The Republic-Preparing for AI Counterrevolution

By 

Michael Solon is a Senior Fellow at the Hudson Institute.

The backlash against artificial intelligence is not the first time Americans have tried to strangle their own prosperity.

Since the fall of the Roman Empire mankind had known only stagnation – living no better than his ancestors. With the genesis of a proto-capitalism, tremendous efficiencies began to arise through investments and machinery making specialization of labor possible.  As virtually every necessity and luxury of life plummeted in cost, this awakening of remarkable productive forces delivering broad abundance should have produced cheering in the streets.

Instead, gnashing of the teeth resulted as new methods of production pushed the old producers into the dustbins of history. Instead of rational analysis that would have endorsed these changes where efficiency of scales and lower costs required ever larger production models, a backlash developed not to the new incomes but to the dramatic changes in every corner of the society and specifically against “big” corporations and the “gilded” rich. Instead of celebrating this newfound income and wealth, politicians, pushed by the losers of the creative destruction, sought to constrain the beast, a progressive concept memorialized by the “Man Controlling Trade” statue in front of the Federal Trade Commission.

As artificial intelligence approaches or crosses the lines of agentic, artificial general intelligence or superintelligence by whatever definition is used, similar political backlashes can be anticipated as those of the late 1800s. Today, AI’s transformation raises similar questions in terms of obsolete producers and job loss. How will that manifest itself into political reaction? How will a much larger and empowered federal government react? And, how will this impair America’s embrace of our next technological revolution?

While this situation mirrors how Progressive movements responded to the Industrial Revolution, new developments offer hope. First, this is not America’s first time at the tech-change rodeo, and we have a history of ultimately embracing change.  Secondly, creation in America’s past technological revolutions far surpassed their destruction. Workers had to change jobs, but their income and consumption always rose. Third, comes experience.  Today’s Wall Street is not our grandfather’s.  In 1900, broad stock ownership was virtually nonexistent, with the vast proportion held by banks and corporate families.1 But by 1990, half of all households held equities directly and indirectly and today roughly 58 percent do.2 Awakening these millions of quiet investors and retirees could provide the key leverage to blocking a repeat of the worst excesses of the next Progressive Movement.

In considering AI’s possibilities, it is hard to imagine any previous inventions matching its potential benefits, but Andrew Carnegie’s steel may offer some parallels. With Carnegie’s embrace of creative destruction captured in his “what can we throw away this year”, he slashed the price of steel from $160 a ton in 1875 to $17 a ton by 1898 — efficiency gains paralleling Moore’s Law.3 His savings wrought the steel rail across the West and traversed gorges and gullies with steel bridges, where railroad miles totaling 30,000 before the Civil War surged to 164,000 by 1890 and 254,000 by 1916. His affordable steel transformed vast villages of five story tenement houses into ten and even 55 storied skyscrapers, such as the Woolworth Building of 1911.4 His metals also forged the “New Navy” that rose from roughly the 12th largest in 1870 to 5th largest by 1900 and won major naval engagements in the Spanish-American War.5

From Carnegie’s creation along with the contributions of Cornelius Vanderbilt, J.P. Morgan and other titans of the so-called Gilded Age, America enjoyed an unprecedented real GDP growth of 297 percent from 1865 to 1900. America’s population surged from 1870 to 1890 by 24 million — the equivalent of an extra Florida today — with 14 million new immigrants, yet real per capita income still surged 83 percent.6 By the 1890’s, the US economy was the largest, its per capita income the greatest and its manufacturing economy second to none.

None can claim these unsurpassed gains flowed only to the rich. Real wages grew by 62 percent from 1865 to 1900 with another 12.6 percent in the next fifteen years. Real wages of manufacturing workers almost tripled in real terms, growing by 189 percent from 1860 to 1915. Even as the number of farmers grew by 69 percent and the number of farms quintupled from 1850 to 1900, the real per capita income of farmers rose 65 percent.

As quantity of incomes rose, the quality of life dramatically improved. With life’s staples increasing in supply, improving in quality and dropping in price, life expectancy surged, infant mortality plummeted, and literacy rose even as the number of hours worked plummeted from 65 hours to 55 hours per week. Over four thousand millionaires arose with more than 80 percent self-made.7 Who could deem this economic expansion of unparalleled prosperity a failure?

Americans could and did.

With our world awakening from millenniums-old economic stagnation, the rapidity of industrialization, transportation, and urbanization compelled workers to shoot the rapids of a bewildering array of “here today, gone tomorrow” jobs that nonetheless increased consumption and national incomes. As agricultural employment fell by almost a third from 1800 to the Civil War and then by roughly another fourth by 1900, generations who had had their fathers and grandfathers’ jobs were compelled to learn skills unrelated to any of their ancestors.8 This combination of breath-taking creation plus unprecedented destruction of familiar institutions gave birth to the Progressive Movement that sought to undo the very factors generating this economic cornucopia.

