In This Economy? Palantir-style Technofascism - Part 2

Trying to put my finger on what is worrisome about the current economic situation, despite some very positive economic stats

In This Economy? Palantir-Style Technofascism Part 2 (Audio Version)

In Part 1 I talked about “The Good News” - playing the guy who says that while consumer sentiment is bad, “You know, ackchually….”

And actually, the stats on GDP, unemployment, inflation, and asset prices are strong.

But there is plenty to be worried about, including on the economic front. These are just speculative thoughts below and maybe simply the nightmares that go through my head at 2 am, but I offer them up as explanations for our common feeling of economic dread.

AI and employment

Nobody has a good handle on what AI will do to employment. In the long run, some worry that vast swathes of white collar work will go away.

In the short run, meanwhile, demand for some white collar work might actually increase? That’s the Jevons paradox: The idea that as something gets much cheaper the demand for it could increase, creating an even better situation for the thing being offered in high volume, including things like white collar labor?

Demand and pay for radiologists is up? We didn’t expect that during the AI revolution.

Another good chart from Torsten Slok of Apollo

Anyway, we have no idea at this point the true winners and losers from the AI revolution. But some of the biggest AI champions keep indicating that they believe there will be widespread job destruction, soon. So there’s that to be worried about.

The Palantir-style Techno-fascist Economy

Related to AI, as we hurtle toward exponential AI dominance combined with the data-center build-outs that allow for ever more-powerful computing, are we building ourselves a techno-fascist economy?

Anybody ever seen The Matrix, Robocop, Ex-Machina, Terminator, War Games, Ready Player One, Minority Report, Blade Runner, or Aliens?

I worry for example about the use of surveillance technology by private government-contractor companies like Palantir as a tool for expanding the reach of federal militarized groups like ICE, with a nebulous and expanding purview. In the service of tracking immigrants, then protestors, then leftist extremists.¹

If we’ve seen or read enough science fiction, we can imagine the dark turn this “advancement” can take.

It can be profitable for an AI-driven big-data company like Palantir to apply its technology in the service of the surveillance state, but it certainly makes our society worse.

With the construction of data centers all over the country and hundreds of billions being spent to expand our computing power, it is possible we are experiencing a booming economy while our scope for private freedom is being diminished at the pace of AI’s expansion.

If what we’ve built through this investment leaves more of us in a state of reduced scope for civil life, well then we could achieve a kind of “national wealth” which feels hollow and worse than what went before.

I absolutely believe there is a difference between what’s “good for the economy” if it’s a Palantir-driven techno-fascist surveillance economy, and what’s “good for regular people.” Mostly a booming economy has the highest benefits to the most people, but are we thinking enough about how to avoid the kind of progress that ruins people’s lives? I hope we’re reading enough science fiction to have the imagination to curb the worst directions here.

Social Credit System

The Chinese government began a social credit system in the 2000s, in which citizens could be graded on their trustworthiness, through the lens of the Communist Party’s view of the world, and what constitutes trustworthiness. Critical statements on social media could lead to blacklisting citizens, while supportive statements could lead to whitelisting. The system incorporated standard financial credit reporting, complemented with a political overlay.

The social credit system in China has gone through a series of regional and public/private iterations, and has been described even benignly as a kind of loyalty-rewards program - like getting better treatment for frequent fliers with an airline. My understanding is that the Chinese system of social credit is fractured and remains somewhat experimental still. But it’s a worrisome trend which we could imagine could be perfected there, and here, through advances in technology.

The US version of a social credit system

While the US does not officially pursue a system like this, we can see versions of political-compliance enforcement everywhere. The “cancel culture” employed by both the left and right against private businesses is one version.

The digital permanence of electronic media - videos, tweets, social media content - puts most anyone and everyone indefinitely “on trial” for past stated beliefs or unwise pronouncements that over time no longer are defensible. That’s another version of the informal social credit system and a system of enforcement.

The current administration’s threats to pursue regulatory vengeance against private companies and organizations that disagree with the administration is also awful and begins to look like a social credit system. Companies and institutions recently pursued by the Federal government, just off the top of my head include:

• JP Morgan - for their CEO speaking out against tariffs.

• ABC - for not cancelling Jimmy Kimmel. Or maybe for keeping DEI goals.

• Oil companies - for not quickly offering to set up business in Venezuela.

• Top law firms - for representing political or legal opponents.

• Harvard and other prominent universities - for (fake) anti-semitism claims.

Every time a company or private non-governmental organization caves or is successfully cowed by the federal government, our society’s scope for civil action is diminished.

Is authoritarianism good, actually, for markets and the economy?

A further and related nightmare keeps occurring to me in my TDS.

Is the economy, and are markets, doing well not despite the authoritarian turn of the current US administration - but actually because of it? That doesn’t fit my long term view of the economic effects of nasty governance, but maybe I’m too naive?

The Russian economy got richer in the initial phase of Putinism, for sure. It also weirdly strengthened by some measures (the ruble at least) after the 2022 full-scale invasion of Ukraine. All the government spending that goes with an authoritarian war is certainly a boost to many parts of an economy.

I hate to do the Nazi Germany comparison thing, but Germany did come blasting out of the Depression in the late 1930s faster than the rest of Europe in large part because of the massive military spending² that accompanied the rise of fascism.

China, since 1990,³ has successfully combined repressive governance with extraordinary economic gains. The mixture of authoritarianism, market economics, and strategic guidance from the central government has worked. It’s been an amazing 35-year run for China.

As Americans we keep expecting that not to work. Political freedom, we tend to think, accompanies economic freedom, and the combination will always beat central planning and authoritarianism. But China is the massive exception and outright repudiation of our expectations.

What if the recent experience of the United States - turning to the strong man who smashes traditions and international norms and regulatory restraints on business - is part of what has helped the economy boom? I hate this, but we can’t completely dismiss it either.

I don’t know. In my angst, this is the kind of stuff that I wonder about. Is consumer sentiment hitting a new low, despite robust economic growth, because so many sense the enshittification of our society?

Cory Doctorow has a way with words.

Finally, what not to wish for

While I think the US economy is objectively strong, and I worry about both the existential threat of Trumpism as well as technofascism, I want to be clear about what NOT to wish for in the coming 6 months.

I do not wish for the US economy to enter a recession to hurt the party in power.

I do not wish for the war against Iran to go very badly for the US side to hurt the party in power.

I do not wish for a market crash which would hurt the party in power.

Each of these things would likely hurt the party in power in November 2026. But they would also hurt a lot of people who are not in power. We should not wish for broad-based immiseration just for the political gain of an opposition party.

I want the US economy to continue to rock. I want markets to perform well.

Also, while I do not wish the destructive force of the US military to wreak havoc on Iran (or Cuba, or Venezuela, or any other country for that matter) I really really do not relish the idea of some military catastrophe befalling our own countrymen. The people most hurt in that situation would be largely innocent. They are not the ones ordering the military, just the ones suffering the consequences.

Anyway, the economy is great everybody. Congratulations. I feel kind of mystified by it, and note that surveys find people think their financial life is worsening. This is my attempt to make sense of the cognitive dissonance.

1. “First they came for the immigrants, but I was not an immigrant, so I did nothing.”

2. Trump has asked to double the budget for the US military, despite 1. Unprecedented federal debt, and 2. Our already outspending the next largest 8 militaries, combined.

3. I pick 1990 because the Tiananmen Square protests and massacre of June 1989 represented a kind of fork in the road. It seemed either the Community Party system would open up, or it would break. It did neither. It remained closed, and fully in power. Economically, China has only thrived since then, despite the West’s expectations about how political and economic freedom have to go hand in hand.