2026-01-27 17:35:43
It might come as a surprise that I’m writing a post advocating that the United States allow Chinese cars to be sold here. First of all, it’s well known that I view China as both an economic and a geopolitical threat to the U.S.; I’ve repeatedly praised the U.S. export controls that stop China from buying American chips and chipmaking equipment. I’ve urged Europe to use trade barriers to make sure that sudden waves of subsidized Chinese goods don’t forcibly deindustrialize its economy. And when it comes to tariffs, I’ve argued that targeted tariffs on final consumption goods (e.g. cars) are less economically harmful and more effective than other kinds of tariffs.
Given all of that, you wouldn’t think I’d write a post saying “America should buy Chinese cars after all.” Yet here we are.
This post was precipitated by Canada’s decision to almost completely eliminate tariffs on Chinese-made EVs, as part of a trade deal:
Under the arrangement, Canada will slash its tariff, currently 100%, to 6.1%, and allow Chinese electric vehicle imports of 49,000 units, rising to 70,000 over five years. Half of the annual quota is slotted for EVs costing less than CA$35,000. Beijing will also make a “considerable investment” in Canada’s auto sector over the next three years, Mr. Carney said. In return, China will slash its tariff on canola seed, one of Canada’s most important agricultural exports, from roughly 84 percent to about 15 percent.
This is not part of a general free trade deal between China and Canada — it’s a targeted agreement. But politically, it’s a big break between Canada and the U.S. Back in 2024, when Biden imposed 100% tariffs on Chinese EVs, Canada followed suit — no doubt worried about losing its crucial American markets and displeasing its indispensable ally.
Now, with Trump constantly threatening steep tariffs on Canada, relations between the two countries generally deteriorating, and U.S. auto investment in China in a long secular decline, Canada’s leaders don’t see as much downside from breaking with the U.S. policy line. (The move might even serve as a signal that if Trump starts threatening Canada the way he’s been threatening Greenland, Canada could geopolitically reorient toward China for protection.)
This is another illustration of how Trump’s bullying tactics often produce unintended consequences. But in fact, Canada’s move is one the U.S. should copy — with some added provisions. Currently, the U.S. has a total tariff of 125% on Chinese-made EVs, along with a ban on cars that are connected to Chinese software ecosystems.
The U.S. should follow Canada’s lead on EV tariffs, slashing them to a very low level while initially limiting the number of annual imports. While Canada’s deal involved only vague promises of Chinese investment in the Canadian auto industry, the U.S. should require far more firm commitments, along with strong incentives for local sourcing of components like batteries and motors. And the dangers of espionage and sabotage can probably be minimized through additional measures.
There are a number of reasons that this would be in America’s own self-interest.
The main reason to let in Chinese EVs is that the United States needs to embrace EVs in general. The world as a whole is doing this:
But in the U.S., the transition to EVs has stalled:
Part of this is due to Trump ending subsidies for EVs. Part of it is Tesla’s unpopularity; the company still dominates U.S. EV sales, but its image has suffered enormously as a result of Elon Musk’s right-wing politics and erratic behavior. But on top of all that, the traditional big U.S. automakers — Ford, General Motors, and Stellantis — have simply been unable or unwilling to compete in the EV space so far:
Ford Motor Co. announced $19.5 billion in charges tied to the retreat from an electric strategy it vowed to go all in on eight years ago…General Motors Co. recently incurred $1.6 billion in charges tied to paring EV production capacity, and flagged more such moves may be in the offing. Stellantis NV has scrapped plans for a fully electric Ram pickup…
For Ford, the eye-popping charges the carmaker expects to record are linked to moves including the cancellation of a planned electric F-Series truck line, shifting production toward gas and hybrid vehicles and repurposing battery plants to produce energy storage systems instead of EVs.
But this is very bad for the U.S. First of all, if the U.S. keeps driving combustion cars while the rest of the world switches to EVs, American automotive technology will be orphaned from the rest of the world. Currently, GM and Ford both make almost a fifth of their revenue from overseas sales; if they only make gasoline cars that the world has no interest in buying, those export markets will be cut off, and the U.S. companies will be confined to their home market. This is known as “Galapagos syndrome”, because it’s as if the U.S. car industry lived on an isolated island.
Second of all, the U.S.’ turn away from EVs will make it a lot harder for the country to develop an indigenous Electric Tech Stack. Batteries and electric motors are the key to lots of future technologies, including all-important military hardware like drones. Currently, the U.S. can’t build many batteries or motors; if this situation continues, American military power will wither.
On top of that, lots of physical technologies — transportation, electronics, robots, and others — are converging on a standardized package of components that includes batteries and electric motors. A country that has no electric supply chain will lose an increasing number of manufacturing industries as more and more devices switch to the Electric Tech Stack. By providing the single biggest source of demand for batteries and electric motors, EVs allow producers of those components to attain large scale, thus driving down costs for a bunch of other manufacturing industries.
In other words, the more Americans learn to like EVs, the more EVs they’ll buy. And if some of those EVs are made in America, it’ll create local demand for American-made batteries and electric motors — especially with joint-venture requirements and local content incentives. That, in turn, will help the U.S. become a producer of batteries, motors, and other electric technologies, which will help the country stay competitive in manufacturing across the board.
Obviously, this won’t work if Americans shun EVs from BYD and Xiaomi, the way they’ve started shunning EVs from Ford and GM. But there are reasons to think that won’t happen. First of all, Chinese EVs are very cheap, partly because of subsidies, but partly because China has essentially the entire EV supply-chain in-country, and has attained massive scale. A lot of Americans would love a cheap nice car.
And these Chinese EVs aren’t just cheap; they are nice. China’s EV industry is viciously competitive (partly because those government subsidies force it to be viciously competitive), so China’s automakers compete on high quality as well as on low price. There has been a lot of reporting over the last three years on how high-quality Chinese EVs are now; here’s a representative review from Facebook:
In addition to futuristic design and high manufacturing quality, Chinese EV makers have developed a bunch of innovative technological features — ultra-fast charging, semi-autonomous driving even in cheap models, and so on.
People who try these cheap, high-quality cars often see the light and switch. Mexico slapped 50% tariffs on Chinese EVs, and they’re still making big inroads into local markets.
This doesn’t mean Americans would all stop driving F-150s and RAV4s and start driving BYD Seals and Xiaomi SU7s. Many Americans will keep their gas-guzzlers. But just as with fuel-efficient Japanese compact cars in the 1970s and 1980s, Chinese EVs would become a significant segment of the market.
Even if Detroit didn’t try to compete in that segment, this would have some beneficial effects. More EVs on the road would mean more demand for charging stations, which would help build out the nationwide network of chargers necessary to eliminate “range anxiety” for people who want to use EVs for very long road trips.
And once EVs became popular among middle-class Americans, more Americans would realize all their inherent advantages — much lower maintenance costs, low noise, fast acceleration, low fuel costs, and the fact that you almost never have to visit a charging station (because you charge it at night at your house). That popular realization would boost long-term demand for EVs in America as well.
That technological upgrade alone would be beneficial for Americans. But there would probably be plenty of other benefits as well.
