Editor’s Note: In this Vuepoint, Saliya Weerakoon suggests that Pope Leo XIV’s new encyclical on artificial intelligence should be read not only as a religious document, but as a civilizational intervention.

Pope Leo XIV recently published his encyclical letter Magnifica Humanitas, addressing the safeguarding of the human person in the age of artificial intelligence. The immediate global reaction followed a familiar modern pattern. Headlines spread rapidly across mainstream and digital media platforms. Social media divided instantly between admiration, criticism and ideological positioning. Some praised the intervention without fully reading the document. Others dismissed it within moments of encountering fragments online.

Many reacted emotionally to headlines rather than substance. Modern civilisation now judges almost everything through thirty-second windows of attention. The velocity of digital discourse leaves little room for reflection, patience or deeper absorption. Public conversation increasingly rewards reaction over understanding. Inside that environment, even a deeply reflective civilisational document can quickly become another object within the attention economy.

Beneath the noise surrounding the encyclical, something much larger may have quietly occurred. A civilisational institution nearly two thousand years old has formally entered the global artificial intelligence conversation, approaching the issue not from technological competition or commercial opportunity, but from the standpoint of the human condition itself. That distinction carries enormous significance because the conversation surrounding AI is no longer confined to engineers, investors or technology companies. The question increasingly concerns civilisation itself.

From Industrial Civilisation to Cognitive Civilisation

In 1891, exactly 135 years ago, Pope Leo XIII published Rerum Novarum, the landmark encyclical that later shaped the social doctrine of the Catholic Church. The world at that time was confronting industrialisation, labour exploitation, class tensions and the transformation of economic power structures. Humanity then stood at the edge of industrial civilisation. Today, humanity stands at the edge of cognitive civilisation.

Back then, the earth carried roughly 1.5 billion people. Today, more than 8.2 billion human minds exist inside a hyperconnected digital architecture increasingly shaped by artificial intelligence systems. Drawing direct comparisons between the nineteenth century and the present era may oversimplify history, but a deeper continuity remains visible beneath the vastly different technological conditions. Both eras confronted moments in which systems were expanding faster than humanity’s emotional, political and institutional ability to fully absorb them.

Magnifica Humanitas appears to confront that same deeper concern. The encyclical raises difficult questions about human dignity, dependency, judgment and agency inside increasingly intelligent systems. Many observers will naturally interpret the document through religious or theological frameworks alone. Such a reading risks missing the wider civilisational significance of the intervention.

The Question Beneath the Technology

The document speaks to anxieties increasingly visible across political institutions, corporate boardrooms, universities, military establishments and ordinary households. People across classes and geographies are beginning to ask similar questions in different languages. Where exactly is the world heading in the age of artificial intelligence? Which human capacities remain essential once intelligent systems become deeply integrated into everyday life? How does civilization preserve meaning, judgment and emotional depth inside increasingly optimized systems?

The messenger also matters enormously at this moment. The weight of the message changes because the messenger carries moral continuity rather than commercial incentive. A technology executive raising concerns about dependency or psychological erosion would immediately trigger market reactions, investor speculation and political interpretation. A pope entering the conversation shifts the centre of gravity differently. The discussion moves away from product cycles and toward questions surrounding human meaning itself.

Imagine similar concerns emerging publicly from figures such as Warren Buffett, Sundar Pichai, Satya Nadella, Jensen Huang, Peter Thiel or Elon Musk. Financial markets would immediately interpret the statements through investment implications, geopolitical competition and corporate positioning. A religious figure speaking about artificial intelligence creates a different type of public tension because the discussion suddenly enters psychological, ethical and civilizational territory.

The Invisible Architecture of Dependency

That tension reflects a deeper reality unfolding beneath the public discourse surrounding AI. The global conversation has quietly shifted beyond simplistic narratives involving China versus the United States, regulation versus innovation, or machines replacing human jobs. The deeper anxiety concerns the invisible architecture of dependency.

Modern societies increasingly depend on systems they neither fully understand nor meaningfully control. Search engines shape perception. Algorithms influence attention. Predictive systems guide decision-making. Artificial intelligence models increasingly calibrate human judgment itself. The architecture of thought is slowly changing beneath ordinary daily life.

Simultaneously, institutions historically responsible for guiding civilization appear increasingly uncertain about how to respond. Governments move slower than technological acceleration. Regulatory structures struggle to adapt to innovation cycles measured in months rather than decades. Educational systems continue preparing students for worlds already disappearing beneath technological transformation.

Even elite circles now carry visible hesitation beneath public confidence. Political war rooms, corporate boardrooms and strategic policy environments increasingly revolve around one quiet question. Civilization may be building artificial intelligence infrastructure faster than humanity fully understands its psychological consequences.

When AI Becomes Internal Infrastructure

Artificial intelligence is no longer external infrastructure alone. It is becoming internal infrastructure. Human beings increasingly think with systems before thinking through themselves. Memory, navigation, creativity, communication and even emotional interpretation now pass through intelligent mediation. Dependency rarely arrives dramatically. It emerges gradually through convenience, efficiency and behavioural adaptation.

