The economist Daron Acemoglu sees a dangerous loss of trust in Western democracies. He believes that social networks are strengthening extremism.

This interview by Albert Steck and Peter A. Fischer was originally published in NZZ on 8.2.2025. Edited for layout purposes by the UBS Center.

Mr. Acemoglu, your research revolves around the question of why some countries are rich and others poor. You see the European democracies as role models. However, Europe is falling behind the USA economically. How do you explain this contradiction?

We see ups and downs like this all over the world. Let's not forget that democracy was by no means preordained in Europe either. Fascism was only defeated eighty years ago, and the continent could have taken a completely different turn. However, I am very concerned about current developments. I see democracy in a serious crisis – in both the US and Europe.

Is it a crisis of trust?

Yes, and the reason is simple: democracies have not delivered what they promised the people in various areas.

Even though prosperity has never been as high as it is today?

There are two main factors: firstly, the lack of equal opportunities, which manifests itself in high youth unemployment. This has been a serious problem in Europe for forty years. In the US, too, young people with a low level of education who live outside the major urban centers have very poor career prospects.

And the second critical area?

Many democratic states have also failed to provide high-quality services. China often performs better in terms of infrastructure quality. A broken bridge there is repaired in a short time, while it takes years in our country. Data show that the cost of public works in the US has increased three- to fivefold in just three decades. Unfortunately, democracies are bad at providing efficient services.

In contrast to the Chinese model? There, the party promises prosperity to the people, in return for which they renounce their democratic say.

No, growth in China is not as broadly based as the Communist Party likes to portray it. The industrial workers’ wages, especially those with poor education, have improved little in the last twenty years. Moreover, the government has made serious management mistakes, which are typical for autocratic systems. This applies to both the real estate bubble and the handling of the Covid pandemic. President Xi Jinping influenced the zero-tolerance policy so strongly that the country stuck to it for far too long, despite the increasing damage.

There was a long-held belief in the West that autocratic countries would automatically develop towards democracy as soon as their prosperity increased.

It is not only evident in China that this theory is false. There is no mechanism for a rich country to become more democratic. However, what can be said on the basis of empirical data is that as soon as an autocratically ruled country experiences an economic crisis, the probability that the leadership will collapse increases. This is something that the governments in China and Russia must take seriously.

The widespread dissatisfaction of people in the West gives the impression that here too, the situation regarding democratic participation is not ideal.

This impression is partly justified. At the same time, social networks are reinforcing this dissatisfaction by giving more weight to extreme opinions. Moreover, populist politicians deliberately stir up these emotions to win votes. But how should we deal with the dissatisfied groups? For example, should the AfD in Germany, with its 20 percent share of the vote, be allowed to join the government or not? If not, many people feel excluded from power. The problem is even more serious in the US and the UK because the woke ideology has become more established there. Polarization is less pronounced in continental Europe.

However, the migration debate is also contributing to greater confrontation in Europe.

The established parties made a serious mistake when they tried to suppress the discussion about the downsides of migration for too long. Here, too, it is a question of having a say: people's concerns about immigration must have a place in public discourse. As soon as politicians try to suppress this in a democracy, they pay a high price.

Back to the initial question: Why is Europe falling so far behind the US economically?

If you look at the period since 1980, America has not overtaken Europe. This has only been the case since the financial crisis of 2008. I believe this has to do with three factors: firstly, Europe did not restructure its banking system quickly enough after the crisis. Secondly, Europe managed the pandemic worse than the US, and thirdly, American politics has relied very heavily on the tech sector. A lot of growth is coming from here at the moment. Europe must therefore try to become more attractive to tech investors.

There is also a difference to the US in the understanding of the state: in Europe, social spending has grown sharply, and the costs of the pension system are getting out of hand. Doesn't this paternalistic attitude towards the state put you at a disadvantage?

Here, too, I would say: you don't realize how lucky you are in Europe, because things are by no means better in the US. Healthcare spending there is already approaching 20 percent of economic output. By contrast, the European healthcare system is much more efficient. This will prove to be an important competitive advantage in the future.

But hardly any new successful companies are emerging in Europe.

Five years ago, everyone was celebrating German SMEs. They have not simply disappeared. Successful entrepreneurship also exists in the Nordic countries, in the Netherlands and, despite huge institutional problems, in France too. We should not write off Europe, but we should make it more innovation friendly. Europe is training many tech talents. The only problem is that too many of them are moving to the US.

So is the concern about weak productivity growth in Europe exaggerated?

Italy has barely increased productivity since 1990, and that is a major structural problem. But periods of strong growth have been followed by weaker phases in the rest of Europe. My concern is the lack of innovative spirit. And that is due to excessive regulation. In addition, more financial resources are needed for innovation. The hurdles for entrepreneurs are generally too high.

Do you expect that the European system, with its social balance, will still be on a par with the US in twenty years’ time?

