Once upon a time there was a norm in American politics, first articulated by Arthur Vandenberg: “Politics ends at the water’s edge”. That norm is well and truly gone, as events at the Munich Conference have demonstrated. “Politics ends at the water’s edge” did not just mean Americans agreed about foreign policy; it meant that when speaking abroad they spoke as Americans rather than as campaigners.

In a world of social media and 24 hour news an American political campaign speech in Munich will be instantly heard in Muncie. The voters’ ears in Muncie are the actual targets for the speech not those of the assembled dignitaries in Munich.

In the past I have warned Americans that the histories, views, and politics in other countries differ from ours. Context is important. “Right wing” and “left wing” don’t mean the same things in Hungary or Romania that they do here. We should be wary of seeing allies in foreign political figures who actually believe in and pursue very different things than we do despite being labelled the same way in their own countries that we are in ours.

I can see now that the same warning applies to foreign politicians. They shouldn’t see likely allies in American politicians who oppose the same American president they do. Their goals and objectives are likely very different from yours. Their context matters as much as yours does.

I think the editors of the Washington Post are failing to make an important distinction in their new editorial on the implications of LLM AI on “white collar” jobs. That distinction is between what generative AI is actually likely to accomplish in the near term and how it is being sold by AI service providers and how American managers are interpreting that. The editors remark:

Artificial-intelligence catastrophism is everywhere. This month saw stock-market ructions after Anthropic, a leading AI company, announced that it had developed and deployed AI “agents” to autonomously execute legal, marketing and sales tasks. The economic potential is real, but the hand-wringing is overblown.

Yes, AI appears to be a transformational technology, and that transformation will sometimes be disruptive. But it won’t render humans obsolete, and the disruption of white-collar work might do a lot of good.

The editors treat AI as a technological phenomenon whose labor effects depend on capability. But corporations do not wait for capability; they act on forecasts. Whether those forecasts are accurate is economically secondary. The layoffs occur at the moment executives believe the technology will soon substitute for labor not when it actually does.

Even if the editors are technically correct, their conclusion about disruption being overblown is wrong because economic behavior precedes technological reality. The economic impact of AI will be driven less by actual technical capability and more by managerial belief in vendor claims. Consequently, job loss can occur even if the technology is immature.

Just a few days ago Microsoft AI CEO Mustafa Suleyman predicted that AI would automate most tasks in white collar jobs with human-level performance within 18 months. Anthropic CEO Dario has repeatedly warned that AI would eliminate half of all entry-level white collar jobs within the next 5 years. IBM CEO Arvind Krishna paused hiring at IBM, explaining that a large number of jobs will be “replaced by AI”. Those are the sales pitches.

How these sales pitches are being interpreted and utilized by Fortune 500 CEOs is equally clear. In 2024 Carol Tomé, CEO of UPS, laid off 14% of the company’s managers, explaining:

We will constrain head count growth through the end of the year, in addition to a limited reduction in roles across the firm… These targeted steps are consistent with our priorities of gaining more agility and creating the right team structures in order to implement effective AI solutions

This year the company has already laid off a significant number of non-managerial workers due to loss of contracts. The contracts were lost in large part due to AI. The CEO of the financial technology company Klarna has frozen hiring—AI can do all of the jobs. Last year David Solomon, CEO of Goldman Sachs, announced a hiring freeze due to AI. I cannot distinguish between the actual results of AI and confidence in the future promise of AI but these CEOs are responding to the sales pitches by improving their companies’ bottom lines by reducing headcount. In the final analysis it doesn’t make any difference whether they’re right or wrong. The jobs are gone in either event.

That’s not alarmism. Those layoffs and freezes are cold, hard facts with serious real world implications for young people who now have thousands of dollars in student loans in anticipation of jobs that are not materializing.

Update

Mohammed El-Erian echoes a number of the things I’ve said above at the Financial Times:

There are also reasons to believe that this period of decoupling of employment from growth may prove more persistent and more consequential.

This time around, it may well last longer because we are just at the start of the AI adoption process, with robotics just around the corner and quantum computing further behind. Moreover, the current mindset of many firms in their initial consideration of AI does not help. Too many executives seem to think of AI more in terms of its labour cost minimisation potential (doing the same with fewer workers) rather than the bigger productivity potential (doing more with the same or additional workers). The latter comes with increasing the capabilities of existing and new workers.