The anxiety surrounding artificial intelligence therefore differs across classes, institutions and geographies, but one underlying concern increasingly converges beneath them all. Human beings fear losing agency inside systems designed to optimise life itself.

This fear often remains difficult to articulate because artificial intelligence simultaneously delivers extraordinary benefits. Medicine advances faster. Scientific discovery accelerates. Productivity improves. Language barriers weaken. Access to knowledge expands across borders. AI is inevitable, and Pope Leo XIV does not appear to be arguing otherwise.

The deeper question concerns the role artificial intelligence will eventually occupy inside the human mind itself. Intelligent systems may remain tools assisting human judgment, creativity and decision-making. Another possibility also exists, one in which human judgment gradually reorganizes itself around intelligent systems. That distinction may ultimately define the psychological architecture of the twenty-first century.

What Must Remain Human?

History repeatedly shows that civilisations eventually create systems more powerful than the individuals operating within them. Industrial systems transformed labour. Financial systems transformed economies. Media systems transformed perception. Artificial intelligence may now transform cognition itself.

The significance of Magnifica Humanitas therefore extends far beyond religion or technology policy. A global public discourse has quietly begun around one of the defining questions of the century: which human capacities must remain distinctly human in an age increasingly shaped by synthetic intelligence?

Clear answers may not emerge immediately. Civilizations rarely understand the full consequences of transformation while living through them. The importance of this moment lies elsewhere. Humanity has finally begun asking the deeper question aloud.

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Editor’s Note: Ahead of Google I/O 2026, Saliya Weerakoon reflects on Alphabet’s latest earnings call not simply as a financial event, but as a marker of a broader civilizational shift. His concern is not the familiar fear that artificial intelligence will become too powerful. It is the quieter possibility that human beings may surrender too much of their own agency, memory and imagination in exchange for convenience.

❝ The danger is not artificial intelligence becoming excessively intelligent. The deeper danger is natural intelligence becoming increasingly unnecessary.

I was 23 years old when I received my first personal email address. Like millions entering the early internet age, I began with Yahoo and Hotmail. Back then, an email address felt almost ceremonial, a small digital passport into a new world. You chose it carefully, memorised passwords and waited patiently for dial-up connections. The internet still carried friction.

Then, in 2004, I moved to Gmail. At the time, it felt less like changing an email provider and more like stepping quietly into the future ahead of everyone else. Google had not yet become the giant it would later become, though there was already a strange confidence surrounding it. The interface was clean. The speed felt different. The architecture itself felt intelligent long before artificial intelligence became fashionable language.

Twenty-two years later, I rarely hear anyone speak about Yahoo or Hotmail anymore. One baby boomer friend still uses an AOL address, like an old photograph on the wall of an ancestral home. The world moved on. More importantly, the world moved into Google.

From Search Engine to Environment

On April 29, 2026, during Alphabet’s first-quarter earnings call, Sundar Pichai stood calmly before the world and narrated the next stage of technological civilisation through financial results. Rumours had circulated not long ago about the possible end of his tenure. Yet there he was again, composed and measured, speaking less like a corporate executive and more like the steward of a rapidly expanding ecosystem touching billions of lives every hour.

Google Services revenues increased 16% to $89.6 billion, led by 19% growth in Google Search & other, 19% growth in subscriptions, platforms and devices, and 11% growth in YouTube ads. Google Cloud revenue accelerated by 63%, reaching $20.0 billion, while Alphabet’s consolidated revenues rose 22% to $109.9 billion. Sundar Pichai also noted that Google’s paid subscriptions had reached 350 million, led by YouTube and Google One, while Nano Banana 2 reached one billion generated images in nearly half the time of Nano Banana 1. He spoke about agents, agentic coding, autonomous systems and the next frontier of intelligence.

To investors, these were extraordinary numbers. To me, they sounded like signals of something much deeper unfolding beneath the quarterly reporting cycle. This story is larger than Larry Page, Sergey Brin or Pichai himself. It extends far beyond another predictable apocalypse narrative surrounding artificial intelligence.

AI is here to stay. It will improve medicine, optimise traffic, reduce waste, personalise education, accelerate scientific discovery and possibly help prevent future conflicts. Every technological revolution in history has carried both advancement and consequence. Human beings eventually adapt to both. The machines are not evil. Corporations are rarely as simple as heroes or villains. Human beings themselves have always defined good and bad through lived experience, fear, ambition and survival.

The true antagonist is far quieter. It is the gradual surrender of human agency in exchange for frictionless existence. Human beings have always loved delegation. I am human, vulnerable, and I love delegation.

The Seduction of Convenience

We delegated farming to machines, navigation to GPS, memory to smartphones and attention to algorithms. Slowly and almost beautifully, humanity is now beginning to delegate thought itself. That was not something I wanted to give away completely.

The world is in a reconfiguration, but the transition does not arrive dramatically. The surrender arrives through convenience, comfort and efficiency. History shows that the deepest civilisational shifts rarely arrive through force. They arrive through seduction: the seduction of rewards, results, hope, fear, jealousy and optimisation.

