2026-11-11 16:51:56
My last post was about how for the first time, I’m becoming bearish on China’s continued economic and technological outperformance. A number of people asked me whether I was similarly bearish about India. The answer is no — I’m actually more bullish on India than I have been in a while. In fact, I had been meaning to write a post about that, so this gives me a good opportunity to do so.
The reason I’m bullish on India and bearish on China is that we’re asking the two countries to do two different things. When we think of China’s future success, we think of whether it’ll eclipse the combined economies of the U.S. and its allies, seize the lead in artificial intelligence, reach Taiwan or Korea’s level of income, or dominate Asia. I’m increasingly skeptical about its ability to do all of those things. But India’s job right now is a lot simpler — it just has to escape poverty and become an upper middle income country. And this I think it can do.
In both GDP terms and in terms of the Human Development Index (which combines GDP with education and health), India is around where China was in the late 2000s.
It’s easy to forget, but in the 2000s, people still thought of China as a basically developing country — its cities choked with smog, its rural areas still mired in poverty, its economy driven by cheap labor and lax environmental protections, and so forth. The challenge now for India is to make the leap that China made in the 2010s — to build abundant high-quality roads, trains, housing, and energy, provide decent jobs and livelihoods to the majority of its people, and catch up to the frontier of technology.
A lot of people don’t seem to realize how good of a start India has made. For one thing, extreme poverty in India has mostly been conquered over the last two decades:
This is an incredible accomplishment — a full tenth of humanity saved from deprivation. And what’s remarkable is that — unlike China — India managed to do this incredible poverty reduction while also reducing inequality:
How did India manage this feat? The World Bank says that it was due to the two usual suspects — economic growth and redistribution:
Over the past decade, India has made remarkable progress in reducing poverty across both monetary and non-monetary dimensions, recording one of the fastest poverty declines in the world…This progress was mainly driven by strong consumption growth, rising employment, especially among women, and expanded social transfers, including food subsidies. [emphasis mine]
A strong welfare state is certainly important, but economic growth has to take the lion’s share of the credit here; without growth, there’s simply less of a pie to redistribute in the first place. And India’s growth has certainly been impressive. Ever since the pandemic, India has been growing faster than China:
Now, India isn’t growing as fast as China did when China was at $10,000 of per capita GDP. Back in the late 2000s and early 2010s, China was still growing at close to double-digit rates; it didn’t slow down to India’s current rate until 2014, at which point it was 40% richer than India is now. But 6.5% is still a very healthy growth rate — it represents almost a doubling of living standards every decade.
And Bloomberg expects Indian growth to accelerate even further, to 8% by the end of the decade. Neelkanth Mishra, the executive director of the World Bank, points out that because India’s recovery from the pandemic recession is still incomplete, there’s plenty of room for a growth acceleration.
You’d expect this kind of growth to transform every part of Indian society and culture, and this appears to be exactly what’s happening. Arjun Ramani has a great in-depth report from his travels across India, focusing on how economic development is changing life on the ground:
How is India producing this rapid growth? India is long past the point where you can tell a simple story about the country’s economic progress — manufacturing, finance, real estate, business services, IT, and a bunch of other sectors are all growing at once.
How is India managing to grow so fast? The Economist mostly credits liberalizing reforms and prudent macroeconomic policy:
A programme of fiscal consolidation has cut the budget deficit from 9.2% of gdp in fiscal 2021 (when it was bloated by pandemic spending) towards a target of 4.4% for fiscal 2026. Excluding interest payments, the deficit will be only around 0.9% of gdp…With inflation under control, interest rates have been cut by 1.25 percentage points over the past year…
The decline in inflation is not just limited to food, points out Sonal Varma of Nomura, a bank. Earlier reforms, such as the creation of a digital-payments infrastructure, which made prices more transparent, as well as the RBI’s shift to an inflation-targeting regime in 2016, have helped reduce inflation expectations and are now paying off. The RBI has also built up its stock of foreign-exchange reserves. A banking sector clean-up and reforms to the bankruptcy code have kept the financial system stable…
The longer term looks even more promising, thanks to a vigorous reform effort…A long-mooted cut in the number of labour codes, from 29 to four, was enacted in November. A cap of 74% on foreign direct investment in the insurance industry has been lifted. Nuclear power has been opened up to the private sector. Financial-market regulation has been overhauled…The states have also pursued reforms. Allowing women to work after dark, for instance, means textile and electronics factories can stay open later.
I have to say, I’m skeptical of this story. Fiscal probity is well and good, but India’s long-term borrowing rates haven’t come down all that much:
A stable financial system is very good, but it’s not clear how that automatically accelerates growth. And most of the real structural reform The Economist mentions is in the future. It’s possible for businesses’ expectations of structural reform to drive growth, but as the article mentions, domestic private-sector investment isn’t really driving the boom. FDI is sluggish too (or at least was until this year).
One bright spot is government investment, which has increased by a factor of four since before the pandemic, in spite of the country’s falling debt levels:
The Indian government has been on a tremendous infrastructure-building boom — correcting one of the country’s notorious chronic deficiencies. Highway spending has increased by a factor of five over the last decade. Central government railway spending has risen eightfold.
This is boosting growth in the short term, but in the long term it’ll make both manufacturing and consumption a lot easier in India. It’s also changing the physical look and feel of the country, much as China’s own modernization did in the 2000s and 2010s (if not as rapidly). India is now building its own bullet trains:
I recently saw an example of a Japanese man who declared that he was impressed by how clean and quiet Indian subways were, compared to Japanese ones!
Another important factor in India’s growth story — and another long-standing deficiency that’s now beginning to be corrected — is the growth in Indian manufacturing.