This decoupling of GDP growth and employment also comes at a time when affordability is already a big political and social worry. An intensifying gap between robust growth and a weak labour market would likely increase income and wealth inequality in an economy already featuring a large divide in the fortunes of the wealthier and less well-off.

This would undermine low-income household consumption as an important driver of growth. It is also taking place at a time when the US Federal Reserve, already under political scrutiny, now faces the prospects of a bigger conflict between the two components of its dual mandate — maximum employment and price stability.

The most dangerous four words in economic and investment analysis — “this time is different” — could well end up applying here. Rather than gradually slowing to a crawl as has happened in the past, we should expect this decoupling phase to accelerate absent any holistic mitigation by companies and the public sector. Indeed, part of the challenge for 2026 is managing a lot better the economic, political and social risks of an economy that, without corporate and policy adjustments, may no longer need as many workers to grow.

Something unmentioned by Mr. El-Erian is that consumption spending by higher income individuals comprises an unusually large proportion of the whole. If job freezes continue to transition into actual job cuts, that could have serious implications for the greater economy.

European settlement of the colonies that would become the United States began roughly 500 years ago. European elites did not settle in those colonies. Although we did have European gentry the European nobility who settled here were not landed. They, too, depended on acceptance, elections, and performance. The United States is what evolved from western European countries without those elites. We created distinctive institutions and practices to replace them. That has been well-documented.

We don’t have a hereditary aristocracy. We don’t have established churches. We have an abundance of land. We developed our own self-defense militias and local governments assume a much greater role here than in most European countries.

The editors of the Wall Street Journal observe concerning Sec. of State Rubio’s remarks at the Munich Conference:

America and Europe are now at another inflection point. Mr. Rubio offered the Administration’s by now familiar critique about Europe’s policy mistakes on mass migration, defense, climate and energy.

But he rooted that criticism in the shared history and values of Western civilization. “We are connected spiritually and we are connected culturally,” he said. “We believe that Europe must survive, because the two great wars of the last century serve for us as history’s constant reminder that ultimately, our destiny is and will always be intertwined with yours.”

Mr. Rubio outlined a renewed trans-Atlantic alliance “ready to defend our people, to safeguard our interests, and to preserve the freedom of action that allows us to shape our own destiny—not one that exists to operate a global welfare state and atone for the purported sins of past generations.”

Judging by the comments by the EU Foreign Minister reported by the Associated Press:

MUNICH (AP) — A top European Union official on Sunday rejected the notion that Europe faces “civilizational erasure,” pushing back at criticism of the continent by the Trump administration.

EU foreign policy chief Kaja Kallas addressed the Munich Security Conference a day after U.S. Secretary of State Marco Rubio offered a somewhat reassuring message to European allies. He struck a less aggressive tone than Vice President JD Vance did in lecturing them at the same gathering last year but maintained a firm tone on Washington’s intent to reshape the trans-Atlantic alliance and push its policy priorities.

Sec. Rubio’s remarks fell on deaf ears and rightly so. America’s culture and Europe’s cultures began to diverge nearly 500 years ago. We are a very different place from the United Kingdom, France, or Germany now and, not to put too fine a point on it, we don’t get to define their cultures. Only they can do that.

Across the Atlantic this difference repeatedly appears less as disagreement over interests than as mutual incomprehension over moral language. American officials tend to describe policies in universal terms—fairness, rules, legitimacy derived from present consent—and assume those categories travel easily. European leaders more often speak in historical terms like continuity, stability, social order, or responsibility shaped by accumulated experience. Each side hears the other as making claims it does not believe it is making: Americans think they are stating neutral principles while Europeans hear instruction; Europeans think they are describing prudence while Americans hear evasion. The result is not simply conflict but misinterpretation. We are allies, but we do not reason about public legitimacy in quite the same way and rhetoric that assumes a shared civilizational conscience therefore lands badly even when the strategic relationship itself remains intact.

This post is a response to a comment.

In 2023 roughly 8% of Chicago’s registered voters cast a primary ballot for Brandon Johnson for mayor and most primary voters chose someone else. He received a majority of the votes cast in the run-off election against an extremely unpopular incumbent and an individual cast as a Trump supporter.

