What does that mean?

Well, I mean, I think in two ways, post-industrial society created deep challenges for liberalism.

that liberal establishment, liberalism as a philosophy, and liberal activists didn't rise up to.

The first one is that shared prosperity, which I mentioned already, had a very natural pathway in industrial society, especially once you had democratic government and a trade union movement.

Companies, when they invested, when they innovated, when they adopted new technologies, wanted to expand.

And to expand, they needed labor.

They needed all kinds of labor.

Now, you're very clear, all societies to some extent have social engineering of some kind, but specifically with that sequence of words, post-industrial social engineering, what are you trying to get at in the book?

Are there ways in which AI will also negatively or positively, for that matter, impact the other bucket that you mentioned earlier, the sort of democratic inclusivity bucket and participation?

Of course.

And that also is not something that's in the nature of AI.

Generally, just like taking one step back, no technology comes with a pre-programmed social impact.

Technology is, broadly speaking Means for us to use our collective knowledge for doing useful things.

Our collective knowledge is vast, and there are many ways in which we can use them and the details, who controls technology, what it goes after, all of these things are choices we make as a society.

All of those are doubly true for AI.

Coming into this 2026 election cycle, how do you think or how do you see AI playing an important role in what people are thinking going into the, going into the voting place or when they're on the Internet? Is it a force for good at present or is it already destabilizing our institutions?

[laughs]

... especially under Trump, but, you know, one has to distinguish crypto from digital assets.

I think digital assets, if managed carefully and within the appropriate regulatory system, could be, uh, both a powerful technology and a, and a, and a democratizing technology.

Around the world, and even in the United States, there's a huge unbanked population, a huge underbanked population, and, uh, even for people who have access to banks or financial accounts, they don't have much personalized services.

And all of those could be improved with digital assets.

Transaction costs can be reduced.

It could- the, the whole banking system can be rationalized with better competition, but crypto is not the way to do it.

Oh, God

not tracked that, but is that maybe in conflict with what you're talking about today? And if so, how can you create a more inclusive society while still raising long-term progress?

Thank you.

Great questions.

And in fact, in this instance, starting from the back is even more justified, because I think these two questions are actually quite complementary.

So let me actually indeed start with the excellent question on agricultural workers.

The US, 50% of US workers were in agriculture as late as 1860.

And that essentially went down to a few percentage points by 1940.

So I would welcome your take on this.

you.

Thank you very much, Efrak.

Thanks for being here.

That's a wonderful introduction, and it's always great to be back at DLSC.

In fact, DLSC was one of the first places where I talked about the current book.

And now that it's published, I have the pleasure of being back here again.

And let me, I'm just going to take no more than 15 minutes to give a background of the arguments, but also mixed with the motivation for writing the book.

please.

And yeah, you might not be able to turn your life, your expertise on a dime.

That's right.

That's right.

I mean, that I don't know how important that is, though, because some of these AI skills are fairly portable, that the very good talent that goes to Meta for hundreds of millions of dollars, they probably could have been employed in some applications doing a great job there as well.

But just to close the circle, then second, there are the more standard reasons for why what the market decides may not be efficient.

And there are two in particular reasons that I would emphasize.

One is we have a tax code that creates a big bias in favor of capital instead of labor.

you get in the broad

It's called What Happened to Liberal Democracy? And in it, he explores the rise of populism in the far right and asks why the working classes have fallen out of love with the ideas of liberal democracy.

This is a singular human achievement in terms of structuring our lives.

Despite the fact that I argue in the book, liberalism has the ideas that are gonna be super useful for the future, and it has delivered in terms of its promises and what people wanted for quite a while.

Over the last forty years or so, liberal democracy and liberal ideas in general are in crisis.

And in a nutshell, what I say is that liberal democracy did not adjust to the new world created by a post-industrial economy.

That's both economics and more broadly social in terms of the changes that have affected us.

Post-industrial society, especially with digital technologies and now AI, but also with the globalization and other social changes that it brought, complicated how to create shared prosperity.

Let's talk about that in a bit more detail, because you do talk about elites being out of touch, not just when it comes to economics, but also culturally.

And the kind of successful epochs that you point to, whether that's like the New Deal and Roosevelt, or whether it's the Nordic social democracies, was there something in what came together there that really allowed liberalism to deliver in power?

Yes, absolutely.

And there were two things.

And each one has got some dimensions that may go just beyond one, but it's really two related but separate things.

