The Fight to the Death

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We should be explicit about the path we’re on.  We are engaged in a winner-takes-all fight for AI supremacy.  The operative assumption is that whoever wins will rule the world, because that country will control a version of AI so powerful that it can improve itself to be invincible.  Whoever wins will liquidate all opposition immediately, so there can be no challenge to its power.  That’s the story for what’s at stake.

There are many consequences to this.  To start with, no effective regulation of AI is possible, because it is impossible to say what constraints on AI development would get in the way of the fight to the death.  In particular some of the most obviously risky issues—such as autonomous military decision making—are the most untouchable. This the worst kind of arms race, where it’s not just a matter of parity.  Only victory is good enough. There are no effective limits to the amount of money it can take.

But even that is just the beginning.  Once you’re in a fight-to-the-death, any form of international cooperation becomes extraneous.  You can’t think too seriously about common interests when everyone is a mortal enemy.  That mindset is all too easy in any case, as common interests are historically a hard sell (even for climate change). So we fall back on the world view we now get everyday—whoever has power deserves what he can get.

That this is acceptable without even much pushback is a matter of ultimate hubris.  It’s all okay, because we’re going to win.  We’re not interested in thinking too much about how international competition works or what it will really take to win.  We’ve been on top for so long that we’re entitled.  All the discussion of the “Thucydides trap” for competing powers is beside the point.  God will make us win.  That’s not an exaggeration for where we are. 

There’s a lot that we don’t know about the end to this story.  The future is never clear.  But there is one thing that is definitely true—we’re stumbling our way into real danger.  The risks are enormous.  For technology we’re certainly not necessarily on top—even today China is a serious competitor—and we’re burning bridges to the future by killing research investments. Even for AI we’re a long way from the finish line.  We’re in a wildly unstable arms race with many new technologies, proliferating nuclear weapons, and no good way even to know who is ahead.

The only workable way to forestall disaster is viable common interest.  You don’t have war or countries laid waste if all parties recognize there’s lots to lose.  (You can still have homicidal maniacs, but they’re less likely to gain power.)  The world needs order, starting with recognition that interdependence, economic and otherwise, is not going away.   So we had better fix it.  Start with trade and the world economy, and then do something about war.  A fight to the death ends with just that, and who knows how many millions would pay.

The Revision of IPCC’s Climate Scenarios

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The UN’s international climate group has revised its set of possible climate change scenarios. They eliminated the most damaging scenario, because of progress in sustainable technologies and because details of the scenario itself seemed unlikely to occur. Trump and other climate deniers have seized upon this change to claim it shows all discussion of climate change is bogus. The following piece was done as a comment to an article in the NY Times.

It seems to me one of the problems with this discussion of scenarios is that people want the scenarios to tell them something different than what the scenarios are trying to do. The scenarios are attempts to model different levels of response to the problem of climate change. There is no default case where we do nothing. For that case the only limit to the temperature is the end year in the study—the temperature would just keep increasing.

The main thing that has happened since the original scenarios is that the world has taken some measures that help: costs of wind and solar solutions have come way down to the point that those make up the majority of new electricity generation worldwide. Electric cars have become cheaper, better, and more prevalent. So it’s not surprising that the current view is somewhat more optimistic.

Where that actually leaves us can never be completely clear. I’m willing to bet the models never considered that the most powerful country in the world would be run by someone trying to sabotage the whole effort. Or that data centers would suddenly demand more power than cities. Or that the Iran war would show everyone the risks of imported oil. There will always be reassessments.

This new set of scenarios should make us appreciate the work that has been done. We can make progress against climate change. But there is much that needs to happen and very strong forces against it. This will never be easy, but it needs to be done.

The Single Worst Thing We’re Doing

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With so much chaos lately it’s hard to keep track let alone prioritize the problems.  But in terms of long-term consequences there is a single worst thing we are doing.  We’re eliminating professional competence in government.

That is of course a joint project of the Supreme Court and the Trump administration.  The Court has decided that all federal employees serve at the uncontrolled whim of the President, and Trump has fired anyone he considers inadequately loyal.  There is no remaining notion of a professional career in government.  You are a political appointee, hired only to prove the President is right.