One way Chinese EVs would benefit America is by forcing Detroit to compete. You can read plenty of articles on how GM and Ford have struggled in their initial attempts to switch to EVs. They’re not being lazy; a huge technological shift like this is just inherently very hard. But without competition, U.S. automakers are likely to simply throw in the towel when faced with initial difficulties like this; they can just go back to selling their old gasoline-powered cars, take a financial loss, and just shrug and say it didn’t work.
But with competition from Chinese EVs, it would be much harder for Ford and GM and Stellantis to give up when the going got rough; if they did, it would eventually mean that BYD and Xiaomi would eat into their market share. They would be forced to make the big investments — to hire engineers and designers who know how to make EVs, to do their own innovation in features and technology, to improve their production processes, and so on — and to keep doing this until it worked.
In fact, something like this happened in response to the First China Shock, back in the 2000s. That wave of cheap Chinese-made imports did devastate lots of U.S. manufacturing and hurt lots of workers, but it also forced local manufacturers to increase their innovation and productivity. Bloom et al. (2011) found that although the First China Shock hurt European profits and workers alike, it also increased innovation and productivity among European producers:
We examine the impact of Chinese import competition on patenting, IT, R&D and TFP using a panel of up to half a million firms over 1996-2007 across twelve European countries…Chinese import competition had two effects: first, it led to increases in R&D, patenting, IT and TFP within firms; and second it reallocated employment between firms towards more innovative and technologically advanced firms. These [two] effects were about equal in magnitude, and [together] appear to account for around 15% of European technology upgrading between 2000-2007. Rising Chinese import competition also led to falls in employment, profits, prices and the skill share.
I don’t like seeing U.S. companies get hurt, but the alternative might be far worse — a long slow death as they cling to a comfortable but obsolete technology. Chinese EVs could be just the thing to save Detroit from its own short-termism, the way Japanese compact cars were in the 1980s.
In fact, this might be what’s already happening in Europe. Europe put only modest tariffs on Chinese EVs, and at first their domestic car brands got clobbered. But recently, Volkswagen appears to have gotten its act together and started selling EVs in its home market:
If VW can do it, Ford and GM and Stellantis can do it too.
The beneficial effect on the rest of the U.S. industrial ecosystem, though, could be even greater. Remember that because cars are very heavy, they’re expensive to ship; they tend to be made close to where they’re consumed.1 This is what production and consumption looked like in 2010-2020, before the Second China Shock began:
And even once China began paying its companies to export huge numbers of EVs, and became the world’s largest auto exporter in just a few years, most Chinese-made vehicles are sold in China:
Over time, the pattern of global auto production would shift back toward this equilibrium. As U.S. companies leveraged their proximity advantage to cancel out China’s price advantages, BYD and Xiaomi and the other big Chinese automakers would start building factories in America. If not, a little bit of tariff could help them along once they’re already in the U.S. market.
This is exactly what actually did happen with Japanese automakers. After a trade kerfuffle in the late 80s and early 90s, Japanese automakers went all-in on building factories in America. Now, Japanese carmakers employ over 400,000 Americans, and Japanese carmakers have helped teach Americans their tricks for highly efficient manufacturing.
And in fact, Chinese automakers are already building factories all over the world; BYD’s investments are concentrated in Brazil, Thailand, Indonesia, Hungary, Mexico, and Turkey. There’s no reason they couldn’t be in the U.S. as well.
There are plenty of things the U.S. could do in order to speed that transition along. One idea would be joint venture requirements, forcing BYD and Xiaomi to include American companies in their local operations, in order to make sure that EV manufacturing know-how gets transferred from China to America. This is exactly how China built up many of its own manufacturing sectors, and Europe is now considering implementing similar requirements for Chinese factories.
Even more important could be local content incentives. If the U.S. taxed imported components used in Chinese-owned U.S. factories — especially batteries, electric motors, and power electronics — this could force Chinese companies to help build up America’s own capabilities in the Electric Tech Stack. BYD, for example, is vertically integrated, and could easily build batteries in the U.S. (preferably, once again, with a joint venture requirement).
Thus, Chinese companies’ desire to sell electric cars to Americans could end up helping to reindustrialize America. It could create plenty of factory jobs, transfer manufacturing know-how, and create demand to build up the U.S. component ecosystem.
It might seem like “tariff man” Donald Trump would be averse to such a scheme, but in fact he recently proposed something like this himself:
During a speech at the Detroit Economic Club this week, President Donald Trump made it clear that he’s perfectly fine with Chinese automakers setting up shop in the States. With just four words, he effectively welcomed brands like BYD and Xiaomi to compete with Detroit in their own backyard: “Let China come in.”
On one condition, of course: These companies are welcome as long as they build a plant in America and hire Americans to work the factory floor.
This isn’t something I say very often, but Trump is right. Let China build cars for the U.S. market, especially if they build them with U.S. workers, U.S. corporate partners, and U.S.-made components.
So far, of course, I’ve neglected the big, obvious risk from Chinese EVs: espionage and sabotage. If China makes the electronics and the software for a substantial number of America’s cars, they can presumably track the movements and collect the personal data of lots of Americans. For this reason, Israel has banned Chinese-made cars on its military bases.
Even more worryingly, they might be able to turn off America’s cars at the start of a war, or cause them to start swerving uncontrollably and cause vast numbers of accidents, paralyzing much of the nation and killing untold numbers of Americans. There have already been some accusations of carmakers doing things like this, as cars become more networked and software-dependent. Whether the accusations are true or not, the risk is obvious.
But although I’m not a cybersecurity expert, it seems likely that there are ways to manage these risks without forbidding Chinese companies from selling anything in America. Researchers are working on new techniques to detect and prevent such meddling; my basic recommendation is for a lot more resources to be poured into those efforts. Detecting and countering Chinese espionage and sabotage efforts will be important whether we buy Chinese cars or not, since China already makes so many of our electronic devices.
Ultimately, this will be a lot easier with requirements for local component sourcing and joint ventures. Component manufacturers in the U.S. can be far more easily monitored, while joint venture partners can keep an eye on Chinese companies. We should also have rules that Chinese cars have to host their software on American clouds and use U.S. telecom networks. All of these monitoring points will make it risky for Chinese companies to try any funny business.
The risk of Chinese espionage and sabotage via their companies’ cars (and other tech products) will never be entirely zero; it can only be managed prudently. Meanwhile, the benefits of letting Chinese EVs into the U.S., in a controlled manner, are increasingly obvious. Canada has shown the way; America can improve on its approach.
There are other reasons for this too, like producers understanding local taste and style.
2026-01-26 15:42:14
Howdy, folks! The theme of this week’s roundup is “self-inflicted harm by the world’s Great Powers”. I left Europe out of the mix this week, since their own improving growth, rearmament, decoupling from America, and successful pushback over Greenland makes them look a little less like a basket case. But the U.S., China, and Russia are each showing weakness in their own ways. For the U.S., the big problem is the MAGA ideology, which refuses to respect the law or interface with reality on many fronts. For China, the problem is Xi Jinping’s autocratic rule and the inevitable internal dissent this fosters. And of course for Russia, the problem is the Ukraine war. But I also note that India is being a lot smarter than the major powers, because it’s focusing on growth instead of on domestic disputes or dreams of empire.
