Fantastic work @Marianne. It's almost like it's a tax on everyone's pensions as they are passively invested in the market without inside information. Who would have thought? ... It's like rich people can't stand the idea of a level playing field.
Thanks, Dave. You’ve hit on something crucial. That is precisely what constitutes the deepest form of asymmetry: those with inside information position themselves ahead of announcements, while ordinary pension savers automatically pump $50 billion into the market every month, regardless of valuation. One group pays. The other takes.
And the worst part is that it’s structurally invisible. The pension saver doesn’t know she’s being taxed. She just sees her pension fund rise as long as the market rises, and she thinks that’s economic growth. But it’s not growth. It is her own money being used to push prices higher so that those who already own stocks can cash in by selling to her pension fund.
Hayek called it “encasement” - encasing the market against democratic pressure. It is the most sophisticated form of invisible wealth transfer ever devised. You’re absolutely right: it’s not that “the rich can’t tolerate a level playing field.” It’s that the entire system is built to ensure that one never comes into being.
Let me add an overarching hope based on Jared Diamond’s comparison of civilisations over long times: while highly centralised societies (China, Russia, US) can quickly and efficiently rise, they regularly go into unnecessary declines, because their centralised rulers take bad decisions from which nobody can stop them. This is precisely the reason why Europe has been faring extraordinarily well over the centuries: its geographical fragmentation meant that there was always an independent ruler nearby who does not decide the same. So Europe as a whole has never risen the quickest, but it has an additional insurance against fast decline. Of course, we all know that these processes can be and have been very murderous in many historical moments. Still, as you write, fragmentation, bureaucracy and due process have positive effects that we should re-learn to appreciate.
Thank you for that important addition. Diamond’s point hits the nail on the head regarding what the section of my essay on friction and institutions attempts to articulate.
Since World War II, Europe has deliberately constructed its social order - precisely as a safeguard against rapid concentrations of power. The German Grundgesetz of 1949 contains Ewigkeitsklauseln, which make certain fundamental rights impossible to repeal, no matter how large a majority might wish to do so. The EU’s unanimity requirement in key areas, the European Court of Human Rights, and the many supranational structures were all built with explicit reference to what happened in Weimar between January and March 1933. We have seen how quickly a democracy can be overthrown from within using precisely the democratic instruments that were meant to protect it.
The geographical fragmentation you point out is one side of the coin. The institutional fragmentation - deliberately constructed by people who had witnessed fascism - is the other. Both function as an immune system.
Diamond’s observation about centralized decision-making is reinforced by concrete historical examples. Mao’s “Great Leap Forward” in 1958-62 cost between 30 and 45 million lives because no one could stop a catastrophic decision from the center. Stalin’s collectivization and the Holodomor in Ukraine in 1932–33 cost at least 4-7 million lives. China’s hyperinflation under Chiang Kai-shek in 1945–49 wiped out the urban middle class’s savings and paved the way for the revolution. Each of these disasters occurred because central leaders could make decisions without the feedback mechanisms that would have stopped them.
“Slow and steady wins the long race” - that is precisely the lesson upon which our institutions are built.
I completely agree. Your wording is more concise than mine - I’ll take that on board.
The friction IS the diversity. That is exactly what makes the difference. When people who think differently come together, questions - and counter-questions - are raised. When questions are asked, you have to think about the answer. It is in that thinking that the best solutions emerge - or at least the solutions that don’t lead to disasters. Streamlined societies have no built-in doubt. They have only decisions.
In my view, the most dangerous people on earth are those who believe they have found the way. This applies regardless of whether they are religious, ideological, political, or technological. It is not what they believe in that is the problem. It is the inner certainty. Those who can no longer doubt can no longer listen and do not ask questions. And those who cannot listen will sooner or later confuse their own convictions with reality.
That is exactly what totalitarian systems have always done - from Mao to Stalin to modern tech utopias. They start with a vision of the ultimate solution. They end up sacrificing real people for that vision.
Friction, diversity, doubt, debate. That is not inefficiency. It is democracy’s defense against itself. Human beings are complex creatures.