As we’ve noted here before—government is needed to support both the development of the economy and the well-being of the population.  Business by itself will do neither.  Adam Smith himself was explicit: “The government of an exclusive company of merchants is, perhaps, the worst of all governments for any country whatever.”  The job of government isn’t simple; it requires considerable technical knowledge, foresight, and understanding of how to get things done.  That’s how we produced the decades of dominance and prosperity after the Second World War.  Our success didn’t just happen.  There were people who made it happen.

That lasted until those running things got too greedy (while China followed our example with success).  We’ve now reached the stage where Trump and his oligarchs have decided they don’t want to pay for anyone else:  they know all there is to know, and  they certainly don’t want to be saddled with the needs of their inferiors. So they don’t need the kind of people who enable government to do its job—because they don’t want that job to get done. They’re all-in for taking what’s there to get.

We’ve eliminated professional competence in government–the definition of decadent rot.

A Meeting in China

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Let’s talk about the basics of the Trump-Xi meeting.

What does Trump think about the situation?

He’s one of the smartest people who has ever lived and can only be compared to historical predecessors such as Julius Caesar or Alexander the Great.  His perfect intuition means that he has never made a mistake.  He is happy to be meeting with one of his only two peers on the planet—Xi and Putin.  And he has brought a bunch of his underlings (i.e. executives) as symbols of his power.  So he is there to glory in shared power and to bring back something he can tout as an achievement.  Glory is the thing.

What does Xi think?

On both ideological and racial grounds he is meeting with a representative of an old elite that is well past its prime.  Furthermore it is an elite that used its power to despoil China–Xi remembers the Opium Wars and the West’s abiding confidence in racial superiority. As for Trump, he actually started a trade war when the Chinese (with superior planning) held all the cards–i.e. complete control of “rare earth” resources required even for the military.  The Iran war is another sign of undisciplined impulsiveness—wasting enormous resources to achieve more damage than benefit.  So the challenge is how to take advantage of the opportunity. Strategy is the thing.

We can be more specific about objectives.  Trump wants some kind of big splash.  That can mean many things, but Trump’s weak position limits options. He’s not going to get a solution to Iran or a permanent relief from rare earths. One prediction has been a major new commitment of Chinese investment in the US.  That’s what he demanded from Japan and the EU. It’s true those are allies—as opposed to China—but Trump’s strategy document is more positive toward his two bros than toward them. That of course fits with Trump’s much-repeated story of all the new foreign-financed factories in the US that will make everyone rich.  On the Chinese side there are two objectives: opening the US market (e.g. for cars) and weakening of US resolve on Taiwan.  Both are useful near-tern and consistent with Xi’s longer-term goal of world economic dominance.

The scary thing is that those US and Chinese objectives could match up!  A big Chinese investment satisfies both—but only one outcome is real.  “Foreign-financed factories will make everyone rich” was always a fairy tale based on the world of the 1950’s.  It’s a mismatch with the world of today and even more so with coming AI and robotics. But Chinese involvement in US markets and technology could be very real.  Competing with the Chinese industrial machine is a challenge at best, and that would give them inside access to US markets and new means to get at US intellectual property.

The Iran war showed that Trump was ready to spend hundreds of billions of dollars and deplete US military inventories, so that he could imagine himself Napoleon.  (He’s given us every other possible explanation as well.) We may be on the verge of surrendering competition to China, so that he can imagine filling the country with 1950’s factories.

We’re so used to normalizing Trump, that we’ve become numb to consequences. This isn’t playacting; it can be real.

Who Gets the Winning?

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OUTCOMES OF THE BIG BEAUTIFUL BILL ACT AND 2025 TARIFFS

Income DecileAvg IncomeTax CutTariff CostService Cuts
(Medicaid, SNAP)		NET RESULT% of Total Benefits
1 (poorest)$38,843+$150-$650-$1,200-$2,7000% (net loss)
2$62,457+$300-$700-$1,000-$1,4000% (net loss)
3$75,733+$500-$800-$600-$9000% (net loss)
4$89,522+$800-$900-$400-$5000% (net loss)
5 (median)$105,481+$1,200-$1,000-$400-$2000% (net loss)
6$122,119+$1,500-$1,100-$300+$100<1% (break even)
7$143,667+$2,000-$1,300-$500+$2001.8%
8$171,786+$2,500-$1,500-$200+$8007.0%
9$218,026+$4,500-$2,000-$0+$2,50021.9%
10 (richest)$517,699+$14,700-$3,400+$0+$7,90069.3%

Source: Yale Budget Lab combined analysis of Big Beautiful Bill Act + 2025 tariffs

Note: Within the top 10%, the richest 1% alone captures 43.9% of all benefits – nearly half of everything.