The old story of India’s economy is that it had “leapfrogged” manufacturing and gone straight to services — call centers, business process outsourcing, software outsourcing, and the like. That concealed a quiet disappointment that India hadn’t managed to get on the same industrialization bus that has carried so many other countries out of poverty. But India’s current growth is very broad-based — manufacturing is growing right alongside services. The Economist has some details:
Manufacturing output in August, the most recent figure available, was 9% higher than the year before, thanks in particular to surging production of cars and electronics…India’s rising manufacturing output…reflects its growing appeal as a place to make things. In dollar terms India’s electronics exports were up by 90% in August, year on year, with American-bound iPhones accounting for a large share of that.
Another encouraging sign is the breadth of India’s manufacturing growth. Whereas Bangladesh’s manufacturing boom last decade was powered mostly by the garment industry, India is making and exporting a bunch of different high-tech products:
The strength of India’s engineering exports lies partly in the diversity of its product segments. Automobiles remained the largest contributor in FY 2025–26, accounting for 21.9% of total engineering exports. Industrial machinery followed with an 18% share, while iron and steel products accounted for 16.9%…Electrical machinery contributed 12.5%, other engineering products 12.7%, and non-ferrous metals and products 11.6%.
And keep in mind, this is all in spite of China’s attempts to throttle Indian industrialization by denying them key technological exports and factory expertise. Competitive pressure from a more established economic power is not something China itself had to deal with, since the U.S. wholeheartedly supported China’s industrialization in the 1990s and 2000s.
Whether India’s growth boom can continue past the next couple of years is an open question. Private investment will have to rise, and probably FDI as well. India is also going to need to correct its bigger structural issues at some point — especially bad rural education, female underemployment, and incomplete urbanization.
But for now, India looks like a big economic success story — perhaps the brightest in the entire world right now. It’s less visible than China’s rapid rise two decades earlier, but it’ll be no less world-shaking when it happens. More people should be taking notice.
2026-11-10 07:01:29
Azeem Azhar of Exponential View is an excellent blogger whom I tend to cite a lot. So it was very fun to call him up and talk to him about the AI boom, and the possibility of an AI bust! The discussion was sparked by this post of mine a few weeks ago:
I don’t think we reached any firm conclusions, but it was fun to mull these issues over. Expect more discussions between me and Azeem in the future!
2026-11-09 15:59:29
Many longtime fans of my Hexapodia podcast with Brad DeLong have been begging us to bring it back. Well, here it is! Hexapodia will now be a series of Substack Live conversations that you can tune in to, and which will be recorded as podcasts and sent out as emails.
Our first episode was a little rocky, as I got the time wrong and ended up arriving 20 minutes late. But Dan and Brad are both brilliant people, so you can watch them talk for a while before I show up! The topic of our discussion was the Anthropic IPO, inspired by my post about it last week:
I give the bull case for Anthropic, while Dan and Brad are both more skeptical. I think this quote sums up my side of the argument:
My bull case [for Anthropic] is not envisioning a world where Anthropic rules all businesses, rules 100% of every industry, or close to it. I’m also not envisioning a case where AI replaces human beings in their jobs.
I’m envisioning a change in the capital structure of the efficiently producing economy. I’m envisioning…a world where in order to succeed in any industry, you must create a tie-up with a frontier AI company that offers you access to an internal proprietary frontier model that will be months ahead of any model distilled from it. And…that doing this will require not purchasing services…at arm’s length from that company, but tying up your capital structure with that company so that you become in some sense a subsidiary of that company. I am envisioning that.
So I’m saying that instead of something where…AI is like oil and everyone has to buy oil or the things made downstream from oil…instead of that sort of arm of length world, I’m envisioning a world in which every company in order to succeed must become a subsidiary of Anthropic, OpenAI, [or] Google…and Anthropic is simply the biggest of those fish in a oligopolistic ecosystem of a few conglomerates competing against each other via their little subsidiaries in every single industry at the same time.
Interestingly, some economists at Google Deepmind just released a paper with a model in which this sort of thing happens. From the abstract of Imas, Koh, and Legg (2026):
When will advances in AI lead to economic transformation? We develop a model of how intelligence…matters for organizations….AI expertise is reproducible while humans’ are in fixed supply, and AIs may not face the same human limits on coordination….When AI is more capable than the average human, organizations of complementary humans can nonetheless outperform AI. Increases in AI competence can change the composition of workers within firms and decrease firm size. As AI coordination improves, however, this can break the Coasean ceiling on firm size and the market structure undergoes a phase transition toward large, concentrated AI-heavy firms. [emphasis mine]
I was envisioning a slightly more complex version, in which humans and AI are complements, where humans have private data that AI is better at using, and where one big conglomerate enters every industry but retains human workers. But I think Imas et al.’s model gets at some of the basic dynamics here.
Financial disclosure: I have no current position in Anthropic, but unless something major changes, I will probably buy Anthropic stock when it IPOs. I own stock in TypeSafe, an Anthropic competitor.
2026-11-08 05:11:43
When I tell people I’m becoming a China bear, they’re often surprised. “Weren’t you already a China bear?” they ask me.
Well, no. I’ve always been a China bull — I’ve always believed that China’s economic growth would be robust, that they would master advanced technologies, and that their geopolitical influence would grow. This is exactly why I was also always a China hawk1 — I recognized the very real possibility that China would become a global hegemon, and I didn’t especially want to live in a world ruled from Beijing. It’s why I advocated so strongly for friend-shoring, for export controls, and for military alliances to balance out China’s awesome and growing power.
