor of Law, Essex & Sussex
https://research.monash.edu/en/persons/christopher-marsden

3. Era of decaying stasis not rapid entropy
Stable populations across the planet – except Central Africa/Pakistan: 8.2billion
Rentier capitalist systems ‘Washington Consensus’
◦ extreme oligarch wealth offshore
Universal digital consumerism –
◦ smartphone society, filter bubbles, Kardashisation/globotrash
Liberal democracy not universal but majority
◦ Universal healthcare broken the cycle of births/deaths
◦ even in the case of COVID
◦ Flaneurism mass spectator sport

4. Stop Me If You’ve Heard This One Before
I explained ‘OffData’ in Georgetown Tech LR 2018
◦ Based on my St Petersburg talk of June 2016
◦ We all have a prior Russian history before February 2022
Followed by…
• platform hype of 2020-22 (COVID home working),
• NFT hype of 2021-22 (artists without galleries),
• cryptocrash of 2022 (techbros & criminals),
• AI hype of 2022-24 (see all the above)

5. Prepare for the Crisis of 2027?
…now with added AI!
What will cause our 2027 crisis?
Failure to learn the lessons from 2000/2008 crises?
Or 1847 crisis…
Railways were a complex system, you say?
William Ewart Gladstone, threatened author of the
Railway Regulation Act 1844 (7& 8 Vict. c.85)
This Photo by Unknown Author is licensed under CC BY-SA

6. Digital platforms following
Vanderbilt railroads…
Regulation only curbed the wilder excesses of capitalism
◦ We have cultures of audit not enforcement
Who will audit the AI industry? The Big 4
◦ AI standards are officially audited by Deloitte under AI Act!
◦ Cantero Gamito, Marta and C. Marsden [2024]
◦ AI Co-regulation? The role of standards in the EU AI Act,
◦ 32 International Journal of Law and Information Technology 1, eaae011
Who will blow the whistle? Not techbros! OpenAI job contracts..

7. Crashing the largest investment
in history (proportionally)
Corporations as liability engines: Joint Stock Companies Acts 1844 & 1856
◦ incorporation of companies without specific legislation
◦ companies include a limited liability clause in their internal rules.
◦ Hallett v Dowdall (1852) 18 Q.B. 2 clauses bound shareholders with notice of them.
1855 Limited Liability Act (18 & 19 Vict. c 133) 1856 Joint Stock Companies Act
◦ replaced by the Companies Act of 1862 (25 & 26 Vict. c89)
◦ provided limited liability for joint-stock companies
◦ Salomon v A Salomon & Co Ltd [1896] UKHL 1
◦ company with legal liability had a distinct legal personality separate from individual shareholders
Extraordinary increase in liquid capital & fraud accompanied by ‘crypto’ gold rush
◦ July 1854: Institute of Accountants in Glasgow petitioned Queen Victoria for a royal charter

8. Systemic crisis in capitalism 1846-7
“1840 credit expansion resumed in the UK and spread throughout France and the United States.
• the stock market entered upon a period of relentless growth which mostly favored railroad stock.
◦ “Bank Charter Act 1844, triumph of Ricardo’s Currency School prohibited the issuance of bills not completely backed by gold.”
◦ Prime Minister Peel forcing higher currency reserves for London’s go-go banks, not to deposits/loans, increased 500% 1844-46
Shadow banking crisis (as prudential regulators had no idea what the loan books looked like)
Credit crunch driven by a ‘natural’ disaster – potato blight 1845-6
• 1 March 1847: Bank of England bullion reserve fell sharply after the announcement of the Irish loan
• 17 April 1847: cost of famine relief would be transferred to local taxes in Ireland
• Mid 1847 Capital outflows for railroads in USA and to pay for food imports overwhelmed the recovery,
25 October 1847 government 'suspended' the Bank Charter Act 1844
◦ Wheeler, M. (2022) The Year That Shaped The Victorian Age: Lives, Loves and Letters of 1845, Cambridge UP

9. (Very) Select Reading
Marsden C. & I. Walden [2025] ‘Regulating Intermediary Liability and Content’ I. Walden ed. Telecommunications Law and Regulation
OUP
Marsden Christopher T. (2024) ‘Generative AI Regulation in the UK’, Chapter 44 in Philipp Hacker, Sarah Hammer, Andreas Engel, Brent
Mittelstadt, Handbook on Generative AI: Technical, Social and Legal Challenges (OUP)
Cantero Gamito, Marta and C. Marsden [2024] Artificial Intelligence Co-regulation? The role of standards in the EU AI Act, 32 IntlJ.Law&IT
Marsden, C. and I. Brown [2023] App stores, antitrust, and their links to net neutrality: a review of the European policy and academic
debate leading to the EU Digital Markets Act, Internet Policy Review, https://policyreview.info/articles/analysis/app-stores-antitrust-net-neutrality-eu-digital-markets-act
Marsden C. [2022] Platform Law in Europe: Combatting Online Harms Through Co-Regulation, 15 J. Law & Econ.Reg 1, pp34-66
Marsden C. [2021] ‘Transnational Information Law’ Ch19 in P. Zumbansen ed. Oxford Handbook of Transnational Law, OUP pp. 419-436
Marsden, Chris, Trisha Meyer, Ian Brown [2020] Platform values and democratic elections: How can the law regulate digital
disinformation? Comp. Law & Security Rev. at https://doi.org/10.1016/j.clsr.2019.105373
Marsden, C. [2020] ‘The Regulated End of Internet Law, and the Return to Computer and Information Law?’ Chapter 1, pp35-57 in K.
Werbach ed. After the Digital Tornado: Networks, Algorithms, Humanity, Cambridge University Press, pp.35-57 ISBN 978-1-108-42663-3
http://assets.cambridge.org/97811084/26633/toc/9781108426633_toc.pdf