Tag: economics

AI-Sourcing White Collar Workers

No one cried for all the blue collar workers who were outsourced. Are we supposed to weep for the white collar workers who are soon going to find themselves AI-sourced?

Artificial intelligence could eliminate half of all entry-level white-collar jobs within the next five years, the CEO of American AI research company Anthropic, Dario Amodei has warned.

In a statement to Axios published on Wednesday, Amodei, who co-founded Anthropic and is a former OpenAI executive, said he hopes to jolt the US government and fellow developers into preparing for the consequences of rapid automation. AI could spike unemployment in the US to 10-20% in the next one to five years, he warned.

AI development companies are already working on systems that could soon replace workers in technology, finance, law, consulting and other white-collar professions, particularly entry-level positions, Amodei claimed. The public and politicians are still “unaware” that a major shift is about to happen and insisted that companies and officials needed to stop “sugar-coating” what lies ahead, particularly for younger workers.

Also, isn’t this a very strong indication that all those immigrants are no longer necessary and can be safely repatriated? That’s certainly one way to ensure that unemployment in the US labor market doesn’t spike to 20 percent.

The fact is that an awful lot of those jobs are just paper-pushing makework anyhow.

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Rethinking Free Trade

After wrestling with Deep Research over the flaws in evolutionary theory, it went a little better when addressing my critique of free trade, although it did require telling the AI to ignore government policy for the actual economic theory. It initially tried to go the classic libertarian “acktually, there is no formal government policy of free trade or open borders” route. It offered to put its conclusions in the form of a policy paper, so I told it to go ahead and so so, then lightly edited the results.

Rethinking Free Trade: The Case for Balancing Efficiency with National Cohesion

Executive Summary

For decades, free trade has been upheld as a pillar of global economic policy, praised for its ability to generate growth, reduce consumer costs, and promote international cooperation. However, the full economic logic of free trade—which includes not only the movement of goods and capital, but also labor—has profound implications that are often ignored. This essay argues that the pursuit of maximum global efficiency through unrestricted factor mobility imposes significant and often destabilizing social costs. Policymakers must reconsider the assumption that free trade and GDP growth are always aligned with the national interest.

Introduction

Free trade, grounded in the theory of comparative advantage, promises economic efficiency by allowing nations to specialize in producing goods where they are most productive. Classical models emphasize that for optimal global output, factors of production—capital and labor—must be able to move freely to their most efficient uses. In theory, this leads to a maximization of global GDP and an increase in global wealth.

Yet this economic logic, when extended to its theoretical limit, demands extensive cross-border labor mobility. As capital and automation make production highly mobile, efficiency increasingly depends on the ability of labor to relocate as well. This creates tension between economic theory and the realities of national cohesion, cultural continuity, and demographic stability.

Theoretical Imperatives of Labor Mobility

In models such as Heckscher-Ohlin and neoclassical growth theory, the equalization of marginal productivity across borders implies large-scale international labor migration. Research from economists like Michael Clemens suggests that lifting all migration barriers could increase global GDP up to 150%, primarily by relocating labor from low-productivity to high-productivity regions. Achieving this would theoretically require 2% of the global labor force to migrate annually for several decades—roughly 15 million workers per year.

These numbers dwarf current international migration levels and point to a fundamental reality: the logic of global efficiency and economic growth demands labor mobility on a scale most nations are socially, structurally, and politically unequipped to handle, and which their native populations do not desire.

Social Costs and Institutional Limits

The pursuit of maximum economic output through unrestricted labor mobility imposes costs that go far beyond wages or employment figures. These include:

  • Cultural displacement and loss of social cohesion in host nations.
  • Brain drain and demographic decline in sending countries.
  • Institutional strain on housing, education, and political systems.
  • Democratic erosion as native populations feel increasingly alienated from policymaking elites.

Nation-states are not merely economic units but are groups of related people built on shared genetics, language, culture, and historical continuity. Large-scale migration—even if economically efficient—will disrupt these foundations. The backlash seen across Western democracies in response to the mass immigration in recent decades is evidence that the social fabric has limits.

GDP Growth vs. National Interest

Gross Domestic Product measures economic activity but says little about its distribution, sustainability, or moral value. Increases in GDP driven by mass immigration or offshoring do not translate into improved well-being for all citizens. They can, in fact, erode the sense of national solidarity essential for democratic governance and eliminate the very concepts of nationality and citizenship.

Policies that maximize GDP at the expense of social cohesion risk trading long-term national stability for short-term economic gain, and due to the financial costs of mass immigration, may not even achieve the economic growth anticipated despite incurring tremendous social costs. It is not anti-market to suggest that economic policy should serve national interests more broadly defined—including demographic stability, cultural continuity, political legitimacy, and public trust.