This was true even as China began to show visible signs of weakness in the late 2010s and early 2020s. Xi Jinping proved himself less competent than his predecessors, and the country’s real-estate-heavy growth model hit the skids. But despite those stumbling blocks, I still predicted that this would be the Chinese Century. The country had what seemed like unassailable advantages in human capital, market size, and state capacity, even as all of its possible rivals were convulsed by internal division. And the one thing that most people cite as China’s big weakness — demographic decline — never struck me as much of a threat to the country’s power.
Now, however, for the first time I can remember, I’ve found myself becoming actually bearish on China. I still think it will be an immensely powerful country — perhaps the most powerful single country on the planet. I still think it will be at or near the forefront of technology, and that it will generally be a safe, moderately prosperous, and tolerable place for its people to live. But more and more, I’m starting to think that global hegemony of the type the U.S. enjoyed throughout most of the 20th century will be out of reach. I’m also starting to think that China’s bid for technological dominance is weaker than I had believed.
And just as my previous bullishness made me a hawk, my increasing bearishness makes me more of a China dove.2 I still think friend-shoring is important, export controls are good, and we need robust military alliances to make very sure China doesn’t try to conquer Asia. But I no longer feel the same sense of desperate urgency about these prudent measures — they feel more like an insurance policy now.
There are basically three reasons I’m revising my China expectations downward. The biggest reason is AI. China’s system is incredibly optimized for an era of technology and economic production that is very quickly coming to an end. AI will change everything, and modern China is not the kind of country that adapts well when everything changes.
The other reasons are less important but still worth mentioning. China’s new economic model — the government-supported push to capture all of global high-tech manufacturing — is not likely to succeed. And third, the country’s political situation appears to be deteriorating. Just as the Deng/Jiang/Hu era illustrated the strengths of authoritarian political systems, Xi Jinping is giving us a much-needed lesson on the weaknesses of those systems. His spiraling paranoia is turning the country inward, just as his economic policies are running out of steam.
Anyway, let’s start with those economic policies. This is an economics blog, after all.
In a nutshell, Xi Jinping’s economic strategy is to dominate manufacturing — to have China be, in the words of Damien Ma, the “make-everything country”. I’m increasingly convinced that this approach is already beginning to backfire.
Going all-in on manufacturing is a strategy you see a lot of developing countries use during their periods of rapid catch-up industrialization. And there are some good reasons for that. When you’re poor, what your people need most aren’t video games or dog-walking services, but houses and cars and refrigerators. Manufactured products are also easy to export, and poor countries don’t have big domestic markets to rely on. It might also be easier to reach the technological frontier in manufacturing, since you can reverse-engineer physical products more easily than services.3
Usually, as countries get rich and their needs evolve from the physical to the ephemeral, they move out of manufacturing and into services to some degree. But Xi Jinping decided that this was a mistake. He reasoned that if China continued to behave like a developing country forever, and promoted manufacturing at the expense of everything else, China could dominate the globe.
This was an interesting hypothesis, and it might have worked — indeed, there’s still some chance it might work. Militaries, after all, depend on manufacturing above all else, so in a big protracted WW2-style war, being the master of manufacturing might give you an automatic win.
And dominating key nodes in global supply chains lets you use export controls to bully other countries without actually bombing them. In fact, China is doing this more and more, using export controls on everything from tunnel-boring machines to rare earths to drones to medicines as bludgeons to force other nations to do its bidding.
In order to make China dominate global manufacturing, Xi unleashed a wave of industrial policy bigger than any the world had ever seen, spending about 4% of GDP per year on subsidizing manufacturing industries — usually through cheap bank loans, but sometimes just by sending cash directly.
For a while, this seemed to be working spectacularly. A 2024 paper by UNIDO got a lot of attention for predicting that China’s share of global manufacturing would be 45% by 2030 — equal to the United States right after World War 2. But cooler heads pointed out that China’s manufacturing share growth had already slowed; more reasonable predictions put its 2030 share at maybe 35-36% — still enormous, but more like America in the 1960s or the early 1920s.
And in U.S. dollar terms, China’s share peaked during the pandemic and has been drifting down since then:
In fact, despite Xi’s push, manufacturing is a shrinking share of China’s economy. China is now less industrial than South Korea, despite being less than half as rich:
The reason is simple, and it’s something I’ve written about many times before. Unlike South Korea, China is a very large country. That means most of China’s manufacturing production is going to have to go to the domestic market. Even if other countries don’t slap big tariffs on your products, export markets will simply saturate. One of the most reliable empirical laws in all of economics is the gravity model of trade, which says that trade volumes drop off rapidly with distance.
Of course, some countries will put tariffs on China. The EU recently forced China to make a deal to limit auto imports, and if that doesn’t work, stronger measures are likely. That will only accelerate the natural saturation of China’s export markets.
And despite everything you’ve read about the “Second China Shock” and the big export boom, China is still far less export-intensive than Korea, and that’s not going to change:
China simply can’t be Giant Korea; it’s so big that its manufacturers need to rely on its domestic market. But that domestic market is becoming saturated even faster than the global market. Profits in the auto sector, the steel sector, the solar sector, and many other manufacturing industries are all collapsing. Weak domestic demand from China’s real estate bust has encountered massive oversupply from government subsidies, and the result is that few companies in China are making much money. That will force lots of businesses to close and consolidate, and it will starve dynamic private-sector companies of R&D budgets, forcing them to rely more on research handed down by the distant, unresponsive, and unaccountable government.
Government subsidies can keep the party going a lot longer than it ought to, but already the limits have probably been reached. Chinese manufacturing indicators are faltering, and manufacturing investment seems to have topped out as well.
