Daron Acemoglu Meets Martin Wolf– What Happened to Liberal Democracy?

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This is a job for Indeed Sponsored Jobs. (upbeat music) Hello and welcome to the How-To Academy Podcast. The Boi Weekly Show from London's Home of Big Thinking and Vast Christopher Dulu. One of the world's most influential economists, the Nobel laureate Darren Agimolo, joined us a few weeks back for a live conversation with the FT's Martin Wolfe, where he shared insights from his new book, What Happened to Liberal Democracy? Remaking a Politics of Shared Prosperity. Enjoy. - What I want to do before we go into the book is I thought one of the most interesting things about this book is it's anchored in philosophy. It's anchored in the question of what is valuable and it starts with, I think the question certainly that is for me central, what is liberalism and because liberalism is obviously absolutely attached to this theme of democracy and how does it fit together in these different dimensions? And I'd like to start with those different dimensions because you talk about the three corners of liberalism in a very imaginative way. So explain what you think liberalism is and how these three corners go together. The way that I see it liberalism is a very big tent. It has to be because liberal philosophers have developed it over many centuries and with very different preoccupations and that's why I try to sort of summarize it with these three corners. And I think one corner is the very less affair end of liberalism with sort of non-interference type ideas sometimes associated with John Stuart Mill but Mill himself changes mind but perhaps Hayek would be another representative of that. At the other extreme you have sort of the foundations of progressive liberalism which comes up in many different forms but you could trace it to many thinkers most powerfully perhaps Sushan Shakru So which tries to found the basic ideas of how society should be governed as well as liberties on some notion of general will. And the general will in some sense is the epitomization of what society wants for self governing, for achieving better things but it is a very powerful construct in telling us how we should live our lives. And you see the big contrast between these two corners of the tent because the non-interference crowd really want the state to play a minimalist role. Whereas Russo style progressive thinking is very open to the idea that the state or its leading cadres know somehow informed by the general will, they know how we should structure society and tool liberty really follows from being in line with the general, obeying the general will in some sense. So there's a tension there, it's not a contradiction but it's a tension. But I think both of these corners in some sense don't do justice to the complexity that we face. And the complexity, as I see it, is that non-interference is definitely not going to cut it when it comes to the complex economic and social challenges and the natural tendencies that the market economy has for creating inequities and inequalities. So you need some sort of protection for the most discriminated, the weakest, the most unfortunate members of society, but also you need other things that really enable opportunities and flourishing. But just turning to the other corner isn't enough because that really undermines the bottom up character. So that's why I propose the sort of ideas that go back to the Roman Republic, sometimes modern new Republican thinkers call them non-domination ideas, which are an extension of non-interference, but recognizing that non-domination means also protecting individuals from great economic inequities and from lack of opportunities. So it's really about enabling individuals, but very importantly, in some sense, I perhaps push it just a little more in the context of developing these ideas. And I argue that the non-domination really has to imply some degree of self-government. So you cannot have meaningful discussions of saying individuals should be free to do this or that, associations, religion, thoughts, but cut it at that point and say, no, they shouldn't have the power to structure their own lives and structuring their own lives really requires self-government because we don't live in isolation, we live in communities. And that means we need to have some say, some participation in the formation and in the governance of those communities, which is I think a very, very important part of liberal democracy and it's also a very important part of I think the future, which we'll talk about later, about how we can revive some of the ideas of liberalism. I think, I mean, I find this perspective very persuasive and very helpful. And one of the points that emerges from this, which fits very well with my own perspective, is that making a working liberal and democratic society involves a balance between different considerations, all of which are to some degree valid. That is to say, it is important that individuals have freedom to make choices for themselves, just stop freedom to do whatever they like. Similarly, there are clearly times when there has to be a shared purpose on certain core values, for example, and though I'm very much anti-Russo, I can very well see that if you look at the last couple of centuries progress has required an agreement that certain fundamental general principles must apply, and then of course, you have to have a degree of so. People have to have a voicing government, and that means the democratic process, which obviously has a collective element in it, is profoundly valid. So we are in the domain of balancing things, and we have to accept that, not only accept that, it seems to me, we have to embrace it. - One hour for seven. And one implication of this, just before we move to the next topic is that, and I think this is a perspective that you share in your book as well, in contrast to some modern liberal thinkers who have come to see liberalism and democracy, almost always in conflict. By the representative, yeah, this perspective says, liberalism must be married with democracy. It doesn't mean that it's always gonna be a happy marriage, there might be some tensions, but that marriage is key. So you talk a bit about, in some, you talk about the four fundamental premises of liberalism, I think of it as more as the great values of it. So why it matters that these things exist? So talk about that a bit. - Yeah, I mean, let me actually change the order from the one that I've presented in the book, and start with progress, because again, liberalism is a big tent, not everybody, and not every liberal thinker emphasizes the same thing, but if you look at many of the great liberal thinkers, and the way that their ideas were translated into practice, starting in the 18th, 19th, and then of course, much more in the 20th centuries, there is a belief in progress. There is a belief that we can do