Policy Recommendations

  1. Adopt a Balanced Trade Framework: Pursue trade agreements that prioritize national resiliency and strategic autonomy alongside economic gains.
  2. Restrict Labor Mobility to Sustainable Levels: Recognize that the social capacity to absorb migrants is finite, and base labor mobility policies on more than just economic efficiency.
  3. Re-evaluate GDP as the Primary Policy Goal: Develop alternative metrics that account for cultural, institutional, and demographic health.
  4. Strengthen National Institutions: Protect the demographic balance, invest in infrastructure, and support civic institutions to enhance national unity in the face of economic change.

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The Irrelevance of International Economics

Branko Milanovic underlines the irrelevance of modern economic theory to international relations and economics:

Mainstream economists can focus on facilitating economic competition within a fundamentally cooperative worldwide system because they pay hardly any attention to how states think about survival in international anarchy, in which war is always a possibility. Thus, concepts like security competition and the balance of power, which are fundamentally important for studying international politics, have no place in conventional economics…Moreover, economists tend to privilege a state’s absolute gains, not its relative gains, which is to say they largely ignore the balance of power.

The inability of economists to meaningfully discuss current international economic relations has become painfully obvious in their, at time pathetic, attempts to teach the US leadership of Economics 101 lessons while not realizing that the US leadership, under both Trump I and II and Biden, was not involved in a policy to improve the position of US consumers or workers but to slow the rise of China and to maintain American global hegemonic position. This inability to engage with reality springs from an extremely reductionist methodological position where one’s welfare is a function of one’s own absolute income only. With such an assumption it becomes entirely incomprehensible why somebody (in this case, a country: the United States) would get engaged into a tariff war and use other policies that reduce welfare of its own citizens (while at the same time also reducing welfare in China and in the rest of the world). A policy that not merely implies a negative-sum game but is designed to be a lose-lose policy, that is, to make both the originator and the target of the policy worse off in economic terms, makes absolutely no sense for such economists.

But it a real world, it does makes sense. Simplicist economists cannot comprehend it because their methodological toolkit is faulty and obsolete: it fails to take into account relativities, that is, the importance, pleasure or utility that we as individuals, and even more so countries and their ruling elites, derive from being richer or more powerful than others. If they were to add another argument in their utility functions, the relativity, whether of own income to another person’s or of own country vis-à-vis other country, they would have to say something meaningful. Instead, they are reduced to the endless repetition of trivialities…

Commentators thus criticize something that is irrelevant, that is not the real goal of the policy and this makes them look silly. They believe that by dispensing elementary economics lessons they show how wrong-headed the governing elites are while in truth they simply reveal inadequacy of their own methodological apparatus.

However, even this critique is too shallow and intrinsically assumptive of the theoretical benefits of international economic theory to be meaningful. First, it completely fails to take into account the actual preferences of the various economic players. Trump is not hurting American workers with his protectionism and the free traders were, quite obviously, not helping American workers with their blitheringly stupid trade policies of the last 40 years.

Second, it fails to observe the real relationship between war and economics, or account for the way in which war with a trading partner is a multiply by zero situation that cancels out all of the supposed benefits of trade and more.

And third, international economics is fundamentally erroneous and therefore reliably unreliable because it takes all the models developed for a single national economy and then tries to apply them, unchanged in any significant way, to a single hypothetical supereconomy that doesn’t even exist and doesn’t have any of the interests, structures, or players that national economies do. International economics is, quite literally, a category error, and is no more viable than Martian water polo or Venusian speedskating.

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Free Trade is Deader than Dead

Free Trade, and the Comparative Advantage theory that supported it, were always examples of the Ricardian Vice, in which all other relevant variables are stripped away in order to support false conclusion based on a single variable. But among the many fatal flaws of Free Trade, and there are at least nine, is the loss of national security based on outsourcing consumer production to potential enemies.

Engineers have discovered ‘kill switches’ embedded within Chinese-manufactured parts in American solar farms, raising fears that Beijing could manipulate power supplies or even ‘physically destroy’ grids across the US, UK and Europe.

Energy officials are now assessing the risks posed by small communication devices discovered inside power inverters – an integral component of renewable energy systems that connects them to the power grid.

While inverters are built to allow remote access for updates and maintenance, the utility companies that use them typically install firewalls to prevent direct communication back to China.

But rogue communication devices not listed in product documents have been found in some solar power inverters by US experts who strip down equipment hooked up to grids to check for security issues, two sources told Reuters.

