Podcast Summary:

Podcast: The Foreign Affairs Interview
Episode: How Liberal Democracy Can Survive an Age of Spiraling Crises
Host: Kanishk Tharoor (for Foreign Affairs Magazine)
Guest: Daron Acemoglu (Nobel Prize-winning Economist, MIT Professor, Co-author of Why Nations Fail)
Date: December 18, 2025

Episode Overview

This episode explores the compounding crises challenging liberal democracy—technological transformation, inequality, global rivalry, institutional degradation, and alienation—through an in-depth interview with Daron Acemoglu. The conversation focuses primarily on the economic and political implications of artificial intelligence, the relative prospects of the U.S. and China, the historic and current fragility of democratic institutions, and what liberal democracy must do to weather the storm. Acemoglu’s nuanced, historically-informed perspective reframes technological determinism and emphasizes the decisive role of human agency and institutions.

Key Discussion Points & Insights

1. The Real Impact of AI: Hype, History, and Human Agency

• Modest Predictions About AI’s Economic Impact
  Acemoglu challenges the narrative that AI is an unstoppable, revolutionary force, arguing its near-term contributions to economic productivity will be limited (~1% to U.S. GDP over a decade).

  “These automation-based technologies, you know, are pretty impressive in some ways, but they generally don't lead to huge improvements in productivity…” (03:12)

• Why the Investment Frenzy?
  He sees current massive AI investments as driven more by hype and a “winner takes all” race among tech giants rather than immediate profit potential.

  “It is impossible… to understand the investments that OpenAI or Google or Anthropic are making in AI without recognizing this winner take all perception…” (04:27)

• Lessons from History:
  Acemoglu urges us to reject the metaphor of technology as a “force of nature.” He stresses that technological adoption is shaped by societal choices, politics, and institutions—and rife with winners and losers, often at workers’ expense.

  “History actually shows the adoption of new technologies has been a much more painful process… It has created huge winners and losers, especially when it has happened within a non-democratic setting.” (07:46)

• On Steering Technology:
  Acemoglu advocates for democratizing decisions about technology’s path, making AI work for existing human needs instead of forcing people to adapt to it uncritically.

  “…why don't we try to steer AI in a direction that's actually quite useful for humans?... that doesn't mean we should just think of AI as an autonomous force which will go where it will go.” (10:02)

2. Global Competition: The Race With China

• The Danger of ‘Race’ Thinking:
  Acemoglu critiques framing China-U.S. AI competition as a zero-sum existential struggle. He points out that this mindset forecloses global cooperation on vital issues like climate and pandemics.

  “We have so many global problems… all of these require global cooperation... None of that seems likely when we emphasize this racing aspect because… we should do our best to destroy China rather than cooperate…” (15:55)

• U.S. vs. China: Comparative Strengths and Weaknesses

  • China: Strong infrastructure, engineering talent, and digital deployment, but dogged by costs of top-down policy and lack of openness.
  • U.S.: Historically dominant due to immigrant-driven innovation, world-leading universities, legal and financial institutions. These assets, Acemoglu laments, are being actively undermined by political currents and policy choices.

  “I would count four things among the top list. One, is the US higher education system... Second...relies on foreign engineering talent... Third... the most innovative economy... Fourth... we can borrow very cheaply from foreigners.” (24:05)

3. Institutions: The Bedrock and Their Erosion

• Why Nations Succeed or Fail
  Acemoglu synthesizes decades of research, explaining how countries’ long-term success depends not on geography or culture but on institutions that distribute power and foster innovation.

  “So you have to think of the institution's role in fostering this technological dynamism. And that's where I think a lot of the explanation lies.” (33:30)

• Challenges to Institutional Theories
  The durability of China’s growth model could challenge his institutional thesis—if an authoritarian state surpasses the U.S. in innovation and prosperity, it might upend the idea that only inclusive institutions sustain long-term growth.