Just a couple of weeks after ICE agents gunned down Renee Good in her car, some other ICE agents just carried out an execution-style killing of Alex Pretti in Minneapolis. There are plenty of videos, and here’s a detailed blow-by-blow of what happened (and here’s another if you want confirmation). Pretti was a protester who showed up with a holstered pistol, which is legal in Minnesota. He was filming ICE, and then went to help a woman who had been shoved by ICE agents. ICE tackled him to the ground, took away his gun, and then fired at least ten shots into Pretti, killing him.
Stephen Miller immediately claimed that Pretti had been a terrorist intent on massacring ICE agents, while JD Vance blamed protesters and Democrats for the killing. But Americans are not fooled, and the administration may have made a tactical error by denying the existence of Second Amendment rights. Some GOP Senators are calling for an investigation into the killing. Meanwhile, this just builds on the wave of anger at ICE that followed the killing of Renee Good; already, a majority of poll respondents in some polls favor abolishing ICE entirely.
Meanwhile, these killings are just the tip of the ICEberg, so to speak. Kyle Cheney has compiled a list of over 2,300 cases in which courts found that ICE illegally detained someone. The federal agency’s lawbreaking is systematic and flagrant, and the fact that the Trump administration has gone to the mat for this illegality leaves little doubt about the true nature of the MAGA movement.
There’s really not much to say about all this that I didn’t already say in my post two weeks ago:
The fundamental problem remains the same: The MAGA movement has convinced themselves that they’re in an existential race war, that mass deportations are the only way to win that race war, and that anyone who opposes those deportations is their existential enemy. That “Great Replacement” ideology is being used to recruit the ICE agents who carry out these killings, and is also the reason that Trump’s base bends over backward to justify each killing. Until we either A) assemble a sufficiently strong and durable political coalition to utterly defeat Great Replacement ideology, or B) disabuse large numbers of MAGA supporters of the idea that they’re in an existential race war, killings like this will probably continue.
Xi Jinping is conducting yet another round of military purges. This one is the most far-reaching and astonishing purge yet:
Among China’s generals, one had long seemed immune to the sweeping purges of the high command in the past two years. Zhang Youxia, its most senior uniformed officer…was not just a personal friend of Xi Jinping, China’s leader. He was one of the few military commanders with combat experience, having fought with distinction in a war with Vietnam in 1979. That bolstered his authority as the senior of the two vice chairmen of the Central Military Commission (CMC), which commands the armed forces (and is headed by Mr Xi)…On January 24th the defence ministry announced that General Zhang, 75, and another member of the CMC, General Liu Zhenli, had been placed under investigation for “suspected serious discipline and law violations”….General Liu, who is 61, heads the joint staff department, which oversees operations, intelligence and training. Perhaps more pertinently, he is thought to have close personal ties to General Zhang as another veteran of the border war with Vietnam.
The investigations mean that Mr Xi has now, in effect, hollowed out his entire military leadership in a purge unmatched since the death of Mao Zedong in 1976.
It was later reported that Zhang, the top general who was purged, has been accused of leaking Chinese nuclear secrets to the United States. If you think that accusation sounds incredibly suspicious, you’re not alone. The real reason for the purge probably can’t be known, and may never be known.
The most popular theory seems to be that Xi wants to attack Taiwan immediately, and is purging his military establishment of any leaders who have doubts about starting a war. But the purges now seem too deep and too wide-ranging to be just about ensuring conformity with Xi’s goals and ideas. If what you really wanted to do was fight a war, would you really fire every single general who had combat experience? It seems doubtful. Stalin did fight World War II after he purged his own military leaders in 1936-38, but he would have preferred not to.
And would you really want to go to war with a bunch of military leaders who had just witnessed nearly all of their predecessors — who were themselves originally hired by Xi Jinping — getting denounced and punished?
Nor does it seem likely that Xi is simply preemptively striking out against alternative centers of power who might someday defy his rule. When Xi attacked businessmen in the software and finance industries four years ago, it was conceivable that he thought the country could simply do without a powerful class of businessmen in those industries. But China can hardly do without generals. Whoever replaces the purged military leaders will still have power over the same military, and will presumably be just as much of a threat.
So although I have no information to this effect, logic suggests that there’s something more serious going on behind the scenes — perhaps a coup plot or something of the sort. In any case, this reinforces my argument that Xi’s personalistic rule is the main threat to Chinese global hegemony, especially as he ages without a clear successor:
In 2024, Russia recorded 1.22 million births. Presumably, about half of these — let’s say, 610,000 — were boys. That’s almost exactly equal to the number of Russian men Ukraine believes it can kill over the next year:
Ukraine aims to "kill 50,000 Russians per month," the country's new defense minister, Mykhailo Fedorov, said during a meeting with the media…"Last month, 35,000 were killed; all these losses are verified on video. If we reach 50,000, we will see what happens to the enemy. They view people as a resource, and shortages are already evident."
In other words, if Ukraine can accomplish its goal, it would wipe out an entire generation of Russian men — simply delete it from existence. Even the recent reported rate of 35,000 Russian deaths per month — 420,000 per year — is enough to mostly delete an entire generation, especially once you add those whose wounds will leave them alive but crippled. Russia is trying to supplement its forces with North Korean allies and African mercenaries, but their numbers are in the low tens of thousands at most — not nearly enough to change the story. Ukraine’s reports of Russian deaths may be modest overestimates, but they’re not far off from independent estimates.
The reason Russia is losing so many men is that assaults by armored vehicles have become pretty useless on the modern battlefield. Faced with the inability of tanks and other armor to make headway, Russia is resorting to “meat assaults” — basically, World War I tactics. These assaults are getting a ton of Russians killed, but are not managing to conquer much of Ukraine:
Of course Ukraine is taking grievous losses too, but warfare favors the defense, so they’re likely to be less. That doesn’t mean Ukraine will be in great shape after the war is over, but it does mean that Russia is really expending a vast number of its citizens’ lives for not much territorial gain — similar to what it was doing in WW1.
This doesn’t mean Europe can breathe a sigh of relief. If Ukraine does eventually fall and become a Russian satrapy, Russia will enslave millions of Ukrainians and send them to fight in the next war (likely against the Baltics, Moldova, and possibly Poland). That is exactly what Russia has done with the populations of the territories it has already conquered in Ukraine.
But what Russia’s losses show is that Europe’s strategy of defense is working. The longer Europe can support Ukraine, the less Russia will be able to recover from this disastrous military misadventure.
Here’s a scary chart of U.S. measles cases:
Axios reports:
This chart shows what it looks like to hit a 30-year high in measles cases — and why the U.S. is on track to lose its measles "elimination status."…We’ve all heard that cases are on the rise, but the reality is that they’re skyrocketing…It started with an outbreak in West Texas, and now infections are reported in nine states and hundreds are in quarantine due to a major surge in South Carolina.
Measles is skyrocketing for a simple reason, which is that fewer Americans are getting vaccinated; almost all of these cases are among the unvaccinated. And the reason for low vaccination rates is the antivax movement, which has spread from the leftist fringe to the conservative mainstream. The Trump administration could fight against this trend by reassuring everyone that measles vaccines are safe and effective, but as Axios notes, the Trump administration has sent mixed messages on the topic:
Health Secretary Robert F. Kennedy Jr. and other Trump administration officials have downplayed the health risks of the virus, and at times they’ve spread misleading claims about the MMR vaccine….They only said later that the MMR vaccine was the “most effective way” to prevent the transmission of the virus.