One man embodied the Progressive Movement: William Jennings Bryan. As the Democrats presidential nominee in 1896, 1900, and 1908, he was a powerful orator known for coining the phrase “you shall not crucify mankind upon a cross of gold”. With the help of progressive Republicans, virtually every one of Bryan’s once radical views became law by 1913-14: a constitutional amendment creating the federal income tax; a constitutional amendment requiring popular vote for US senators; the creation of the Federal Reserve as an alternative to the gold standard; the Clayton Act strengthening the Sherman Antitrust Act of 1890; and the Federal Trade Commission added to regulate industry as the Interstate Commerce Commission (1897) ruled railroads.

As with the Industrial Revolution, when the AI revolution comes, the public focus will be on the losers rather than the gainers.  Whole sectors will undergo major restructurings. A young Sam Walton fresh out of law school could decide he hates law partnerships as much as billable hours and dramatically replace law firms using AI for research and more shoe leather lawyers at a fraction of the current cost. Long established law firms will disappear. College graduates who never chose paths safe from AI will find themselves without jobs in their restructured professions and sizable college debt. Together they will form a potentially powerful coalition of the harmed, turning to government for salvation.

Undoubtedly a progressive will arise as the next William Jennings Bryan, but who will play the role of populist Republicans joining the Progressive effort to rein in the free market? Recall that unlike when the Progressive efforts began, a federal government that was 2.8 percent of the economy in 1901 is nine times larger today, with far more tax, regulatory and investigatory power.9

In a recent book, Robert Bork Jr., the son of the great former federal judge Robert Bork Sr., identifies this generation’s populist Republicans who will determine our government’s reaction to the coming AI revolution. Claiming to protect a way of life, our workers, our children and freedom of speech from social media and AI, the Republican “conservative socialist” will involve legislators and regulators.

Of all the risk to AI, Mr. Bork rightly ranks antitrust legislation near the top. Historically, antitrust can be defined to prosecute virtually any economic activity and therefore can serve any goal. Antitrust could convert the US’s dynamic economy into one like stagnant Europe. A populist Administration could work with the EU to import their aggressive antitrust laws and regulations here. It could leave our tech community in a chase mode in the AI race against China.

Whether it is populist antitrust, taxes, or regulations, how can the AI sector manage policy makers who will react to destruction rather than the creation that comes from the AI revolution?

First, messaging must be more positive.  All we know about the future is based on the past, and our past has shown America’s fortune with technology. Referencing former technologies and technocrats can help people become more comfortable with technological change. Will AI change our world more than Edison did with the light bulb, than the Wright brothers did with the airplane, or than Henry Ford did with the automobile? Turn their questions into questions they must ponder. Reminding Americans of our history of technology with similar topline messages will get significant segments more comfortable. This is not America’s first experience in dramatic technological change.

In this regard, trust must be established by an undeniable fact:  in 1980, the UPI headline declared “More Workers Likely To Lose Jobs to Computers Shortly” yet 41 million new jobs were added, unemployment hit a low of 4 percent and real GDP averaged 3.2 percent annual growth from 1981 to 2000.10,11 AI technocrats must realize that history says the losses will be temporary while the gains will be broad and permanent.  Therefore, avoid talk about welfare and income support payments to compensate the losers. Instead, turn every potential talk about a negative future into a discussion about a positive past. Talk positively or don’t talk at all. When it comes to technological change, we did it before, we’ll do it again.

Next, the facts. Dramatic change is hardly a new notion nowadays but until the 1800’s, very little changed and only very slowly. When the share of US workers in agriculture dropped to 1.5 percent today from 75  percent in 1800, it ended a pattern going back roughly twelve thousand years.12 Today jobs are evolving and the rate is growing even faster. Compared to 1940, not only did 60 percent of our jobs not exist then, no occupational titles were even imagined for them.  Yet workers are winning more in the job creation than losing from the job destruction. Job Openings and Labor Turnover data since 2000 shows 5.1 million workers being “separated” from jobs every month but 5.2 million getting new jobs at the same time. Further, while 1.9 million of those separations are layoffs, 2.8 million or 55 percent are quits where the vast majority are choosing to leave for a a new job or a better life.13 The Internet is breaking the relationship between jobs and income generation. Globally, bloggers, influencers and online creators generate more income for themselves than the Hollywood film industry and three times as much as the music industry. Young people are not losing jobs to AI.  A recent Apollo Global Management report reviewed BLS data and concluded since the advent of ChatGPT, “there is no sign that AI is increasing unemployment among younger workers, and there is also no sign that young people or recent college graduates are having a harder time finding jobs at the moment than other demographics.”

Finally, experience. A large portion of the population will not be moved by AI benefits until it personally affects them.  To create a winning share of the population that accepts and protects AI from a progressive backlash, the massive number of Americans who own stocks directly and indirectly must be awakened.

Internet searches indicate Bill Gates owns perhaps $33 billion of Microsoft’s $3.3 trillion valuation. Warren Buffett owes about $140 billion of Berkshire’s $1 trillion valuation. Elon Musk owes roughly $175 billion of Tesla’s $1.3 trillion valuation. The fact that creators own billions while American investors hold trillions represents the greatest, most productive transfer of wealth the world has ever seen. This is not the Wall Street of Scrooge and J.P. Morgan, but far wealthier and far more dispersed in ownership. 72 percent of US domestically held stocks are held by pension plans, 401(k)s, individual retirement accounts and charitable organizations, or held by life insurance companies to fund annuities and death benefits.14 The mass democratization of corporate ownership has their own interest in protecting their share of their wealth.