Listening carefully to Pichai’s earnings call, I realised the deeper strength of the Google ecosystem is not technological dominance alone. Its true power lies in behavioural integration. Google no longer exists merely as a company people use. It is becoming an environment people inhabit. I understand this personally. Eventually, if I move deeper into Google’s health devices and hardware, I would touch the Google ecosystem every second of life, even in sleep.

Search thinks alongside you. Maps guide movement. Gemini writes and summarises. YouTube studies psychology through patterns of attention. Android follows movement through daily life. Google Photos remembers moments with greater consistency than human memory itself. Workspace increasingly organises professional cognition. Most people no longer remember phone numbers. Many struggle to travel without navigation systems. Birthdays, memories, schedules, conversations and even moments of silence increasingly pass through digital mediation first. The ecosystem no longer sits outside human experience. It increasingly positions itself between the human being and reality.

That is where the real question begins: what happens when human beings remove every difficulty required to remain human?

What Friction Teaches

Growing up, my parents taught me something modern systems increasingly avoid. Friction mattered. Failure mattered. Waiting mattered. I was four years old when I first learned to write words on a small tablet-sized blackboard with white chalk. The handwriting was imperfect. The process was slow. Learning required repetition, embarrassment, boredom and failure.

Natural intelligence emerged through struggle: through reading countless books whose meanings only became clear years later; through demanding teachers, examination failures, workplace betrayals, uncertain decisions and painful consequences. It emerged through frustration, silence, heartbreak and long periods when answers refused to arrive quickly. As a child, I learned imagination through boredom. Today, stimulation arrives before silence has a chance to speak.

Real intelligence was never frictionless. It was forged slowly through resistance.

When Assistance Becomes Dependency

Today, an entirely different architecture is emerging. A child uncomfortable with boredom reaches immediately for stimulation. A student facing difficulty summons AI assistance before wrestling with uncertainty. A politician models speeches through predictive systems. A CEO increasingly relies on machine-generated strategic interpretation rather than instinct formed through lived consequence.

At first glance, this appears like remarkable progress. In many ways, it truly is. Cities may become cleaner. We may end up with calmer traffic, predictive healthcare, lower crime rates, optimised nutrition and wars mediated by intelligent systems capable of simulating outcomes beyond human processing speed. Human civilisation may eventually become astonishingly efficient.

People will embrace this world because human beings naturally prefer comfort over difficulty. Speed, optimisation and predictive certainty create emotional reassurance. Frictionless systems feel safe. Yet beneath optimisation, another process quietly unfolds. Human tolerance for ambiguity weakens. Patience deteriorates. Memory externalises. Instinct dulls. Independent imagination narrows. Creativity risks becoming synthetic recombination rather than lived originality.

Even suffering, one of humanity’s oldest teachers, slowly loses relevance inside predictive systems designed to minimise discomfort before it appears. The danger is not artificial intelligence becoming excessively intelligent. The deeper danger is natural intelligence becoming increasingly unnecessary.

History repeatedly shows that human capacities left unused eventually disappear. This is why the future conversation cannot remain limited to innovation, regulation or corporate competition. The deeper conversation concerns preserving human depth within intelligent systems.

Preserving Human Depth

Humanity does not need to reject AI. Fear alone will solve nothing. The challenge is resisting complete surrender. There is a difference between assistance and dependency. There is a difference between optimisation and meaning. There is a difference between reducing friction and removing the conditions necessary for human growth itself.

Ironically, the more perfect systems become, the more imperfect human beings may quietly feel within them. A civilisation may soon know everything instantly, yet understand itself less deeply than ever before. Living inside Google may be the deeper reality unfolding beneath the product launches, quarterly numbers and extraordinary technological breakthroughs.

The world does not lack intelligence. It is screaming for orientation and purpose.

The Trump-Xi Summit in Beijing May 14-15, 2026

Stability, or the Appearance of Stability?

On May 12, econVue convened a subscriber panel ahead of the Trump-Xi Summit in Beijing. The panel asked whether the meeting would produce a meaningful reset in US-China relations, or simply a pause in a more profound strategic confrontation.

The discussion featured Christopher Balding, CEO of Siphtor and senior fellow at the Henry Jackson Society; Brian McCarthy, managing principal and chief strategist of Macrolens; and Eric Huang, senior fellow at Hale Strategic and an expert on US-China-Taiwan geopolitics. The conversation was moderated by Lyric Hughes Hale, editor-in-chief of econVue and host of The Hale Report.

The central question became clear early in the discussion: Will the summit produce real stability, or merely the appearance of stability?

Two Leaders, Two Centralized Systems

Panelists agreed that both Washington and Beijing are now operating through unusually centralized leadership systems. Xi Jinping’s China has become far more disciplined around one-man rule, while Trump’s second term has placed China policy in the hands of a smaller and more loyal circle. Christopher Balding argued that Xi’s advisors should not be understood as independent policy voices in the American sense, while Eric Huang described the current CCP system as one of “singular leadership under Xi Jinping.”

Taiwan: The Issue No One Wants on the Table

Taiwan emerged as one of the most sensitive issues. Huang warned that Taiwan does not want to become a topic at the summit. A warmer US-China relationship can sometimes reduce cross-strait tensions, but only if Taiwan is not treated as a bargaining chip. Brian McCarthy said the most important signal to watch would be any shift in US language on Taiwan, especially if Washington moved from not supporting Taiwan independence to actively opposing it.

