Recommended Weekend Reads
The Implications of the Global AI Boom, China’s Latest Engineering Marvel, The Spread of “Mega Force” Middle East Spending, and Why Bolivia’s Election is So Important
August 15 -17, 2025
Below are a number of reports and articles we read this past week and found particularly interesting. Hopefully, you will find them of interest and useful as well. Have a great weekend.
The Implications of the Global AI Boom
How Artificial General Intelligence Could Affect the Rise and Fall of Nations The Rand Corporation
This report is intended to stimulate thinking among policymakers about possible impacts of the development of artificial general intelligence (AGI) on geopolitics and the world order by highlighting potential future scenarios for AGI's governance and its effects on global power dynamics. In this report, the authors focus on a variety of impacts — some of which are perhaps unlikely but significant — arising from AGI's development and deployment that could fundamentally alter the existing geopolitical order. To drive thinking about these potential world-changing impacts, the authors develop eight illustrative scenarios based on the extent of centralization of AGI development and its geopolitical outcomes. These scenarios cover AGI impacts that empower the United States, that empower U.S. competitors, that cause a significant geopolitical shift, and that result in an interruption in the development of AGI. These scenarios are designed to demonstrate how the extent of centralization in AGI development is a crucial determinant of the geopolitical outcomes that might materialize. In more-centralized scenarios, either the United States or an adversary could gain significant advantages, whereas decentralized development might lead to a multilateral governance model or even geopolitical destabilization if nonstate actors become significantly more powerful because of the development of AGI.
‘Absolutely immense’: the companies on the hook for the $3tn AI building boom Financial Times
Meta is building “Prometheus” and “Hyperion”, Elon Musk’s xAI has “Colossus”, and OpenAI is developing “Stargate” — each a more than $100bn project to build the world’s most powerful supercomputer and usher in a new generation of artificial intelligence. But each of those gargantuan ventures is just a fraction of the spending required to build the data centers needed to power the AI era: one of the biggest movements of capital in modern history. “The amount of capital required is absolutely immense,” said Rob Horn, global head of infrastructure and asset-based credit at private equity group Blackstone, which manages an $85bn data center platform. “The scale of the opportunity is exhausting the capital of [any one financial] market and is requiring an all-of-the-above approach, with private capital playing a very large role.” Google, Amazon, Microsoft and Meta will spend more than $400bn on data centers in 2026 — on top of more than $350bn this year.
Trump's AI action plan pivots from guardrails to green lights Peterson Institute for International Economics
Seizing on a historic boom of investment in artificial intelligence (AI), President Donald Trump unveiled his administration’s AI Action Plan at the end of July, with a goal of accelerating the development and diffusion of AI in the US and around the world while discarding the Biden administration’s cautious approach to regulating AI. Trump’s plan covers wide ground from workforce and infrastructure to refining export controls viewed as barriers to AI development in the US and export of US technology abroad, although provisions addressing concerns over safety and national security risk management are also included. The plan targets environmental regulations that have delayed power and data center buildouts as well as a growing patchwork of state AI laws that could fragment the US AI market. Ignoring earlier criticism from Trump, it also recommends continued support for the Biden-backed Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act of 2022, which has achieved historic success in attracting investment to produce advanced semiconductors in the US. Missing, however, is any easing of the administration’s tough policy discouraging immigration, a problem because the US needs to keep relying heavily on foreign talent to compete with China’s strong pipeline of AI researchers.
GenAI Misinformation, Trust, and News Consumption: Evidence from a Field Experiment Filipe Campante/Ruben Durante/Felix Hagenmeister/Ananya Sen – NBER
Abstract: We study how AI-generated misinformation affects demand for trustworthy news, using data from a field experiment by a major German outlet, Süddeutsche Zeitung (SZ). Readers were randomly assigned to a treatment highlighting the challenge of distinguishing real from AI-generated images. The treatment raised concern with misinformation (0.3 s.d.) and reduced trust in news (0.1 s.d.), including SZ. Importantly, it affected post-survey browsing behavior: daily visits to SZ digital content rose by 2.5% in the immediate aftermath of the treatment. Moreover, we find that subscriber retention increased by 1.1% after five months, corresponding to about a one-third drop in attrition rate. Results are consistent with a model where the relative value of trustworthy news sources increases with the prevalence of misinformation, which may thus boost engagement with those sources even while lowering trust in news content.
China
China’s Role in Global Innovation Is Changing Federal Reserve Bank of St. Louis
For many years, China was widely viewed as a fast follower, leveraging access to foreign technology, expanding its manufacturing capacity, and competing primarily through cost advantages. While that characterization may have once captured the essence of China’s role in the global economy, it is increasingly incomplete. A growing body of evidence suggests that China is transitioning from technology absorber to innovation leader in its own right. Across a range of indicators, China is now innovating and exporting technologies in sectors traditionally dominated by advanced economies, including the United States.1 This convergence is not merely the result of others moving on to new technologies. Rather, it reflects China’s deliberate and sustained investments in innovation, capabilities and industrial upgrading, part of a broader strategy to position itself as a peer competitor at the global technological frontier.