In fact, the Covid pandemic cemented opposition to vaccines as a core pillar of the new right-wing belief system in America. This isn’t just going to stop people from vaccinating their kids for measles — it’s going to negatively affect the progress of scientific research in the field. Here’s a report from Bloomberg:
Moderna Inc.’s chief executive officer said the company doesn’t plan to invest in new late-stage vaccine trials because of growing opposition to immunizations from US officials…“You cannot make a return on investment if you don’t have access to the US market,” Stéphane Bancel said…Regulatory delays and lack of support from US health officials are making the potential market size “much smaller,” he said.
Bancel’s comments are some of his strongest yet about the difficulties that vaccine makers face in the Trump administration. He joins a chorus of other pharmaceutical executives who have started to vent their frustrations with the government’s assault on immunizations…
Under the leadership of Health Secretary Robert F. Kennedy Jr., a vaccine critic, US officials have narrowed the population of people who are eligible for Covid vaccines, created confusion over how to get them and raised questions over their safety.
That’s pretty scary, given the increasing power of AI-assisted amateurs to create bioweapons in their garages! There’s also the chance it might slow down progress in mRNA cancer treatments, which are also vaccine-based. This might condemn lots of Americans to unnecessary death from cancer.
In fact, the assault on vaccine science is just the most egregious part of a general assault on science by the Trump administration:
The example of the antivax movement shows that the MAGA folks don’t really care if the science they cancel happens to be stuff that saves lots of people’s lives. Their crusade against the progressive-leaning scientific establishment can’t be interrupted by such trivialities. Meanwhile, America continues its slow deterioration into anti-science, anti-technology medievalism. And America’s international position in scientific research continues to deteriorate:
I suppose countries get the futures they choose for themselves.
So far the theme of today’s roundup has been the world’s Great Powers doing stupid stuff to harm themselves. But it’s worth noting that there’s one rising power that’s doing a lot of smart and effective things these days: India.
Where America has been weakening its own scientific establishment, India’s is growing rapidly in strength. Note India’s skyrocketing performance in the publication of the well-cited papers, overtaking the UK, Japan, and Germany in just a few years:
This rapid ascent — which mirrors China’s two decades earlier — undoubtedly contains some amount of fraud and self-dealing, just as China’s did (and does). But ultimately, China’s research turned out to be mostly real, and India’s will too.
India also seems to recognize the importance of electric technology — the essential physical technology of the future, which China has embraced and the U.S. has downplayed. A new Ember report shows some numbers on how fast India is electrifying. Here are three key charts, showing that India is embracing electric power even faster than China did:
Ember notes that the potential advantages to India go far beyond climate and cheap power:
Another dimension to the electrotech revolution is manufacturing opportunities…If any country has the scale, capital and economic dynamism to become a major electrotech manufacturer alongside China, it is India…With Sino-American tensions showing few signs of easing and advanced economies scrambling to diversify their electrotech supply chains, the demand for alternative trading partners is only rising…
There are strong signs India is seizing the opportunity, starting with its electronics industry. India’s electronics industry is surging – nearly sixfold from $22 billion in FY2015 to about $130 billion in FY2025. Domestic mobile phone production alone has risen from 2 million units in 2014 to 300 million a decade later. This matters because, as China has shown, electronics is the gateway to electrotech. The capabilities built for consumer electronics spill over into solar panels, batteries, and EVs. A mobile phone, after all, has more in common with a solar panel than a gas plant does.
Indeed, this momentum is expanding beyond electronics. Solar module production now stands at 120 GW – a twelvefold increase over the past decade, and enough to make India self-sufficient. The shift into upstream components is similarly pronounced: solar cell manufacturing, virtually absent a decade ago, has expanded to 18 GW. Beyond solar, government production incentives are spurring domestic industries for batteries and electrolysers. India is positioning itself to capture a growing share of the global electrotech market.
China leapfrogged America, Europe, and Japan in electric technology; India may end up leapfrogging China.
One tailwind here will be India’s huge domestic market growth, which will give Indian manufacturing a big edge. The OECD now expects India’s economy to be bigger than China’s by the end of the century, due in large part to diverging population trends:
At a time when every other major power seems to be shooting itself in the foot, India is making smart moves and accelerating its development.
So far this roundup has been pretty down on the United States, which is making some very stupid moves under Trump. So I think I’ll balance it out by pointing out that many criticisms of the U.S. are not true. For example, the left-leaning economists who have spent the last decade and a half decrying America as a failure of capitalist excess are being forced to come up with ever-less-credible reasons to pooh-pooh the strength of that capitalist approach. For example, Gabriel Zucman recently tweeted a chart which he claims as proof that income in the U.S. has been growing no faster than in Europe:
In fact, this chart doesn’t show what Zucman claims. First of all, Zucman’s claim that America hasn’t grown “one iota” faster than Europe is falsified by his own graph, in which the U.S. is ahead of Europe in every category. Second, there is no reason to think that GDP per adult (which I assume means GDP per working-age adult, for the math to work out) is a worse measure of income than national income per adult; the latter includes income from overseas investments, while the former includes only production within a country’s borders.
Third, Europe includes East Europe, which has been growing more quickly than West Europe as it completes its catch-up from the communist era. The major West European economies have all fallen behind the U.S. in recent years:
Note that the U.S. is richer, meaning that European countries should be catching up. Instead they’re falling behind. Something is wrong, and left-leaning economists like Zucman need to acknowledge that fact.
Meanwhile, the socialist conviction that America is a hellhole of ever-increasing inequality needs a major update. The Congressional Budget Office just published an analysis showing that once you account for the increasing generosity of the American welfare state, inequality in the U.S. hasn’t actually gone up much at all since the 1980s:
And Arin Dube finds that the compression in American wages — the strong rise in low-end wages since the early 2010s, coupled with anemic wage growth at the top of the distribution after the pandemic — seems to be persistent so far:
Socialists who keep repeating the mantras of the 2010s without looking at updated numbers sound increasingly out of touch with the facts. The U.S. has an inequality problem, but it’s not nearly as bad as socialists think, and U.S. growth really has been robust in recent years. Capitalism has not failed.
2026-01-24 11:54:41
This past week, the world was treated to another fun and exciting episode of “Donald Trump almost wrecks the U.S. economy”. Trump escalated his threats to invade Greenland, causing the Danish territory to actually begin preparing for war. The U.S. President seemed to signal his seriousness by threatening to impose 10% tariffs on any European country that opposed his seizure of the island. That tariff rate by itself isn’t very high, but the fact that Trump was making the threat seemed to indicate that this time, his aggression was more than just bluster.
Financial markets reacted sharply to the seeming seriousness of the latest threat. U.S. stock markets dropped sharply, the U.S. dollar fell in value, and U.S. Treasury yields rose. As CNBC reported, this was basically a “sell America” trade:
The “sell America” trade is in full swing Tuesday morning after President Donald Trump and European leaders escalated tensions over Greenland…U.S. bond prices tumbled, sending yields spiking. The U.S. Dollar Index, which weighs the greenback against a basket of six foreign currencies, fell nearly 1%. The euro jumped 0.6% against the dollar…“This is ‘sell America’ again within a much broader global risk off,” Krishna Guha, head of global policy and central banking strategy at Evercore ISI, wrote in a note to clients.
