And you are out of touch with the current reality. The "western world" is currently undergoing a labor shortage; in the United States, unemployment just hit its lowest point in 50 years! That runs completely counter to the thesis that increased automation will inevitably cause mass unemployent.
You've also disregarded the obvious solution to any decreasing demand for labor: make the work week shorter and everyone simply works fewer hours.
>The more we automate all these things, the less humans are involved, and following that it means the economy will shrink.
You've conflated "the size of the economy" and "total hours of labor". By any reasonable definition of economic size, if you have two societies and one produces more economically valuable output than the other, then it is larger, regardless of how many hours of labor are involved. One worker with a spoon produces less than one worker with a shovel, and spending ten times as long to achieve the same result does not make that economy larger.