The Engineering Marvel That China Hopes Will Help Wean It Off Foreign Energy Wall Street Journal
China has begun the construction of a giant hydropower project at the earthquake-prone edge of the Tibetan plateau, a spectacular engineering feat that is central to Beijing’s enduring mission to become self-sufficient in critical areas such as energy. The $167 billion facility will require digging tunnels that plunge through high mountains to harness the power of a river that sharply descends through the deepest and possibly longest canyon on the planet. If its planners succeed—after shrugging off objections from neighbors—the project could generate triple the output of the world’s largest hydroelectric facility, China’s Three Gorges Dam, which is big enough to power around 40 million Chinese homes.
China's Achilles Heel Robin Brooks Substack
Brooks, a senior economist at the Brookings Institution, points out Everyone has an Achilles heel. The US’ Achilles heel is irresponsibly wide budget deficits, which - in the ongoing tariff confrontation - create large vulnerabilities that China very skillfully exploited earlier this year. China has an Achilles heel too, which is that its growth model is almost entirely predicated on exports. This year’s sharp rise in US tariffs is undermining this growth model meaningfully.
Geoeconomics
BRICS’ plans to replace the G7 are thin on the ground OMFIF
The hype about the demise of the G7 and the traditional system of financial governance has dominated the media in the last few years. However, the G7 is still going strong and the proposed alternative governance system – the Brics+ bloc – has not become operational. Governance is enacted through multilateral organizations, such as the International Monetary Fund and the International Bank for Reconstruction and Development, through global banks, global financial markets, and regulations.
Optimal Tariffs with Geopolitical Alignment John Becko/Gene Grossman/Elhanan Helpman – NBER
Abstract: As geopolitical tensions intensify, great powers often turn to trade policy to influence international alignment. We examine the optimal design of tariffs in a world where large countries care not only about economic welfare but also about the political allegiance of smaller states. We consider both a unipolar setting, where a single hegemon uses preferential trade agreements to attract partners, and a bipolar world, where two great powers compete for influence. In both scenarios, we derive optimal tariffs that balance terms-of-trade considerations with strategic incentives to encourage political alignment. We find that when geopolitical concerns are active, the optimal tariff exceeds the classic Mill-Bickerdike level. In a bipolar world, optimal tariffs reflect both economic and political rivalry, and may be strategic complements or substitutes. A calibration exercise using U.N. voting patterns, an estimate of the cost of buying votes in the U.N., and military spending suggests that geopolitical motives can significantly amplify protectionist pressures and that the emergence of a second great power can contribute to a retreat from globalization.
Dollar Dominance Is Here to Stay World Politics Review
Six months into President Donald Trump’s second term, the conventional wisdom is clear: U.S. hegemony is in terminal decline, and the dollar’s run as the world’s dominant currency is ending. Between Trump’s frontal assault on democracy and the rule of law at home, and his aggressive protectionism and unilateralism abroad, uncertainty about U.S. economic and foreign policy and the future of the “liberal international order” are greater than ever. Fearful of becoming the next target of tariffs and sanctions, and eager to insulate themselves from the uncertainty of Trump’s United States, foreign governments and investors are increasingly eager for alternatives to the dollar. Indeed, demand for alternatives may be greater now than at any point in the past 50 years. But demand is one thing. Supply is another altogether. If there is going to be a major shift away from the dollar, someone must provide viable alternatives, and the reality is that there are only two possible actors who could do that: the European Union and China. Neither is remotely ready, willing or able to do so, and the reason is precisely why so many observers around the world are now worried about the dollar: domestic politics.
The Middle East
The ‘Mega Forces’ Spreading Middle East Wealth Across the Globe Bloomberg/Businessweek
When Iran launched a missile barrage at an American air base in Qatar this summer, it was one of the most direct attacks on US assets in the Middle East in years. Yet just hours after the projectiles were shot down in the night sky over Doha, it was business as usual in the country’s capital and financial hub. In neighboring Abu Dhabi, investments proceeded on track, and bankers in Dubai expressed confidence that the United Arab Emirates would sidestep any major fallout. In the weeks after the attack, Bloomberg News reported that American companies including BlackRock Inc. and Elon Musk’s xAI were discussing deals in Saudi Arabia. It will apparently take more than a few ballistic missiles to shake the business community’s confidence in the Middle East. With its low-tax regimes and growing pool of sovereign and family wealth—which now tops $5 trillion—the region has weathered all kinds of instability. Even as conflict in the area has greatly intensified since 2023, investors there are signaling that the Middle East is still open for business, and global companies are eager to accept their money.
The Americas
Bolivia braces for tense elections as ruling party implodes ACLED
The dispute between Evo Morales and current President Luis Arce has triggered deadly violence in defense of Morales’ cause, which signals the power of his supporters to question the legitimacy of an election that excludes the former president.
How the US and Colombia can tackle crime, migration, and fallout from Venezuela’s crisis The Atlantic Council
While the United States seeks to prevent more migration from Venezuela, the strain of hosting 2.8 million Venezuelan migrants and refugees is putting Colombia on the back foot in its fight against transnational criminal groups. Bilateral efforts to improve security cooperation, reduce irregular migration sustainably, and improve opportunities for Venezuelan migrants and refugees in Colombia can benefit both countries. Colombia must balance between asserting regional leadership in managing the Venezuelan crisis—which requires a clear strategy—and keeping a communication channel open without legitimating Nicolas Maduro’s rule.