Iran, Hormuz, and China’s Leverage

The panel also examined how the Iran conflict and the Strait of Hormuz could reshape the summit. McCarthy argued that markets are now focused heavily on Iran and energy risk, and that any real movement toward de-escalation may have to run through Beijing. Karim Pakravan, joining from the audience, emphasized that Iran’s relationship with China is transactional: Beijing has leverage over Tehran, but that does not mean China wants the same outcome as Washington.

Strategic Decoupling Moves From Theory to Policy

Strategic decoupling was another major theme. McCarthy described the emerging US approach as one that allows some continued trade in non-strategic goods while seeking to reduce dependence on China in critical sectors. Balding noted that supply chains are moving out of China, but that the biggest beneficiaries are often countries such as Mexico and Vietnam, rather than the United States. The harder task is securing pharmaceuticals, metals, medical devices, semiconductors, transformers, rare earths, and other critical inputs.

AI and the Battle for Technology Ecosystems

AI added another layer to the discussion. Huang argued that China is advancing quickly in business applications of artificial intelligence and intends to build a competing technology ecosystem. Taiwan sits at the center of that contest, both through TSMC and through the choices its firms will make between US and Chinese systems.

Allies Fear Both Abandonment and Entanglement

The panel also touched on Japan and allied confidence. Richard Katz, joining from the audience, noted that Japan fears both abandonment and entanglement: being left exposed by a US-China deal, or being pulled into conflicts driven by unpredictable US policy.

China’s Economy Beneath the Headline Numbers

On China’s economy, Balding and McCarthy both questioned the usefulness of headline GDP figures. McCarthy argued that China is barely growing in nominal terms, while Balding pointed to flat domestic car sales as one sign that official data may not reflect the underlying reality.

What to Watch Now

The discussion closed with a broader warning from Iraj Abedian: economies require predictability, and predictability has gone out of the picture.

What to watch now is not only what Trump and Xi say publicly, but what they avoid saying. The most important signals may come from the omissions: Taiwan, Iran, rare earths, AI controls, dollar dominance, and the pace of strategic decoupling.

As Christopher Balding put it, the key may be watching “what isn’t said.”

Audience Poll:

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The Trump-Xi Summit in Beijing May 14-15, 2026

You are invited to an econVue virtual panel discussion on the upcoming Trump-Xi Summit, scheduled to take place in Beijing on May 14–15. The conversation will be moderated by Lyric Hughes Hale.

The meeting comes at a critical moment for US-China relations. Trade tensions, technology restrictions, rare earth dependencies, Taiwan, sanctions, and the widening geopolitical fallout from the Iran conflict are all converging ahead of the summit. Whether the meeting produces a genuine reset or merely a diplomatic pause, markets, policymakers, and allies will be watching closely for signs of how Washington and Beijing intend to manage competition in a more fragmented global economy.

👥 Panelists

Our panel will bring together three sharply informed perspectives on China: Christopher Balding, who spent much of his academic career in the PRC; Brian McCarthy, who analyzes China from a Wall Street and global macro perspective; and Eric Huang, Hale Strategic senior fellow, joining us from Taipei.

Christopher Balding is CEO of Siphtor, a financial data provider based in California, and a senior fellow at the Henry Jackson Society. He spent nine years at Peking University HSBC Business School in Shenzhen and later taught at Fulbright University Vietnam. His work focuses on China’s economy, financial markets, technology sector, and corporate governance. He is widely followed on X as @BaldingsWorld.

Brian McCarthy is the Managing Principal and Chief Strategist of Macrolens LLC. A Harvard-trained economist, he has held senior roles at Alliance Capital, AIG, Barclays, UBS, RBS, and Emerging Sovereign Group, where he managed a China-focused macro hedge fund. He founded Macrolens in 2018 to provide institutional investors with independent research on global macro trends, China, and US-China financial dynamics.

Eric Huang is a senior fellow at Hale Strategic and a recognized expert on US-China-Taiwan geopolitics. He previously represented Taiwan’s Kuomintang Party in Washington, DC, where he worked at the intersection of cross-strait relations, US policy, and Taiwan’s domestic political debate. He is frequently quoted in leading global media, including The Economist, BBC, and Bloomberg. He holds degrees from Johns Hopkins SAIS, Harvard Kennedy School, and MIT.

Lyric Hughes Hale is editor-in-chief of econVue and host of The Hale Report. A longtime observer of the Chinese economy and US-China relations, she will moderate the panel and audience Q&A.

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❝ The unhappy scenario is one in which confidence in the dollar is lost abruptly…I worry about risks to financial stability that could lead to a disorderly migration away from the dollar before adequate alternatives exist.
— Barry Eichengreen

Episode Details

Guest: Barry Eichengreen
Book: Money Beyond Borders: Global Currencies from Croesus to Crypto
Host: Lyric Hughes Hale, Editor-in-Chief of econVue
Producer: Sam Fu
Recorded: Friday, May 1, 2026 | 48 minutes

Episode Overview

Barry Eichengreen joins econVue editor Lyric Hughes Hale on the The Hale Report to discuss his new book, Money Beyond Borders: Global Currencies from Croesus to Crypto. The conversation ranges from ancient coins and Spanish silver to sterling, dollar dominance, gold, stablecoins, and central bank digital currencies. His book spans centuries, from the history of money, to the state of US dollar dominance, and the future of digital money.