Thank you. I am also concerned. The U.S. is not just a country - the U.S. defines the global economy, and that is what makes the current developments so serious. It doesn’t just affect Americans. It affects all of us.
What worries me most is the amount of anger and misinformation now circulating in the American public discourse. It makes it difficult to have a democratic debate about the structural problems that have built up over four decades.
My hope is that this period can be the one that leads the American people to choose the path taken after the 1930s - toward a more just society, where the state once again takes responsibility for its citizens, and where the upward transfer of wealth is curbed. It has happened before. It can happen again.
But it requires that we acknowledge where we stand and take action. Thank you for reading.
Unfortunately this is not the 1930's. At some point politics was replaced by Edward Bernays marketing (where you don't sell a car, you sell a lifestyle). Perhaps it was a far back as Kennedy, perhaps Nixon, but politics has for a long time been all about misdirection. Your analysis is as good as it is complex and so these ideas will not break through to enough voters. Political leaders have long since determined that it is easier to mobilize voters against "an immigrant invasion" or "murder of the unborn" than it is to explain what amounts to a complex fraud. When politicians do try to explain it, well that's "talking down to you" and "elitist". Besides if any stray ideas get through, well then "everybody does it" (remember the "Biden Crime Family").
Dave, unfortunately, you’re right about Bernays. Politics as a consumer product - don’t sell a car, sell a lifestyle; don’t sell a policy, sell an identity - has been the dominant paradigm since the 1960s. You’re also right that my analysis is complex and therefore doesn’t resonate with voters who are trained to react to simple narrative devices.
Politics today is, unfortunately, far too personality-driven. For many, politics and ideology no longer seem relevant in these TikTok times, where political messages have a LIX score of 5 and are delivered in short clips. It is worth considering that the version of TikTok operated by ByteDance in China - called Douyin - has strict content rules, time limits for minors (40 minutes a day for those under 14), and a strong editorial focus on education, science, and traditional culture. The Chinese authorities do not allow their own children to view the kind of algorithm-driven content they export to the West.
I would like to point out something that offers a glimmer of hope. After Watergate, the U.S. actually made a serious attempt to introduce structural safeguards against presidential abuse of power. The War Powers Resolution of 1973 limited the president’s ability to wage war without congressional approval. The Ethics in Government Act of 1978 required financial disclosure for senior officials. The Federal Election Campaign Act Amendments of 1974 limited campaign contributions and established the FEC. The Presidential Records Act of 1978 made the president’s records public property - a direct consequence of Nixon’s attempt to destroy tapes. The Congressional Budget Act of 1974 limited the president’s power to withhold appropriations.
This shows that the U.S. is capable of structural reform. The problem is that most of these laws have been eroded over the past 25 years - through court rulings like Citizens United (2010), through lack of enforcement, and through political polarization that has made further reform impossible.
What the U.S. really needs is not just political reform. It is constitutional reform. A clause that cannot be repealed even with a 100% majority in Congress. Germany has it. It is called the Ewigkeitsklausel - the eternity clause - in Article 79, Section 3 of the Grundgesetz. It makes certain fundamental rights and democratic principles impossible to repeal, no matter how large a majority might wish to do so. Human dignity, democratic governance, the rule of law, and the federal structure are protected forever.
The Germans wrote it in 1949 as a direct consequence of what happened in Weimar between January and March 1933, when the Nazi Party used precisely those democratic instruments to dismantle democracy from within. After the war, Germany said: never again. We are building a constitution that cannot be used to dismantle itself.
The U.S. has no equivalent protection. The Supreme Court can be packed. Justices are appointed politically by the president and confirmed by the Senate, making them political compromise figures rather than legal experts. In many states, Supreme Court justices are even directly elected by the people. That should stop. Judges must be impartial, not political actors. The three branches of government can be politicized. Constitutional amendments can, in theory, abolish anything. The Founders in 1787 relied on institutional balance and civic virtue. But neither balance nor virtue alone is enough when a small group with enormous resources is determined to dismantle the system from within.
