Reversion to Mean

By Dee Smith

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Mutual Assured Malfunction

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

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

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

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

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

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

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

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

The Rollback

Two tripartite acronyms that came to represent some of the most important policy packages of the post-Cold War West — ESG (Environment, Social, Governance) and DEI (Diversity, Equity, and Inclusion) — are becoming obsolete at an impressive speed. President Trump’s opposition to both was clearly articulated during his campaign. It was part of his electoral appeal to a variety of American constituencies. He has now used his powers to roll them back. European officials are rushing to keep up. Corporates generally welcome all this, although they refrain from saying so publicly. ESG and DEI both added costs. Their repeal is part of the expected package of deregulation and tax cuts that was the foundation for corporate and investor support of Trump’s second candidacy. But a new world after ESG and DEI might not be as commercially liberated as many are anticipating.

The Europeans tend to draw a distinction between the US initiatives, which they see as driven by “ideology,” and their own, which they characterize as driven by a need to compete with US companies that will henceforth be operating by a different set of rules that entails reduced costs. Since, in the European view, the initial impetus comes from US ideology, European governments and companies are rendered blameless as they are only reacting to the US abandonment of what were, until recently, held to be common Western values. For people whose environment, as a result of these changes, is poisoned, or whose workers are returned to labor conditions describable as “modern slavery,” this will seem like a very fine distinction. If one’s values can be overturned in a matter of weeks by a fear of future market pressures, then those values cannot be reckoned to be very strong.

Will abandoning them have the desired effects? Since the US-European playing field is, by virtue of this shared rollback, being not so much leveled as lowered, the strictly economic effects, in competitive terms, are not likely to be impressive. If all firms save the same costs in the same way, then the benefit to any individual firm is not great. What this common downward leveling will do, however, is reduce the barriers to competition for companies from economies that did not much subscribe to Western-led DEI and ESG initiatives in the first place: China, Russia, much of Southeast Asia, parts of Eastern Europe and Latin America. The dominant Western economies, fixated on competition with each other, are abandoning policy levers that, given the importance of their consumer markets, would have given them a type of comparative advantage. Some would say that was what made those levers politically viable in the first place.

This is especially the case with ESG. The DEI situation is interestingly different. One reason the US economy is distinct from those in industrialized Europe and East Asia is that the US has always been a multi-racial and multi-ethnic society dependent on immigration for growth. While DEI as such is quite new, the inclusion of diverse peoples with at least a horizon of equity to aim for — expressed in ideas of Americanization, assimilation, the melting pot, color-blindness, and market-based opportunity, among others — has been a feature of the US from its beginnings, even if it has always been extremely contested. European and East Asian societies, by contrast, have been constructed much more around a central ethnos, the preservation and advancement of which have been seen as constituting much of the purpose of the nation. While there are many, many exceptions to this, the European and East Asian varieties of DEI really have to do with immigration (and gender equality). They are features of just the last few decades. In the US, they are part of a long-established social contract.

Perhaps the distinction is not that important. Ultimately, in both cases, the central question is the supply of labor and its price. Neither the white population in the US nor the Korean or Japanese or German or Dutch labor forces are growing. Robotics and AI and the suite of labor-saving (or job-replacing) technologies may manage to reduce the drag that this lack of population growth has on national economies. Technological protectionism (and other kinds) might also increase employment of skilled nationals. But the demographic and other counter-trends are very strong. The US and other powerful states are expecting capital to be more patriotic, which might create some domestic jobs but could also reduce the returns to capital that were had by outsourcing the rich world’s working class. Meanwhile globalization gave many less-developed economies enough of a middle class to increase domestic demand for domestic production.

The US is, as ever, an outlier. Unemployment is and has been low, unlike in every other major economy. And DEI in the US, unlike in other countries, does not have principally to do with immigration but with the relationship between white and non-white. So does the anti-DEI wave. The Department of Education took the Supreme Court’s ruling against using race as a factor in elite college admissions and decided that it applied, or should apply, to every school of whatever kind in the United States that takes federal funds. The Supreme Court is encouraging white Americans to equate their experiences of racial discrimination with those suffered by non-whites. Missouri’s attorney general is suing Starbucks on charges of discriminating against white men. The secretary of defense, Peter Hegseth, fired senior Pentagon officials he seems to have thought were DEI hires, on a gender as well as racial basis.

All of these moves represent a dramatic change in US social relations, one whose implications can only be guessed at. The unemployment rate for white men is at 3.1 percent. (Its lowest previous rate in memory was 1.7, in December 1968.) White unemployment rates run slightly higher than those for Asians but significantly below those for other groups. If there has been discrimination against white men, and if immigration is held at bay, then employment of white American men is likely to go up at the expense of other groups — perhaps not Asians? — whose unemployment rates are already higher. Over time, the US might return to having an unusually empowered white male working class, recreating to some degree the era when trade unionism, which discriminated heavily in favor of white men, was at its peak and income inequality at its lowest. But it is hard to imagine the nonwhite working class, which is today (unlike in the 1950s and 1960s) the majority of the working class, going along with such a social order. Nor is the unemployed part of the white population likely to jump at jobs that it currently tends not to accept. Corporates and investors have not liked DEI and are abandoning it with impressive alacrity, but the post-DEI world, like the post-ESG world, may not be quite as commercially successful as expected.

The Importance of Ideology

Humans seek patterns in order to stabilize their relationship to their surroundings. The first month of Donald Trump’s second term has been rich in new policies, staff reductions, bureaucratic reorganizations, and diplomatic initiatives. The patterns have not been so easy to identify, though. So people take inadequate information and construct what patterns they can with it — patterns that make sense to them, but might not be related to what the prime actor, in this case the Trump administration, thinks it is doing.

