Structural Dissolution: How Artificial Intelligence Dismantles Coordination Architecture and Reconfigures the Political Economy of Production

TL;DR

This paper presents the Structural Dissolution Framework, explaining how AI reconfigures traditional industry boundaries, shifts value creation to data flows, and fosters regional data sovereignty, fundamentally transforming production relations.

Contribution

It introduces the concept of Interface Internalization, showing how AI dissolves organizational boundaries and replaces traditional coordination with intra-system computation.

Findings

AI erodes firm and industry boundaries

Value creation shifts to data refinement loops

Regional data sovereignty entities emerge as new organizational forms

Abstract

This paper introduces the Structural Dissolution Framework to explain how artificial intelligence restructures the coordination architecture of traditional industries. We argue that AI dissolves the boundaries that once separated firms, markets, experts, and consumers by internalizing human multimodal interfaces, including language, vision, and behavioral data, into computational systems. This process is not merely an efficiency gain but a qualitative transformation of production relations. It generates four major shifts: the erosion of firm and industry boundaries; the movement of value creation from physical resources and human collaboration to continuous token flows produced through data refinement loops; the rise of domain-specific data refinement infrastructure as the new basis of positional control; and the emergence of regional data sovereignty entities as organizational forms that replace the coordinating role of firms and markets. We define this mechanism as Interface Internalization, through which inter-agent coordination is absorbed into intra-system computation. The framework challenges the Coasian view that organizational boundaries are determined by transaction cost minimization, arguing instead that AI makes such boundaries economically obsolete. Firms may continue to exist as legal and physical entities, but their coordinating function is displaced as they become data nodes within regionally governed AI infrastructure. Using resource-dependent regional economies as an illustrative case, the paper shows how AI adoption can both transform seasonal industries into continuous economic infrastructure and replace intermediate coordination roles and traditional employment structures.