How Liberal Democracy Can Survive an Age of Spiraling Crises. Foreign Affairs. Published on December 18, 2025.
Intro
The world is in the throes of a pervasive crisis:
- Widening economic inequalities.
- Breakdown in public trust.
- Liberal democracy under strain.
- Economic alienation.
- Threat of technological change.
About AI
Thesis:
- AI will contribute only 1% to US GDP growth over the coming decade (0.1% a year).
Facts:
- AI limitations in improving productivity.
- Replacing workers with machines and increasing productivity is not revolutionary.
- Technologies need to be integrated into organizations, which is not easy.
- The numbers came out to be quite modest. It's 1% or 10%, not 50%.
- AI is going to have fundamental impacts on our society in 10 to 20 years.
Perceptions:
- A lot of the investment is driven by hype and racing.
- A winner-take-all perception to justify the big investments.
- AI as an unstoppable gale.
- AI is so different from the rest of technologies that we have little to learn from the past.
Historically, the adoption of new technologies, has been:
- Very slow.
- Unequal for winners and losers.
- The birth pains of any technology are going to be more than what you might first expect.
For instance, the first 80 or so years of the British Industrial Revolution:
- Waving machines were incredible.
- Real wages fell (the wages of weavers were reduced by two-thirds).
- Working hours lengthened.
- Working conditions became horrible.
- Life expectancy was of 29 years.
Drawing analogies from history:
- We shouldn't expect AI to spread that fast in the production process.
- It might create big winners and losers...
- ...unless democratic oversight and institutional adjustments.
- Caution about that we will all benefit from this technology.
- US are locked into an existential race to AGI.
Use technology in the right way:
- To help when we are undergoing demographic change
- Make the energy sector less fossil fuel intensive
- Design cities in a more sustainable way.
- To provide new goods and services for an aging population.
- AI to make workers more productive without destroying jobs.
About Geopolitics
The challenges that the world faces are largely global:
- AI.
- Pandemics.
- Climate change.
- Demographic change.
- Nuclear nonproliferation.
- Taxation and regulation of powerful multinational companies.
- Inequality.
- Aging of populations.
- Macroeconomic risks.
- China-US-Russia rivalry.
All of which require global cooperation. So the racing mentality is dangerous.
About US
The divergence between the U.S. and the rest or between Britain and Southern Europe, between parts of India that industrialized and parts didn't, it's all related to industrializations, new ideas, new technologies. So you have to think of the institution's role in fostering this dynamism.
You see the same pattern inside the US. It's in the Northeast of the United States where you see the patents, the new entrepreneurs, the new machines. It's not because in the south there was slavery, it's because institutions.
US is destroying every valuable part of its economic engine:
- US higher education system:
- Grants are being cut.
- Universities have been declared enemies of the administration.
- Immigration:
- Blocking foreign talent from coming in.
- Legal institutions:
- Courts now are not impartial.
- Special treatment.
- Innovation.
- Discouragment by biased courts, procurements, property rights...
- Weakening of US dollar currency.
- Weakening of institutions.
China's features:
- Infrastructure spending
- Digital infrastructure.
- Education: engineers
- Industrial policy is a double-edged sword.
- Top-down Chinese approach is very costly, it does not allow a competition of ideas.
Bottlenecks for China:
- Institutional structure.
- Hierarchical nature of how entrepreneurship and science is done.
- Authoritarian way in which questions are resolved.
About Growth
Four approaches to explain growth:
- Geographic. Geography didn't change, but wealth did through time.
- Cultural. Culture change, interacting with institutions.
- Institutional. It's institutions what matters.
- Lucky. Europe colonized the right places.
Why Nations Fail Thesis:
- Authoritarian regimes can grow for short periods of time, for decades sometimes.
- For sustained growth driven by innovation, it is inclusive institutions that have an advantage.
The crisis of democratic capitalism:
- Repression.
- Turbulence.
- Disintegration of democratic institutions.
People are feeling increasingly that they don't have voice. Declining trust in:
- Institutions
- Journalism
- Academia
- Congress
- Presidency
- Courts
How do we navigate these very turbulent waters?
- Strengthen our institutions, starting from local communities to the nation states and then some global cooperation.
- To revive the promise of liberal democracy: working-class liberalism.
- Scandinavian states as potential models, taking idiosyncrasies into account.