better. We're not gonna live on their absolutist regimes where there is already God-given hierarchy, and we're all gonna be able to improve both the material and non-material lot of the people. So that Mary is both, Mary's economic growth. that we can actually improve what we produce and therefore the material conditions we can give to people, including improving poverty and eradicating poverty and things like that, but also building better societies, better norms, better institutions, better governance. But where does that come from? And I think in its center, the liberal ideas that we do that by understanding the world and building better technologies, better ways of organizing the production process but also better way of organizing ourselves, our institutions, our governments and our other civil society associations. And I argue that's very much related to the fact that liberalism encourages experimentation. By that, I mean that we recognize in liberalism that every idea can be wrong. So even if certain behaviors, certain ideas in the realm of economic entrepreneurship and business and certain ideas in the realm of advocating new norms, new freedoms, new governance structures, we should be open to that. That is I think a very key aspect of science, science also builds on this idea of falsifiability but it's much more broadly true and you see the sort of societies in history that have closed themselves off to experimentation because they settle on to a particular truth. They stop that kind of progress. But then I add to that the non-domination type ideas because experimentation would just remain an empty word unless you give people the power, the courage and the opportunities to actually engage in things that is in line with their ideas or their aspirations and that really requires non-domination. And that is particularly true in our modern society where there are so many centers of power and there are so many uncertainties that we really need some sort of arrangement for people to feel empowered in order to do the experimentation. And then finally, it's not enough to produce new knowledge. If you produce new knowledge that was the image of never true. I know of people in Oxford and Cambridge and they would make amazing discoveries and put them in their drawer. That wouldn't translate into opportunities for society to better itself. So you need to share that knowledge and community is the best way of creating trust communication so that those new ideas, both in the material domain but also in terms of norms and what we accept and what things that weren't taboo before and now become acceptable, how did they actually spread out? How we communicate about how we conform compromises, community is key. And those four premises I think are central but they're not, you know, a walk in the park. Community and freedom, for example, are always intention and I emphasize that a lot. Community is essential for freedom but at the same time, community norms can be extremely stifling so that liberalism has always got to sort of walk that tight rope. - This has many implications but one of them, which I think is very important to make it is liberal societies will tend to be quite dynamic or turbulent or changing society and that's very consistent with our history and it fits again with the fact that one of the things liberal societies cannot accept is permanent ascribed status and we see these huge shifts in status. So one of the things any liberal society has to embrace is change, which is always rather difficult. One hundred percent and you know, it has another corollary which essentially follows directly from what you said. Liberalism and its practices are also a work in progress and this is one important distinction between the Russo corner of the liberal tent and what I try to defend as the way forward is that there is no clear cut answers to all the challenging questions that a liberal rulebook will give us. Liberalism creates a framework within which we have to forge our own consensus, our own compromises and deal with some very difficult questions. So for example, you could ask after becoming convinced that liberal ideas are the way forward. Okay, should we use levels of taxation like in Sweden or in the United States? Well, liberal ideas don't answer that question. There are pros and cons and it's a social decision that again is starting from communities and local government societies have to make themselves. You think you know a browser, but Gemini and Chrome, that's new. 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This is a job for Indeed sponsor jobs. - Let me ask you one more, I can go on forever, pretty important and fund the mental philosophical question which you address which seems to me to be becoming more and more real for us, which is is a liberal necessarily committed to allowing free expression of and free action by, in political action, by people actually believe passionately in illiberal ideas. Is this an actually suicidal contradiction as if we're in liberalism? And of course, you know the residents are bad in many historical and even contemporary context. - Well, thanks Martin for raising that because I think that is a very important continuation of what we were just talking about which is that there are many deep difficult questions to which liberals have never come up with completely convincing answers. They've struggled, but perhaps now we have a better understanding of how we can form consensus and deal with problems of inclusion. Because liberal ideas were developed by aristocratic people in a very unequal society in which women had no rights in which there was racial discrimination in many cases and lower social status, lower economic, social economic status people were often excluded from political power and social regard. But there's also the question of how to deal with ignorance, how to structure education systems, both at the same time trying to impart liberal values and civic responsibilities, but not becoming an indoctrination. And even more vexing is the question of how to deal with intolerance. Something that liberal thinkers going back to John Locke and Voltaire spent a lot of time on partly because they were reacting to religious intolerance. But today intolerance exists in many dimensions. And I don't think we have ready made answers to those. But I think liberalism necessitates that we don't shut off debate too soon. Because even intolerant ideas, if they are suppressed will create grievances that affect the core of liberalism. And it would probably not even be effective as we've seen over and over again, because it would feed into backlash. Now, today, of course, the situation is different because we have social media, which is a grievance machine, and every disagreement can be exploited. But we can come back to that, for example, where our social media is consistent with the liberal society. - Well, we're going to come