A government can be validly elected and still rest on a very narrow base of participation. The rules worked. But it becomes harder to say the outcome represents a shared civic decision when so few take part.

In a democracy authority ultimately rests on the consent of the governed and consent is easier to infer when participation is broad. When participation narrows, elections begin to select leaders rather than express the public will.

I worked nearly 30 years as an election judge. Voters once approached the polls as if they were exercising power. You could see it in their postures, in conversation, in their anticipation. Today many arrive irritated or detached, as if the result exists elsewhere and they are only acknowledging it. I would call that discouragement.

Maybe ranked-choice voting would help by requiring broader coalitions, though it may also confuse some voters. Mandatory voting might raise participation, although countries that adopt it often later weaken it. I don’t know the answer, but a system in which fewer citizens feel they are choosing their government is moving away from what democracy is meant to be like.

I wanted to commend a post at Outside the Beltway to your attention. The post is about the impact of LLM AI on jobs in the United States. James’s observations are pretty quotidien (technology is improving rapidly, employment is increasing slowly, productivity rapidly, etc.). It’s the comments that are interesting. Most are the typical outright rejection and denial but there’s one, made by individual who comments here occasionally, that hits the nail squarely on the head:

It can generate code at the level of an intern, requiring large amounts of supervision. Typically, interns are useless on net, and the internship is just a months long job interview looking to see if the little rugrat can show signs of growing past that.

and

I worked at a startup decades ago, and quickly realized that what we were ostensibly doing was not the real goal — we weren’t really making a product, we were selling a dream to the investor class, telling them that we would be revolutionizing the internet and that they could get in on the ground floor. The actual users were just a means to an end, and their happiness was almost irrelevant, so long as a non-expert investor could look at it and think “yes, stupid peasants might like this.”

Here the dream is straightforward, and the dream of every C-suite executive: get rid of employees. It doesn’t have to be successful, it just has to be convincing to non-experts that long-term it will be successful. And even if all it does is make employees nervous and “grateful to have a job”… that’s part of the dream.

When I began working sixty years ago, big companies routinely and systematically trained new employees. That hasn’t been true for years. Today entry-level jobs exist primarily as training investments when they exist at all. Firms do not hire entry-level workers for productivity; they hire them to create future productive workers. If managers believe AI will replace that future worker, the rational action is to stop creating the positions now.

Other arguments are secondary at most. It doesn’t matter whether AI can do all jobs or, indeed, any jobs better than human beings in the near term. The point is what management believes and as long as managers believe that AI can do as good a job as a human employee, LLM AI will reduce the number of entry-level jobs created first, then higher level jobs.

That will be seen first where the largest number of entry-level jobs have been created, e.g. in South Asia. Entry-level technology jobs are already being disrupted in India, according to the India Times and Storyboard18:

Artificial Intelligence adoption is nudging India’s IT hiring in a new direction, slower at the entry level, steadier at the top, and sharper on skills.

A firm-level study by the Indian Council for Research on International Economic Relations (ICRIER), supported by OpenAI, finds that companies are moderating hiring, particularly for entry-level roles, even as mid- and senior-level employment remains largely stable.

This has happened multiple times in the past. Railroads massively overbuilt before profitability. MBA spreadsheet models drove layoffs in the 1980s before productivity gains existed.

The “title inflation” with which the technology sector will ensure that a significant number of jobs are eliminated. And it’s not just the technology sector. Any sector that has already experienced significant outsourcing including the financial sector will do the same thing. The number of associates being hired by large law firms will decline.

India is the canary in the coal mine.

Before it disappears into the memory hole I wanted to take note of WSJ London editor Jillian Kay Melchior’s recent piece in the Wall Street Journal. A NATO wargame in Estonia has revealed some serious deficiencies not just in NATO’s combined defense capabilities but in its institutional capacity to learn and adapt:

Russia and Ukraine have shown the world the future of warfare—and America and its allies aren’t ready for it. That’s the lesson of a major exercise that North Atlantic Treaty Organization members conducted in Estonia last May. What transpired during the exercise, with the details reported here for the first time, exposed serious tactical shortcomings and vulnerabilities in high-intensity drone combat.