On Top of the Heap

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We’ve been there for more than 75 years, since the end of World War II.  We are the power that maintains the world order. As such we’ve overseen a remarkable period of growing global (and our own) prosperity.  People from both political parties agree that we are the ones that make things happen.  We’re so comfortable with that role we’ve come to believe it is ours by right and permanent.

Recently though our attitudes toward that role have changed.  We’ve now decided that since we’re in position to run the world, we ought to be able to keep more of the benefits for ourselves.  So instead of maintaining that world order, we’re now in it for everything we can get—confident that the sky is now the limit.

However we have found there’s a hitch.  We attacked a medium-sized country—Iran–to put them in their place, and we didn’t win.  Not only that, an even more minor power—Ukraine—has shown itself more capable of defending our allies than we are. We still have more bombs and aircraft carriers than anyone else, but somehow that doesn’t do the job anymore.  And the problem is getting worse.  We’ve been so preoccupied with China, we haven’t noticed that the problem is not just that.

With nuclear proliferation, computer-controlled drones, and rapidly evolving AI the past pecking order no longer holds.  Instead the future looks considerably more chaotic—with murky and changing notions of international strength and weakness and risks of conflict from both overconfidence and paranoia.  When we tell everybody our new story—that powerful countries should be able to do anything they want to everybody else (because that’s the way it ought to be)—it not always so clear which side of the story is us.  And lowering the threshold to war isn’t necessarily such a great idea either.

Whether we want to admit it or not, we were pretty stupid in the Iran war.  We ignored obvious issues when we attacked, and we were so overconfident that we didn’t do even the most basic job of preparing for the fight.  We didn’t win.  But that’s not the end of it.  Our changed notion of international roles was equally stupid and blind.  We gave up on the idea of international order just when we actually need it, when we can no longer count on always ruling the roost.

Neither problem has a simple solution.  We’re going to come out of the Iran war worse off than when we started.  It’s hard even to guess what we’ll have to give up.  For the world order things are different.  We have proven that a reasonable world order can benefit everyone (at least generally).  We don’t have to be able to shakedown everyone else.  We just have to participate in recreating and inventing conditions for international success.  That must now include addressing climate change, for example, in addition to preventing war.  The job is not simple but the choice itself is: we can either help to create a livable world or suffer in nuclear-armed chaos.

Disconnects

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One of the biggest problems with politics in this country is assumed connections that simply don’t exist.  DOGE and the closing of USAID and other government programs were money in the bank for the Trump base (instead it went to tax cuts for the rich).  Getting rid of immigrants would leave more of the pot of gold for everyone else (but growing the pot is the big issue and immigrants are contributors).   The reason we can’t have free public college here is that the Europeans didn’t contribute enough to NATO (though the Republican Party has consistently blocked any such public services).  And of course the big one—making rich people richer will trickle down to everyone else (which has never happened anywhere—they just get more power to help them keep it).

You have to be really careful with anyone’s tacitly-assumed connections.  Even if they existed in the past, there’s no guarantee they’re going to continue as before.  The particular case I want to talk about is the assumed link between national power (military and corporate) and population well-being.  For most of the 20th century that link was real.  That’s Trump’s factory economy with good jobs and the corporate might that won two world wars.  But that’s not the reality today–manufacturing is 8% of GDP, unions cover 10% of workers, and many service sectors are low-wage and dead-end.  It’s going to be even less the reality going forward.  The AI world is simply not going to supply that kind of employment-linked prosperity—there will be good jobs but not so many of them for a good long while. Experts spill ink arguing about the impact of AI, but the desperation of new college graduates (and current students) is the real world.

Many people have compared AI to the industrial revolution of the nineteenth century.  Britain at the time was the most powerful and prosperous country that had ever existed.  It was a world of fabulous wealth and horrendous destitution, both domestically and in its empire.  Eventually the world was able to adapt to the new reality, but that took a whole century of well-documented horrors.  Economies can’t adapt overnight.  The private sector will not miraculously solve the problem.  The only way is for government to create the link that is broken. (Note there is another side of this picture–we are all increasingly dependent on a relatively limited group who make the difference for rest of us. There is no alternative to spending money on education and research and also restoring our status as the destination for the best and brightest from everywhere.)