to this right now. - Oh, right, right, all right. - I wasn't expecting it that quickly. - I think this question, but I don't want to, is this not about me as you were? But the. - Oh, no, it is, it is. - I want to tell you a question of what are the limits of the intolerant that can be accepted within a democratic society? And this is obviously always the question that is raised when people think about what happened in Europe in the 30s. And it's a very, very big question, but I think we may have time to come back to it. But what is clear, I think this is a very important philosophical background. explains what one is. trying to achieve and what it's trying to defend and how complicated it is. But I think most of us would accept that over the last, let's say, 10, 20 years, I'm not gonna get into chronology about this. Liberal democracy has gone into disrepute. Its popularity on many polls has declined dramatically. It's become associated with in the eyes of many citizens of our countries, in Western countries, not just in the world with corruption, self-dealing, and so forth, and sheer incompetence. And we are seeing, I'll give you one example, which I use, I wrote about this, the analysis of the quality of liberal democracy of democracy by one of the best known body during these analysis, VDEM, said that in 2025, one year the United States had in absolute movement just about the steepest decline in the quality of liberal democracy, of course, many dimensions ever. And I don't think it's easy to deny this. So things look pretty grim. So before we go, related to me, Turkey has had the sharpest decline in many years, the US has had the sharpest decline in one year, so wherever I live, the UK, the UK is where I live for seven years, is doing a little better. We're doing a little better. I'm not gonna go so far as to blame you for all this. The, so before we can decide what's to be done, the other big question, and we've got a little time to look at this, what's gone wrong? Why is this happened? What is your story, obviously I know, but talk about your story about the early 90s, not people who weren't complete fools, everyone going to this, thought sort of democracy was winning, had won, we tried the extreme of Rousseauistic fantasy which was Soviet communism and it collapsed, and the people really seemed to rather like being free, and democracy seemed to be in. And certainly not how it looks now, and it's only 35 years, 36 years ago. So what's going wrong? - Well, I mean, I think your chronology is partly right. You see this very strong discontent with democracy over the last 20 years. People becoming more polarized in surveys, saying democracy is not working much more freely that the whole system is rotten, so the anti-establishment feeling is very strong over the last two decades. But I think the roots of the problem go further back. They go 40 years, perhaps 50 years. And in a nutshell, I would say that liberal democracy as the institutionalization of liberal and democratic ideas worked reasonably well, if very successfully, in an industrial age with broad coalitions. So what I mean by that is that by the broad coalitions is that there was support for democratic ideas and liberal principles from many segments of society in the sort of Scandinavian or Nordic social democracy it sort of brought the workers to trade unions together with the middle class farming interests and then brought businesses into the fold. In Roosevelt's new deal coalition, it brought labor, intellectuals, southern Democrats together, and then brought in some small businesses as well. Same thing in the UK. And industrial societies created a natural pathway for one of the most important promises of liberal democracy, which is shared prosperity, meaning that that progress that I was talking about is really broad-based progress. It doesn't just favor one group or a few people or leave behind large segments of society. And the reason why industrial economics undergirded a form of shared prosperity is because trade unions and democratic governance created a framework within which businesses, if what they wanted to expand, to achieve bigger markets, to invest, to innovate, they needed labor. And the only way they could do that was to pay higher wages. They couldn't cause labor, they couldn't get it through other means in the functioning labor markets supported by trade unions. So that created a natural pathway from business expansion and business investment and technological progress to shared prosperity. And when you look at continental Europe, the UK, North America, in all of them, you see the same pattern that shared prosperity, meaning periods in which economic growth happened, hand in hand with wage growth. And in fact, inequality declined for a period of about 30 years and pretty much every Western nation. It was undergirded by rapid wage growth. Post-industrial economy changed both the social basis of democratic politics and this economic structure. Let me start from the economy, digital technologies and to some extent globalization as you also emphasized in your book, created a very different environment in which now businesses could expand, reach big markets, make a lot of profits, while at the same time cutting their workforces because they could automate or they could offshore and shift production to South Asia or other parts. And that really severed this powerful link between innovation, technological progress and shared prosperity in the United States where labor market institutions were very weak. This is particularly jarring where you see from around 1980 to about 2014, pretty much every year the real inflation adjusted wages of non-college men declined. That's just a remarkable fact that for about 35 years, you have the economy growing, some people becoming extremely wealthy but something like 30, 35% of the labor force is actually losing ground rather than actually keeping up with those gains. And that's really discombabulating to people that really changed the shared prosperity bargain that really laid the foundations of the later crisis. Again, something you discuss in your book as well. That's why I think the last 20 years would be too short because those economic changes started earlier. But the social and political changes are equally important because they are partly responsible for why liberal democracy and especially left liberalism, which has traditionally been a bulwark, protecting the working class, has remained passive during this process. At the same time as the economy got transformed, the social status and role of college-educated groups within Western society increased. So people like us well-educated, relatively well-off living in major cities became both more numerous and socially more influential. But at the same time, we've also started living very separate lives from the rest of society, in terms of where people live as neighborhoods, who they socialize with, who