In fact, this isn’t even the only example of Xi Jinping taking a developing-country strategy and pushing it far beyond its limits. Infrastructure is another. For many years, China invested huge amounts into building more roads and bridges and high-speed trains than they knew what to do with. But there was a limit to that process, and China has now hit the limit. The Economist reports that China’s infrastructure investment has leveled off:
China’s years-long splurge on bridges, tunnels, expressways, high-speed rail and airports is beginning to tail off…In July this year a senior transport official said China’s main transport network was “91% complete”, and the country would pivot from expanding to upgrading existing infrastructure.
But it isn’t so easy weaning yourself off of infrastructure overinvestment. China built so much infrastructure that it will have to spend a lot of money just to upkeep all those roads, trains, and bridges. That’s the iron logic of depreciation. And since much of China’s infrastructure isn’t really carrying many passengers or much cargo, that means China is stuck spending a significant fraction of its GDP upkeeping stuff that people don’t really need — unless, of course, it chooses to let some of that infrastructure decay into ruin.
All of this means growth will slow. And of course, it’s all happening against the backdrop of weak demand from the continuing, protracted fallout from China’s real estate bust. There are signs that the real economic damage in that sector is only getting started:
Weak domestic demand won’t just be a drag on China’s headline growth — it will also make it harder for China’s manufacturing sector to maintain its 30% global market share, much less expand it to 35% or more. Xi seems to think that China can just sort of pull resources off of real estate development and put them into manufacturing, one for one, like a corporate manager reassigning engineers to a different project. But it doesn’t work like that; demand matters, and China’s manufacturing triumphs in past decades depended heavily on the tailwind that the long property boom had been delivering.
Chinese economists realize this, but Xi seems to have stopped listening to economists, and to have purged his government of anyone who was inclined to listen.
(And of course as the years go by, China’s accelerating population decline will reduce its domestic market size by more and more, compounding the pressure on manufacturing. I don’t expect this to be a big factor until at least 2040 or so, but it’s worth mentioning.)
In other words, Xi’s “make-everything country” strategy is likely to see only modest short-term success. It will not let China conquer the world. And the failure of this strategy will come just as a massive new technological revolution upends the global economy — a revolution that China, despite all reports, is not well-prepared to take advantage of.
2026-11-06 14:46:24
Democrats won a historic victory in Tuesday’s election. It was the best possible outcome — Donald Trump has made so many mistakes, engaged in such flagrant corruption, and committed such egregious acts that for his party not to have been punished at the polls would have boded poorly for America’s future. But as it is, I’m cautiously encouraged — normal Americans reasserted control, delivering a rebuke to the extremists who had used a moment of division and chaos to seize the commanding heights of power in our country.
It was the biggest midterm wave in half a century. Obama’s midterm loss in 2010 and Trump’s in 2018 don’t even come close. You have to go all the way back to 1974 and 1976 to find wipeouts like this:
Wait…1974 and 1976? 1974 was the year Nixon resigned due to Watergate, and 1976 was the year Jimmy Carter was elected president. Did either of those election victories herald an era of Democratic dominance in America? No, they did not. In fact, the GOP bounced back shortly afterwards, dominated American politics in the 1980s, and pulled the country to the right for decades.
So before they go patting themselves on the back for winning everything, forever, Democrats should think about that history of brief success followed by long-term failure, and ponder how to avoid a similar outcome this time. After Hannibal won a great victory, one of his generals is said to have told him: “You know how to win a victory, Hannibal; you do not know how to use it.” The Democrats must figure out how to use their victory.
That’s a tricky question. Democrats now control Congress, but that doesn’t mean they’re in power; Trump can and will veto most legislation they pass. With their limited capabilities, the Dems have to do the following, all at once:
Block as many of Trump’s bad policies as possible
Keep the spotlight on Trump even though he’s now a lame duck
Demonstrate a clear ideology and a clear plan to the American people despite not being able to pass much legislation
That’s possible to do, especially if — as seems very likely — Trump keeps being corrupt and making mistakes and alienating the country. The Dems won the 2006 midterms, and went on to put Obama in the White House two years later. Trump seems like he’s on a similar track:
But it doesn’t always happen — the GOP lost to Obama in 2012 after their big midterm wave in 2010, and the Dems barely eked out a victory over Trump in 2020 (with a lot of help from Covid) after winning the midterms in 2018.
If Democrats are going to translate midterm success into presidential victory — to say nothing of long-term partisan dominance — they’re going to have to work hard at rebuilding their brand, their sales pitch, and their policy platform after the disastrous years of 2016-2024.
One important point, which a lot of other people have already made, is that the big Democratic wave was mostly won by moderate Democrats. Here’s the NYT:
For much of the midterm campaign, progressive Democratic insurgents commanded the spotlight…But the path to Democrats’ sweeping victory this week, when they seized control of both chambers of Congress, was paved overwhelmingly by moderates who had spent months persuading voters in Republican-leaning states and competitive congressional districts…
The scale of moderate gains was reflected in the growing ranks of the centrist groups on Capitol Hill. The Blue Dog Coalition, a caucus of moderate and conservative Democrats in the House, announced on Wednesday that it had added at least 14 to its ranks, nearly doubling in size, and other centrist groups including the New Democrats and Problem Solvers strengthened their numbers substantially.
Some of this is purely mechanical. Far-left types tend to win by unseating moderate Dems in primaries in deep-blue districts and states, while moderates tend to win in swing districts and states; thus, when a wave is bigger and the Dems win more swing districts and states, moderates tend to do proportionally better than leftists.