Despite all the propaganda to the contrary, government needs a bigger role in employment. This isn’t charity. Government needs to finance work that needs to be done but won’t get done by the private sector alone.  An obvious case is climate change, which will require monumental transformations well beyond the cost of the new equipment.  In this country we have the dubious distinction of currently paying for a huge, debt-financed, fossil-fuel-powered datacenter expansion–that will end up being reworked in short order for a cheaper sustainable successor whether we like it or not! There are also many other parts of the public sector that have been starved for years–for example in healthcare and education.  All of that sounds like a recovery plan from a depression—how to put people to work–but there’s a big difference: we have the money. As with the industrial revolution the problem is not a shortage of work or a shortage of money—it’s making the link.  This time we need to do it.

That isn’t a trivial problem, but it’s worth understanding it as THE economic challenge of our era.  The wealth growing out of the new AI economy has to benefit societies overall. In this it’s worth recognizing that the companies we’re talking about are not in cut-throat price competition with each other–if anything our problem today is too much consolidation and sector monopoly behavior.  Tech companies operate with profit margins that would have been unthinkable in competitive industries. Google’s operating margin runs over 25%. Apple’s over 30%. Microsoft’s over 40%. But we do need to be careful to make taxation work effectively, and we need to avoid an international race to the bottom.  I’m not going to attempt to solve all of that here. But I will note that the prevalence of stock buybacks is an indication that companies have more money than they know what to do with, and also that some kind of equity participation by the government in business is consistent with the value of the infrastructure provided. Fitting this wealth distribution into international trade rules isn’t simple, but we’ve done that sort of thing before–with labor standards and environmental regulations.

To end this piece I’d like to take the international part a step farther. There are many reasons why the world today needs new forms of cooperation–including tough problems like nuclear proliferation and war. This economic issue is everyone’s problem, and (as opposed to many other issues) it can be rationally addressed. It would also be stabilizing for the welfare of national populations.  So if we can make progress with this one, perhaps it is also a step towards the rest. We need to do this.

Lessons from Rare Earths

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It’s weird that the press keeps discussing rare earths as a strange one-of-a-kind issue. As we noted here before that problem wasn’t an act of God—it was the Chinese figuring out something we didn’t.  We as a country were structurally incapable of planning for the future.  And we’re still that way. We haven’t always been quite so bad, but with the Republican private-sector orthodoxy and now Trump’s “intuitions” that’s where we are.

In that last piece I talked about slashed support for scientific research and lost professionalism in government as reasons why we’re just waiting for the next such example to pop up. But I should have been even more emphatic; there is an obvious example right now—our electrical infrastructure. We’ve mentioned that issue before in the context of climate change, but the parallel with rare earths needs to be emphasized.

The US electric power network is antiquated, disorganized, and insecure. The Chinese could put it out of service any time they really wanted to. It needs major investment so that it can act as a resource for the economic development of the country.  This isn’t just a matter of tweaks—there is every reason to believe that that the electrical network is going to drive much more of the economy in the future than it does today.  That has to do with new power sources (e.g. fusion or other nuclear), new application areas (datacenters are just a first example), and also (whether we like it or not) climate change.  The network has to enable all kinds of new uses involving higher levels of electric power wherever it is needed.  China is already making huge investments, employing some higher-capacity technologies than we have here.

What are we doing?  We have to make major new investments to power the tremendous energy needs of the coming gigawatt datacenters.  But we aren’t even thinking about what that means for upgrades to our electrical network—we’re making it exclusively a matter for the datacenters themselves. And we’re prohibiting use of wind and solar in those datacenter projects—even though those are used in 90% of new electricity projects worldwide. There is no national project for development of a secure and capable electrical power infrastructure.  We’re going to build and power all of those datacenters and then figure out that the hodge-podge of point solutions is no good for high-speed car charging (for example) or for other applications that will come out of China but not here. So we’ll just have to declare another emergency for the years it will take the infrastructure to catch up.

We refuse to think beyond the immediate needs of today’s businesses. And that matters. Same as for rare earths.