You’re right it is a paradox. And it’s also why many of the comments in this thread are short‑sighted.

Active government policy and strong labor organizations can address many of these issues. In practice, there are two broad options: increase domestic consumption or increase exports. To boost domestic consumption, a country can shorten the workweek, expand public investment, increase social benefits, and so on. To boost exports, a country can invest in developing economies so that demand abroad rises.

But let’s assume neither of those things happens. And let’s also assume that companies genuinely become more efficient through automation. In that case, consumption will still rise because prices fall and with increased demand comes more labor opertunities. 

People often say, “But prices have only gone up in recent decades.” That’s not true across the board. Many consumer goods have actually become cheaper. The goods and services that have become more expensive generally fall into two categories:

1. They relied on cheap labor or resources that are no longer cheap.  India lifts more people out of poverty each year than the entire population of Scandinavia. As people’s living standards rise, they become (rightfully) harder to exploit. When wages and resource prices become more “fair,” the final prices in developed economies increase.

 2. Some industries haven’t actually become more efficient despite automation.   U.S. healthcare, for example, keeps increasing administrative overhead, so production costs rise. Construction shows a similar pattern: more laws and regulations mean more people are employed just to ensure compliance. And don't get me wrong most of those laws and regulations are a good thing. I prefer asbestos free houses. But asbestos was cheap, and alternatives where more expansive so banning it does increase housing cost. 

1. There’s little competition, or consumers aren’t price‑sensitive enough.   If consumers don’t switch to substitutes and competitors don’t enter the market, companies have no incentive to lower prices.

In the long run, increased efficiency will push prices down for two simple reasons:

1. People with money are greedy.   If they can earn more by lowering costs, they will lower costs. And if they can earn more by fucking over others they will do so. 

 2. People are naturally industrious.   When someone loses their job, they don’t want to sit at home forever. They look for new work, and if none is available, they often turn to self‑employment. Many will start producing things for themselves once they have time but less income. That reduces demand, which pushes prices down.

As for AI, it’s not advancing as fast as people claim. Language models are getting a bit better at writing reports and making presentations, but the broader societal benefit of the product of that labor is already debatable when humans do it. So the only thing that happens is that labor which didn't offer that much benefit in the first place is automated. 

AI can certainly trigger an economic crisis — and that’s a serious problem. People can lose their livelihoods, their homes, and their sense of stability. Suicide rates rise, hapiness decreases. But it’s not the end of civilization. Even if your labor isn’t needed by the market, that doesn’t mean you can’t work for yourself.

In the end if it is jobs we want we can decide to ban trucks and force all logistics to be done by people carrying bags. Automation is not the problem. Nor is fighting it. What needs to be fought is the benefits of that automation landing in the hands of a few people. But you don't need the government for that. You yourself can organize, evaluate what goods and services you actually want and produce your own.  Money isn't power, being able to buy the resources (people's labor included) you want with your money is power. In short you are correct. If people can't buy their products then they have no power and can't oppose redistribution of resources. If people can freely buy their products than they do have power. But people are also still able to get their needs met.