However, there are signs that this election cycle actually represented a broad endorsement of moderate center-leftism. Ballot initiatives have rejected various leftist policies all over the country, and leftist candidates have been losing to center-left ones in deep blue strongholds:
And leftist candidates have generally performed more weakly at the ballot box:
What’s more, many of the most prominent Democrats who won high-profile races this year have explicitly endorsed centrist positions on key issues:
Nor have many prominent Dems done the kind of “woke” cultural signaling that they regularly did in 2020 and 2022.
There are two parts of the basic story here. First, the “woke” cultural wave of the 2010s, which peaked in 2020-21, continues to slowly recede. You can see this in continued voter support for conservative positions on cultural issues like trans sports:
Second, voters have not yet embraced the socialist movement, as demonstrated by the relatively weak performances of Bernie Sanders-endorsed candidates and the failure of the billionaire tax in California.
That means that Democrats understand that this 2026 midterm victory is a contingent and fragile one. Normal Americans have risen from their apathetic torpor and their jaded hyperpartisan paralysis, and are prepared to punish extremists of either party:
The normie uprising has brought center-left Dems to the fore, and it has also forced more progressive Dems to tone down or strategically compromise their more extreme positions.
But moderation itself is neither an ideology nor a policy program, and herein lies the big challenge for the Dems over the next year and a half or so.
Right now, my assessment is that most Democratic voters — including Independents and swing voters who lean toward the Dems — aren’t thinking very hard about how the country ought to be governed or what the future of America should look like. They’re simply thinking short-term thoughts about the immediate threat. They hate Trump and MAGA, and they want them gone, and it’s really as simple as that.
Nate Silver calls this “Heather Cox Richardsonism”, after the extremely popular Substack politics-and-history blogger Heather Cox Richardson:
Silver wrote:
The third faction [of the Dems is] Richardsonism or a term I’ll treat as synonymous with it: #Resistance Libs. They’re older, with extremely high educational attainment, predominantly female, and very highly politically engaged. This is the audience for a cluster of political activism encompassing things such as the No Kings protests and some highly popular anti-Trump Substacksalong with certain prominent podcasts and much of Bluesky.
Nate has a bunch of criticisms of “Heather Cox Richardsonism”, most of which I disagree with. I like Heather Cox Richardson. I like suburban moms who listen to NPR all day and who feel physically ill when they see Donald Trump on a screen. Their instincts are good. Trump is an extremely bad president — and not just bad, but uniquely bad, in ways that are degrading the long-term stability and effectiveness of the United States itself. It’s eminently reasonable and understandable to be mad about this, even to the exclusion of all other political viewpoints and causes. As for the No Kings protests, they seem to line up perfectly with — and probably contributed to — this week’s midterm results.
And for most regular people, being mad about Trump is enough. Most citizens are not political philosophers or movement leaders or intellectuals. It’s not reasonable to ask them to think about where the country should go after Trump, or what ideologies and ideas should guide us in the absence of such imminent threats.
But someone has to think about those things. Otherwise Democrats will prove just as unable to govern as Trump was — well, maybe 70% as unable to govern, which will be bad enough. And our politics will continue to be an endless series of backlash-to-the-backlash-to-the-backlash, as each party focuses all its energy on getting to the day of the revolution and none of its energy on what happens the next morning.
Right now, the problem with Resistance Liberalism is that it’s headless. In Trump’s first term, the Resistance was animated by various identity movements, unified by the idea of a struggle against structural racism, misogyny, and so on. Hillary Clinton made a conscious choice to frame her 2016 campaign as a battle of antiracism versus Trumpian racism, Kamala Harris did something similar in 2020, and Joe Biden quietly let his administration push what would have previously been considered extreme versions of various identitarian social causes.
In fact, the American public still thought those versions were extreme, and punished Democrats in the polls accordingly. The end of the woke revolution lopped the head off of the Resistance — it left them with all of the same rage, but without a vision of a future America.
As I see it, there are basically three factions vying to replace identity politics as the guiding ethos of the Resistance. These are:
The leftists — Abdul El-Sayed, Zohran Mamdani, Bernie Sanders, and so on
The Warrenite progressive intellectuals
The Abundance movement
Each of these has deep flaws that I think will end up basically disqualifying it.
The leftists are organized, purposeful, disciplined, and driven, and they probably want the job of leadership more than the other factions. But their movement has some fatal weaknesses that make it a bad choice to lead the Dems. First of all, the leftists are intensely factional, focusing relentlessly on knifing the Democratic establishment rather than building a big tent.
Second, their policies tend to be so extreme that they overreach and backfire. The failure of the California billionaire tax is a case in point. Americans want to tax the rich more, but the billionaire tax was so extreme and poorly designed that voters didn’t just reject it — they approved a competing ballot proposition forbidding such taxes in the future.
Third, leftists instinctively ally themselves with bad people and bad causes. Leftist streamer Hasan Piker has praised terrorists and supported Vladimir Putin’s seizure of Crimea, incoming leftist congresswoman Darializa Avila Chevalier founded a group claiming to be dedicated to “the total eradication of Western Civilization”, and so on.
And fourth, although leftism is sometimes viewed as an alternative to wokeness, leftists themselves tend to be very woke. Just for fun, check out the famous footage from the 2019 DSA convention, or watch this widely mocked display from Representative Ro Khanna:
These shortcomings ought to prove fatal to the leftists’ chances of taking over the American left — and they probably will.
The second faction vying to take over the Resistance are the Warrenite intellectuals, who are laser-focused on attacking the rich — specifically, the rich people in the tech industry. Although Warren failed to catch fire in 2019, her faction had great success putting its people into positions of power during the Biden years.