Trump responded by backing off, declaring that he wouldn’t use military force to seize Greenland:
After a meeting with [NATO Secretary General Mark] Rutte on Wednesday, Trump called off promised tariffs on European nations, contending that he had “formed the framework of a future deal”…It was a stark shift in tone for Trump, who just days earlier had declined to rule out using the military to secure ownership of Greenland and posted an image online of the territory with an American flag plastered across it…Trump…sought to de-escalate, calling for immediate negotiations to discuss the U.S. bid to acquire Greenland. “I don’t have to use force,” he said. “I don’t want to use force. I won’t use force.”
Trump also dropped his tariff threats against Europe. He instead announced a “deal” that would give the U.S. full military access to Greenland (which it already had) and give the U.S. the right to mine minerals in Greenland. Stock markets rose and Treasury yields fell, though the dollar didn’t rebound against the euro.
In terms of the immediate economic outcome, this is fine for Trump. Stock and bond markets are back to normal, and the weaker U.S. dollar will help American exporters, which is probably a good thing. It looks like another case of “TACO” saving the day. But as Arin Dube notes, the long-term implications are still worrying, because investors’ expectation that Trump will always chicken out means that he has to do crazier and crazier things each time in order to cause the kind of financial market reaction that will make him pull back:
The more interesting story here is why Trump pulled back, and why markets reacted the way they did.
The stock market drop wasn’t very surprising, and it also doesn’t tell us much — stocks tend to drop on basically any kind of worry or negative news. Similarly, the fall in the dollar could just be an indicator of general pessimism. But the fact that bond yields rose is important, because it tells us something about why investors were “selling America”.
When Treasury yields rise, it means that people are selling U.S. bonds. Higher yields happen when investor demand for bonds goes down; you have to issue bonds that pay higher interest rates in order to entice investors to buy them.
Often, when there’s an economic crisis, demand for U.S. bonds goes up and yields go down. This happened in 2008-9, for instance, during the financial crisis; even though the crisis originated in the U.S., people still thought U.S. government bonds were the safest asset out there, because they made a bet on long-term American economic strength.
But ever since Trump returned to power, the opposite has been happening. When Trump announced his massive “Liberation Day” tariffs in April 2025, Treasury yields went up. It was only after Trump started backing off of many threats, and the TACO trade set in, that yields began drifting back down:
Basically, Trump’s reckless tariff threats temporarily convinced a lot of people that the U.S. was going to start intentionally hurting its own economy. They reacted to this news the reasonable way — by pulling their money out of America, and putting it in European bonds and elsewhere. The term for this is “capital flight”. I wrote a post explaining it, back in April:
We know capital flight was underway because at the same time that investors were dumping Treasuries, they were also moving their money out of the U.S. entirely. Usually, when investors sell Treasuries, they put the money elsewhere in the U.S. - stocks, real estate, etc. But last April, the dollar went down even as yields went up:
This means that people were pulling their money out of the country entirely. When investors sell U.S. bonds and stocks, and buy assets in Europe or elsewhere, they have to swap dollars for foreign currencies in order to do it. Selling dollars pushes down the value of the dollar. So because Treasury yields went up and the dollar went down, we know people were moving their money out of America.
That’s probably why Trump backed down on tariffs back in 2025. And it’s probably why he backed down on Greenland this time — the sudden rise in Treasury yields and drop in the dollar were an uncomfortable echo of what happened back in April and May. There’s a popular idea that Trump cares mainly about the stock market, but the bond market is probably a bigger deal.
Why? As I’ll explain, capital flight is scary in a way that simple stock market declines aren’t. And the U.S. is primed for a ruinously damaging run of capital flight — we’ve benefited for years from the reputation that we’re still the country that won World War 2 and the Cold War. If investors around the world decide that the era of American exceptionalism is over, the economic consequences for American living standards could be harsh — and Trump could take the blame.
2026-01-22 18:35:22
Take a look at the marvel that is modern China. The endless gleaming lines of bullet trains. The air taxis and the drone delivery services and the driverless cars. The bubble tea franchises and the cavernous malls and the fast fashion and the pay-with-your-face apps and the robot waiters and the automated factories. The Shanghai clubs and the side streets of Chongqing and the manicured parks of Shenzhen.
You are looking at the peak. China will continue to be a spectacular, world-leading civilization for a couple more decades, but sometime around the century’s halfway point, demographic decline will begin to sap its vitality. Sometime around the mid-2010s, China’s birth rate fell off a cliff, and has not stopped falling since:
It’s difficult to state just how stark and catastrophic of a collapse this is. The number of births in China fell by 17% in just the last year. In fact, as economist Jesús Fernández-Villaverde recently pointed out, China had fewer births in 2025 than in 1776, when its population was less than a fifth of what it is now.
China’s total fertility rate now stands at around 0.93, less than half the replacement level. At that rate, every four grandparents will have fewer than one grandchild. Fernández-Villaverde explains what this means for the future of China’s population:
[I]f China could somehow sustain 7.92 million births per year from now on, its population would eventually stabilize at roughly 625 million, far below today’s 1.405 billion. In reality, as smaller cohorts reach childbearing age, births will fall well below 7.92 million. Hence, 625 million is a very generous upper bound[.]
But this isn’t a post about China; it’s about the whole world. Those who expect China’s low fertility to end its bid to dominate the globe are in for a severe disappointment, since fertility is falling in the rest of the world as well. It’s true that China is an especially severe case — a TFR of less than 1.0 puts it in a special category with Korea, Taiwan, Singapore, and Thailand (Japan, interestingly, is still slightly higher). But over the past decade, fertility has begun collapsing all over the world, much faster than it had been declining before.
Fernández-Villaverde has a good set of slides from 2023 explaining why the new fertility crisis is different and more urgent than traditional concerns. In earlier times, fertility tended to gently decline in each country until it was just under the replacement rate — the kind of baby deficit that seemed like it could be fixed with reasonable policies. But since the mid-2010s, the fertility decline has accelerated, and there seems to be no bottom to the new collapse; every year, statistical agencies revise their already negative projections downward even more.
When they confront these stark numbers, there are several things that people tell themselves (or shout on social media) to try to cope with the notion of a shrinking humanity. I’ll go through the most common of these coping statements, and explain why each of them is wrong.
People who say this forget that a shrinking population is also an aging population. Old people can work longer, but eventually their bodies and minds break down and they need to be supported by younger workers. Here’s what I wrote in 2024:
[With an aging population] every working-age adult has to toil harder and consume less in order to support a growing number of people who are too old to work…In the 1990s and 2000s, there were more than 5 working-age Americans (age 15-64) for every elderly American (64+). By 2021, there were fewer than 4. That means that the economic burden of supporting each elderly American is now shared among only 4 people instead of 5…And in other rich countries, it’s even worse. In France, there are only 3 working-age people for every elderly person. In Japan, there are only two[.]
And here’s what I wrote in 2023:
[A] shrinking population means that profitable investments will be a lot harder to come by…[I]f there are more old people and fewer younger people, then demand for the assets of the old is going to have to be split among more sellers. And that will mean a lower price. In other words…people will have to save more and more during their working years in order to make it to a comfortable retirement.