Eichengreen does not believe that the dollar is about to be replaced by the euro, renminbi, gold, or crypto. Instead, he warns that geopolitical fragmentation, US debt, sanctions, pressure on Federal Reserve independence, diminished faith in institutions, and new forms of market fragility could erode trust in the dollar system faster than alternatives can develop.

The result would not be a clean transition to a new reserve currency, but a more unstable monetary system, marked by increased reserve diversification, parallel payment systems, digital money, gold accumulation, and echoes of the 1930s.

About Our Guest

Barry Eichengreen is one of the world’s leading economic historians and monetary scholars. He is Distinguished Professor of Economics and Professor of Political Science at the University of California, Berkeley, where he holds the George C. Pardee and Helen N. Pardee Chair. He is also affiliated with the National Bureau of Economic Research and the Centre for Economic Policy Research, and previously served as Senior Policy Advisor at the International Monetary Fund.

He is a regular columnist for Project Syndicate and a past president of the Economic History Association. His most recent book is Money Beyond Borders: Global Currencies from Croesus to Crypto.

🎤 Topics and Key Moments

Money Beyond Borders: Money That Travels
The conversation begins with one of the book’s central ideas: currencies become international through trade before they become tools of finance, from ancient coins to Spanish silver to the US dollar.

The Life Cycle of Global Currencies
Eichengreen discusses whether reserve currencies rise and fall according to a recognizable life cycle, and whether the dollar’s century-long global role is entering a new phase.

The Dollar Under Stress
The dollar remains dominant, but Eichengreen argues that its strength depends on more than markets. It also rests on political stability, rule of law, Fed independence, and alliance trust.

❝ International currency status has economic and financial prerequisites, but it also has important political prerequisites.

Gold, Oil, and War
The conversation explores why central banks are buying gold, how sanctions are reshaping reserve management, and how Eichengreen sees events in the Middle East.

❝ I do think events in the Middle East are dollar negative and renminbi positive.

China, Silver, and Hong Kong
Eichengreen explains why the renminbi lags far behind the dollar, what China’s silver standard period reveals about global money, and why Hong Kong’s dollar peg depends on unusually specific institutional conditions.

Crypto, Stablecoins, and CBDCs
The discussion turns to Bitcoin, stablecoins, tokenized bank deposits, and central bank digital currencies, including Eichengreen’s warning that stablecoins could create new forms of Treasury-market fragility.

❝ We know from history that something that is safe and liquid today can become unsafe and illiquid tomorrow.

Monetary Fragmentation and the 1930s Scenario
The episode’s darkest warning is not that the dollar will be replaced overnight. It is that confidence in the dollar could be lost before alternatives are ready.

❝ The unhappy scenario is one in which confidence in the dollar is lost abruptly.

Policy and Practical Takeaways
To preserve the dollar’s role, Eichengreen argues that the United States must protect Federal Reserve independence, address its fiscal trajectory, maintain institutional credibility, and reassure allies.

Mentioned in This Episode

• Barry Eichengreen, Money Beyond Borders: Global Currencies from Croesus to Crypto
  Eichengreen’s newest book and the focus of the episode.

• Barry Eichengreen, Exorbitant Privilege
  Referenced through the discussion of dollar dominance and the advantages and burdens of the dollar’s global role.

• Federal Reserve Act of 1913
  Discussed in relation to the creation of the Federal Reserve and the early use of the dollar in international trade finance.

• GENIUS Act and CLARITY Act
  The GENIUS Act, signed into law in 2025, created the first federal framework for payment stablecoins, including rules on reserves, redemption, supervision, anti-money-laundering obligations, and sanctions compliance. The related CLARITY Act, still under debate in Congress, addresses the broader digital-asset market structure by clarifying regulatory jurisdiction between the SEC and CFTC.

• Dodd-Frank Act
  Discussed in relation to post-global-financial-crisis regulation, stress tests, and capital requirements.

• Smoot-Hawley Tariff Act
  Referenced as part of the 1930s breakdown in trade and global liquidity.

• Project mBridge
  The cross-border central bank digital currency project involving China, Hong Kong, Thailand, the UAE, and Saudi Arabia.

• Simon Kuznets’s “four kinds of economies” line
  A memorable reference to “developed, developing, Argentina, and Japan,” used to explain Japan’s unusual place in the global economy.

• John Greenwood
  Referenced in connection with the Hong Kong dollar peg. Greenwood is widely associated with the design and defense of Hong Kong’s modern currency board system, which restored the Hong Kong dollar’s fixed link to the US dollar in 1983. In the episode, his views are discussed in relation to the peg’s automatic convertibility and rule-bound credibility, as a comparison to stablecoin protocols.

• Paul Warburg
  Discussed as a central figure in the creation of the Federal Reserve and Eichengreen’s chosen dinner guest.

  ---

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Are we overreacting, or not responding enough to recent events?

