You're assuming unbounded demand for whatever product the company is producing. If demand for their product is bounded, having 1 dev produce the output of 5 devs means that the company is going to have devs simply sitting around doing nothing for most of the day.
> If a dev produces value for the company, and then the company can automate away the least valuable part of the dev's job, the dev is now more valuable.
I don't follow this argument - there is a practical limit to how much development a company requires. In the past they may have had a team of 10 to satisfy that limit. If the limit is satisfied by a team of 2 the company... does what exactly?
After all, a limit is a limit.