Using these devices to skirt firewalls and switch off inverters remotely, or change their settings, could destabilise power grids, damage energy infrastructure and trigger widespread blackouts, experts said.

‘That effectively means there is a built-in way to physically destroy the grid,’ one of the sources declared.

In other words, it appears that China can turn off power to the West any time it chooses, thanks to the economists and politicians who encouraged the outsourcing of solar power manufacturing there.

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Build a Reserve

If the recent blackouts weren’t sufficient warning to rely excessively on your credit and debit cards, this recent announcement by the Spanish government effectively limiting cash withdrawals to EUR 3,000 should catch your attention:

New rules in Spain: cash withdrawals over €3,000 under strict control. From now on, anyone withdrawing €3,000 or more from a Spanish bank must notify the Agencia Tributaria (Spain’s tax agency) in advance. If you’re planning to take out €100,000 or more, you’ll need to give at least 72 hours’ notice. For smaller sums over €3,000, a 24-hour notification is mandatory. The warning must be filed through the tax agency’s official website using a digital certificate, Cl@ve PIN, or electronic ID card. You’ll receive a receipt that must be shown at the bank when withdrawing your cash.

Translation: there may be a significant bank failure on the horizon that will inspire bank runs and other financial issues. I don’t think this is about trying to push everyone toward the cashless society, not so soon after the blackouts there when all the cards were useless.

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Sanctioning the Wrong Side

President Trump has completely failed to address the war in Ukraine in an appropriate manner capable of bringing it to an end, and now we’re back to the failed neocon strategies of the past:

The US has finalized a new set of economic sanctions targeting Russia as leverage to force Moscow to settle the Ukraine conflict, Reuters reported on Friday, citing several sources. It remains unclear, however, whether US President Donald Trump will approve the measures.

Earlier media reports suggested that Trump has not ruled out the sanctions if a ceasefire is not reached soon. On Monday, Moscow offered a 72-hour ceasefire from May 8 to 10, portraying the initiative as a chance to begin “direct negotiations with Kiev without preconditions.” Ukraine’s Vladimir Zelensky dismissed the overture as “manipulation,” insisting on a 30-day truce.

The targets of the new sanctions under discussion include state-owned Russian energy giant Gazprom and major entities involved in the natural resources and banking sectors, an administration official told the agency, without providing specifics.

Apparently the USA remains agreement-incapable under President Trump. At some point, Washington is going to realize that its rhetoric is no longer capable of reshaping reality, and that sanctions will never have the desired effect on major powers. But today is not that day.

If President Trump wants to end the war, he would do much, much better to sanction Ukraine and the EU.

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The Ports Shut Down

The once-busy port of Seattle has all but shut down.

The Port of Seattle on Sunday, April 27, 2025: EMPTY. This is the 4th busiest port in the nation. Inbound freight from China has STOPPED. Supply-chain disruption will now begin, nationwide. Anyone who has spent time in Seattle can tell you that these docks are always PACKED and the Puget Sound is usually overrun with waiting cargo vessels.

Here is the Marine-Tracker for Seattle: Waiting ships: ZERO. Inbound ships: ZERO. There are presently ZERO cargo ships docked or en-route. There are ZERO containers in the yard, and there are ZERO trucks waiting to haul cargo.

Even if this global trade war is ended tomorrow, it will take a minimum of 30 to 55 days, but more likely at 7-9 months, to normalize supply chains and have available product again. And that’s if everybody calls it off immediately. 40% of cargo vessels leaving China today (vessels that were already paid to make the journey, whether there is a reason to or not) are traveling completely empty. Inbound Shipping container volume is down 80%.

There were always going to be trade disruptions. This is a good time to get stocked up, top up supplies, and avoid travel and unnecessary expenses.

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You Don’t Get What You Pay For

Mercenary companies always sound very impressive. G4S is the flavor of the day, apparently

With roughly 800,000 employees, G4S maintains its own rapid response units – essentially private strike teams supported by in-house intelligence operations. Many Western PMCs now have access to reconnaissance aircraft, satellite data, and cutting-edge surveillance tools. “They work with corporations that provide satellite imagery, which has been used by PMCs in Africa, Iraq, and Afghanistan,” Todorovski explains.

Alexander Artemonov, a defense analyst at the Eurasia Heritage Foundation, estimates G4S maintains a fighting force of 250,000–280,000, equal to the number of troops Russia deployed in Donbass. The rest of the workforce consists of support staff, prison guards, and logistical teams.

G4S’s arsenal includes everything from AK-47s and Glock 17s to MP5s, sniper rifles, Uzi submachine guns, and even Israeli Hermes 450 drones. Their operatives have access to anti-personnel mines, grenade launchers, and portable anti-air systems. For mobility, they rely on armored Land Cruisers, Humvees, and military-grade carriers like the Cougar and RG-33.

