The Crisis of Democracy

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It’s common to speak of our current politics as a crisis of democracy.  We still have some features of democracy, but it doesn’t really work that way.  So the question that tends to get asked is how to address issues with our democracy to make it better.

If we’re going to fix things, it’s important to recognize that’s not quite right.  We don’t have a democracy anymore, and the government works exactly as intended. 

The first thing to emphasize that the functional Constitution is not a document; it is a construct enforced by the Supreme Court. The law is what the Court says it is.  There are no constraints on its interpretations, and in our current environment they don’t necessarily even give reasons for decisions.

Our current Supreme Court was put together over decades by the Koch organization with the objective of creating an authoritarian state, a dictatorial oligarchy for the benefit of big business and rich people.    This is no wild conspiracy theory—Jane Mayer’s Dark Money from 2016 documents what has always been hidden in plain sight.  The Kochs recognized early on they could take over the country through the Court, and they put together an organization funded by oligarchs to get there.  Their project produced Citizens United in 2010 and was essentially complete with the death of Ruth Bader Ginsberg in 2020. They aren’t fans of the whole Trump program–not tariffs for example–but the tax cuts and cuts in government services excuse all other sins.

They created and managed the Federalist Society and nurtured a community of lawyers to do the work.  All six so-called conservative justices have had careers in their service. The Koch organization at times has had a bigger operataing budget than the Republican Party.  They created institutes and named professorships in law schools. They have an organization to provide text for bills in Congress.  They recognized the extreme importance of the 2010 midterm state elections, because of redistricting after the 2010 census combined with new powers under the Citizens United Supreme Court decision. With the demise of spending limits they put unheard-of money into state-level campaigns and created the gerrymandering problems we have today.

(As a Massachusetts resident I remember the 2010 Scott Brown election. You couldn’t turn on the television with seeing an ad from a PAC named something like “The Committee to Protect Social Security”. No one understood the avanlanche of new money. That election effectively made Obama a lame-duck President–killing his filibuster-proof majority in the Senate, just as the emboldened Republican Party announced it would block all Presidential initiatives in the service of a Republican return to power. Citizens United was an effective anti-democratic tool from day 1.)

We have the government they wanted—dictatorial and ready to be bought.  What we call corruption is intended behavior.  It’s how the powers-that-be get what they want.

Changing this is not going to be easy.  As Paul Krugman in particular has pointed out, the wealth and power of our domestic oligarchs have reached unprecedented levels.  Also by lucky circumstance they now own a large chunk of domestic media channels—CBS and soon CNN together with Musk’s X plus the long-term ally Fox News.

So what is going on is not one or another problem with democracy.  We’ve experienced a well-planned and carefully-executed coup.  They’re pillaging the country.  As it turns out they’re also making a mess of things, even for their own interests, but thus far that hasn’t mattered to them.  And they’ve got the other media too scared to offer resistance. 

The 2026 election is of course critical. It can’t fix everything, but it would give a basis to start.  If we can win there, we can think about 2028 and the Court.  Otherwise all we can say is that 250 years was a good run RIP.

America First

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It goes down too easily “America First”.  On the face of it, it’s an obvious goal for anyone running the country.  But in fact that’s not right.  The real objective is the well-being of the country and everyone in it.  “America First” doesn’t say that, and the difference is important.

America First has embedded in it the idea that all our problems are because someone else has put himself first in line.  So it sells you on what the problems are without even pretending to look at what’s true.  And it’s not just a matter for foreign affairs.  Any problem you have becomes someone else keeping you from getting what’s yours.  It’s a slogan of grievance masquerading as a solution. It doesn’t want you to ask questions.  We know who’s evil and we’ll get rid of them. It’s a slogan to hide behind.

Economics can be complicated, but this story doesn’t have to be.  Let’s talk about the good old days that Trump says he is bringing back—the postwar decades of the fifties and sixties.  What made those times happen?  Coming out of World War II we were the most equitable society we had ever been. The difference between CEO’s and working people’s wages was laughable compared with today.  The GI Bill made college affordable.  Government-funded research and development won the war and established the US predominance that remade the world.