The news cycle follows constant crisis: conflict in the Middle East, rising tensions in Asia, a deepenin…

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The recent meeting in Beijing between Xi Jinping and KMT Chairwoman Cheng Li-wun marks a significant recalibration of cross-strait optics…

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Guest: Arthur Laffer
Title: The Other Side of Taxation: Incentives
Host: Lyric Hughes Hale
Producer: Sam Fu
Recorded: Mon March 17, 2026 · 57 minutes

Art Laffer on Incentives, Policy Design, and the Future of the Global Economy

My conversation with Arthur Laffer explores a central question in economic policy: how incentives—shaped by taxation, trade, and monetary systems—drive outcomes across the global economy. What follows is a short guide to some of the key ideas discussed in the episode.

About our Guest

Arthur Laffer is best known for the Laffer Curve—the idea that beyond a certain point, higher tax rates can discourage work, investment, and entrepreneurship, ultimately reducing both economic activity and government revenue. His work helped shape the tax reforms of the Reagan era and continues to influence debates about taxation and growth today. Trained at the University of Chicago and long engaged at the intersection of academic theory and public policy, Laffer has spent decades focused on a central question: how incentives shape economic behavior.

In this conversation, Lyric Hughes Hale speaks with Arthur Laffer about how those ideas apply today—at a moment when policy decisions are reshaping the structure of the global economy.

🎤 Topics and Key Moments

Laffer’s framework is deceptively simple:

“ Incentives are what economics is all about.”

From this starting point, the conversation moves across taxation, trade, healthcare, and monetary policy—but consistently returns to the same underlying principle: policy does not merely allocate resources, it shapes behavior, often in ways that are not immediately visible.

This is something that, in Laffer’s telling, policymakers either recognize—or fail to recognize—at critical moments.

One of the more striking parts of our discussion—and one that aligns with broader questions about structural imbalances in the global economy—was Laffer’s critique of tax-exempt institutions.

He argues that exemptions, particularly in healthcare and education, have created significant imbalances in how capital is allocated. Resources flow not necessarily to their most productive use, but to sectors where tax treatment is most favorable.

“We could get rid of the income tax… just by eliminating those exemptions.”

The point is not simply fiscal. It is structural. When policy privileges certain sectors, it shapes the direction of investment, the cost structure of services, and ultimately the behavior of institutions.

On trade, Laffer offers a perspective that reflects both classical theory and contemporary reality.

“No one wins from a trade war—but they don’t all lose the same.”

That distinction reflects a shift from theory to application. Trade relationships are no longer evenly balanced, and policy tools—especially those executed through executive authority—can be deployed quickly and strategically.

Here, Laffer’s experience across administrations becomes instructive. He describes Ronald Reagan as unusually open to economic reasoning—willing to adopt ideas such as broad-based tax reform and energy decontrol, even when they ran counter to internal resistance. Policy, in that context, was designed with a clear view of incentives.

That same emphasis on execution appears in his description of Donald Trump—not in ideological terms, but in operational ones. As Laffer recounts, the ability to move from concept to action quickly can itself shape outcomes.

“President Trump doesn’t sit there and study a subject for 300 years… he makes a decision and it’s done.”

Whether one agrees with the policy or not, the observation points to something fundamental: the timing and clarity of decisions can be as important as the ideas themselves.

In discussing energy policy, Laffer points to earlier moments when shifts in policy reshaped entire markets. As he noted at the time—in a New York Times op-ed during the Reagan administration—measures such as oil price decontrol were not simply about prices, but about changing the incentives that governed production and investment decisions across the energy sector.

The lesson is consistent: policy works through the signals it sends—and those signals propagate across the system.

The conversation then turns to healthcare, where Laffer identifies a structural challenge rooted in the absence of information.

Without price transparency, markets cannot function effectively. Consumers cannot make informed choices, and providers face limited pressure to compete on cost or quality. The result is a system in which prices rise, but signals remain unclear.

Here again, the issue is not simply cost, but structure. When information is obscured, incentives shift—and behavior follows.

From there, the conversation turned to monetary policy, where Laffer draws a sharp historical contrast.

Prior to the creation of the Federal Reserve in 1913, he describes a system in which money was largely private—issued by banks, backed by their balance sheets, and subject to market discipline. Bank-issued notes circulated alongside one another, with their value tied to the credibility of the issuing institution.

From his perspective, the transition to a centralized system marked a profound shift.

“Starting in 1913, all hell broke loose.”

Laffer contrasts this with the earlier era of commodity-linked and privately issued money, which he describes as one of long-run price stability. While that period included cycles of inflation and deflation—including during wartime and financial disruptions—the overall price level remained broadly stable over extended periods, rather than exhibiting the persistent upward trend that has characterized much of the modern era.

It is in this context that he views the emergence of digital currencies:

“Stablecoins are the private market’s attempt to replace government money.”

Much like earlier bank-issued currencies, instruments such as Tether are designed to provide a stable medium of exchange, backed by underlying assets and governed—at least in principle—by market mechanisms.

This perspective places current developments within a longer intellectual lineage—one that extends through Laffer’s own work to that of Robert Mundell. Mundell, often described as the father of the euro, argued that the world had not yet gone far enough—that a truly international currency was still needed.