My fear is—like yours—that most American voters won’t understand this until it’s too late. But my small hope is that the political exhaustion that follows these four years might open a window for precisely the kind of structural reform that hasn’t been possible since the 1970s. The U.S. has done it before. The U.S. can do it again—but only if enough people understand that it is not politics that needs reforming, but the Constitution itself.
The U.S. should look outward more, instead of constantly looking inward. Other nations have been there. The U.S. is a young nation - with a youth’s self-perception of its own superiority and blindness to its own faults.
It’s maddening and saddening. You’re right. But it’s not hopeless.
I am aware of the post Watergate laws. Like the Civil Rights Act and corprate constraints like anti trust and banking regulation, the constraints on Executive power have been attacked and eroded from the moment they were passed. I think they all lie in tatters.
I share your hope for change albeit in a slightly different direction. Sadly, I see little that can be done to stop the American slide towards some sort of modern feudalism. However, that sad example has had a clear impact in other countries like Canada, Australia, Hungary and others where the worst exemplars of American style bigotry have been defeated electorally.
Perhaps the hope is for a more Eurocentric world or Mark Carney's alliance of "Middle powers". And that these models allow the rest of the world to watch as America tears itself apart and collapses. The worry, of course, is what they may destroy on the way down.
Dave, I completely agree. You’re absolutely right: the Civil Rights Act, antitrust laws, banking regulations, and post-Watergate legislation—all of them came under attack the moment they were passed. For a European, it’s hard to understand that this is possible. That is exactly why the U.S. needs constitutional protection, not just legislative protection.
You’re pointing out something important about other countries. The American example has actually served as a warning to the rest of the world. Canada, Australia, the Netherlands, Poland in 2023, and most recently Hungary on April 12, 2026, where the Magyars’ TISZA party defeated Orbán with a two-thirds constitutional majority. This is no coincidence.
Voters in other countries have seen what American-inspired bigotry and institutional dismantling lead to, and they have rejected it. The U.S. has become a negative example - the modern version of “we shouldn’t do that.”
Mark Carney’s “middle powers” alliance is an interesting idea.
It fits into a broader movement I’ve seen unfold in recent years - France, Germany, the UK, Canada, Australia, Japan, South Korea, the Scandinavian countries, and now likely Hungary under Magyar, coming together on trade, security, and digital infrastructure independently of the US. The EU has adopted massive initiatives for digital sovereignty. France is switching to Linux and LibreOffice. Denmark is working to phase out American tech. The International Criminal Court is migrating to European systems following Microsoft’s suspension of Karim Khan’s account. We are quietly building a new world order while the U.S. is preoccupied with itself.
My hope is that these four years can be the catalyst that makes Americans see clearly. Because they are losing so much during this period that it will become impossible to continue lying about the reality of the system. Life expectancy is falling. Child mortality is rising. Children are becoming poorer than their parents. The healthcare system is collapsing for ordinary Americans, while the tech elite flies to Beijing. At some point, the losses will be so obvious that even the most skilled Bernays-style marketing cannot cover them up. Those who are certain to survive are the top 10%.
My hope is that reality will eventually break through the narrative. That is precisely what my essay attempts to articulate - that the system may choose to look away, but reality can only be postponed, not abolished.
Your concern about what the U.S. might destroy on its way down is real. My concern is the reverse butterfly effect - because a financial crisis or any other crisis will affect the entire world. We in Europe share that concern. We are building as fast as we can on the structures that will protect us when the U.S. dollar loses its reserve currency status. Our politicians talk about U.S. security guarantees - but in reality, no one in Europe believes the U.S. can be trusted anymore. This is not theory. It is the infrastructure we are building now - bypassing the U.S.
But you’re right. It’s going to hurt. For everyone. Europeans didn’t want this - but we can’t be allies with a nation led by a man who changes his agreements depending on which way the wind blows - and until the next phone call with Putin.
Fantastic work @Marianne. It's almost like it's a tax on everyone's pensions as they are passively invested in the market without inside information. Who would have thought? ... It's like rich people can't stand the idea of a level playing field.