One is that the coalitions that supported liberal ideas and liberal democracy were rather broad.

In the U.S., with New Deal liberalism.

It included left-leaning intellectuals, college graduates.

That's part of it.

So do you think the post or the AI first economy is as different and strangely shaped as the pre to the post-industrial revolution economy?

Absolutely.

Well, first of all, I think you were asking absolutely the right questions and you put them exactly the way I would put them as well.

So first of all, thank you.

Secondly, I actually think that the transition from the industrial to post-industrial economy, which took place very slowly, was hugely disruptive.

That's what my book was about.

So what happened to liberal democracy is In one word, the answer is post-industrial society.

And so what is your thesis for pro-worker AI? How does that actually work in practice? And what would that mean from a company's standpoint to deliver on that?

Mm.

An age defined by digital technologies, globalization, and new coalitions in society.

Liberal democracy needs a new governing philosophy.

What I mean by that is that we need to inspire people to support liberal ideas and democratic participation and shared prosperity and form a broad coalition from different groups around that objective, and part of that objective is dealing with technology.

Part of that objective is creating bridges in society so that we're not as polarized, we're not as conflictual anymore, and none of that is easy, but that's what a governing philosophy does.

If you look at what liberalism did in its heyday, it really created a huge number of aspirations that people a century before could not have even dreamed of, and people came around to supporting those aspirations and the democratic institutions that would deliver on them.

That's what we need to do.

Do you think it can change forever the way that economies are run and you're worried about that?

Can you outline that case that you make for us?

Well, I think the way I put it is that you cannot understand liberal democracy's crisis without recognizing that we've transitioned from an industrial society to a post-industrial society.

but also that in this post-industrial society, liberalism became a much more dominant ideology.

Many liberal ideas were developed in the context of authoritarian regimes, conservative regimes, monarchies.

So liberalism was in opposition, and now it's closer to the establishment.

But many of the issues that were very thorny for liberalism including dealing with the problem of inclusion in heterogeneous societies, how to deal with intolerance, how to structure educational institutions so that they are consistent with liberal values but also provide civic education supporting liberal values.

All of those were in the background when liberalism was in opposition and became central issues when liberalism became the establishment.

What are the specific ways in which modern liberal democracies you feel don't go far enough?

I

think that is the most important part.

of the story that often gets ignored.

Especially from the left, you'll hear people blame it on neoliberalism or this or that.

There's some truth, deregulation contributed to inequality, unions got weaker, that contributed to a lot of things.

From the right, we'll blame China, etc.

But two things really are very important to bear in mind.

So what do you think of their rise? Does that suggest there's a hunger out there for some of the things that you're- 100% it

I mean, is the failure of liberalism, how much do you see it as related to a kind of neoliberal failure?

Well, I am really hoping that seventh time is the charm for the UK, and you'll have a better, more stable government, and the fact that for once there is a, a leader who has local governance experience is actually good news.

That being said, I think blaming everything on neoliberalism is a little too simple.

Sure, deregulation created problems and contributed to inequality.

Both Thatcher and, uh, Reagan and some of the politicians that followed them went after unions, and I think unions were an important part, and in the form that they were before the '60s, I don't think they could survive in the post-industrial age.

But I think labor organization is going to be important moving forward as well.

And in the United States especially, uh, there was a complete abrogation of the responsibility of the government to check monopolies and enforce, uh, guardrails against mergers, et cetera.

Hmm.

I mean, is the failure of liberalism, how much do you see it as related to a kind of neoliberal failure?

Well, I am really hoping that seventh time is the charm for the UK and you'll have a better, more stable government.

And the fact that for once there is a leader who has local governance experience is actually good news.

That being said, I think blaming everything on neoliberalism is a little too simple.

Sure, deregulation created problems and contributed to inequality.

Both Thatcher and Reagan and some of the politicians that followed them went after unions.

And I think unions were an important part.

So what is it about our, you know, post-industrial age economies and societies that has led to this breakdown of kind of the ability to find consensus, to debate and to discuss that presumably you would argue was there in the time when liberal democracy was thriving?

Yeah.

And the way that I explain that is that social democracy was the way to implement the kind of the bundle of liberal ideas under a liberal democratic institution, uh, in the industrial economy.

So we need a similar governing philosophy, an aspiring set of idea- aspiring set of ideas, uh, for the current post-industrial economy, for the AI age, and that's what working class liberalism is meant to be.