they marry, where they work. So if the industrial firm, just like four factories or general motors, general electric, they were the melting pot. Every level of education, very different types of skills were represented. And now today's firms are much more segregated in terms of education. So that really changed the social dynamics and it changed social dynamics even more so on the center left. And you see this pattern in the labor party in the UK, in the democratic party in the United States, in social democracies, in the Nordic countries, in France, in Germany, the center left used to get the majority of its votes from what you can call the working class, people who work for a paycheck, often with low education, manual jobs, or white color jobs that were in offices or in customer service as basic industries. And the more educated engineers, college graduates, managers, just like the very wealthy voted for the center right. By now, that's completely reversed. Indeed. Everywhere in the West, the college-educated supporter center left, the working class has shifted its vote to the center right or the heart right. The timing is a bit different in the United States, it actually starts in the mid-70s with the Watergate babies and the Atari Democrats in the United Kingdom a bit later, but it has happened everywhere. And as the college-educated became both ascended, but also more separated from the rest, I think they ignored the plight that was coming both from economic change that I described, but also from. the cultural change of the social changes that we're challenging for many working class communities. Okay, so this is what I call in just one more sentence. This is what I call in the book, Sins of omission and Sins of commission. Talk a bit about two other elements and really, but how does identity politics fit into the Sins of commission? Yeah. And where does you talk about digital technologies, effects, automation and so forth. But what about media? And you touched on this. Are these closely linked social media identity politics, the fragmentation of our citizenry, in some sense, essential elements of this or not? Those are central questions. I don't have perfect answers to all of them. But the way that I see it, what you've called identity politics, I don't use that term in the book because it's a little bit derogatory, but I use cultural politics. But it's the same thing. You know, it has to be viewed in the context of the rise of the college educated. The college educated once they became more of a force did not change the focus of the center left on creating a better society. But they saw for a variety of reasons some of the social challenges as very important. Discrimination against women, discrimination on the basis of race, other minority issues as well as the inclusion of immigrant groups. I think those are very important issues. So it was natural that those issues would have to be tackled in the context of modern societies. But at the same time, because of the dynamics that I've highlighted, and this is where the center left meets the tech in some sense, they became very relaxed about economic opportunities. So that's the sort of the context in which cultural politics becomes so ascendant is that they were important issues that the new powerful groups wanted to tackle. But at the same time, some of the earlier preoccupations of the center left, they didn't put as much emphasis. And part of that was, again, you could see that with the Atari Democrats, for example, there was a deep belief that technology is just going to solve all of these economic problems, which obviously turned out to be completely false. Look at AI. But it's this sort of a complex thing. But this is where the big in my mind, Sin of Commission King, because these are very difficult issues. And the liberal ideas, as I mentioned earlier on, never had perfect solutions to these problems. And I think they required much greater consensus, which oftentimes was bypassed for a more top-down approach, which I call social engineering. It came from a position of need that we needed to deal with these issues, but trying to deal with them in an accelerated way turned out to be wrong. Now, that mistake perhaps could have been handled in an age where we didn't have social media and we didn't have as much polarization, but social media and other dynamics really accelerated sort of the backlash against them. I don't blame social media by itself. It's a very pre-nicious force. But you again see the same dynamics before social media. So you see them already in 2000s and 2010s before social media became so important. But social media is deepening those things and it's going to make any solution to our divided society much harder to concoct. Starting or growing your own business can be intimidating and lonely at times. Your to-do list may feel endless with new tasks and lists can easily begin to overrun your life. 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The first most important part of it that I argue in the book, and in fact it's the reason why I wrote the book, is that we need to recognize that we need a new governing philosophy for liberalism and liberal democracy. It isn't a problem of defeating Nigel Farage or Donald Trump. That's not going to get you anywhere. Of course, it's a necessary step, but you're not going to solve the problems and build a much better society that's going to function and avoid the same traps and the same crisis by just defeating Donald Trump at the polls. So, we need to start with a true inward-looking effort of what went wrong and how we can fix it. And the way to fix it has to start with new aspirations that can unite people. And what I suggest, as the basis of that, summarized by the term I used for it, working class liberalism must put the working class at the center stage of liberalism. So, it's not just a matter of getting votes in this community or that community from this demographic group or that demographic group. You cannot have liberal democracy. That's functions that unites and that delivers in terms of shared prosperity and broad participation at the community level and at the national level. Without bringing the whole group of people who work in lower-paying jobs, who work with their hands or who work in service jobs, it really needs to make a true effort to be a tent that includes the working class. Right now, this is a very rolled zine, sort of a staircase. It is rolled zine, but not in terms of its social contractarian rules, but in terms of the political liberalism of roles. And we have to start from the recognition, of course, we have to, that the working class has left the center left and the center left has to be a leader of this change. So, working class liberalism, therefore, must have three points of great emphasis. One is the economic priorities of the working class. So, that's shared prosperity jobs, wage growth, which is becoming