Wakening them is hard, but two options exist. The first is to employ the same logic behind Google and other social media search engines. If searching for information on retirement savings, investment assets, or similar searches, these individuals would receive promotions to join an “investors protection coalition” or a similar pro-investors group, that could quickly build an organization which speaks on behalf of present and future retirees in protection of their assets. Not only could such a group defend against the coming legislative and regulatory onslaught of the next technology revolution, but it could also help defend against efforts to use private wealth for public purposes such as the ESG efforts. Such an effort could start small and concentrated, such as in states of progressive Republicans and build back pressure against the weakest part of the free market coalition.

Next, a major public policy debate is needed over the power of the market versus the power of government to take care of our people. It is coming. In 2034, Social Security will have its trust fund run out and benefits will be cut by roughly one-fifth unless a rescue occurs. Democrats like President Clinton and the late Senator Moynihan and Republicans like President Bush and Senator Gramm have called for an investment solution to save Social Security for one very good reason: 2 percent of a worker’s paycheck fully invested in the marketplace could exceed what the 12.4 percent payroll tax can no longer cover.15

One reason earlier rescue efforts failed was because of progressives concerns that an investment solution would make the marketplace the hero and people would not need government as they historically had. This is true. As Senator Gramm stated in a 2005 debate at the New York Economic Club, “if seniors have an entitlement, they need politicians.  If they have wealth, they need investment advisors… It moves the plates under the political earth.” Like it or not, an investment solution to Social Security would put both Democrats and Republicans in the same boat as the investors – hoping for higher, secure returns to keep retirees safe. With virtually every American involved in Social Security benefits, an investment solution could compel individuals’ experience to generate new alliance of common interest in rates of returns — returns that AI will largely be generating for the foreseeable future.

Technocrats need to understand the fear that drives Americans where the destruction will be viewed for more than the creation. Yet the choice is not theirs but handed down from the Enlightenment itself. When through blood, sweat, and tears, man earned the power to control his prayers, his vote, and his wages, the result was peace, freedom, and prosperity.  In the chase for prosperity, the right of workers to control their wages was focused on consumption, not work, for if we worked the same as our grandfathers worked, we would consume no more than our grandfathers. Many nations have become lost in varying forms in putting the workers’ demands over the consumers choice, losing both freedom and prosperity. As in the original progressive movement, the worker, not the consumer, will be the battle cry in the coming AI counterrevolution. Both the consumer and the investor must prepare to defend themselves.

 

References

  1. Carola Frydman, Eric Hilt, and Lauren Mostrom, “Ownership and Control of American Public Corporations, 1880-1920”, Working Paper P. 3.  Their study notes “Immediately after 1900—and in a few cases before—the diffusion of shareholding and the shift of power to salaried managers begin,” ↩︎
  2. Federal Reserve System, “Changes in U.S. Family Finances from 2019 to 2022 Evidence from the Survey of Consumer Finances, October 2022”, 19. ↩︎
  3. Paul Johnson, A History of the American People, (Norwalk Connecticut, Easton Press, 1997), 552. ↩︎
  4. Paul Johnson, A History, 535, 577. ↩︎
  5. Eugene Kolesnik, Conway’s All the World’s Fighting Ships, 1860–1905, London: Conway Maritime Press, 1979. ↩︎
  6. Phil Gramm and Donald Boudreaux, The Triumph of Economic Freedom, (New York, Rowman and Littlefield Publishing, 2025) 20. ↩︎
  7. Phil Gramm and Donald Boudreaux, The Triumph, 22. ↩︎
  8. Stanley Lebergott “Labor Force and Employment, 1800–1960” (NBER, 1966) Table 2, 119. ↩︎
  9. White House, OMB Historical Tables, 2025 Table 1.1; Census Bureau,Bicentennial Edition: Historical Statistics of the United States, Colonial Times to 1970  (Washington, Government Printing Office,1975) Series F 1-5. ↩︎
  10. United Press International, More workers likely to lose jobs to computers shortly. ↩︎
  11. White House, Council of Economic Advisers Report to the President. Tables B-1, B-27 and B-29. ↩︎
  12. Stanley, Lebergott, “Labor Force”  Table 2, 119; US Department of Agriculture. ↩︎
  13. US Department of Labor, “Job Openings and Labor Turnover Survey” Job Openings, Separations, Layoffs and Hires,  2000 to present. ↩︎
  14. Phil Gramm and Michael Solon, “Who Pays Corporate Taxes? Look in the Mirror”.  Wall Street Journal (New York, Dow Jones and Company, April 23 2024). ↩︎
  15. Social Security Administration, “Memorandum from the Deputy Chief Actuary to the Chief Actuary, Long-Range OASDI Financial Effects of Clawback Proposal for Privatized Individual Accounts-Information”, December 3, 1998. ↩︎