What’s the message today about how to reestablish that prosperity?  It’s certainly not what worked before.  No major government role in education, infrastructure, and forward-looking research.  No commitment to democracy.  No unions.  The solution is simple: the rich and powerful will make you rich, so you just get rid of anything in their way and all will be golden.  Don’t look at us–it’s other countries and immigrant parasites stealing everything that’s yours.

The one thing you can say for all that is that it has certainly been great for making them richer.  Inequality in America has reached levels far beyond even the “gilded age” of the nineteen century.  The following chart of net worth values show the magnitude of the change. The recent Big Beautiful Bill fits this picture well.

Elon Musk is worth more than a trillion dollars.  Trump has made on the order of 10 billion for himself and his family since the election. But the broader payoff is for the indefinite future–maybe.  After all we’re told the economy is already great, the greatest economy ever.

What about all those people we’re getting rid of?  Is it really all about them?  We were told they were all murderers and rapists, but that’s not who they’re rounding up–productive families who’ve been here decades.  Supposedly that’s still okay, since once we get rid of the immigrants there will be more of the pot for everyone else.  It hasn’t worked that way.  And  there’s a lesson for that also from the good old post-war days.   The war didn’t bring all elements of society together, but it did bring some marginal groups—Jews and Italians for example—into the mainstream.  That didn’t make things worse for the others, it made things better.  Bringing everyone in meant everyone could contribute. 

What matters is to grow the pot for everyone, and that’s actually more true now than ever before.  Most of the pot is being reinvented before our eyes.   We live in a time where winners and losers are decided by companies and technologies coming from nowhere to dominate the world.  We’ve lost the real main message—what works for individuals and our country is full opportunity for everyone. We need the best and brightest from everywhere to help reinvent the future.  But we can’t work at that one, because we’re too busy spending fortunes on ICE. 

Finally we need to get back to the international part—it’s “America First” after all.  To begin with we need to recognize that the America First rhetoric about the whole world taking advantage of us is manifestly false.  Apple is an example of why.  We import the hardware and sell it in a combined hardware/software product worth far more than the input.  This is hugely profitable but a net negative for the balance of payments.  The rest of the world is not predatory in this transaction—we retain the high margin part, and the hardware is an intermediate product we can’t make without destroying the economics of the deal. (TSMC does make chips here, but only a small, lower-tech part of their output.) The balance of payments calculation is hardware-based and doesn’t capture what we earn from trade-enabled business.  Even adding in the contribution to balance of payments from services misses most of it.  However once you actually try, it’s not so hard to get a real trade number and see that our trade relations with the rest of the world are a clear net positive.

It’s possible in  the future that some currently outsourced production comes to the US, but the main driver for such cases will be robotics bringing down production costs. Despite all the rhetoric, there’s no change to this picture that will recreate lots of 1950’s jobs.  If we want to solve the problems of people left behind in the last decades, we need to get past the blinders of “America First”—and follow the money. To really create jobs we’ll need some of those billionaires’ stratospheric profits.

For the international case too there is a lesson from the good old days.  After World War II we put real money into the Marshall Plan for the recovery of Europe.  That money paid itself back in spades with the spectacular growth of GDP in the whole Euro-American zone.  America First would have left us vastly poorer.  The world is different now, but the economic realities are more similar than you might think.

We have to recognize now as we did then that stability has enormous value.  Even today we can see how war hurts. Conflicts are prodigiously expensive, and nuclear proliferation risks even worse.  The only way out is an international system that works for everyone—American gains far more from a system of rules than it does from turning alliances into protection rackets.  We haven’t profited from the freedom to start wars whenever we want.  And American’s freedom to declare climate change a hoax and sabotage climate action will hurt everyone—with ourselves as deniers most of all.