harder and harder in the age of AI, so that sort of also then leads to what kind of policies, for example, in the context of AI, we have to pursue. The second is sort of reaffirming the commitment to freedom of speech and discussing difficult questions so that we can build new compromises. And the third, which is related, is to elevate community. And community is both centrally important to people's identity, but also is the place where we have to start when and there is a notion that people are in control of their lives, that they can engage in self-government, and it also gives us more freedom to start the business of building compromises, because this way, you don't need to build a compromise at the national level than it's imposed on everybody, but different communities can have different rules. Different communities will have different religious preferences, they will have different ways they might want to organize their lives. That has to be subject to some core liberal principles, in particular, individuals' freedoms have to be respected, and the right to exit of individuals out of communities has to be recognized as absolute. But we must go back to the times where community was integrated with freedom and governance, which again, we have lost over time. We can say we've lost it because of social media. That's true. The age of social media has fundamentally reduced the time that people spend in their communities. It's civic action, basic things like giving blood, or participating in what they do in the community. They have spent much less time with friends. But all of those actually start again before social media. Social media is just an acceleration of them. And I think part of it is again, the cultural politics was very disruptive for community. The question obviously is, is this feasible or is it too late? And I mean, you have described a process which was endogenous within the system and natural of economic change, association, social change, cultural change, and political change, which ended up where we are now. And that continues to be the direction, if we look at recent election results in Europe, for example, our own polls. Where is ultimately politics and social change involved? Power, force. Somebody has to be in charge, or some groups have to be who want this. And we know from the past of human history, well, most of our history, we've lived in coercive, highly orthocratic regimes, at least since the greater revolution. So where does this counter-revolution come from? If we look at our politics today to put it mildly, it isn't obvious at all, it isn't obvious at all, and look, you're absolutely right to challenge me on that. Am I sure that this can be reversed? No, but what other option do we have than work for a change? Because I think the current path is disastrous. And I think the way I put it just before we were talking briefly, I'm not an optimist, but I am hopeful. Because I think it's only with hope that we can try to do some things. And I don't think we should have blind hope, but I think two things are very, very important to recognize and people may disagree with me on this. But first, humans are almost infinitely adaptable. If you look at our history, what you were alluding to, we've lived under such different conditions, geographically, economically, socially, and people have adapted to them. So we can adapt to the social media age, we can adapt to the AI age, it takes time, but we can adapt to it. Second, I think humans deeply believe in fairness. So we now live in a very divided society. In the United States, for example, and the same is true in Europe and in the UK, but I think it's a little more extreme in the United States. There really is such animosity between the troop holes of the political spectrum that sometimes they see each other as a devil. But still, once you start a conversation and talk about what's fair and trying to encourage, and this is where the softer version of roles in this is actually very interesting, is if you actually not impose it on people, but encourage people to look at it from other's perspective. It actually often works. And even in the modern times, we've seen in very unlikely topics, consensus has sometimes emerged in its own, you know, a difficult way. One that I spent quite a bit of time in the book is the citizens assemblies and the referendum in Ireland on abortion. A topic that everybody thought was gonna divide the Irish society down in the middle and did that get everybody to agree, no, but it took a long process of communication, deliberation, people discussing with each other and trying to understand each other's perspective. And at the end, by the standards of modern times, an overwhelming majority of the Irish voted for, in both the citizens of the assemblies and the later referendum to actually make it radical change that has stuck and has worked, has function reasonably well. In the United States, the same dynamics were seen in the state level referendums, a few of them, on game marriage. So I think this is a game possible. Social media is gonna make it hard, provocateurs are gonna make it hard, but there are passways to doing it. Now, that's on the social side. On the economic side, I think again, it's not easy because if AI goes in the direction of replacing jobs, which essentially the AGI artificial general intelligence are dendais, just mimic humans more and more and better and better and do better and better and humans in all tasks, how could it go in any other direction? And if we go in that direction, the dream of building foundations for shared prosperity would be just that, a dream. So we have to steer AI in a more pro-human, and I would say pro-worker direction, which again, I developed some degree as a template in the book. - Let's, I'm gonna move to questions now. They're quite a variety and I won't, I'm sorry, be able to address all of them. So, a couple of questions were actually about China and they fit together. One was, has the legitimacy of democracy been declined because of the perception that the Chinese model just works better, but there's a more upbeat few of this, which I've recently been debating with Fr. Kiyama in his book, and he would probably say, well, we could learn from the fact that the Chinese actually have effective government. So, what is the impact of China, but also the opportunity to use, can we learn from them? - I think I have a slightly more nuanced answer to that. I do think that Chinese example and Chinese propaganda have weakened the pro-democracy forces and some developing nations, especially in Africa and some parts of Asia. But I don't think many people, at least until now, from the West have looked at China and said, oh, this is the reason why we don't want democracy. Of course, it may make the status quo lock down and gridlock a little bit more jarring sometimes in the United States or in Europe, but I don't think China is to be