The MB Weekly Selection
To accompany the Monthly Barometer, my reflections on 5 macro themes, together with a few significant articles to help you make sense of what’s going on and get an inkling of what might be next.
(1) THE ALMIGHTY USD – BUT FOR HOW MUCH LONGER? (2) CLIMATE ADAPTATION: WHAT IS AT STAKE GEOPOLITICALLY? (3) AI STEALING OUR JOBS - REALLY? (4) HOW TO BETTER UNDERSTAND RUSSIA’S COGNITIVE WARFARE? (5) REGIME CHANGE: WHAT DOES IT TELL US ABOUT TRUMP?
THE ALMIGHTY USD – BUT FOR HOW MUCH LONGER? In today’s global economy, there are three superpowers which are roughly comparable in terms of size (China, the US and the EU), but last year 89% of all foreign exchange transactions were denominated in USD for a US share of world exports hovering around 10%. How come? This is because the USD, as the premier global currency, plays a dominant role in world finance which far outweighs the global importance of the US economy. The USD dominance is not under immediate threat because doing business in dollars remains much easier and cheaper than doing so in any other currency, but how long can this last when Donald Trump is weakening his country and its global standing? Paul Krugman provides a response in this Substack post (free access). He explains that the supremacy of the USD which can be weaponized and gives the US global financial power is now being “seriously damaged by the rise of alternative payment systems.” China, in particular, has used the Iran war to strengthen one such system that bypasses the dollar (hence allowing governments that are at odds with America to evade both US surveillance and US sanctions). Krugman’s conclusion: “The Iran debacle has demonstrated that using dollars and retaining access to the US banking system, while convenient, aren’t necessary.”
CLIMATE ADAPTATION: WHAT IS AT STAKE GEOPOLITICALLY? Extreme weather events are all around us, sparing not a single region in the world. As a result, all countries are now at risk of climate-induced disasters that threaten the physical foundations, such as critical infrastructure and supply chains, that underpin the functioning of their economy. They’ll have to mitigate the risk through climate adaptation, and to a considerable extent, how countries prepare for extreme weather will shape their future economic, and therefore gepolitical, prospects. In this Foreign Affairs article (behind a paywall that may require prior registration), two academics explain how extreme weather events will upend US-China competition. At the moment, China is ahead because it invests so much in climate resilience and possesses global dominance in clean energy; and last year, it delivered another record year for both solar and wind, investing more than the rest of the world combined. Their key point: the cost of falling behind on climate adaptation will be severe and if the US “does not do more to protect the sources of its national power from the extreme weather to come, its economic competitiveness could suffer ever more severe blows.”
AI STEALING OUR JOBS - REALLY? The stakes regarding the impact AI will have on the labour market are so monumental (economically, politically. socially) that we regularly post on this issue. About a month ago, we stated that it wasn’t a question if AI would prove to be very disruptive for the labour market but rather when. The data for the moment was telling us that the disruption is not yet here Therefore there is still some time to prepare. The questioning goes on: what exactly will the disruption look like? Will AI steal all our jobs? Probably not because current LLM (Large Language Models) are not reasoning machines but plausibility engines. This is the argument Zeynep Tufekci makes in this oped (gifted): “It’s not just that they (the LLMs) don’t test their outputs to make sure they’re correct or logical, or that they fail to do so in certain instances. They can’t, and they’ll never be able to on their own.” It is true that LLM can do many impressive things, “but they can’t do the vast majority of human jobs without skidding into disaster here and there.” This means that the threats of a job apocalypse are overdone, with the exception of jobs that occupy formal or verifiable domains, i.e.: whose output is either verifiably right or wrong, functional or not functional, and can be definitively checked through an automated process. Read on to understand why Zeynep thinks we’ve been misled about the nature of AI.
HOW TO BETTER UNDERSTAND RUSSIA’S COGNITIVE WARFARE? Everybody can see Russia’s kinetic warfare waged against Ukraine and its hybrid warfare waged against Europe, but it’s much harder to see how its cognitive warfare operates. Yet it is the centrepiece of the entire Russian military strategy, destined to shape perceptions, beliefs, emotions and decision-making deep within the societies Russia aims to combat. It does so by combining disinformation, propaganda, cyber operations, influence campaigns, strategic narratives, political manipulation and psychological operations, aiming to create confusion, erode trust, polarize societies and weaken an adversary’s capacity to act coherently. This piece of investigative journalism in Bloomberg (gifted) describes how the Moscow-based SDA (Social Design Agency) tries to control the information that underpins search engines and AI chatbots to simply distort reality, and (it hopes) destabilize the West and shape its public opinion. It is designed to capture search traffic and influence AI chatbots with false information about politicians and current events, the documents show. The report is peppered with examples of what can and is being done. A must-read to understand what Putin is up to.
REGIME CHANGE: WHAT DOES IT TELL US ABOUT TRUMP? Regime Change - Maggie Haberman and Jonathan Swan’s (two NYT reporters) book that chronicles the first 14 months of Trump’s shattering second term - has been an instant hit. Based on more than 1,000 interviews with a multitude of sources, including the President himself. This quote of a meeting they had with Donald Trump says it all: “He wanted us to read this document, and the document that he said was written by a historian starts with the line, “Donald Trump is, without question, the most powerful man that the planet has ever known.” Then it goes on to compare him to Hitler, Stalin, Mao, Alexander the Great, Attila the Hun, Genghis Khan, William the Conqueror. Trump says, “It’s the top ten.” There’s no comparison on any basis of morality. There’s a little bit of a mention that some of these were terrorist-type figures. But really, it was just about power. What he wanted us to understand is he has more power than they ever had, and he’s willing to use it.” The whole interview can be read here (metered paywall).