It would be a terrible world if Europe fell further and further behind, and the US became even more dominant with its tech giants. That would mean that there is insufficiently strict competition legislation and too few institutional controls. The American model may work well in the short term, but its disadvantages are considerable. I therefore hope that Europe pulls itself together, provides better support for innovation, and that we come to a kind of global agreement that prevents us from ending up in a monopolistic and hegemonic economy.

What worries you is the phenomenon of “the winner takes it all” – in the case of digital platforms, the number one usually dominates the entire market. However, these superstar companies are very productive.

Sometimes. But even if this is true, their impact on employment and the economy as a whole is small. Even if Facebook were to double its value on the stock market, only a tiny proportion of the working population would work for this company. That is America's problem.

At least the so-called American dream lives on in the USA.

The American Dream exists, but not in reality. The data clearly show that the real wages of the average worker in the US have hardly grown at all between 1980 and 2015; for low-wage earners, they have actually fallen.

The new US president, Donald Trump, wants to run the government like a company and has appointed many businesspeople to the administration. Won't that make the United States even more competitive?

I don't think so. Everyone complains about regulation in Europe, but it is now even worse in many sectors in the US. You need a lot of bureaucracy and licenses to become a hairdresser in the US, for example. And the paperwork that companies have to do to get a government contract is enormous. As Trump's commissioner for bureaucracy reduction, Elon Musk will hardly be able to fix that. And anyway, when entrepreneurs like Elon Musk determine policy, they do so in their own interest. Musk's Tesla depends on subsidies, SpaceX on government contracts. You shouldn't make the fox the guardian of the henhouse.

You give the impression that the US is on the wrong track.

I fear that at the end of this century, historians will write that the year 2025 marked the turning point at which the decline of the US began. There are many reasons for this, but Trump is the most important.

That's a strong statement. Despite all the skepticism you express about Trump, the US does have a well-balanced system of checks and balances.

There are five historical counterweights to the president's power: his own political party, the courts, the administration, the member states, and civil society. During Trump's first term in office, these were able to hold their own, except perhaps for his own party. But this time, I consider it unlikely that these checks and balances will continue to function.

What do you say to the argument that a little Trumpian disruption would even do a good turn for an overregulated society?

A little disruption, yes, but within the legal framework.

You say that too much disruption is dangerous, but that too little leads to sclerosis.

There is no doubt that a society can become paralyzed and sclerotic due to the influence of interest groups. However, the threat to a democracy is even greater when a society is divided. This is currently the case in the US.

What makes this division so dangerous?

American politics has become corrupted. This is evident from the fact that polarization is greater between the parties than among the electorate. The original Republican Party is now dead, and the Democrats are on the verge of the same fate. Why is this? Both parties are dominated by activist groups. In the past, however, they consisted of different coalitions, which meant that power was more broadly distributed. This enabled the parties to better resist extremist currents.

Where does Europe stand in this development?

The difference is that in Europe, extremists do not occupy the established parties, but instead found their own new parties. In the US, on the other hand, these people have infiltrated both the Republican and Democratic parties. Donald Trump has complete control over his party.

It is up to the voters to change this again.

My positive scenario is that the Democrats return to sensible politics in the next two years. Then they could do so well in the midterm elections that Congress would be able to stop Trump. This would set in motion a process of healing the institutions. But first of all, a lot of damage can be done in two years. And secondly, this correction will not happen if the Democrats put their faith in a future party president who is incompetent and also belongs to the extreme wing.

As an economist, you actively participate in the political debate. Have you noticed that your voice carries more weight since you were awarded the Nobel Prize?

I take part in this debate because I consider the risk of Western democracies collapsing to be too great. That's why I think we should all do our part to prevent this. Although I consider my influence to be rather limited.

Even as a Nobel Prize winner?

The prize does have a certain impact. For example, my opinion receives more attention in the New York Times. In social networks, on the other hand, the effect is less clear: if I write a comment on X, for example, it always leads to extreme reactions. If you talk to people in person, you usually come across very reasonable views. In social networks, on the other hand, radical opinions dominate. That worries me.

How can such radicalization be prevented?

Restricting freedom of expression would not be a solution. However, we should start looking at algorithms: by promoting radical statements, they enable platforms to make high profits. In this respect, stricter regulations make sense.

Will artificial intelligence make this development even worse?

It doesn't have to be that way. But the way things are going at the moment, I consider artificial intelligence to be a danger. That's because it offers powerful tools for manipulation. In principle, people could also use AI precisely to expose these abuses. At present, however, the incentives point in the opposite direction. Many governments are using the technology not primarily to provide people with better information, but for censorship, repression, and surveillance.

You are quite pessimistic about the prospects for Western democracies. Is humanity currently going through a critical phase?

I am not optimistic. But I remain hopeful. It's not about what happens in the next few months. The critical junctures for our democracy and prosperity will be the choices we make over the next ten years. Depending on what Trump does, this critical period could be shorter.