But the critical thing that both of them have in common is that liberal democracy cannot survive without a broad coalition.

Again, that is something I learned from history and, and maybe naively following history, whereas there's a different vision out there that's completely different.

I don't know.

But the, the, the sort of the, the, the model, for example, is Roosevelt's, FDR's, uh, coalition, which consisted of left-leaning intellectuals, college graduates, very elite for their time when there were only a few percent of the economy or the society that were college graduates.

Yeah

Mm-hmm

... is polluted by this belief that the menu is exactly what we're doing, is exactly what OpenAI, Anthropic, and Google are doing, and nothing else is possible, and even if asking that question is sacrilege.

No, AI is such a versatile technology.

It is the ultimate information technology, which means technology that provides information to humans.

Many pioneers of computer science, starting in the 1950s, envisaged a day They thought it would come sooner.

But envision a day where digital technologies would be a tool, powerful tool in the hands of humans to expand human capabilities.

Going back to our discussion from the last episode, to enable humans to contribute more to the production process, to productivity, to society, not sideline them.

Yeah.

So if you were to sum it up, you know, what fundamentally has happened to liberal democracy that got you worried enough to write a book about it?

Thank you, first of all, for having me on the program and for asking that question, which goes to the heart of it.

Indeed, liberal democracy is a worthy subject to study because it has been so important for our achievements.

Our social achievements are really remarkable.

I mean, if you think of, you know, where we come from, our- how our ancestors lived, the ability of forming such complex society that are peaceful, provide public services, and create the conditions for shared prosperity, that is just amazing.

And we really owe that to liberal ideas and liberal democracy.

And the reason why I'm writing about liberalism's crisis is because I think it is so important for our future as well.

So tell us, what are the omission and what are the commissions?

W- which of the two would you say is, is more important in terms of causing the crisis we're in?

I would say that the two are united by their cause, which has to be assessed as part of the crisis of liberalism, which I refer to as the rise of post-industrial society.

So it was post-industrial society that ushered in a new era, which made shared prosperity one of the founding promises of liberalism and liberal democracy much harder, and also changed the nature of coalitions and the power of different social groups in, uh, society, especially among those supporting liberal ideas.

The two have worked together in my assessment, but I wanna emphasize that none of this is inevitable in the sense that post-industrial society didn't, say, didn't impose on us greater inequality.

It shut off some of the most potent pathways for shared prosperity that existed in the industrial society, in particular companies under democratic governance and, uh, w- under the watchful eye of the labor movement, expanding while also hiring workers and thus paying them more and being forced to treat them better.

That pathway was closed because in post-industrial economy, you could automate and get digital tools, robots, and now AI, do the tasks that workers used to perform, and that really was a sea change.

But it also fundamentally changed the nature of who has more say and what sort of coalition would form to support liberal democracy.

Yeah.

Why is it that the place that was the beacon for liberal democracy, why is it the United States seems so ripe now for illiberal thought and illiberal policy? What, what changed? Does it come down to the economic inequality that just shattered the promise?

The, the phenomena I'm describing are remarkably similar across most of the industrialized advanced economies.

That being said, because of the weakness of protective labor market institutions such as unions, uh, regulations protecting workers, minimum wages, and the extent to which tech played a central role, uh, United States has experienced far greater increase in inequality and a far more jarring form of inequality than pretty much every other country.

UK is the next in line perhaps, but the United States stands apart, for example, in how inequality did not just mean an opening of a big gap between, say, the college-educated and less co- the non-college-educated, but the college-educated improved their standing and in real incomes while those of people without a college degree got worse and worse and worse for a period of about 35 years from 1980 onwards.

That is a really striking pattern.

Second, differently from many parts of the, the advanced world- The United States has had a history of anti-establishment right-wing ideas brewing in various different forms, going back to the Birch Society, to the, uh, strong opposition to New Deal liberalism coming from some business quarters, et cetera.

I mean, I'm not saying that the same did not exist in Canada or in France and Germany, but it was sort of more pronounced in the United States.

Is there something that he is getting right That appeals to those who seek a return to a more liberal democratic life

Mm.

That is the economic aspect of it, and once shared prosperity was in tatters, that also meant that one of the big pledges of liberal democracy is maimed, and that was bound to create some sort of crisis.