  “...if China surged ahead and became a more innovative economy than the United States, that would be a challenge to the institutional thesis.” (31:10)

• Global Cooperation and the Nation-State Although nation-states can be sources of division, Acemoglu underscores their indispensability for building effective global cooperation in the face of worldwide problems. (41:18)

4. Democratic Capitalism in Crisis

• Multiple Overlapping Crises
  Acemoglu lists staggering inequality, demographic decline, climate change, institutional decay, U.S.–China competition, and AI-driven disruption as ingredients of today’s “uniquely turbulent time.”

  “Inequality has reached alarming levels. AI is going to disrupt everything one way or another. The world is aging as it has never done before… plus Trump destroying U.S. institutions…” (44:15)

• Collapse in Trust The erosion of shared prosperity, public services, and political voice contributed to a pervasive collapse of trust in democracies.

  “Liberal democracy promised shared prosperity, high quality public services and voice to people… over the last four decades or so, it has failed...” (46:38)

5. The Path Forward: ‘Working-Class Liberalism’ & Institutional Renewal

• Working-Class Liberalism Defined
  Acemoglu proposes an alternative: community-based, job-creating, egalitarian liberalism faithful to liberty but responsive to working-class concerns.

  “A working class liberalism is a template for a more community based and economically more egalitarian form of liberalism.” (49:28)

• On Model Societies: Scandinavia, the U.S., and Historical Contingency
  The “golden decades” after WWII serve as models but not blueprints: their success stemmed from shared prosperity, strong communities, and participatory politics—but the specific political coalitions and institutional solutions varied (53:01).

Standout Quotes & Memorable Moments

• On Technology as Human-Made, Not Inevitable:

  “Once you start thinking of new technology, just like a gale or a storm that is out of our control, then the best thing we can do is...adapt to it... But if we are choosing the direction of AI, then an obvious question is, why not meet halfway?” (10:02)

• On U.S. Decline:

  “Right now we are in the midst of, to put it bluntly, destroying every valuable part of the US economic engine.” (24:05)

• On Systemic Trust Erosion:

  “Trust in Congress, presidency and courts has collapsed. So the future… is to revive that promise of liberal democracy.” (46:38)

• On Radical Individualism:

  “To me, [individual rights] was the most inspiring part of liberalism. But that doesn't mean that we should erase the common good or the community.” (56:35)

Notable Timestamps

• 03:12 – Acemoglu’s economic take on AI’s “modest” forthcoming impact
• 07:46 – Historical lessons on technological change and democratizing technology’s path
• 15:55 – The peril of viewing innovation as an existential U.S.–China race
• 24:05 – Four pillars underpinning U.S. economic vitality—and how they’re being undermined
• 31:10 – Would Chinese growth invalidate Acemoglu’s institutional thesis?
• 41:18 – The role of the nation-state and community in global governance
• 44:15 – Multiplicity and interconnectedness of contemporary crises
• 46:38 – Why trust in democratic institutions has collapsed
• 49:28 – Defining “working-class liberalism”
• 53:01 – Are post-WWII “golden decades” and Scandinavian models repeatable?
• 56:35 – Reconciling individual rights with the common good under liberalism

Tone & Style

Acemoglu’s language is analytical, empirically grounded, but accessible; he weaves in historical perspective, cautious optimism, and an insistence on agency and pluralism—advocating for neither technocratic fatalism nor radical utopianism. The host, Kanishk Tharoor, draws out connections to institutional theory, contemporary policy, and global resonance, contributing thoughtful, probing questions throughout.

Useful For Listeners Who Missed The Episode

• Understand the debate over AI’s real impact, why the “AI race” narrative may be self-defeating, and how history complicates our expectations for technology.
• Learn how institutional health underpins both democracy and economic dynamism in the U.S., and why China poses a complex but limited challenge.
• Get Acemoglu’s prescription for reviving liberal democracy: start at the community level, empower working-class interests, and actively steer technological change.
• Hear a spirited, nuanced defense of liberal democracy that balances individual rights, community, and economic justice.