The exercise, known as Hedgehog 2025, involved more than 16,000 troops from 12 NATO countries who drilled alongside Ukrainian drone experts, including soldiers borrowed from the front line. It simulated a “contested and congested” battlefield with various kinds of drones, says Lt. Col. Arbo Probal, head of the unmanned systems program for the Estonian Defence Forces. “The aim was really to create friction, the stress for units, and the cognitive overload as soon as possible,” he says. That tests the soldiers’ ability to adapt under fire.

What the wargame reveals more than any single tactical failure is the widening gap between institutions that are operating under real evolutionary pressure and those that are not. Ukraine is learning under fire. Its feedback loop is measured in hours and days. Russia, whatever its other deficiencies, is subjected to the same brutal discipline. NATO, by contrast, is largely learning in simulations and conferences. Exercises are useful but they are not selection events. War is. Institutions that survive it adapt—or they disappear. We should assume that both Ukraine and Russia are adapting. The question is whether NATO’s collective defense structure can adapt at anything like the same speed without the benefit or the horror of actual battlefield experience.

Here’s the kernel of the piece:

A single team of some 10 Ukrainians, acting as the adversary, counterattacked the NATO forces. In about half a day they mock-destroyed 17 armored vehicles and conducted 30 “strikes” on other targets.

and

Overall, the results were “horrible” for NATO forces, says Mr. Hanniotti, who now works in the private sector as an unmanned systems expert. The adversary forces were “able to eliminate two battalions in a day,” so that “in an exercise sense, basically, they were not able to fight anymore after that.” The NATO side “didn’t even get our drone teams.”

We have very little experience operating in a drone-saturated battlespace against a near-peer adversary. Whether we are prepared is not something open sources can answer. A word to the wise is sufficient.

I hope our European allies were paying close attention. I may be wrong but the evidence suggests that they aren’t. I have identified articles in Slovakian and Romanian on the exercises but not in German or French. It is telling that coverage appears in countries that sit closer to Russia’s shadow while comparable discussion in German or French media is harder to find. There’s nothing like an imminent sentence of death to clarify the mind.

It’s just a few weeks until the Democratic primary and I’m struggling to decide which candidate running to replace Dick Durbin in the Senate I should vote for. The leading candidates are:

While each emphasizes different issues in tone, in Robin Kelly’s case gun control, the central planks of their campaigns overlap substantially: immigration abolitionism, Medicare for All, and opposition to Donald Trump. None has mentioned how how they will pay for “Medicare for All” beyond vague statements about making the “rich pay their fair share”.

Beyond that there is a significant emphasis on demographic representation as a campaign differentiator. Or, in Krishnamoorthi’s case, that he is an immigrant. Robin Kelly and Juliana Stratton are both black women. Mr. Krishnamoorthi also has the largest warchest, much of it from out-of-state donors. He’s been running ads for months and is considered the frontrunner.

This race is a wonderful example of why I reject the notion that the reason our politics are as they are is the voters. My choice is among three candidates all running on what are materially the same platforms. How is that the voters’ fault?

In multiple ads, both Mr. Krishnamoorthi and Lt. Gov. Stratton use the word “fight,” accompanied by footage of protest-style rallies. That rhetoric suggests an activist posture rather than a legislative one. I recognize these ads are not targeted at me. I think they are targeted at what they think are the median Democratic primary voters. If that is what consultants believe motivates the median Democratic primary voter, it is an interesting assumption. I am not persuaded it reflects the temperament of the median Illinois voter or even the median Illinois Democratic primary voter.

In his Washington Post column David Ignatius takes note of some developments in the Middle East. I reflect on the developments he reports and draw a very different conclusion. Mr. Ignatius points to elements of a feud between the Saudis and the UAE:

Saudi Arabia and the United Arab Emirates, the two drivers of modernization in the Middle East, should be rejoicing together these days. Iran is weak, its proxies are on the run, and an American armada approaches the Persian Gulf. But instead they have stumbled into an epic feud that could polarize the region.

When the quarrel detonated in late December, it seemed like a fight over strategy for resolving the forever war in Yemen. But it has since escalated into a social media battle in which Saudis have attacked the UAE as “Israel’s Trojan horse” and denounced the Abraham Accords, joined by the UAE in 2020, as “a political military alliance dressed in the garb of religion.”