But I think the crisis, at least my diagnosis, is that the crisis is, is even more severe because of the social changes that the post-industrial economy has unleashed, and those relate to new dimensions of social power and new balances in society.

In particular, if you look at the coalitions that supported early liberal democratic institutions such as Roosevelt's, FDR's New Deal coalition, they were very broad.

They had the left-leaning intellectuals of the time that played an important role, but also Southern Democrats who were very conservative, representing small businesses and very different geographic interests and very different philosophical priorities.

And the trade union movement, labor movement that was very important for vast support for FDR and his policies, and also for making sure that liberal democracy prioritize wage growth and employment growth and not let people- Starve unemployed in the streets.

Since then, those with college education, people like us, postgraduate education, living in major cities, have become mo- both more numerous, but also socially much more powerful because we are playing a very important role in the economy, and other groups are being more sidelined by technology such as automation that targeted manufacturing workers, et cetera.

Mm-hmm

Straighten that out for us right now before we dive into this conversation.

Yeah, thanks, Tim.

And that's very important.

Liberalism has had many meanings over the ages, and today it's a big tent.

But at the core of it is a commitment to protect individual liberties, also protect the weaker members of society, and also a commitment to progress from which we all benefit.

Those are the defining features of liberal ideas, and they have acted as a rallying cry for people to build a better society.

And the way that I define it, liberal democracy is the institutionalization of these ideas.

And, you know, I think it might have been with Mr. Sanger, this concept of people or maybe living different worlds, completely separate worlds.

So the reason why agriculture has become so productive is because machine have replaced man, uh, mostly by man, that were plowing, uh, pl-- seeding and so on and so forth, no?

One hundred percent that automation is and can be a powerful source of productivity growth.

If automation enables you to use cheaper machinery for more expensive labor, it increases productivity.

However, if it goes excessive, what I've called so-so automation, you get a lot of replacement, a lot of displacement, but at the margin, capital is not doing so much better.

You know, you get things like dysfunctional customer service, which doesn't do its job.

It replaces workers, but it doesn't deliver value to consumers or value to firms.

And that's the opening where now if the right kind of technology was produced by tech companies and understood and demanded by CEOs, it could be human complementary and productivity enhancing, and the market could support it.

... uh, in the next, uh, in the first 100 days?

What do you think liberal democracy and its promise and its remit for the purpose of ensuring shared prosperity means pragmatically and proportionally for a tax code?

First of all, nobody, nobody today, even if they say otherwise, really practices or even imagines practicing what nineteenth century, early nineteenth century, uh, e-economists used to call laissez-faire, where the government has no role in the economy.

And as I described in the book, government's role in regulating, providing the infrastructure, and enabling people's equal access to opportunities is critical.

And a very important part of that is the tax code, and a tax code has two distinct, related, but distinct roles.

One is redistribution.

If you want to s-- You cannot have a liberal society without some public investment in education, healthcare, infrastructure, sanitation, etc.

That requires tax revenue, so you need to put taxes in order to deal with that, and often in the form of progressive taxation, whereby the rich pay a somewhat higher proportion.

How do you square those two observations?

You know, we need to restrict what books are put out by publishers"?

So first of all, you know, the history is that when the printing press first came, it was used in the religion wars, so it did have some periods during which we adjusted to it.

If I was alive during that period, I don't know what my reaction to that would have been.

But think of American society or European society or even, you know, India or Latin America in the nineteen eighties.

I think even though some people could be swayed by some extremist books of one sort or another from the right or from the left, I think humanity, human community was very well adjusted to the broadcast of certain free speech-driven ideas via books.

Algorithms are a completely different matter.

So if social media, and this is one of the proposals I make related to social media, always stayed in the sort of non-algorithmic feed that on Facebook, Twitter, TikTok couldn't exist in that case, you only see posts by your chosen outlets and your friends and neighbors in chronological order, I think we would adjust to that very quickly.

Do you wish to revise your estimates?

Mm-hmm

...

according to the way that I see it.

Because liberalism, first and foremost, promised three things.

Shared prosperity, no group would be left behind.

It's not sort of progress.

Progress is important to liberalism, but it's not a progress that just benefits one group.

What would it say about your thesis if it turned out that China was, was stable and intact and stayed authoritarian or totalitarian, whatever label you wanna put on it, going forward, and ended up being sort of a hegemonic, stable, totalitarian power with, with, with the kinds of institutions that it has, and how likely do you feel that is in the moment?