blamed for democracy's crises. Now, I think China has problems, but on the other hand, it has some virtues and I think two very important virtues are it has great state capacity. And that's what I think Fr. Kiyama is referring to. Some of that is difficult to replicate because that state capacity goes back to, you know, 2,000 years or not, well, 1,500 years of imperial structure that sort of cultivated a particular type of bureaucratic ethos. But it is interesting because it shows how regulation in areas that in the West today, we think, is impossible, can actually work in China. You know, China regulates tech sector very heavily. It regulates AI. It has regulated in every stage. Now, we wouldn't want deregulation. We wouldn't want the values that underpin that regulation, but at least it shows that regulation of the tech sector is feasible. So that's one thing. The other thing that's very important for Chinese economic success from which we can learn a few things is they've put a lot of emphasis in training a very large supply of engineers. And the engineering talent in China has played a very important role in both the manufacturing success of the nation and in the tech sector. - Let me talk now. There are a number of questions about the great theme of this moment. It's subject I intend to write about tomorrow. So you can tell me what to write. (laughing) Artificial intelligence. How big a threat is it? I, in other words, is it about to make everything you've talked about much, much, much worse? The decline in employment, decline of incomes increased in equality, and now, we are told absolutely an ability to control it. So serious people are suggesting that we're in sort of on the verge of an extinction event. Well, what do we do about this and how big a threat is it really? So first observation, everything about AI is uncertain. I think how quickly AI is going to spread in the economy. It's exact effects. There is a lot of uncertainty on all of these things. And that's why I think you need to hold a couple of at least seemingly contradictory ideas in your mind when it comes to AI. The first one is that I think AI so far hasn't created major job loss and it has not created major product. The evidence seems quite clear. Yeah. On the other hand, I think when it's current path, it will obviously have some productivity effects in the future. And it will have more job loss effects. How much? That's uncertain. But even moderate displacement effects would make the agenda of shared prosperity much, much harder. Indeed. And the current debate, I think you can frame it narrowly or broadly. If you frame the current debate narrowly, like loss of control and alignment are about superintelligence AI that's going to come and create an extinction level event for humanity, I'm not so concerned about that. I'm not saying that's zero probability. There are weird things that are happening. But but I think the likelihood that within the next 10 years AI is somehow going to take control of the physical infrastructure and start killing humans just seems fanciful to me. On the other hand, if you interpret loss of control more broadly and view it as AI models and the people who control AI models becoming more and more misaligned with social objectives and the good of society, I think that is a real concern. And that's why this is the right time for a new regulatory framework. And by a regulatory framework, I don't mean the current type of regulations that we engage in both in the United States and in Europe, which is we have a very reactive system of regulation. We let tech companies do whatever they want for a while. And then if there is some danger that it's going in a direction that we don't like, then we jump in and we try to put guardrails. That's never going to work. And it's not really up to the task of dealing with AI's transformative effects on society. So we need a more proactive agenda. And the first step of that I argue is to recognize that there is nothing in the nature of AI that says it has to be just for automation. Also, that I define what I call pro worker AI, which is AI that actually expands what workers do, enables them to gain new expertise, perform new tasks from all kinds of workers, from scientists to nurses, from teachers to electricians or blue color workers. And I try to explain why that's feasible and much more socially desirable and how we can actually achieve something like that. Now, not easy again, you can definitely say you're being a bit polyannaish there, thinking that you can redirect AI that has become a multi trillion dollar industry now. But I think there are clear pathways in which AI could develop in a way that's much better for workers, much better for productivity, and much better for humanity. So there are two ways of doing that. And both of this comes out again in the questions. One way is to change incentives and sort of standard tax policies and what you subsidize and so forth. And the other is basically just to tell them all to do. And the simplest way of doing that might be to nationalize them. These are central, you might say, they're performing central utility functions increasingly in society. And somebody responsible should control them, which is what we did with electricity. And there might be hybrids. So institutionally, and in terms of economic incentives, what would your, these policies you're talking about look like? So I don't think nationalizing the entire AI industry is either feasible or consistent with rapid progress. That doesn't mean the government shouldn't play a role. I think the government should play an important role in the way that say DARPA, the Defense Advanced Research initiative, did in the '50s and '60s, where the government supports and encourages certain directions that are socially beneficial and acts as a partner to certain types of research that's actually sorely needed. But you do need the entrepreneurship that comes from people in the market for this technology to develop. And it's not just a question of incentives. So I think incentives by itself wouldn't be enough. I think we need to change both incentives and norms. And that's why I believe a very important part of the change has to be to alter the narrative. There are many, many very talented young people who are going into AI who actually don't just want to accumulate power for themselves or make big wealth. They also think they want to do something socially good. But the way that the discussion has been structured both in the United States and to some extent on this side of the Atlantic is that if you want to do that, the only way is you make AI models more and more intelligent, more and more human-like so that you can reach some sort of superintelligence or cognitive revolution. And I think that's just a false premise. And if we change the conversation, the narrative, that there are ways in which you can develop AI, that isn't this sort of AGI