And here’s the upshot:
So in general, the shrinking world will be a world of toil. Working people will have to bear the burdens of higher taxes, more eldercare, and longer working lives. And despite working more, they will have to be thrifty and ascetic, saving more money for their own retirements.
On top of all this, a shrinking population creates a problem for physical infrastructure. Road systems, sewer systems, electrical grids, and so on were built to support a certain size of population; cut the population in half, and there won’t be enough people to support all that infrastructure in any given area. We tend to forget just how quickly human structures depreciate and fall into ruin, and how much human maintenance they require to remain usable.
You can try to consolidate people into fewer towns and smaller areas, but human mobility is not infinite; some people will be stuck in decaying towns, rotting away in despair.
It’s true that if you raise total factor productivity, it will compensate for a shrinking work force. But there are three big problems here. The first is that with a few exceptions, every country is already trying as hard as it can to raise productivity, so there’s no button you can press that says “raise productivity even more” when your labor force starts to shrink.
The second problem is that shrinking workforces also shrink the number of people who are available to work on improving productivity. Chad Jones models this out in a 2022 paper, which shows some potentially dire consequences from a shrinking pool of researchers.
The third problem is that aging populations tend to have lower productivity growth:
And this is from Ozimek et al. (2018):
The aggregate data show a clear relationship between an older workforce and lower productivity at the state-industry level, in both cross-section and panel models. The results are confirmed using employer-employee linked data…that show having older coworkers reduces an individual’s wages.
So low fertility will actually make it harder to raise productivity to compensate for low fertility.
I encounter this one a lot these days. But this is also a coping statement rather than a solution. For one thing, we have no idea if it’s true or not. So far, AI systems are able to do some things very well and other things not very well, meaning there’s still a lot of need for human labor.1 That might change — we might develop AI systems that do everything well, allowing technology to replace labor instead of complementing it. But we don’t know if we’ll be able to do that, and it’s foolish of us to place all our hopes in that one possibility.
On top of that, total replacement of the human labor force with AI would just be a different kind of posthuman future. It would be an incredibly disruptive event for societies as they are currently set up. At the very least it would require massive labor reallocation of the type that we haven’t proven very good at in the past, creating a vast dispossessed underclass almost overnight. It could also drive up prices for electricity, land, and water to the point where humans are essentially driven to starvation, requiring large-scale redistribution of capital income in order to keep the human population alive. That would disrupt every political system on Earth, possibly causing disruptions more severe than occurred during the Industrial Revolution.
In other words, this is not a scenario to comfort ourselves with.
When I warn about low fertility on social media, I inevitably encounter a few progressives telling me not to worry, because:
Concerns about low fertility are actually just concerns about low white fertility, and
Concerns about low fertility are excuses to enslave women and turn them into baby-making machines.
The first of these is just flat-out false. Asian fertility is lower than white fertility, for one thing. But fertility rates are also collapsing at an accelerating rate throughout the entire world, including Africa, Latin America, India, and poor countries in general:
As for sexism, I haven’t seen anyone contemplate turning society into The Handmaid’s Tale, and even deeply religious Muslim countries have seen stark fertility decline. So enslaving women doesn’t seem to be on the list of policy responses to the population crisis.
Paying people to have more kids does “work”, in the sense that people do have more kids when you pay them to do so. The problem is that they don’t have very many more kids; the effect sizes are so small that the amount of money required to boost fertility to near replacement levels would be prohibitive.
China has been trying to boost fertility with economic support for years, with no apparent result. Hungary tried to pay people to have more kids, with no lasting results at all. South Korea implemented a very substantial “baby bonus”, equivalent to about $700 per month, and it had the effect of reducing the fertility decline by 4.7% — not nearly enough to offset the catastrophic declines of recent years.
Even under optimistic assumptions, the sums of money required to restore non-collapsing fertility through baby bonuses are astronomical. This is from Lyman Stone, who studies this issue:
In 2020, the total fertility rate is probably around 1.71 children per woman. Thus, to reach 2.07, we would need a 21% increase in birth rates. To accomplish this, we would need the present value of child benefits to increase by somewhere between 52% and 400% of household income. For the median woman, this would mean providing a child benefit for the first 18 years of a child’s life worth approximately $5,300 per year in addition to currently-provided benefits, with the range running from $2,800 more per year to $23,000 more per year.
$23,000 per year, or even $10,000 per year, is an incredibly large sum of money — much more than any current welfare proposals, and enough to require gargantuan tax hikes that would no doubt prove politically toxic. But even this would not be enough — not even close.
Since Stone wrote that post, the U.S. TFR has fallen again, to 1.62. There is no reason to think it won’t fall more. This means that even under extremely optimistic assumptions about the power of baby bonuses, the amount we’d have to pay to get fertility back up to near replacement is just a complete political non-starter. For countries like China and Korea, the gap is far greater still, and baby bonuses are looking like they have only a very small effect.
Back in 2012, there were policies available that might have raised fertility to sustainable levels in many rich countries. As of 2026, in the face of the catastrophic and ongoing acceleration in the fertility decline, we have no known policy capable of addressing the problem.
Immigration is good, but sadly it won’t solve the population problem. First, fertility is falling across the entire world, even in the poorest countries of Africa. In the world as a whole, fertility rates are approaching replacement level and may already be there.
There is no other planet to get immigrants from.
Rich countries, of course, can continue to dull the pains of population aging and shrinkage by taking people from poor countries. But as Fernández-Villaverde notes, it’s not that simple, because those rich countries have strong welfare states. Poor immigrants are going to use lots of welfare benefits, ultimately canceling out much of their economic contribution to the nation. And because immigrants themselves age, they’re eventually going to contribute to population aging, especially because many of them come when they’re already middle-aged.
So anyway, there is a massive amount of coping on this issue, because people see a grave and possibly even existential threat coming inexorably in their direction, and they don’t think there’s anything they can do to stop it, so they need something to tell themselves in order to stop worrying. But this sort of self-reassurance won’t solve the actual problem or avert the actual threat.
In fact, we mustn’t bury our heads in the sand on this issue, or tell ourselves that it’s all going to work out. Instead, we have to face up to the problem, so that we can start looking for ways to solve it.
Humanity has always relied on technical solutions to get us out of our worst problems. It was research into green energy that has given us hope of stopping climate change. Vaccine research has given us hope of stopping pandemics. The Green Revolution staved off mass starvation from population growth, and so on.
Collapsing fertility is a bit different from those other problems, because it’s fundamentally a social problem rather than a physical threat like climate change, disease, or starvation. Social science research is typically much more expensive and much less conclusive than research in the physical sciences.
But despite that big hurdle, it stands to reason that the human race should be doing lots and lots of research on how to avert this imminent and nearly existential threat. I propose a Fertility Policy Research Center, gathering together top researchers in experimental economics and development economics, epidemiologists, quantitative sociologists, and so on. The goal would be to find a solution to the problem of long-term stabilization of the fertility at or near the replacement rate of 2.0.
The center’s activities could include:
Epidemiological and observational research on the causes of fertility drops
Randomized controlled trials of policy interventions to raise fertility
Trials of technological interventions for increasing fertility
The first and third of these won’t be that expensive. It’s the second of these — RCTs for policy interventions to raise fertility — that will cost a lot of money and take a lot of time. A single study can cost millions of dollars.
