"Start Preparing Yourselves..." - Jeffrey Sachs

The American economy has two parts to it. There is a digital and war industry, which is booming, let's say. It's booming on Pentagon contracts. It's booming on war. So if you look at Silicon Valley and you look at the AI bubble and now AI bubble for autonomous weapons and Palantir information systems and the like, yeah, this is good if you happen to be the few people that own our government. But for the rest of Americans, they can't believe what's going on. And that's why Trump's approval rating reached the grand number of 34 percent against, I think it's 58 percent disapproval rating in the most recent Economist poll, but somewhere around there, 58 to 60 percent. People are disgusted. They can't pay their bills. The United States budget is totally a joke. Seven percent of GDP budget deficit. Trump's asking for a 500 billion dollar increase of military spending. This is nuts. This is exactly what we're seeing in the domestic management that the rest of the world is watching in the American escapades in the Gulf, complete incompetence. And I hope they pay Hassett well, because, you know, to be a grown person and stand up and say such nonsense, I hope he gets some compensation for that. But it's also absurd. They talk to the CEOs. I'm sure the CEOs are doing just fine, thank you. But the people whose credit card bills from necessities, as the Fox News was kind enough to remind us, is soaring. So we have two Americas. One has most of the people in it. They're not feeling well. They hate this war by overwhelming majorities. They can't pay their bills. They are falling further and further behind. And then we have the CEO class, of course, and we have Anduril and we have Palantir. We have all of the big tech companies. They're having a glorious time. War is good business and things are revving up. There are two things going on. One is exactly what you said, and it's a deep trend which did not start with AI. It started with automation robotics already more than 40 years ago. And we see it in one key, very interesting number. You can take the national income in the United States and ask what part goes to workers and what part goes to capital income. And when I was a student of economics in graduate school in the late 70s, we used to say that the share that would go to workers was about two thirds of the total national income. Now just the most recent data puts it at about 50 percent. In other words, it's gone from about 0.65 to 0.5. That is a big deal. What's happening is more and more of the national income that's produced is going to profits, is going to corporate earnings, is going to rents, to ownership of patents and so forth. And what workers get is absolutely falling as a share. But for a great part of our society, what workers get is falling in absolute terms. And AI will speed that up. Artificial intelligence substitutes these algorithms for human labor. And whatever anyone says, this is a process that's been going on for decades and wages are stagnant or falling for those segments of the labor force where that substitution can occur. Let's say 30 years ago, it was people on the assembly line. Those jobs didn't go to China. Those jobs went to the robots. Now the jobs are going to Claude and to others. And this is happening actually with a new swath we know. It's with the college graduates this year. They're not finding jobs when they come out. And this is showing up as this shift of national income. The second thing that's happening, I think most likely, this is always a judgment that only can be made ex post, is that we really have a bubble. We really have the Elon Musk thrill that we got the gazillion dollar companies and the trillion dollar man and all the rest. I see no way personally that the valuations that are being put on big tech and on the IPOs can in any way be justified, because one of the core features of these technologies is that they diffuse. There really is competition. There isn't somehow control by the first mover. China runs AI on an open source stack because it's trying to compete with the United States. So it's trying to get users all over the world. That means there's going to be a lot of open source ways to access this very powerful technology. And all these huge, huge revenues that are being anticipated by these companies that are now 50 times earnings or 100 times earnings or infinite because there are no earnings. I don't think this is going to materialize in the way that is expected. So on top of the fundamental shift towards profits, which I think is real and deep, there's also, I think, a financial bubble that is underway. This has happened repeatedly. These technologies we call GPT, general purpose technologies, which means something like the steam engine, which was the great invention of 250 years ago, created the factory world and not just in one sector, but across the economy. And it created the railroad and many other things. Electrification was a general purpose technology. AI is a general purpose technology, an extraordinarily powerful one, in my view. I don't believe it's hyped. I think it's amazing and real. But what you find with general purpose technologies is that generally they raise overall output in the economy, but dramatically redistribute the output as well. In the first industrial revolution with the steam engine, there were vast numbers of losers. The economy started to boom, especially in Britain, which was the first