A View From Europe

By Dee Smith

I recently returned from 6 weeks in Europe — Austria, Italy, Switzerland, and the United Kingdom. My trip coincided with the build-up to President Trump’s tariff announcement on “Liberation Day” and the reactions that followed it. The most interesting element of the trip was the evolution, or devolution, in views of the United States.

At the end of February, the attitude I first encountered was a mix of perplexity about the changes in the US and sadness that they were occurring. Even people who were disposed to dislike the US discovered that they had nonetheless kept within themselves a kind of hope based on belief in America and its distinctive experiment in democracy and freedom. Even with all its flaws the US seemed, so they said, to represent a possibility that humans might be better than we fear we are. One remark I heard summarized the attitude: “It seems that the lights have gone off in the shining city on the hill.” It was a sense of tragedy, almost of grief. Now, some said, they see that the U.S. is “just another country.”

But as the tariffs were imposed, this recessional mood changed. The attitude of heartache began palpably to transform into fear, and into anger. It was not as if the winds of change had not been blowing, and they knew that. There had, for example, been warning signs over the years that the US was pulling back militarily from Europe. And the Europeans were certainly aware of the fractures in US political structures, as in their own.

However, the tariffs were something different. The universality of them, the suddenness, and the way they were applied — with a chart apparently developed with the help of ChatGPT based on an arbitrary calculation — was disorienting, then frightening, and finally angering.

When the White House suddenly, and apparently temporarily, backed away from the tariffs soon after they were announced, it simply added confusion to the fear and anger around the entire issue and in many minds further undermined the stability of the US governance and financial system. “I really don’t know what to think” was a comment I heard more than once, sometimes followed by “but I’m angry.”

Although they may not have known what to think, they did know how they felt. People have cancelled trips to the US and taken other personally expensive measures, so off-putting have they found the developments.

There was still, amid the feelings of loss and anger, the wish that the old US would come back to something like what it was and an ember of hope that it might. But the dominant note was fear, driven by US actions but not only about them. People fear the Ukraine war continuing while they also fear it being settled: they fear Russia’s intentions once it is loosed from the constraints of fighting in Ukraine. They fear war in other hot spots: Iran, Taiwan, the Koreas. They fear the non-sustainability of their economic situation. They fear having to dial back their social support systems to increase their military budgets. They fear they will be outcompeted by other areas of the world. They fear for their supply chains. They fear more and larger waves of immigration from the Middle East and Africa, particularly if war escalates in the Middle East. They fear for the social and political stability of their countries. They fear unfair competition from China, and they fear what kinds of collusion China and Russia may be up to. And, as a constant, chronic theme, many fear the impact of climate change.

Europe is, like the rest of the world, in the midst of extraordinarily large transformations with unknown trajectories. The changes seem to have come on very suddenly, although of course they have not: there have been harbingers for years. The causes of the changes also elude many. That of course is for history to judge, but I did not find a single person who disagreed with the idea that fundamentally, beneath it all, lie broken promises. I have written about this previously, and will not go into any detail here, but people see that, although they played by the rules, the implied promises they believe were made by the political and economic system — that their children’s lives would be better than theirs, for example — have been irreparably broken.

Most surprising to me, I heard more than a few people in Europe, including investors and businesspeople, say quite seriously that they thought we were at the point of a very big change. And a number said the period between the end of the old and the beginning of the (unknown) new will be very tumultuous and dangerous.

Europe was the birthplace of the Enlightenment, and it was on Enlightenment ideas and ideals that not only the American system but also every system in Europe, and now far beyond, were based. Holding that the world is fundamentally comprehensible, the Enlightenment posited that humans make decisions rationally, in their own best interests, and thus that society can be rationally organized in a purposeful and predictable way. Not just democracy and capitalism, but socialism, Marxism, and communism are all based on different views of how to apply European Enlightenment ideas about organizing society rationally, purposefully, and predictably. Unfortunately, this rationalism simply does not seem to be an accurate take: we make our decisions emotionally.

So I found I was asking myself many times on this trip: if this whole superstructure of concepts does not in the end work — if it cannot work because of the nature of the drivers of human behavior — well . . . then what? That is the largely unspoken fear lying underneath all the other fears, perhaps not just in Europe.

Reversion to Mean

By Dee Smith

About a decade ago, we entered into a period of escalating social and political chaos, increasingly “hot” geopolitical conflict, and growing economic crises — a time that seems uncharacteristic given the previous decades. Unfortunately, the current period may represent a return to the norms of human history. The relatively peaceful, prosperous time we lived through may have been the deviation.