The funding for fertility policy research will thus have to be in the billions of dollars. That’s outside of the range of modern philanthropic research, but not by much — the ARC Institute has pledged grants of $650 million, and CERN’s Future Circular Collider has $1 billion, all from private sources. It’s not out of the realm of possibility that a group of billionaires might be willing to pool their resources and endow a Fertility Policy Research Institute with $5 billion or even $10 billion.
Take Elon Musk, for instance. The world’s richest man has clearly identified ultra-low birth rates as an existential threat:
Musk’s net worth is now over $750 billion. Just one percent of his wealth could fully endow a Fertility Policy Research Center with all of the money it would likely need for at least two decades. Five percent of his wealth could endow the center with all the money it would ever need. Isn’t solving an existential threat worth five percent of one man’s wealth?
Anyway, there is no dearth of hypotheses to consider here. Big questions for the research center might include:
Is social media causing the recent acceleration in the decline of fertility rates? Would restrictions on social media use be sufficient to raise TFR by a significant amount?
Does geographically concentrating people with high fertility rates tend to increase or decrease society-wide birth rates?
Does living space per person affect fertility rates?
How does economic security affect fertility rates?
Which is more cost-effective for raising fertility: cash payments or in-kind benefits like free child care?
Would AI nannies or tutors relieve some of the burden of child care, thus increasing people’s desire to have children?
How do maternal and paternal leave affect fertility rates?
Does gender equality in household chores affect fertility?
How do norms of higher and lower fertility get transmitted? Can these norms be influenced by deliberate media campaigns or other informational interventions?
Are there interventions that encourage couple formation earlier in life?
Are there any public health factors affecting fertility rates to a significant degree?
These are just a few hypotheses off of the top of my head. Putting $50 million toward investigating each of these would use up only 0.065% of Elon Musk’s wealth, while the payoff from even one important, usable finding could be absolutely huge.
It would be even better, of course, if governments could get involved with the funding effort. This could be tricky, since government grants usually go through laborious and slow processes. In the U.S., a special research project — similar to the Human Genome Project — might be able to circumvent some of those procedural hurdles. And since fertility decline is such a worldwide problem, there are probably plenty of governments who would contribute some funding to the center — many without onerous red tape. China, in particular, seems like it would want to fund a crash program for solving the birth rate problem.
Government support will be especially crucial when scaling up policy interventions from RCTs to actual government policy. This can be very tricky and very expensive, since many interventions don’t scale up. Government support, both logistical and in terms of funding, would often be essential — but it would also probably be forthcoming.
It’s kind of insane that nobody has done this yet, and it speaks to the power of the six coping statements that I listed above. A lot of people have managed to convince themselves that the problem of low fertility is no big deal, or that it’s easily solved, or that even viewing it as a problem is illegitimate. They are all wrong. It’s a huge problem, and we need to be attacking it with the same tool — scientific research — that we’ve used to defeat so many adversaries in the past.
This is a stochastic version of Moravec’s Paradox.
2026-01-20 09:49:45
Hi, fellow Americans! Would you like our country to become an authoritarian police state? A nation where federal agents can knock on your door and search your home without a warrant? A nation where everyone has to carry around their proof of citizenship at all times, or risk being arrested by federal agents on the street and thrown into a dungeon? A nation where peaceful protesters are at risk of being maimed or even killed in the street? A nation where the President invokes emergency powers to crush protests with troops?
Those all sound like lurid exaggerations when I type them out — the kind of thing crazy Resistance Libs would rant about on Bluesky. And yet consider the most recent news from America’s immigration crackdown:
Homeland Security Secretary Kristi Noem is defending reports that people have been asked by federal agents to prove their citizenship status as Immigration and Customs Enforcement operations continue in cities across America…
On Jan. 3, a Texas detainee died in ICE custody in what a medical examiner is likely to rule a homicide, according to The Washington Post; on Jan. 7, Minneapolis resident Renee Nicole Good was shot four times by an ICE agent while attempting to drive away from officers, and was soon pronounced dead; on Jan. 9, a 21-year-old anti-ICE protester was permanently blinded and allegedly mocked by agents after he was shot at close range by non-lethal ammunition, according to his aunt; and on Jan. 14, a Venezuelan man was shot in the leg during a struggle with ICE officers.
Footage of agents clashing with protesters, crashing into vehicles and going up to homes in cities like Minneapolis [has] spread through social media, and Trump has threatened to invoke the Insurrection Act in Minnesota to squash anti-ICE protests with military force.
The truth is that some Americans probably do like this. There is no freedom gene that courses through the blood of those whose ancestors fought in the Civil War. A deep reverence for liberty does not flow from the water of the Mississippi River. There are some who quietly nod their heads and grin when they see protesters beaten savagely by government thugs, relishing the thought that “the left” is being put in its place. There are those who smile at the notion that an invasion by the anti-White hordes of the Third World is being finally turned back by our valiant Boys in Masks.
But there are fewer of these than before. The furor over the killing of Renee Good and the ICE raids in Minnesota and elsewhere has not died down and vanished into the bottomless pit of the news cycle like almost every other outrage during the long Trump Era A recent poll found that 82% of Americans have seen the video of Good’s killing, and by and large they agree with the obvious interpretation that the killing doesn’t look like self-defense. Many more Americans say the shooting was unjustified than say it was justified:
Those numbers are just the tip of the iceberg. America is getting increasingly fed up with Trump’s immigration policy in general:
ICE’s name is becoming toxic, with a majority of white voters and even 25% of Republicans disapproving of the agency:
Trump’s internal polls appear to show the same. Here’s reporting from Axios:
President Trump's team recently reviewed private GOP polling that showed support for his immigration policies falling. The results, reflected in public surveys, bolstered internal concern about the administration's confrontational enforcement tactics…
The private polling suggested a rupturing of the coalition of independent, moderate and minority voters who were key parts of Trump’s victory in 2024. Such voters will play a big role in determining whether Republicans keep their slim House majority in November’s midterms…
60% of independent voters and 58% of undecided voters said Trump was “too focused” on deporting illegal immigrants, the poll viewed by Trump’s team found.
Joe Rogan, the nation’s most popular talk show host and a prominent Trump supporter in 2024, is among those for whom the stormtrooper tactics of the immigration crackdown have gone too far:
Nor is the ICE storm the only thing that Americans despise about the second Trump presidency. Even most Republicans are opposed to Trump’s threat to seize Greenland from America’s allies:
And Trump’s already-dismal numbers on the economy continue to deteriorate.
To many Democrats and progressives, the news that America is turning against Trump comes as a balm of reassurance amid the otherwise grim drumbeat of headlines. Resistance Liberalism was right about Trump — he was a corrupt, brutal authoritarian at the head of a fundamentally racist movement. Media bullshit can deceive some of the people some of the time, but in the end, being right about things tends to shine through.
Many Dems no doubt hope to ride the wave of dissatisfaction with Trump to victory in November, and perhaps in the 2028 presidential election as well. Polls show that Dems have surged past the GOP in terms of party identification, and that a record-high 28% of Americans label themselves ideologically “liberal”. Gen Z is ideologically more progressive than Millennials on most issues.
Perhaps the American people, bamboozled by right-wing media narratives, simply had to discover the error of their 2024 choice the hard way, and Democrats simply need to sit and wait for the masses to come home.
