The thing, western governments fear is AI-powered terminators. They want the tech first, so they can win the war when someone attacks them. That is the arms race part.
The unemployment explosion is obviously also happening. But that's actually a pretty good thing in the long run as a society with 90% unemployment and the need to work to live is absolutely unsustainable. AI will basically force the end of capitalism by increasing the system's volatility until it adapts.