Thanks, Dave. You’ve hit on something crucial. That is precisely what constitutes the deepest form of asymmetry: those with inside information position themselves ahead of announcements, while ordinary pension savers automatically pump $50 billion into the market every month, regardless of valuation. One group pays. The other takes.
And the worst part is that it’s structurally invisible. The pension saver doesn’t know she’s being taxed. She just sees her pension fund rise as long as the market rises, and she thinks that’s economic growth. But it’s not growth. It is her own money being used to push prices higher so that those who already own stocks can cash in by selling to her pension fund.
Hayek called it “encasement” - encasing the market against democratic pressure. It is the most sophisticated form of invisible wealth transfer ever devised. You’re absolutely right: it’s not that “the rich can’t tolerate a level playing field.” It’s that the entire system is built to ensure that one never comes into being.
Thanks for reading.
Let me add an overarching hope based on Jared Diamond’s comparison of civilisations over long times: while highly centralised societies (China, Russia, US) can quickly and efficiently rise, they regularly go into unnecessary declines, because their centralised rulers take bad decisions from which nobody can stop them. This is precisely the reason why Europe has been faring extraordinarily well over the centuries: its geographical fragmentation meant that there was always an independent ruler nearby who does not decide the same. So Europe as a whole has never risen the quickest, but it has an additional insurance against fast decline. Of course, we all know that these processes can be and have been very murderous in many historical moments. Still, as you write, fragmentation, bureaucracy and due process have positive effects that we should re-learn to appreciate.
Slow and steady wins the long race.
Thank you for that important addition. Diamond’s point hits the nail on the head regarding what the section of my essay on friction and institutions attempts to articulate.
Since World War II, Europe has deliberately constructed its social order - precisely as a safeguard against rapid concentrations of power. The German Grundgesetz of 1949 contains Ewigkeitsklauseln, which make certain fundamental rights impossible to repeal, no matter how large a majority might wish to do so. The EU’s unanimity requirement in key areas, the European Court of Human Rights, and the many supranational structures were all built with explicit reference to what happened in Weimar between January and March 1933. We have seen how quickly a democracy can be overthrown from within using precisely the democratic instruments that were meant to protect it.
The geographical fragmentation you point out is one side of the coin. The institutional fragmentation - deliberately constructed by people who had witnessed fascism - is the other. Both function as an immune system.
Diamond’s observation about centralized decision-making is reinforced by concrete historical examples. Mao’s “Great Leap Forward” in 1958-62 cost between 30 and 45 million lives because no one could stop a catastrophic decision from the center. Stalin’s collectivization and the Holodomor in Ukraine in 1932–33 cost at least 4-7 million lives. China’s hyperinflation under Chiang Kai-shek in 1945–49 wiped out the urban middle class’s savings and paved the way for the revolution. Each of these disasters occurred because central leaders could make decisions without the feedback mechanisms that would have stopped them.
“Slow and steady wins the long race” - that is precisely the lesson upon which our institutions are built.
Thank you for putting it into words.
My pleasure! I’ve been trying to put this optimistic thought into another catchphrase. Maybe like this
Diverse societies can handle significant errors of leadership. Streamlined societies cannot.
I completely agree. Your wording is more concise than mine - I’ll take that on board.
The friction IS the diversity. That is exactly what makes the difference. When people who think differently come together, questions - and counter-questions - are raised. When questions are asked, you have to think about the answer. It is in that thinking that the best solutions emerge - or at least the solutions that don’t lead to disasters. Streamlined societies have no built-in doubt. They have only decisions.
In my view, the most dangerous people on earth are those who believe they have found the way. This applies regardless of whether they are religious, ideological, political, or technological. It is not what they believe in that is the problem. It is the inner certainty. Those who can no longer doubt can no longer listen and do not ask questions. And those who cannot listen will sooner or later confuse their own convictions with reality.
That is exactly what totalitarian systems have always done - from Mao to Stalin to modern tech utopias. They start with a vision of the ultimate solution. They end up sacrificing real people for that vision.
Friction, diversity, doubt, debate. That is not inefficiency. It is democracy’s defense against itself. Human beings are complex creatures.