Look more closely, though, and you can see that neither Trump, nor Trumpism, nor the Republican party is collapsing, the way support for George W. Bush’s presidency collapsed at the end of his second term. The Resistance Libs were completely right about Trump, but they still haven’t managed to come up with a compelling alternative, either ideologically or in terms of a plan for governance. And this is probably putting a ceiling on support for the Democrats.
First let’s look at some numbers, and then let’s talk about some principles and ideas.
2026-01-18 17:50:26
The biblical story called the Judgement of Solomon isn’t just meant to illustrate what a wise king Solomon was. It’s also supposed to demonstrate a central principle of economics, and of society in general — that the world isn’t a fixed lump of resources waiting to be divided up. In the story, two women are arguing over which one is the real mother of a baby; Solomon proposes to cut the baby in half and give half to each woman, causing the baby’s actual mother to be instantly horrified. The lesson is that a baby is much more than the sum of two halves of a baby.
I feel like modern American leaders and intellectuals often forget this important lesson. There are plenty of thinkers and leaders on both the right and the left who think of society’s main task as slicing up and handing out a lump of “resources”. And yet when they make economic policy based on this idea, it keeps failing.
A prime example is Trump’s immigration crackdown. During the 2024 presidential campaign, Trump and his people swore up and down that kicking millions of illegal immigrants out of the country would result in a bonanza of jobs for the native-born. They probably still believe this. But people are now flowing out of the United States on net, and native-born employment rates haven’t risen:
In fact, native-born unemployment has risen, even as immigrant unemployment has fallen slightly:
This isn’t just because immigrant laborers are becoming more scarce, either. In fact, despite Trump’s successful crackdown, the number of jobs held by immigrants actually rose in December, while the number of jobs held by native-born Americans fell:
If the Trump administration had bothered to ask economists, they would have replied that the overwhelming majority of the empirical evidence indicates that immigration — even low-skilled immigration — doesn’t take jobs from Americans. Immigrants also produce goods and services, growing the pie and creating labor demand that helps provide work for native-born workers. But the only economist they seem to have bothered to ask was George Borjas, a man who has spent his life unsuccessfully trying to prove that immigration is bad for America. The new jobs numbers illustrate the failures of Borjas’ zero-sum economics.1
Tariffs are another example. Trump and his people swore that tariffs would bring manufacturing jobs back to America, by reducing foreign competition. But while we do see a few heavily protected industries like steelmaking adding jobs, most manufacturing industries in the U.S. are hemorrhaging workers:
Joe Weisenthal notes how broad the pain in American manufacturing is:
It's not just that total manufacturing employment is shrinking. The number of manufacturing sub-sectors that are adding jobs is rapidly shrinking. Of the 72 different types of manufacturing tracked by the BLS, just 38.2% are still adding jobs. A year ago it was 47.2%.
If the administration had bothered to ask economists, they would have explained that since manufacturing uses a lot of intermediate goods, tariffs hurt American manufacturing more than they help. But the only economist Trump seemed to listen to on the topic was Peter Navarro, who seems to have a lot of gaps in his knowledge about trade.
Zero-sum thinking failed on immigration because the U.S. economy isn’t a lump of labor. It failed on tariffs because the global economy is not a lump of manufacturing.
Now it’s also probably going to fail Trump on geopolitics as well. Trump recently overthrew the leader of Venezuela, and he has made it clear in speeches and statements that one of the reasons he did this was to seize control of the country’s oil. Many of the less thoughtful figures on the right expect this move to deliver a bounty of mineral wealth to the United States:
But whether removing Maduro was the moral thing to do, it’s unlikely to result in significant economic windfalls for the U.S. Oil majors are reluctant to invest, given the ongoing political chaos in Venezuela. In fact, the history of conquering and seizing oil fields for economic gain is not encouraging — witness how the U.S. failed to reap significant benefits from the Iraq War.
Or consider Trump’s desire to conquer Greenland. Simply adding a large chunk of land to America’s map would not mean riches for the U.S. economy. The U.S. already has access to Greenland’s natural resources and shipping routes; conquering the island would simply earn the enmity of both the Europeans and of Greenland’s people themselves. The U.S.’s previous relationship with Greenland was positive-sum and cooperative; switching to zero-sum piracy would not be an improvement.
So far I’ve been talking about the Trump administration. But there are also plenty of people in the progressive movement who think that economic policy should be mainly about redistributing “resources”. For example, many progressives and leftists believe that industrialization happened because European countries stole mineral wealth from other nations; some even think that poor countries are still being kept poor to this day by Europe and the U.S. buying their minerals for artificially low prices.
But as I wrote back in 2023, the former hypothesis is extremely dubious:
Imperialism is very old — the Romans, the Persians, the Mongols, and many other empires all pillaged and plundered plenty of wealth. But despite all of that plunder, no country in the world was getting particularly rich, by modern standards, until the latter half of the 20th century…So the fabulous wealth of the modern day can’t be due to plunder alone…
[I]t’s pretty clear that imperialist extraction was neither necessary nor sufficient for a country to get rich. South Korea, Singapore, Sweden, Denmark, Finland, Switzerland, and a number of other countries have gotten rich without ever having colonial empires, while Germany only had a small one for a very short time. Meanwhile, Spain and Portugal, which had vast and highly extractive colonial empires, were economic underperformers for a long time, and are still poorer than much of Europe.
Here’s a good tweet that makes the argument even more succinctly:
And leftists’ argument that poor countries are poor today because America and Europe refuse to pay sufficiently high prices for rocks — is obvious nonsense:
[N]ow, commodity prices are generally set on the world markets…the price of copper Chilean miners get is going to be about the same as the price American or Australian miners get. Rich countries might use dirty tricks to lower the global price of commodities…but they’d have to be willing to hurt their own miners too…And this would also involve screwing over rich countries like Australia that are primarily commodity exporters. Australia is very obviously not a poor country, so if we’re screwing over Australia through suppression of global commodity prices, we’re not doing it very much…
The idea that commodity exporters chronically undervalue their currencies also doesn’t fit with the recent history of these countries. Commodity-exporting nations are known for overvaluing their own exchange rates, in order to afford more imports.
With a few small exceptions, countries simply don’t get rich from “resources”; they get rich from reshaping resources into useful goods and services using human ingenuity and hard work.
Closer to home, progressives constantly talk about “resources” — a language that clearly invokes a lump of wealth. And yet progressive policies often end up making cities poorer, by taxing productive businesses to send money to useless but politically well-connected nonprofit groups. The California High Speed Rail Authority has not managed to create any high-speed rail whatsoever despite billions of dollars in spending, but brags about how many jobs that spending has created. It’s all redistribution and no production.
Perhaps in a rich country like America, where the pie grows only slowly and there are lots of opportunities for redistribution, it’s natural for people on both the right and the left to start thinking of the world as a lump of “resources” to be divvied up. But in reality, it’s production that maintains our high standard of living, and which creates the wealth necessary for redistribution to occur. A dangerously large number of Americans seem to have forgotten that.
The jobs numbers do not PROVE, by themselves, that immigration is benign for native-born American workers. But the mountain of careful causal research showing that immigration doesn’t displace native-born workers is evidence enough.