or artificial superintelligence dream, but in a way that's more pro-worker, pro-human, pro-democracy, I think it would also motivate people. And you see the tensions of the current AGI agenda, that's why every week there is somebody who leaves ontropic open AI or Google or meta saying, "Well, I was drawn to them because of their promises, but now I realize it's all false." But the language that they use is often in terms of this loss of control or artificial superintelligence because that's the milieu in which they have grown up. It gives your job post the boost it needs to be seen, and helps reach people with the right skills, certifications, and more. That's Indeed.com/podcast, terms and conditions apply. Need a hiring hero? This episode is brought to you by Pomolive. Family time isn't just the big moments. It's weeknight dinners. Sitting around the table, everyone talking all at once. So when the plates are empty and the sink is full, use Pomolive Ultra. Pomolive's most powerful formula removes up to 99.9% of grease, leaving your dishes sparkling clean, and the new convenient pump makes cleaning even easier, so you can spend less time tackling dishes and more time together. Shop now at Pomolive.com. There's one question which sort of bears a bit on this nationalization question, and I think since it's been asked, I think I should ask this before we go. And it says, "Given the tenants of shared prosperity, general will, I'm not clear that you have that tenant. Non-domination and non-domination does liberalism simply need socialism? Isn't capitalism the issue?" Now my view is if we've learned one thing in the last century, is there's nothing that generates complete domination as totally as a situation in which the state controls the means of production. But what is your view? Is there a former socialist that will work? And this fits with a very closely related question, in which countries is what are what you think should happen, most happening, happening best? My suggestion is it might be Denmark. And now is Denmark with its Flexibility, security, an example of the sort of socialism that would be relevant here, or is it actually the example of our right form of capitalism? So, in my view on the question, the first question, anyway, is very similar to yours. I think central planning is very difficult to make work, but even more fundamentally there are two issues with central planning that go against the ideas that I have descended in this book. One is that central planning doesn't truly encourage or cannot truly fully accommodate experimentation, so it doesn't have that bottom-up process of trying, failing, doing new things, which comes with competition and which comes with lack of control from the top. And second, socialism, at least the way that I see it at the moment in history, is very much embedded in these sort of notions of general will, that there needs to be a socialist cadre of socialist party that believes in the right way of organizing society and then if necessary imposes that. So I think democratic centralism, whatever you want, some called it the Leninist Party, but yes. So I think both of those are really in tension with the core liberal ideas. And so that's why I wouldn't point out to any of the remaining socialist countries as like Cuba or China as the role models, I would point out to no country I think approximates what I'm talking about because no country has really come up with this kind of new governing philosophy I'm calling for, but Switzerland, Denmark, I think are great examples. And what you have in Switzerland is a much greater emphasis on local politics and community involvement of people at every stage. And that sort of emanates into a very dynamic economy as well as a more consensual politics. It's no, I mean, no country is immune to social media, to polarization, to new conflicts. But if you look at Switzerland, you see those much weaker than in other places. In Denmark, I think is another excellent example. It has kept relatively strong unions by European and American standards, although much weaker than they used to be. It has the flex security system, as you've pointed out. It has encouraged a lot of entrepreneurship and new technologies. It has tried to be more consensus building on difficult questions. And as a result, it is a place where the jarring inequalities have emerged, although Denmark has become more unequal, that is something we have to recognize. All Nordic countries have become more unequal. But Denmark has sort of navigated some of these better, but it's very, very far from any kind of socialism. It's even more market friendly today in Denmark than it was in the heyday of social democracy in Norway, Denmark and Sweden in the 1930s. And the socialism shows in that a very large part of income is shared through the state. And there is a very generous welfare state, which in some say shares at least if you like the income being generated by the system. Right. And this is true both for Nordic countries other than Denmark and Denmark. The reason why there is greater equality, less inequality in Denmark than the United States isn't just the redistribution system. That provides foundations through schooling and through health, but it's wage growth. There has been wage growth in Denmark. There hasn't been in the United States. And the United States is a complex case. So a myth that's common on both sides of the Atlantic is that somehow the U.S. is much less progressive in its taxation than Europe as a whole. It is less progressive than Sweden and Norway. But by most metrics of pretty progressivity, actually it's as progressive as France, Germany, the UK, Spain, Italy. But it has a lot of waste in its government and it doesn't tax some segments of population, especially the billionaires very much. But it taxes the middle class a lot and it doesn't tax at the federal level the poor. So the sort of the low income people pay higher taxes in Europe than they do in the United States. It's a complex system. So it's not like you're going to be able to fix the U.S. system by a better redistribution system. The spending is less progressive. My sworn defense and health is very biased. Yes. Now, a completely different question, but very relevant to this, how do you change the reform of funding of political parties in a way that or is it important even to change the funding? Oh, absolutely important. Very simple. Okay. I mean, I don't have answers to many questions you might have about institutions, how they should be designed, tax systems that are complicated. On this one, it's very simple. You just have a public funding for parties rather than privately financed campaigns. That's what Nordic countries do and it has kept their politics much cleaner than the United States. The United States is the complete opposite. The spigots of private money are open to the maximum. There's no public support. There's no public effort to create