Thank you for that beautiful phrasing.
What a formidable essay!
Your diagnosis is sound, I’m afraid.
Thank you. I am also concerned. The U.S. is not just a country - the U.S. defines the global economy, and that is what makes the current developments so serious. It doesn’t just affect Americans. It affects all of us.
What worries me most is the amount of anger and misinformation now circulating in the American public discourse. It makes it difficult to have a democratic debate about the structural problems that have built up over four decades.
My hope is that this period can be the one that leads the American people to choose the path taken after the 1930s - toward a more just society, where the state once again takes responsibility for its citizens, and where the upward transfer of wealth is curbed. It has happened before. It can happen again.
But it requires that we acknowledge where we stand and take action. Thank you for reading.
Unfortunately this is not the 1930's. At some point politics was replaced by Edward Bernays marketing (where you don't sell a car, you sell a lifestyle). Perhaps it was a far back as Kennedy, perhaps Nixon, but politics has for a long time been all about misdirection. Your analysis is as good as it is complex and so these ideas will not break through to enough voters. Political leaders have long since determined that it is easier to mobilize voters against "an immigrant invasion" or "murder of the unborn" than it is to explain what amounts to a complex fraud. When politicians do try to explain it, well that's "talking down to you" and "elitist". Besides if any stray ideas get through, well then "everybody does it" (remember the "Biden Crime Family").
I must say, I find it maddening and saddening.
Dave, unfortunately, you’re right about Bernays. Politics as a consumer product - don’t sell a car, sell a lifestyle; don’t sell a policy, sell an identity - has been the dominant paradigm since the 1960s. You’re also right that my analysis is complex and therefore doesn’t resonate with voters who are trained to react to simple narrative devices.
Politics today is, unfortunately, far too personality-driven. For many, politics and ideology no longer seem relevant in these TikTok times, where political messages have a LIX score of 5 and are delivered in short clips. It is worth considering that the version of TikTok operated by ByteDance in China - called Douyin - has strict content rules, time limits for minors (40 minutes a day for those under 14), and a strong editorial focus on education, science, and traditional culture. The Chinese authorities do not allow their own children to view the kind of algorithm-driven content they export to the West.
I would like to point out something that offers a glimmer of hope. After Watergate, the U.S. actually made a serious attempt to introduce structural safeguards against presidential abuse of power. The War Powers Resolution of 1973 limited the president’s ability to wage war without congressional approval. The Ethics in Government Act of 1978 required financial disclosure for senior officials. The Federal Election Campaign Act Amendments of 1974 limited campaign contributions and established the FEC. The Presidential Records Act of 1978 made the president’s records public property - a direct consequence of Nixon’s attempt to destroy tapes. The Congressional Budget Act of 1974 limited the president’s power to withhold appropriations.
This shows that the U.S. is capable of structural reform. The problem is that most of these laws have been eroded over the past 25 years - through court rulings like Citizens United (2010), through lack of enforcement, and through political polarization that has made further reform impossible.
What the U.S. really needs is not just political reform. It is constitutional reform. A clause that cannot be repealed even with a 100% majority in Congress. Germany has it. It is called the Ewigkeitsklausel - the eternity clause - in Article 79, Section 3 of the Grundgesetz. It makes certain fundamental rights and democratic principles impossible to repeal, no matter how large a majority might wish to do so. Human dignity, democratic governance, the rule of law, and the federal structure are protected forever.
The Germans wrote it in 1949 as a direct consequence of what happened in Weimar between January and March 1933, when the Nazi Party used precisely those democratic instruments to dismantle democracy from within. After the war, Germany said: never again. We are building a constitution that cannot be used to dismantle itself.
The U.S. has no equivalent protection. The Supreme Court can be packed. Justices are appointed politically by the president and confirmed by the Senate, making them political compromise figures rather than legal experts. In many states, Supreme Court justices are even directly elected by the people. That should stop. Judges must be impartial, not political actors. The three branches of government can be politicized. Constitutional amendments can, in theory, abolish anything. The Founders in 1787 relied on institutional balance and civic virtue. But neither balance nor virtue alone is enough when a small group with enormous resources is determined to dismantle the system from within.