Laffer suggested that we may be closer to that trajectory than many assume—a market-driven, technologically enabled step toward a more global monetary system.

If there is a single thread that runs through this conversation, it is that policy design shapes incentives—and incentives shape outcomes. Taxes are simply negative incentives.

Policy structures evolve quietly, and become embedded in systems that appear stable, even beneficial in the short term. Over time, they influence behavior in ways that are difficult to reverse.

At a moment of structural change in the global economy, the question is whether incentives are aligned with the most beneficial global policy outcomes. And the answer is that we have a long way to go.

📚 Related Reading & References

Taxes Have Consequences: An Income Tax History of the United States, coauthored by Arthur B. Laffer, Brian Domitrovic and Jeanne Sinquefield

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💬 What we are seeing is not the end of globalization, but the emergence of a new geostrategic system of alliances—more connected, not less.

If you missed our panel last week, or want to revisit it in light of Japanese Prime Minister Sanae Takaichi’s visit to Washington this week –as well as the postponement of the Trump-Xi Summit, the replay of our March 11, 2026 panel is posted above.

Our panel asked a central question: Are we witnessing the emergence of a new Monroe Doctrine, and what are its geographic boundaries? Panelists include Dr. R. Evan Ellis, Dr. Joshua W. Walker, and econVue Senior Editor Eric Huang.

Why This Matters Now

Today, President Trump will meet with Japanese Prime Minister Sanae Takaichi as markets and policymaker reassess global risk. Japan’s Maritime Self-Defense Force is one of the most capable naval forces in the world, underscoring the strategic weight of the US-Japan alliance.

US actions in Mexico and Venezuela, and the escalating crisis with Iran, could have profound implications for security strategy and trade across Latin America and the Indo-Pacific—including Taiwan.

Key Takeaways

Evan Ellis (Latin America)

“This administration increasingly sees engagement in the Western Hemisphere not as co-development, but as an extension of U.S. homeland security.

Joshua Walker (Japan)

“Japan is our canary in the coal mine—no country needs the U.S. alliance more, but none is watching its limits more closely.

Eric Huang (Taiwan)

“Economic security is no longer a supporting pillar—it is the foundation of U.S. global strategy, and that is where Taiwan becomes indispensable.

Governments across Latin America, Japan, and Taiwan are reassessing assumptions about sovereignty, deterrence, and alliance commitments as the implications of recent events ripple across both the Western Hemisphere and the Indo-Pacific. Recent developments are sending geopolitical shockwaves far beyond the regions directly involved, and China’s leadership is no doubt recalibrating its options after US strikes in Iran.

Are we seeing the early contours of a new Monroe Doctrine in US strategic thinking — one that extends beyond the Western Hemisphere — as Washington navigates a more contested global order?

Introductory remarks by our speakers were recorded, but the Q&A session was off the record.

↳ Panelists

R. Evan Ellis
Research Professor of Latin American Studies at the US Army War College Strategic Studies Institute, specializing in China’s role in the Western Hemisphere.

Joshua W. Walker
President & CEO of Japan Society; former Eurasia Group executive and U.S. government official focused on alliances and Indo-Pacific strategy.

Eric Huang
Geopolitical strategist and econVue Senior Editor specializing in US–China–Taiwan relations and strategic technology competition.

It was a pleasure moderating this panel. My thanks to our panelists, and to our audience, who posed excellent questions. Join us next time to be part of the discussion.

–𝓁𝓎𝓇𝒾𝒸 💬

Editor-in-Chief, econVue

^📍Chicago

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Dear Readers,

Last month, we lost Karen Petrou. I wanted to reshare a conversation I had with her five years ago, a podcast we recorded in March 2021.

I first contacted Karen after reading her excellent reports at Federal Financial Analytics. She did me the honor of reading and commenting on mine. I planned to be in Washington for an event where she was speaking, and we agreed to meet after her speech. As I sat listening in the audience, I noticed that she had a dog at her side. Only then did I realize she was blind.

I could not believe that she was able to digest and analyze the enormous amount of information required for her reports, and I never complained again about having too much to read. I learned so much from her, especially from her book on Federal Reserve policy and inequality, which we discussed during this podcast five years ago, and personally from her remarkable ability to make what she did seem effortless.

It was a great privilege to know Karen. She never let her blindness keep her from the truth. Her work, including as Board Chair of Foundation Fighting Blindness, mattered to so many.

–𝓁𝓎𝓇𝒾𝒸 💬

About this Podcast

The March 2021 Hale Report podcast is my interview with Karen Petrou, discussing her new book, Engine of Inequality: The Fed and the Future of Wealth in America. Just published, it is already the #1 book in its category on Amazon.

Ms Petrou is a well-known and influential commentator on monetary policy and banking regulation, and is managing partner at Federal Financial Analytics in Washington DC. We have often included links to her analysis in our newsletter, and I have had the great pleasure of meeting her both in Chicago and Washington. 

That was not possible this time of course, so I interviewed Ms Petrou remotely. She made several key points: the Fed is responsible for the record rise in inequality between 2010 and 2016, and it continues to look for data in all the wrong places. Other potential countermeasures to inequality such as education simply take too long.