We as a country and as a world have a primary interest in stability and making things work.  There is no golden age to be found in holding everyone hostage—such a world would be less prosperous, and we have no assurance it would be peaceful or that we would always be on top.  Peace and prosperity are the objectives—nothing less.

Choke Points

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Everyone talks about choke points. The Strait of Hormuz was always there and occasionally mentioned as a theoretical issue–until we blundered into it. Now people talk about choke points, but still as something around the edges. Hormuz affects others but not so much us.

However choke points aren’t just geographic. Rare earths were and still remain choke points that the Chinese can use any time they want something from us. Even the military can’t function without them. The Chinese figured out those choke points and prepared, while we just trusted our future–a cautionary tale. But that’s just the beginning.

Let’s go back to a chart from our piece on trade:

🏆 Top 10 U.S. Companies by Market Capitalization (2026 estimates)

  1. NVIDIA Corporation – approx. $4.5 trillion (currently world’s largest)
  2. Apple Inc. – ~$4.0 trillion
  3. Alphabet Inc. – ~$3.8 trillion
  4. Microsoft Corporation – ~$3.6 trillion
  5. Amazon.com, Inc. – ~$2.5 trillion
  6. Meta Platforms, Inc. – ~$1.4 trillion
  7. Broadcom Inc. – ~$1.7 trillion
  8. Tesla, Inc. – ~$1.3 trillion
  9. Berkshire Hathaway Inc. – ~$1.0 trillion
  10. JPMorgan Chase & Co. – ~$0.6–0.7 trillion (approximate, rounding into the top decade range)

As noted, the top two companies are 100% dependent on hardware from TSMC in Taiwan. The companies do the design work, and TSMC builds it. For Nvidia that’s everything. For Apple there is some manufacturing in the US, but not the more advanced, product-defining chips. So the two most valuable companies in the US can do nothing without Taiwan. And again that’s just the beginning. It also says that the entire AI infrastructure on which we are basing the future of the country and for which we are investing inconceivable sums of money is close to 100% dependent on hardware from Taiwan. Those Nvidia cards from Taiwan are our supposed key advantage to win the AI race with China!

So Taiwan is a monumental choke point now and for the foreseeable future. It’s not simple for China to use it, but even harder for us to stop them. Xi made very clear to Trump that he was not to get in the way of China’s plans for the future of Taiwan—whatever those might be—and Trump immediately backed off on planned US arms sales. For the record we have also depleted our own munitions in the Iran war. And our behavior toward Cuba is hardly a model of respect for independence of an island 100 miles off the coast.

Where does that leave us? We may continue to strut around as if we still owned the world, but China has the keys. The idea that we can shake down the rest of the world because no one can touch us is patently false. We need an orderly world where we can avoid wars and count on stability of choke points. That doesn’t happen by itself; it requires allies and international norms. Otherwise it’s no longer our world, as we want to think God made it.

Effective Democracy

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Let’s start with facts:  we live in a failed democracy that has transitioned to incompetent dictatorship. Given that kind of mess, it is worth going back to first principles to think about effective government.

First of all it should be noted that there is an intrinsic conflict of interests in any national government.  This isn’t complicated; it is basically parallel to what goes on in any corporation between the interests of labor and interests of management.  Near term they are dividing up profits, but longer term both have a common interest in the success of the company.   Successful companies are able to manage the conflict.

In government you have the economic powers-that-be versus the population as a whole.  Both have to benefit for success, but immediate interests are opposed in much the same way.  It should be emphasized that here too exclusive power to one or the other is disastrous. We’re accustomed to hearing one side of that story—uncontrolled spending on government benefits for the population will bankrupt the economic engines of the country. But an exclusive focus on the business side is equally bad and it’s not just a matter of living standards:  business interests are myopic both in terms of time scales and in terms of the environment needed for success.  You won’t have the technologies, or the people, or the physical environment necessary for the economy (and as we’ve seen recently, business people can risk bankrupting the country too!). Government has to speak for the whole picture. Even the patron saint of free enterprise—Adam Smith—was well aware of this issue.  “The government of an exclusive company of merchants is, perhaps, the worst of all governments for any country whatever.” There is nothing sacred or proven about claims that government should never interfere with the marvelous natural workings of the marketplace—that’s just self-serving propaganda for the “haves” side.