voice for alternative candidates. Very easy to know what system would work. Of course, going from here to there is almost impossible. I have very much the same view in my own book. Now, here's a question which is very relevant. Well, actually, let me ask this question since, as was pointed out, there are quite a few people who have come from your mother country. And it's relevant to a broader question which I think is the future of liberal democracy in the emerging world, very broadly, where there's been a lot of backsliding and very depressing. And to me, I followed Turkey very closely and wrote about quite a bit even when I was at the World Bank. So the question here, you want to depress yourself even more, if you have a lot of questions. How hopefully you are, are you that Turkey and countries like Turkey will return to liberal democracy? It's a long road, but it's a difficult situation because, you know, in this book, I make a congenious effort not to talk about Donald Trump or the Alt-Ride or Elijah Farage, all the sort of sorted new right philosophies because I think we have to look at liberal democracy and its foundations. But one thing has to be said, which is that in no country, again, China being the exception, but it's a different sort of beast, China and Singapore, perhaps Vietnam. But in no country, these new authoritarian ideas or regimes or politicians have had any success in terms of doing what they promised and doing what people want. The economy worsens, the problems get delayed, and for many developing economies, they don't have much time because their economies being transformed, their populations are aging rapidly. It's not the end of the world when you can adopt to labor scarcity via technology, but many of these countries are behind the technology curve. And AI is also going to make the problems of economic development more challenging. Turkey has really missed the bolt in that sense and has just like, you know, the Western countries that we're talking about, a limited number of limited amount of time in order to get it out sacked together and, yeah, the democratic institutions have become extremely weak in Turkey or non-existent. One question here, which is very relevant to recent developments in British politics, and it captures perfectly this issue we were discussing about tolerating the intolerant. We've recently had protests in Port Smith, where, as the question points out, we have had masked men forming a legitimate protest, supposedly legitimate protests, but clearly threatening, and intended to be threatening. And we also see interest in me again, religious ideas, certain religious ideas. In this case, I don't know whether these people say Christian nationalism. Being attached to this, this is pretty troubling isn't it? It is, and at what point do you say, again, given the history of Germany in the early '30s, do you have to say, this just isn't legitimate? I think on that question John Stuart Mill has to be our starting point we may not want to stop there but he was very clear that freedom of speech stops when it becomes a public hazard and a pathway to physical violence so it's very different to advocate certain ideas and even campaign on the basis of them versus turn them into a threat against the security and livelihood of other people so I think the example that you've provided clearly fall into that category I think the harder things are parties like AFD what do you do with parties like AFD in Germany which is in as we've seen in the recent election isn't isn't as on the rise I think we cannot deal with AFD by banning their ideas you have to defeat them in the public discussion so long as they remain again a political party that stays away from violence the moment they sort of veer into violence that's a different matter but I think even for organizations like AFD at the end just banning them is going to create a bigger problem down the line it's going to create a bigger backlash that's not the way that liberal society should deal with them because I think liberalism has the better arguments has the better track record we should have the confidence in our ideas and aspirations that they can ultimately convince people if if we talk about them openly and convincingly but surely and this is the very last question all that depends on the continuation the survival we saw this example in Hungary very recently of reasonably fair elections absolutely one and it's not very difficult to see and you we've discussed this recently an example from recent history of democracy in Turkey that that can be stopped what happens and we are very close to it so give me basically looking at where we are now and looking at that fact that the people who want to take power and put it in their hands want to overthrow elections themselves so you lose the liberal and the democracy how close are we in your view oh we're very close to the United leasing that fundamental check and then suddenly we are in a world of authoritarian well we're very close then that we cannot obviously tolerate it has come to that and for example Donald Trump in the United States runs for another term and wins but that's already defeat I mean if a second term of Trump somehow is allowed by democratic institutions and people vote for it that's already the death of liberal democracy but the Hungarian example also shows in six seconds that not always lost as long as violence can be put in check so the the thing that's distinctive about hungry is that Orban despite the repressive authoritarian regime that he run did not have a very repressive security service and that's what enabled something from his movement to emerge as a I would argue that's because a big part of it was that the European Union as an institution did stand up in this sense using its money and so forth for core institutions I'm happy to give you the last word on that one so what I will conclude I think this has been a very deep complicated discussion of an immense number of issues and Aaron has given his usual authoritative answers I hope you are more optimistic now than when we started I remain very very anxious about where we are but at least it seems to me it is clear from any sensible analysis that the threat to liberal democracy is profound and it is up to all of us as far as we can in the ways we can to fight for it this episode starred Darren Ajimolu and was presented by Martin Wolf it was produced by Georgie Derry and we make the show with Nicole Wong and our editor John Dorty until next time I'm Vast Christodulu thanks for listening now at Kruger your points at up to more ways to save every trip use them your way to take dollars off groceries at checkout or save at the pump you can even save up to thirty five dollars on your next fill up same points more choices and with low prices on fresh quality food plus digital and personalized offers tailored to how 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