My fear is—like yours—that most American voters won’t understand this until it’s too late. But my small hope is that the political exhaustion that follows these four years might open a window for precisely the kind of structural reform that hasn’t been possible since the 1970s. The U.S. has done it before. The U.S. can do it again—but only if enough people understand that it is not politics that needs reforming, but the Constitution itself.
The U.S. should look outward more, instead of constantly looking inward. Other nations have been there. The U.S. is a young nation - with a youth’s self-perception of its own superiority and blindness to its own faults.
It’s maddening and saddening. You’re right. But it’s not hopeless.
I am aware of the post Watergate laws. Like the Civil Rights Act and corprate constraints like anti trust and banking regulation, the constraints on Executive power have been attacked and eroded from the moment they were passed. I think they all lie in tatters.
I share your hope for change albeit in a slightly different direction. Sadly, I see little that can be done to stop the American slide towards some sort of modern feudalism. However, that sad example has had a clear impact in other countries like Canada, Australia, Hungary and others where the worst exemplars of American style bigotry have been defeated electorally.
Perhaps the hope is for a more Eurocentric world or Mark Carney's alliance of "Middle powers". And that these models allow the rest of the world to watch as America tears itself apart and collapses. The worry, of course, is what they may destroy on the way down.
Dave, I completely agree. You’re absolutely right: the Civil Rights Act, antitrust laws, banking regulations, and post-Watergate legislation—all of them came under attack the moment they were passed. For a European, it’s hard to understand that this is possible. That is exactly why the U.S. needs constitutional protection, not just legislative protection.
You’re pointing out something important about other countries. The American example has actually served as a warning to the rest of the world. Canada, Australia, the Netherlands, Poland in 2023, and most recently Hungary on April 12, 2026, where the Magyars’ TISZA party defeated Orbán with a two-thirds constitutional majority. This is no coincidence.
Voters in other countries have seen what American-inspired bigotry and institutional dismantling lead to, and they have rejected it. The U.S. has become a negative example - the modern version of “we shouldn’t do that.”
Mark Carney’s “middle powers” alliance is an interesting idea.
It fits into a broader movement I’ve seen unfold in recent years - France, Germany, the UK, Canada, Australia, Japan, South Korea, the Scandinavian countries, and now likely Hungary under Magyar, coming together on trade, security, and digital infrastructure independently of the US. The EU has adopted massive initiatives for digital sovereignty. France is switching to Linux and LibreOffice. Denmark is working to phase out American tech. The International Criminal Court is migrating to European systems following Microsoft’s suspension of Karim Khan’s account. We are quietly building a new world order while the U.S. is preoccupied with itself.
My hope is that these four years can be the catalyst that makes Americans see clearly. Because they are losing so much during this period that it will become impossible to continue lying about the reality of the system. Life expectancy is falling. Child mortality is rising. Children are becoming poorer than their parents. The healthcare system is collapsing for ordinary Americans, while the tech elite flies to Beijing. At some point, the losses will be so obvious that even the most skilled Bernays-style marketing cannot cover them up. Those who are certain to survive are the top 10%.
My hope is that reality will eventually break through the narrative. That is precisely what my essay attempts to articulate - that the system may choose to look away, but reality can only be postponed, not abolished.
Your concern about what the U.S. might destroy on its way down is real. My concern is the reverse butterfly effect - because a financial crisis or any other crisis will affect the entire world. We in Europe share that concern. We are building as fast as we can on the structures that will protect us when the U.S. dollar loses its reserve currency status. Our politicians talk about U.S. security guarantees - but in reality, no one in Europe believes the U.S. can be trusted anymore. This is not theory. It is the infrastructure we are building now - bypassing the U.S.
But you’re right. It’s going to hurt. For everyone. Europeans didn’t want this - but we can’t be allies with a nation led by a man who changes his agreements depending on which way the wind blows - and until the next phone call with Putin.
Thank you for continuing the conversation.