I see a future where AI is banned to avoid that situation. If AI creates too much work and ends reducing advanced countries output then something will need to be done.
Individually, AI helps me to be more productive. But, as you point out, at society level makes everybody less productive. So, I have no incentive to stop. Nobody has. Only if we all agree to stop using it then it works. A tragedy of the commons problem.
I think this is a lot more likely than people realize, but some won't like the execution on this.
It's either a vague blanket "ban on AI" that wraps up all dev work in red tape, or it's shutting down specific businesses like OpenAI and Anthropic while letting Google and Microsoft continue to dominate.
But how does a true AI ban actually look in practice? The open weight models are out there, the hardware is out there. Spamming is already illegal but so commonplace that it's pretty laughably enforced at this point. Even really heinous stuff in the dark corners of the web still finds its way into the hands of users, I don't see how AI is any different in this regard.
This is about as likely as magic getting banned in your world. Stick to demon-slaying and leave the technological dystopia up to us.