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 20^th 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.