This intrinsic dichotomy is very important for effective government.  Both sides must be present but neither side can win.  That’s one of the reasons we’re in such bad shape right now.  What we have today is business capture of government—exactly what Adam Smith worried about.  To be effective government needs to provide means for functional negotiation and cooperation between both sides.  Those sides don’t map exactly to the Republicans and Democrats, but that’s pretty much what it comes down to.  Bipartisanship is not about being nice; it’s working out fundamental tradeoffs between the two sides.

That is precisely what we have lost–structurally.  There are three immediately obvious issues.  The first is the primary system.  Since primaries are partisan, candidates are chosen exclusively based on appeal to one side or the other.  That guarantees extreme positions and more importantly disenfranchises the center of the voting population.  A second example is the way partisan power is used to control legislation offered in Congress.  In the House the so-called Hastert rule only allows on the floor measures that are supported by a majority of Republicans.  In the Senate the majority leader Mitch McConnell routinely blocked anything he disagreed with—regardless of overall support.  Both rules disenfranchise the center and make the country effectively ungovernable except in extremes—so whiplashing policies are a matter of course.  Finally there is the Supreme Court: lifetime appointments plus limitless power give a huge incentive for partisan appointees.

All of this is bad news and good.  The bad news is that it isn’t clear when we’ll be in a position to fix any of it. The good news is that there are significant items that really aren’t so hard to fix.  For primaries, there are a number of possible variants, including non-partisan primaries with rank choice voting.  For the Congress, you don’t need to change the constitution to change the rules.  And there are many proposals to fix the terrible mistake that is the Supreme Court—an undemocratically-chosen body with lifetime appointments and no constraints on its power.   With a decent Supreme Court we should be able to fix gerrymandering, for example.  That is a math problem we chose to turn into a political mess.

Bipartisan cooperation is fundamental, and we can stop going out of our way to make it hard.  That way we can make the tradeoffs for the country to be governable.  Then we can move on to two other necessary and straightforward matters:  direct election of the President (the current system is grossly inequitable and invites fraud) and adding the few extra Senate seats needed to compensate the ill-represented largest states. Such measures won’t solve everything (not control of media for example), but we can make things quite a lot better.  We can make our democracy work.

It’s not so complicated–if we ever get a chance to do it.

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, so there can be no challenge to its power.  That’s the story, true or not. We’ve got to win.

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, since common interests are always 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. With the Iran war we’ve gone a step farther, asserting that (with the closing of the Strait of Hormuz) we have absolute freedom to inflict damage on the rest of the world whenever we perceive gain for ourselves.

That this view is acceptable without much pushback is a matter of ultimate hubris.  It’s all okay, because we’re going to win.  In fact we’re not actually much interested in how international competition works or what it will really take to win.  We’ve been on top for so long that we’re entitled.  God will make us win.  That’s not an exaggeration of 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 everywhere. 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 and attacking all foreigners as parasites. Even for AI we’re a long way from the finish line, and it’s unclear whose paths will get there first. More generally 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. Yet we’re using war as if it’s a regular element of national policy.

The only workable way to forestall conflict is viable common interest.  You don’t have war or countries laid waste if all parties recognize there’s a lot to lose.  (You can still have homicidal maniacs, but shared prosperity helps keep them out.)  The world needs order, starting with recognition that interdependence, economic and otherwise, is not going away.   So we had better fix it.  Start with economic issues—trade, climate change, AI—and then do something about war.  A fight to the death ends with just that, and who knows how many—both here and abroad—could 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. They figured out the coming importance of “rare earths” while we didn’t.  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.