While not halcyon days, the 70 years after 1945 were a period in which great-power conflict was avoided, more than a billion people were lifted out of poverty, life expectancy — due to advances in sanitation, medicine, and living conditions — increased significantly, and norms regarding the value of human life changed dramatically. Murder, for example, was very common in most societies 200 years ago as a means of “solving problems.” Today, it is much less so.

The financial stability of recent decades was also new. There were no true global depressions, and highly disruptive events like sovereign defaults by major economies were absent. This was not true in the past.

Simply put, this relative economic stability was purchased by an overwhelming surfeit of debt. Two occasions on which this debt was used stand out: to rescue institutions deemed “too big to fail” in the financial crisis of 2008, and to stabilize world economies during the Covid pandemic. But debt has mounted continuously in most countries. In the US, public (government) debt is over $36 trillion. Private US debt is between $20 trillion and $30 trillion, depending on how it is counted. The extreme efforts to avert financial disasters mean that markets have never been allowed to clear. Like a forest in which fires are suppressed and undergrowth is never cleared by smaller burns, the fire, when it comes, may be cataclysmic.

After many years of increases in democratic governance in the 20th century, the 21st is seeing considerable backsliding. According to Transparency International:

In every region of the world, democracy is under attack by populist leaders and groups that reject pluralism and demand unchecked power to advance the particular interests of their supporters, usually at the expense of minorities and other perceived foes.

The form of democracy endures. In 2024, more people voted in elections than ever before in history. But with the rise of illiberal democracies, many countries are preserving the form but not the substance of democracy as it has been defined over the past 250 years. It is of particular interest that young people in many places are increasingly dissatisfied with democracy.

Why is all this happening? There are many interacting reasons, but I would suggest that four factors should be singled out.

First, as I have written before, are the broken promises so many people perceive in their lives. They feel that they played by the rules and were promised that their lives would improve and their children’s lives would be even better than their own. If anyone reading this sincerely believes this now, I would be surprised.

Second, the underlying conviction that economic well-being is the primary motivation of almost everyone and the most reliable source of human happiness — and that humans are rational self-interested agents who pursue and maximize their own well-being. This is the basis of not only capitalism, but also socialism and communism.

But, as it turns out, Marx was wrong in his estimation that economics is the moving force of history. It could rather be said that economic forces are moving history away from economics and toward identity politics. As people move or are moved en masse for jobs and economic production, community structures come apart, engendering an urgent need for identity. That need frequently takes the form of a desire to belong to some group that excludes others (social, religious, political, economic, even place-based).

A third factor is technology, particularly the technology of connectivity, and most particularly, mobile visual connectivity (smart phones, tablets, etc.). Not only do these devices demonstrably increase loneliness and affect cognition, as continues to be shown in studies, they also contribute two additional, crucial elements. The first is transparency. People now are intimately aware of how other people live to an extent that has never occurred previously. Whether such accounts are exaggerated, false, or accurate doesn’t matter much, the effects are often the same: envy, sadness, depression, and anger.

Second, mobile visual connectivity allows people with similar interests and thoughts —  including politically aggressive and polarizing ideas or destructive and self-destructive desires — to find one another, create relationships, share and develop ideas, and then act on them. It is perhaps most important that they are all able to do this from a distance and almost instantly. In the past, it was much more difficult for people whose thoughts were outside the norm to find one another and act in concert.

Fourth, much of the avoidance of major wars during the past 8 decades was due to the so-called Pax Americana, a system imposed on the world by the United States and made possible by American military power. Recently, with changes in military technology and the rise of other powers as near peers in military terms, this superiority begun to erode. Other factors are contributing to the eclipse of the Pax Americana, especially the debt load mentioned above. For the first time, the US last year spent more on government debt service than on its military.

All of these factors augur a more conflictual, impoverished, and insecure world. In other words, reversion to the conditions of most of human history. Perhaps some change or series of changes can avert this fate, and we should hope that they do. But if trends continue on their current path, life may be very different.

Mutual Assured Malfunction

The past week has been a lively one for the eternal battle between digital networks and national, sovereign security. After a two-year standoff, Elon Musk’s Starlink was able to reach deals with India’s #1 and #2 telecommunications companies, Reliance Jio and Bharti Airtel, on providing satellite Internet to the subcontinent’s vast and underserved rural market. A few days earlier, Dan Hendrycks, Eric Schmidt, and Alexander Wang — respectively, director of the nonprofit Center for AI Safety, former chairman of Google, and the CEO of Scale AI — released a paper , “Superintelligence Strategy,” arguing that no one state will ever be able to win the AI race.