After reporting on several aspects of the “feud” he observes:

For the Trump administration, which has close ties with both countries, the Saudi-UAE wrangle illustrates the difficulty of working with two headstrong regional powers at once. The administration is said to have offered to mediate, but both sides have balked, according to several knowledgeable officials. Because of the intense personal feelings, one official told me, “This is not something you mediate.”

with this point:

“The Saudis want obedience, or at least alignment with their regional policies,” said Jonny Gannon, a former senior CIA officer with decades of experience in the Middle East. “The Emiratis don’t want to be obedient. They want optionality.”

I think that Mr. Ignatius is operating under some shaky premises. Those are highlighted by his use of this phrase: “an Arab official”. And the United Arab Emirates is not an “it”; it is a “they”—a loose confederation of seven emirates, each with different histories, rules, goals, and objectives. Here’s his conclusion:

Family feuds come and go in the Middle East, as around the world. What concerns me about this quarrel is the growing attacks on the UAE because of its opening to Israel. No country has a bigger stake in stopping the spread of Islamic extremism than Saudi Arabia. In its seeming encouragement of vitriolic Saudi attacks on the UAE as a “Devil of the Arabs” that takes orders from Israel, the kingdom is playing with fire.

I understand why Mr. Ignatius uses the phrase “an Arab official.” He is protecting a source. But the phrase quietly implies a degree of common political perspective that does not exist. “Arab” is a linguistic designation, not a strategic one. A Saudi official and an Emirati official do not represent variations within a common bloc; they represent competing sovereign regimes with distinct ambitions.

My read of the “feud” is different from Mr. Ignatius’s. Mohammed bin Salman is less “modernizing” Saudi Arabia than consolidating power and asserting Saudi primacy among the Gulf states. UAE President Mohamed bin Zayed resists that not because the UAE is drifting toward liberal democracy, but because Abu Dhabi wants autonomy in regional strategy.

“Modernization” in the Gulf should not be confused with liberalization. Civil liberties remain tightly constrained and the religious and patronage networks that have long exported conservative Islamist ideas have not evaporated simply because senior leaders now speak the language of “tolerance” and “reform.”

Nor are Israel’s interests synonymous with America’s. Trade and diplomatic rapprochement are welcome, but they are also transactional and reversible especially when domestic legitimacy, regional rivalries, and succession politics are always in play.

That is why I’m wary of treating a Saudi-UAE rupture as a solvable “family feud.” The region’s alignments can shift quickly, for reasons outsiders only partly perceive. He who sups with the devil needs a long spoon.

Nearly 20 years ago, I predicted that no street-legal, fully autonomous automobiles would be operating on the streets of American cities for the foreseeable future. That was received with scoffing by some of my readers. If Waymo is to be believed, nearly 20 years have now elapsed and the fine print tells the real story:

The Waymo Driver autonomously navigates tens of thousands of rider-only miles across San Francisco, Phoenix, Los Angeles, and Austin daily. It can navigate common scenarios, like adhering to a crossing guard directing traffic, as well as more unique interactions like avoiding a swerving vehicle. As the Waymo Driver travels across town, it might contact fleet response for additional help.

Much like phone-a-friend, when the Waymo vehicle encounters a particular situation on the road, the autonomous driver can reach out to a human fleet response agent for additional information to contextualize its environment. The Waymo Driver does not rely solely on the inputs it receives from the fleet response agent and it is in control of the vehicle at all times. As the Waymo Driver waits for input from fleet response, and even after receiving it, the Waymo Driver continues using available information to inform its decisions. This is important because, given the dynamic conditions on the road, the environment around the car can change, which either remedies the situation or influences how the Waymo Driver should proceed. In fact, the vast majority of such situations are resolved, without assistance, by the Waymo Driver.

or, in other words, Waymo’s robotaxi is not fully autonomous. If the system requires human judgment to resolve edge cases in real time, it is not fully autonomous. It is largely autonomous and that is a development to be applauded.

The irony of this is that what they’re actually doing is the right way: autonomous with human oversight. For decades I have said that I would joyfully accept fully autonomous vehicles in our streets if strict liability applied. That would align incentives properly. Waymo’s mistake is in advertising their robotaxis as “fully autonomous” rather than what they actually are.

The main open question is whether you trust operators potentially thousands of miles away to get Waymos in San Francisco out of tricky situations.