But it kind of backfired. The New Antitrust movement got little done in a practical sense, and more fundamentally it failed to advance any kind of rewrite for our antitrust law. Years of frothing with rage against Mark Zuckerberg and the old FAANG companies just ended up looking silly when AI came along and disrupted their business models. The intellectual movement to “steer” the development of AI toward more pro-worker technologies (whatever that would even look like) is going nowhere.
In addition to being composed primarily of a bunch of egghead intellectuals who routinely fail to catch fire with voters, the Warrenites have a fatal flaw — they’ve chosen the wrong target. Democrats are entirely focused on hating Trump, while the Warrenites are focused on hating Mark Zuckerberg and Jeff Bezos. Americans just fundamentally aren’t that mad at the fact that Zuckerberg and Bezos are rich. They generally despise Elon Musk, but only for his right-wing activities and his online attitude — when he was just a businessman selling electric cars and reusable rockets, they didn’t mind his billions.
The Warrenites are simply never going to convince the nation that the billionaire techbros, rather than the rightists of MAGA, are the biggest threat to our way of life.
Anyway, the third faction is Abundance. Of the three, this would definitely be my choice if I had to pick, since I really like what the Abundance movement stands for. Abundance policies, like the bipartisan permitting reform bill now making its way through Congress, are both smarter and more politically feasible than almost all of what the leftists and Warrenites want to do.
The problem with Abundance is that it’s primarily an intellectual movement, not a political one. It’s all about policy — about whispering in the ears of princes, rather than marching in the streets. Abundance’s leaders are nice guys like Ezra Klein and Derek Thompson who just want to see everybody be happy and get a puppy.
And all of the Abundance ideas, to a rounding error, are good ones. Many of them are going to get implemented, especially concerning housing and energy. But they will do so because elites — including some leftists and some Republicans — will be intellectually convinced that they are good things to do, not because they have the ability to harness and direct years of pent-up anti-Trump anger. Abundance will win, but it will not win all the things the Democrats would need it to win.
The Democrats need something more than any of these movements has to offer. They need an ethos that both inspires popular passion and has a chance of pragmatically working. They need something that will give regular, normie Americans — the voters who just rose up to throw out the GOP — a reason to believe in the future, and a reason to believe that the Democrats can take them to that future.
That ideology exists. It was harnessed by FDR and his successors a century ago, first to fight the Depression, then to win World War 2, and finally to build the modern society that came after the war. I’m talking about liberal nationalism:
Here’s what I wrote in that post half a year ago:
In the 20th century, America had an ideology that was committed to forging a single national identity from a dizzying array of backgrounds. That ideology was liberal nationalism…
FDR ended forced assimilation policies for Native Americans, and gave them greater autonomy on tribal lands. He maintained a group of Black advisors, created plenty of programs to help Black people economically, created cultural programs to publicize Black achievement, and preserved the testimonials of former slaves. He created campaigns promoting interfaith understanding and cooperation, helping to reduce America’s traditional anti-Catholic prejudice as well as antisemitism. His Federal Writers Project employed writers to document America’s cultural diversity…FDR also strongly promoted the notion of America as a nation of immigrants — an idea that still deeply holds sway over the American psyche, despite rightists’ attempts to get rid of it…
FDR and the liberal nationalists were not modern multicultural progressives. They strongly believed in national unity. This obviously meant patriotism, respect for American institutions, and a shared sense of national purpose during World War 2, but it also meant a lot more. FDR and the New Dealers — and especially the Office of War Information — advanced the notion that America had a unifying culture, set of democratic ideals, sense of history, and way of life that transcended Americans’ different backgrounds. The history of the New Deal is littered with examples of attempts to forge American-ness into a sort of shared civic religion.
The Democrats can have liberal nationalism back if they want. Moderate figures like Jon Ossoff and James Talarico can use Rooseveltian pluralistic patriotism just like Barack Obama did, in order to go beyond good-governance centrism and opposition to Donald Trump. The intellectuals of the Abundance movement can use liberal nationalism to add passion to their policies — after all, isn’t it precisely because we’re Americans that we deserve material abundance?
Right now, Americans hold a bunch of basically Rooseveltian beliefs, and many Democrats still have the Rooseveltian instincts they’ve inherited from their party’s past. But we’re still not to the point where liberal nationalism has filled the vacuum of passion and inspiration left by the demise of “Woke 1.0”. The Democrats have a year and a half to resuscitate that vision.
Doing so will require some clashes — with leftists who believe that America is an evil empire, with Warrenites who want to destroy big tech companies instead of harnessing them to the national purpose, and with identitarian activists who believe that promoting a unified national culture is a form of racist oppression. But if this is not undertaken, the Democrats will either continue to drift aimlessly from backlash to backlash, or fall under the sway of highly suboptimal captains.
There’s also the more pragmatic question of what Dems should actually do over the next two years, while they hold Congress but not the presidency. This is an inherently difficult problem, because Trump can just veto almost any legislation the Dems pass. The usual tactic here is to just obstruct anything the president wants to do, hoping that making the president’s term in office look like a failure will help the opposition in the next election.
But I believe Democrats can do better than this. First of all they can, and should, investigate Trump and his family and friends for corruption. Corruption turned out to be a huge issue in these midterms — even more important than I realized it would be.