For example, officials of the Department of Government Efficiency (DOGE) are extracting datasets from a number of government agencies; Elon Musk seems to be running DOGE; Elon Musk has an AI company, xAI; so maybe DOGE is extracting data to feed xAI? That is a pattern, but is it in any way truthful? Similarly, the president’s Ukraine policy is seen by some as part of a larger strategy to lure Russia away from its partnership with China; others see the same policy as encouraging aggressive states to acquire territory by force, which could spur both Russia and China to greater belligerence, contrary to US interests, while not harming their current partnership at all. These are opposite patterns, both mildly supported by current information but still fundamentally speculative. This kind of chaos does not render decision-making easy, for investors or anyone else.

SIG’s view is that there is an identifiable pattern to the White House’s initiatives. The core intention is to counter what the Center for Renewing America calls the censorship-industrial complex. One example of this complex identified by the center is the National Endowment for Democracy, which they say is “a ‘quasi-independent’ non-governmental organization (NGO) that operates as a front for the State Department and Central Intelligence Agency (CIA) [and] serves as the tip of the proverbial iceberg for a sprawling censorship industrial complex.” The sprawl, as envisioned by the center in a report dated 7 February 2025, reaches across federal agencies, universities, and corporations, particularly any corporations that deal in information, creating a “global nexus of governmental, non-profit, and private sector entities that work together to monitor and stifle speech that threatens the elite political and ideological consensus. These entities include agencies like the Cybersecurity and Infrastructure Security Agency (CISA), tech giants like Meta or Twitter, higher-education affiliated centers like the Stanford Internet Observatory, and non-profits such as Meedan. These organizations are utilizing the strands of institutional power to establish the political, policy, and moral predicate to justify the policing of free expression in a direct threat to foundational God-given rights recognized in the U.S. Constitution.”

The center sees this process as decades-long, originating in American disinformation abroad by intelligence and security agencies which eventually enabled these agencies to “cultivate an ecosystem — through partnerships with NGOs and the private sector — that quickly took root at the domestic level” (emphasis in original). The center concludes that “it remains to be seen whether or not it is even possible to fully defang the progressive orthodoxy in these agencies without dismantling them and starting over. It may very well be the case that there is no other choice but to take it all down.” 

The Center for Renewing America is a vigorous non-governmental organization founded by Russell Vought in January 2021. Vought served in the first Trump administration as deputy director of the Office of Management and Budget, then as its director. While Trump was out of office, Vought and the center published (December 2022) a budget plan for Congress called “A Commitment to End Woke and Weaponized Government.” Vought and the center played a major role in the Heritage Foundation’s Project 2025, an effort to construct an agenda for a second Trump presidency. Vought was policy director for the Republican National Committee’s platform committee during the successful 2024 campaign. (The author of the February 2025 report quoted above, CRA senior advisor Wade Miller, was political director for Texas Senator Ted Cruz’s 2018 campaign then chief of staff for Texas Congressman Chip Roy, himself a former Cruz chief of staff.) Vought became budget director for the current administration on 7 February as well as acting administrator for the Consumer Financial Protection Bureau. The center published a brief on 10 February urging that the consumer bureau be closed.

The point here is not that the Center for Renewing America and Russell Vought are influential in the Trump administration, although they clearly are. (The US budget director is not a trivial position. The center’s policy papers on Ukraine, the State Department, and immigration, among other topics, anticipated as well as anything the policies that the Trump administration is now adopting.) The point rather is that the worldview expressed in Wade Miller’s article quoted above, which stresses a long-standing US government conspiracy with NGOs and tech corporations to suppress conservative speech, appears to be an animating force within the administration. Vought, Miller, and the center are not the originators of this worldview, they are simply articulating it.

Seeing Trump administration policies through this lens helps to make sense of them. For example, Vice President Vance’s speech at the annual Munich security conference last week baffled many observers with its exclusive emphasis on threats to freedom of speech in Europe. “The organizers of this very conference,” Vance said, “have banned lawmakers representing populist parties on both the left and the right from participating in these conversations….[T]o many of us on the other side of the Atlantic, it looks more and more like old, entrenched interests hiding behind ugly, Soviet-era words like ‘misinformation’ and ‘disinformation,’ who simply don’t like the idea that somebody with an alternative viewpoint might express a different opinion.”

Reluctant to understand Vance’s words as meaning more or less what they said, commentators sought other explanatory patterns, such as a White House effort to further US dominance of European technology markets. A similar disconnect applied to criticisms of the administration’s dismantling of USAID and the State Department’s foreign-aid infrastructure, of its rejection of environmental legislation to combat climate change, and its Ukraine policy. But claims that USAID was pursuing a woke agenda or that pre-Trump Ukraine policy involved “spending American blood and treasure to ensure the continuation of a liberal and feminist social revolution in the furthest corners of Europe,” regardless of their accuracy, were genuinely felt.

Two notable recent failures of political-risk analysis were the underestimation of Trump’s “economic nationalism” in his first term and of Xi Jinping’s commitment to Communist Party control of the private sector. In both cases, ideology was discounted by an analytical confidence in constraints that reality was expected to impose on ideological ambition. Certainly those constraints existed, but their ability to prevail was wildly overestimated. Something similar is happening today with the Trump administration. People look to oligarchic power grabs or oil-company influence or Russian disinformation campaigns — patterns that make sense to them — rather than to the stated beliefs of powerful actors.

Nonetheless those beliefs are real. Looking for other, supposedly more sensible explanations can lead to poor analysis.