In the first instance, a technology company with, it is fair to say, its own distinctive geopolitical interests could potentially gain a hold over the telecommunications of the world’s second largest national market. In the second instance, tech industry leaders with, particularly in the case of Schmidt, a strong record of advocating US technology dominance in competition with China are asserting that such dominance can never be complete. Indian digital sovereignty and US digital sovereignty are rendered highly problematic if not impossible. If a state is on the networks, as all powerful states are and will be, then their sovereignty is inherently partial. Taking these two major developments together, the future of digital self-determination can be seen to be rather weak. In SIG’s view, this represents an overdue recognition of the interdependence of states even as they engage in fierce geopolitical competition.

Reliance Jio has, in the past five years, revolutionized India’s telecommunications, particularly mobile communications, bringing huge numbers of Indians online. Bharti Airtel has done a surprisingly good job at catching up, giving Reliance Jio much-needed competition. The Indian state has not been idly observing these developments. Its vigorous advocacy of an indigenous digital infrastructure, often now referred to as the “India Stack,” has become an example to others, including the European Union. (See the SIGnal post “The America Stack,” Feb. 5, 2025.) India is determined to become a major tech power. It has also, with the world’s fourth-largest defense budget after the US, China, and Russia, aggressively advanced its own space program and its own space-based navigational system to rival GPS (US), Glonass (Russia), and BeiDou (China). Balancing US and Chinese telecommunications majors over the past decade-plus, India has artfully and purposefully pursued its desire to achieve digital self-determination.

That made the Starlink deal a surprise. It appears to have been hammered out between Musk and Indian President Narendra Modi during the latter’s recent visit to Washington. The Indian government has an interest in nurturing Reliance Jio and Bharti Airtel, but it also has an interest in good relations with the US under President Donald Trump and in making sure that neither Reliance nor Airtel accumulates too much power domestically. Both the US and China have faced a similar problematic in simultaneously backing and controlling their own tech majors. The deal with SpaceX, Starlink’s parent company, provides one way for India to meet these several challenges. Indian reaction to the Starlink deal has been understandably wary and somewhat confused. After all, the Indian government, at various junctures, has humbled Facebook, Google, Amazon, Microsoft, Huawei, and ZTE, among other foreign firms eager to reach the Indian market. A recent Indian report characterized Starlink as “a technology of geopolitical control,” pointing meaningfully to Starlink’s role as the guarantor and master of Ukraine’s Internet access in that country’s struggle with Russia.

SIG’s view is that Starlink will not be able to repeat its Ukraine dominance in India, any more than its US and Chinese rivals have been able to subdue the subcontinent — not for want of trying. It is nonetheless striking that Modi, Reliance, and Airtel — the latter two have long opposed letting Starlink into the tent — now believe that the advantages of working with SpaceX outweigh the disadvantages. At the very least, Musk has dramatically proved that having the ear of the US president provides enormous business benefits.

While the “Superintelligence Strategy” has been in the works for some time, it is difficult not to read it in the context of the Trump administration’s declared determination to press the US’s AI dominance. One of Trump’s first moves was a $500 billion AI infrastructure project, and Vice President J.D. Vance later stressed in a landmark speech in Paris that the US “will ensure that American AI technology continues to be the gold standard worldwide and we are the partner of choice for others — foreign countries and certainly businesses — as they expand their own use of AI.” Vance held back from a simple declaration of hegemony but the administration’s message has clearly been that US AI should indefinitely be the parent in comparison to the efforts of other nations, especially China.

The “Superintelligence Strategy” has at its core the highly convincing argument that any large-scale AI system, even an American one, will always be vulnerable to infiltration and disruption by rivals. The strategy offers a very worldly solution, based on, but distinct from, earlier strategic arguments about nuclear weaponry. It is called Mutual Assured AI Malfunction (MAIM): the acceptance that there will be a balance of AI power, not a resolution or well-meaning regulation of it. Further, MAIM “already describes the strategic picture AI superpowers find themselves in.” A new Mutual Assured Destruction (MAD), AI version, is already with us. As in the earlier, nuclear version, there can be no victors.

There is much here for China and others to digest. The old, US-led idea of a free and open Internet, so recently repudiated, can be seen as returning, but in a much darker form appropriate perhaps for darker times. How states and companies react is the crucial question for investors. The venerable commercial goal of scaling, ideally to a global level, is not going to be achievable. AI-fueled tech companies, which increasingly means most tech companies, will face geopolitical limits. Commercial cooperation within those limits — and successful digital competition is inherently commercial — seems to be the only way forward. Musk, Modi, and the authors of the “Superintelligence Strategy” are simply ahead of the curve, and showing the rest of us where it bends.