“Mercenaries and auxiliaries are useless and dangerous; and if one holds his state based on these arms, he will stand neither firm nor safe” – Niccolo Machiavelli

As Machiavelli pointed out in his works, mercenaries are actually good at one thing and one thing only: getting paid. They’re not getting paid to fight and die, they’re getting paid to put on a good show and provide deterrence. The ideal mercenary operation is to get paid to defend a location or an individual, deter any attacks from taking place, and go home considerably richer in return for doing nothing.

It’s when they actually have to deliver results that mercenaries tend to show their true colors, as G4S already has:

G4S has also assumed control of prison facilities traditionally run by governments. In the UK, the company managed two immigration detention centers and six prisons, including those in Oakwood and Birmingham. In 2018, the Birmingham facility was returned to government control after inspectors uncovered appalling conditions: inmates roamed freely while staff locked themselves in offices; cells were filthy, infested with rats, and reeked of bodily fluids.

If they can’t manage a prison successfully, what are the odds that they’re even going to show up to fight Russian regulars?

Some might point to the successful use of the Wagner Company by Russia in the Donbass. But first, they were more convict conscripts than mercenaries proper, second, they were utilized as urban warfare cannon fodder, and third, they too showed the expected lack of reliability when Prigozhin staged the short-lived revolt against Moscow that ended his career with an accidentation.

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The End of the Middleman

The Internet has reduced the need for retailers and various rising costs have rendered their cut unviable, and increasingly, their businesses too, as Fandom Pulse chronicles the shutdown of Boardlandia:

It’s been a strange space in board gaming for the past several years as companies have turned to direct crowdfunding more and more, abandoning brick-and-mortar shops. While some online retailers have thrived by offering discounts, the industry received an artificial boost due to COVID-19, and a lot of gamers buying board games because they were stuck at home.

That boost faded, and now retailers have been in a precarious situation where most of the big sellers have all transitioned to direct crowdfunding, leaving little room for such retailers to exist. Enter the new tariffs, which have created a panic among board game companies who get their product from China. 

This is why, despite the various difficulties we’ve battled over the last few years, I’m confident that the direct infrastructure we’re still building is going to be the right way to go over the next decade or two.

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Pay Now or Pay More Later

The Chinese Global Times points out some of the obstacles that are facing the USA’s attempt to bring back the semiconductor industry:

The substantial losses incurred by Taiwan Semiconductor Manufacturing Co’s (TSMC) factory in the US state of Arizona illustrate both the consequences of ignoring market logic and the deep-seated difficulties the US faces in its attempt to forcibly restructure global semiconductor supply chains through political intervention. TSMC’s Arizona facility incurred a staggering loss of nearly NT$14.3 billion ($441 million) in 2024, the largest loss since the establishment of the US factory, Taiwan-based media outlet Economic Daily News reported on Monday, citing TSMC’s latest Annual General Meeting Report to shareholders. By contrast, TSMC’s factory in Nanjing, East China’s Jiangsu Province earned nearly NT$26 billion last year.

This financial disparity goes beyond a simple comparison of operational efficiency; it underscores the challenges of replicating TSMC’s traditional profitability model in the US, a market plagued by high costs and a fragmented supply chain.

TSMC’s Arizona struggles were predictable. It is no secret that the decision to build chip manufacturing plants in the US was never driven by commercial viability but by geopolitical pressure under the CHIPS Act. There are multiple causes for TSMC’s losses in Arizona. While the site has been in volume production since late 2024, the trajectory of financial deficits indicates that its problems are not temporary. 

A key factor is the disruption of the supply, industry and market chains. The semiconductor industry is a highly complex and intricate system where upstream and downstream companies are closely interdependent.  While the US excels in chip design, it lags significantly behind Asia, especially East Asia, in terms of the complete supply chain needed for manufacturing. TSMC’s Arizona factory relies heavily on importing key components and raw materials, which not only drives up logistics costs but also extends the supply cycle. Any hiccup in the supply chain can lead to production standstills.

All of these issues, problems, and challenges are real. And yet, what is the alternative? There is no alternative, unless the USA is willing to become dependent upon either a self-reliant USSR or the global manufacturing giant China for all of its digital devices?

The point is not efficiency or minimum cost; it’s the misplaced focus on efficiency and lowered costs that created this dilemma for the USA in the first place. The point is national sovereignty, particularly when war is increasingly going to be decided by large-scale high-tech drone manufacturing. It’s important to take market logic into account, but it’s even more important to avoid confusing market logic with national best interest.

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