industrialized nation. But those masses in the satanic mills, these were women and children who used to have jobs in rural areas, for instance, spinning yarns. All of that went away with mechanization. They ended up as degraded workers. And it was exactly that, what we call a miserization, becoming more miserable, that led Karl Marx and Friedrich Engels to issue the Communist Manifesto in late 1840s. So that was real. Then over time, new institutions were developed to share the increase of output. Actually, Bismarck in the new German state in the 1870s and 1880s invented public pensions as a way to ensure that this booming economy would help more and more people. Well, this has been a repeated phenomenon. Big technological advance, the overall size of the economy increases. But the way that the pie is divided in the proverbial expression changes dramatically. And we're going to have that with A.I. as well. And the American political system for at least 50 years has been don't help anyone. We're on our own. Good luck to you. And in an A.I. era, that would prove devastating. Now, Trump appealed to those who are suffering both in 2016 and 2024 on a clever political messaging that was fundamentally false. He said China took your jobs. He said the migrants took your jobs. He didn't say technology has changed how we live and redistributed the national income. That is the right answer. There are no jobs coming back from China. By the way, I go to Chinese factories all the time. They don't have workers in them anymore because they're all automated. What we have is a technological revolution, positive, actually, in that we can do more. We can be more clever. We can have better health care diagnostics or many other things, but it's not going to fall equally. It's going to immiserize part of our society unless we actually decide for the first time in more than half a century to act like a society rather than to act like a group of individuals out in brutal competition with each other. But we don't even have that kind of understanding in our political discourse right now. But the A.I. is moving forward relentlessly with or without it. And by the way, the number of meetings every day in every sector talking about loss of jobs, reshuffling of the workforce, this is happening everywhere right now. And we don't have any public policy framework and we won't under Trump. The surveillance state and specifically the war economy are big business precisely for the A.I. industry. So it's not only incidental that they want to crack down. These are gold mines for them. More war. Phenomenal. Look at the biggest booming stock market in the world right now is Israel because it's basically a war machine. It's happening so much faster than anything else. And we have metrics which we call adoption rates. How long does it take a certain number of users to use the technology? And we've never seen anything like what we have right now. Chat GPT is announced and within weeks it's hundreds of millions of users worldwide. So we're seeing something that is happening completely at an unprecedented scale. And I think that that will continue in terms of what it means for human well-being. There are two issues. One issue is the distributional issue that we say gainers economically could compensate those who lose because the overall pie grows. Elon Musk, you know, he doesn't really need a trillion dollars of personal net worth. Doesn't need that. So if we actually distributed well-being in our country, we could have a broader gain. Then there's the meaning of life and the meaning of work question, which is that these technologies in a fair society would mean less work. The robots can do physical labor and the A.I. can do cognitive work of various kinds. Is that a good thing in principle? Again, if it's done thoughtfully, it could very well be a good thing because we would have more time for friends, for family, for leisure, for culture, for exploration, for other things if the drudge work is actually carried out mechanically. So per se, earlier technologies, it's not true that they've always created new jobs to replace the old jobs. We actually work less hours per day on average than 100 years ago. By far, as a matter of fact, the average work time of an adult American is about three hours, 20 minutes at this point, something like that. That's for an economy of a $30 trillion output. Now, that counts weekend time, that counts retirement time, that counts time in school, that counts vacation time, leisure time, and so on. But the point is, we don't work like our grandparents and great-grandparents did. And this is a big change. And on the whole, I believe it's a plus. But American society, as we've been discussing, is quite distinctive. It's barely a society. Our political system is so corrupted, it's not regarded as a society. It's regarded as a group of particular interests, of which Silicon Valley itself is interest group number one. It's more powerful than every other interest group, partly because the generals are desperate for this technology. The military, the government has put its hands into Palantir. Palantir is more important than the rest of our government. They're watching everything we do. They're building the surveillance state. So in this sense, we have a political and ethical problem that's quite fundamental in this country. And these are gangsters. They're not in any way, shape, or form even remotely aware or interested in these questions.