Even in opposition, Democrats can shine some sunlight on the Trump administration’s seemingly endless parade of dirty deeds. And in fact, it looks as if this is going to happen:
Corruption topped the list of concerns for voters who ousted Republicans…Now, the newly empowered Democratic Party is putting the issue front and center…Senior Democrats in both chambers of Congress have vowed to marshal the subpoena powers and larger investigative staffs that come with their soon-to-be majorities to probe what they say is the self-enrichment that President Donald Trump and people in his orbit have done at the public’s expense…
House Democrats are preparing a vast oversight agenda to look at how Trump and his family have become wealthier since he returned to office…Garcia, the top Democrat on the Oversight and Government Reform Committee, has outlined five priorities, including Trump family business dealings, the administration's handling of the Jeffrey Epstein investigation and Immigration and Customs Enforcement operations. Rep. Jared Huffman of California, the ranking Democrat on the Natural Resources Committee, said he wants to dig into Trump's White House ballroom and other construction projects, as well as the Trump family's role in mineral deals…In the Senate, Sen. Richard Blumenthal, D-Conn., who is expected to become the chairman of the Homeland Security Committee's Permanent Subcommittee on Investigations, said his panel will want to look into Trump's real estate projects around the nation's capital and his crypto dealings with special envoy Steve Witkoff.
This is great. But other than this, and perhaps some bipartisan deals and some obstruction and oversight of Trump’s worst abuses, what can the Dems in Congress do?
What they can also do is to workshop their economic policy program under low-stakes conditions. America has two big economic challenges looming — the out-of-control national debt, and AI. Dems can start demonstrating — and at the same time, start figuring out — how they’d address both of these challenges if they had the presidency.
The debt is actually the much harder piece of this in political terms. Deficit reduction is inherently painful, as it involves some combination of spending cuts and tax increases — both of which tend to be unpopular with the electorate. If Dems submit budgets that go all-out with spending cuts and tax hikes, Trump will just veto those budgets, and Americans — who have not yet been forced to reckon with the need for debt reduction — will praise Trump for it.
Instead, Dems will need to introduce only parts of their ultimate deficit reduction plans. Sunsetting the Trump tax cuts on pass-through businesses is one good idea — there’s basically no reason for people like me to pay lower taxes than Americans with W-2s, just because we’re self-employed.
AI is ultimately the thornier policy challenge, because we really don’t know how AI is going to affect the economy. But putting in place measures to protect human labor from the inevitable disruptions — flexible welfare programs, employment incentives, social wealth funds, and the like — has little downside, and it offers Democrats a way to sell a vision of harnessing the benefits of technology for the public good. The Dems can observe how these ideas go over with the public, and make the popular ones part of their candidate’s platform in 2028.
This midterm blowout was the first step toward building a better country and putting the chaotic, shameful Trump Era behind us. But there’s a lot of work to be done, both on the ideological side and in terms of crafting a policy program. The morning after the revolution is always when the hard work begins.
2026-11-04 18:33:58
The MAGA people appear to have been laboring under a number of delusions.
First, they seem to be genuinely surprised by the fact that they suffered a crushing defeat in the midterm elections. In fact, polls, forecasts, and prediction markets had all been calling a Democratic victory for months now. But a lot of MAGA types appear to have believed that America always has some big hidden reservoir of shy Trump supporters out there that everyone always misses, and that this silent majority would ride to the GOP’s rescue and prove all the pollsters and forecasters wrong, as they did in 2016.
To put it mildly, that did not happen. The election night surprise actually favored the Democrats, who won a far more extensive and decisive victory than almost any of the pollsters and forecasters had anticipated.
Even Trump’s traditional demographic support base — white voters without a college degree — abandoned the GOP in droves this time:
Trump could try to challenge this electoral verdict — to cry that the vote was rigged, to declare a state of emergency and suspend the Constitution, to abuse the powers of the presidency to nullify the popular will. But my gut says that he won’t, and here’s an important reason why:
As long as the MAGA people could tell themselves that Trump’s opponents were a bunch of old people and women, they could fantasize about prevailing in the street confrontation that would erupt in the wake of an autogolpe. But if young men — and especially young white men — aren’t on Trump’s side, then starting some sort of civil war would likely not go well for MAGA.
Anyway, as of this writing, here’s what the Senate election map looks like:
Kansas is colored blue. So is South Carolina. So is Iowa. Mississippi will probably end up blue as well.
And most of all, Texas is blue. Not just the Senate race, either — the GOP governor, Greg Abbott, has been unseated by Democratic challenger Gina Hinojosa. Bo French, who tweeted alarm at seeing Indian American football fans at a University of Texas game two months ago, lost his bid for Texas Railroad Commissioner to Democrat Jon Rosenthal.
The fall of Red Texas is an epochal, era-defining event. Growing up in Texas, I saw Dems win statewide office occasionally, but these were always old-school conservative Southern Democrat types. Yesterday’s election saw Gina Hinojosa and James Talarico, both staunch progressives, win the governorship and one of the Senate seats. In fact, the only Republican now holding a statewide office is…Ted Cruz.
How did that happen? Part of it was bad candidate selection — MAGA primary voters tossed out the popular mainstream Republican Senator John Cornyn for not being slavishly loyal enough to Trump, and replaced him with Ken Paxton, a man who has been repeatedly indicted and investigated for financial crimes and corruption. But Abbott was a popular, mainstream Republican incumbent governor with a strong economic track record, and he still lost to a progressive upstart challenger.
Rightists were simply unprepared for a world in which this was possible. Here was Jonathan Keeperman, whom I recently debated about Indian immigration, just yesterday:1
The only possible interpretation of this huge wave election is that it was a referendum on Donald Trump. Trump is now among the least popular presidents in living memory, rivaled only by George W. Bush at the end of his presidency. I wrote about why most Americans despise Trump, and my analysis hasn’t really changed:
Trump was elected to tame inflation, but he raised taxes on almost everything Americans buy from overseas, and raised gas prices by attacking Iran. When people complained about the cost of living, he told them to buy their daughters fewer dolls. Trump was elected to stay out of Middle Eastern wars, but he plunged us into an expensive quagmire. He has relentlessly promoted the interests of Vladimir Putin, whom normal Americans hate with a passion. His antics — threatening to invade Greenland, trying to bully people into renaming the Gulf of Mexico, Lake Ontario, and artificial intelligence, and so on — seem dangerously unhinged.