She strongly believes that the Fed should have a third mandate in addition to employment and price stability, economic equality. I've included excerpts from her remarks below, but hope that you will find time to listen to our half-hour podcast via the link below.  I always hope our listeners will learn something they didn't know before, or hadn't thought about in that way. I think this interview accomplishes just that.

Excerpts

❝ I think, sadly, the data the Fed uses are often way off base, because they're averages and aggregates. And in a highly unequal country, as the United States has become, that's very misleading.

❝ Something happened in 2010 and income and wealth inequality grew far worse, far faster than ever before. And the one thing that clearly changed, starting in 2010, after the Great Financial Crisis's worst effects were behind us, was new monetary and regulatory policy. And that's what this book is about. What happened in 2010, and how could it have made us so much less economically equal and, as you said, what can we now do to change?

❝ Think about it though, economic inequality, what's it about? It's about income and wealth. That's the engine that makes us more or less equal. But what is its fuel? In economic inequality, the fuel is money. There is no agency in the United States with the power over money other than our central bank. That's what monetary policy is all about. Bank regulation, what is it about? It's about who has the money, who gets the money, how much does it cost to get the money.

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💬 We used to live in a kind of high-trust globalization. What we have now is a world of great connectivity — but high-fear globalization.

🎙️Episode Details

Guest: Steve Clemons
Title: The Man About Town in a Fragmenting World
Host: Lyric Hughes Hale
Producer: Sam Fu
Recorded: Mon Feb 16, 2026 · 60 minutes

Episode Overview

What happens when the era of high-trust globalization gives way to something more conditional, more fractured—and far less certain?

On this episode of The Hale Report, Lyric Hughes Hale speaks with journalist and global policy convener Steve Clemons, a longtime observer of power, who has spent decades moving between Washington, journalism, and the world’s major geopolitical forums—from Tokyo and Brussels to Davos.

Clemons did not come to journalism through the usual route. Trained in economics, policy, and U.S.–Asia relations, and shaped by a childhood spent on U.S. military bases abroad, he built a career convening conversations among policymakers, business leaders, and thinkers across ideological and national lines. That perspective informs a wide-ranging discussion of how global alliances, domestic politics, technology, and journalism itself are being reshaped in real time.

From the legacy of Chalmers Johnson’s developmental state to Japan’s political transformation under Prime Minister Sanae Takaichi, from NATO’s evolving role to the growing power of Big Tech, Clemons argues that the world is reorganizing into more conditional and ad hoc arrangements. The United States remains central—but no longer unquestioned.

At home, he sees a Washington defined by internal fractures and performative politics, while globally the risk of conflict may arise less from deliberate strategy than from miscalculation in an increasingly unstable system.

Underlying the entire conversation is a quieter theme: the role of journalism in such a moment. In an era of fragmentation and personality-driven media, Clemons offers a reminder that the journalist’s task remains what it has always been—to illuminate reality, not become part of the spectacle.

About our Guest

Steve Clemons is a journalist, policy strategist, and global convener. He serves as Editor-at-Large of The National Interest and is the founder of Widehall, an international forum convening leaders across policy, business, and media.

Over the course of his career, Clemons has held senior roles at The Atlantic, The Hill, and Semafor, and founded the influential Washington policy blog The Washington Note. He has worked closely with leading figures in U.S. foreign policy and international economics and has been recognized internationally for his contributions to transatlantic understanding.

He is widely known for bringing together diverse voices across ideological and national divides to foster substantive global dialogue.

Topics Discussed

• The formative influence of growing up abroad and entering journalism through policy and economics

• Chalmers Johnson, industrial policy, and lessons for China and the United States

• Japan’s political evolution and the leadership of Prime Minister Sanae Takaichi

• Remilitarization of Japan and Germany post-WW2

• The shift from “high-trust” to “high-fear” globalization

• NATO, conditional alliances, and Europe’s emerging strategic autonomy

• Washington’s internal political fractures and performative partisanship

• Big Tech’s growing structural power and parallels to the robber-baron era

• AI, surveillance, and the future of privacy

• The rising risk of accidental conflict in a fragmented world

• The coming midterm elections in the US

• Journalism’s credibility crisis—and the importance of remaining neutral, factual, and accountable

🎤 Key Moments

❝ Unconditional alliances are over. They are going to be more conditional and ad hoc.

❝ Both parties are an exercise in the study of schizophrenia.

❝ I worry more about escalation, miscalculation, and accident than deliberate war.

❝ Journalists are not the story. They should never be the story.

📚 Related Reading & References

• Chalmers Johnson — MITI and the Japanese Miracle

• Graham Allison — Essence of Decision

• Thomas L. Friedman — The Lexus and the Olive Tree

• Brad Smith — Tools and Weapons: The Promise and the Peril of the Digital Age

• George Orwell — 1984

• Richard Vague — The Banker Who Made America: Thomas Willing and the Rise of American Finance

💬 Join the Conversation

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🎙️ About Our Host

📍 Chicago

Editor’s note: Recent changes inside China’s military have prompted renewed debate about command authority, political control, and the country’s longer-term strategic trajectory. In this article, eco…

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