Then there’s the corruption. Trump has relentlessly looted the country to fatten the pockets of himself, his family, and his close political allies:
The American people noticed. This is from last week:
Voters are now more concerned about government corruption than any other issue, including high grocery and gas prices, according to the final CNBC All-America Economic Survey before the Nov. 3 midterm election…[T]he results nevertheless align with other recent polls showing corruption has shot to the top of voters’ list of pressing worries…A Fox News poll published last week found 60% of registered voters are extremely concerned about government corruption, surpassing concerns about inflation and high prices. A Washington Post-ABC News-Ipsos poll released Sunday found some two-thirds of respondents think Trump is using the presidency to enrich himself, up 10 percentage points since September 2025. Gallup recently found perceptions of government corruption in the U.S. have hit multi-decade highs. And an August poll from Reuters/Ipsos found nearly 7 in 10 Americans believe Trump’s businesses influence his presidential decisions.
And here’s their chart:
Republicans seemed to somehow labor under the delusion that regular Americans were going to just ignore all this. Perhaps they thought that Trump’s charisma, which allowed him to bounce back from the January 6th coup attempt, made him invincible. It’s possible they reasoned that Americans had simply become so jaded about corruption that they would ignore dozens of scandals that each would have ended any other presidency. Perhaps they believed that no matter how bad Trump got, Americans’ dislike of woke culture and progressive governance would always make the Republicans the lesser of two evils.
Maybe they believed that Americans never really cared about inflation in 2024, and that worries about the cost of living were just people’s way of expressing their worries about immigration and wokeness. Or maybe they believed America would blame Dems for the assassination of Charlie Kirk, and reject them at the ballot box accordingly. Perhaps they thought they could scare Americans away from the Democrats by calling them “communists” and screaming about “Western civilization”:
This was MAGA’s greatest delusion — the idea that the average American sees things similarly to the rightists on X. The truth is that the average American does not see “Western civilization” as a fortress under siege. The average American does not spend all day in a state of panic that brown immigrants and their children are invaders bent on subjugating the white race.
One gets the sense that the MAGA people believed that the average American doesn’t even exist. For decades, ideologues and extremists in both parties have shouted — often in direct contradiction of the evidence — that swing voters don’t exist, that polarization rules everything, that moderation and appealing to the center are useless, and that electoral victory goes to whichever party mobilizes their base to come out and vote.
That was always probably wrong, but MAGA seems to have taken this flawed logic one step further, convincing themselves that the country consists only of “the left” and “the right” — that every voter is either a blue-haired trans communist or a chisel-jawed defender of Western Civilization who spends all day posting memes on X about gender-swapped Draco Malfoy. If you have no idea what the heck gender-swapped Draco Malfoy is, or why on Earth anyone would think it’s politically important, rest assured that you’re not alone.
Texas and Kansas and South Carolina have been turned blue by a coalition of voters who aggressively, emphatically neither know nor care about gender-swapped Draco Malfoy, or Anakin Skywalker memes, or any of the other nonsense that bounces around the rightist echo chambers on X and 4chan. It was a coalition that never read Elon’s never-ending stream of tweets about James Talarico wanting to “trans your kids and destroy the border”. It was a coalition that does not know or care whether it’s white French people or brown French people burning down Paris this week.
It turns out that normal Americans do exist — in great numbers, in fact. It’s possible to keep them divided with relentless partisanship. It’s possible to drive them to jaded apathy with relentless he-said-she-said accusations and manufactured scandals. It’s possible to get many of them to stay home on election nights, simply by ignoring their wishes for long enough. But if you push them hard enough — if you step on their face again and again, with corruption and mismanagement and disdain for their daily struggles — they will eventually bestir themselves and rise up and smack you down. They will remind you of who won the Second World War, and why.
So the Democrats, ideologically divided as they are, took a well-deserved victory. The risk now is that they don’t learn their lesson from watching Trump’s implosion. Just as MAGA convinced themselves that the average American was a meme-spouting rightist, Democrats might marinate in their own echo chambers, egged on by leftist activists and progressive pressure groups and Bluesky cancel-culture warriors.
Democrats might convince themselves that what Americans really care about is Palestine rather than the cost of living. They might embark on a borrowing binge in order to throw more money at health care, resulting in rising interest rates and rising prices. They might try to halt inflation with price controls, with predictably terrible results. They might spend their political capital on billionaire taxes of the type that California’s electorate just rejected. They might forget the lessons of 2024 and try to admit as many illegal asylum-seekers as possible.
And if so, I’ll be writing another version of this post in 2030 or 2034, explaining why a Democratic president got hit with a red wave in the midterms.
Update: I’ll add a few tweets here that I think make good points about the election.
“Benito Tortellini” points out that even as Democrats crushed Republicans nationwide, “woke” and leftist ballot initiatives failed in blue districts around the country. This election really was the Revenge of the Normies.
Joe Weisenthal hypothesizes that this is the first election where social media use fell, and hypothesizes that people were talking to AI instead. Both of those hypotheses need to be tested with data, of course. But they are very consistent with my thesis that social media is a uniquely polarizing and radicalizing force in society, and that AI is at least a partial remedy.
In fact, Talarico said that God is “nonbinary”.
