Carney at Davos: A Perfect Illustration of Why Middle Powers Are Doomed

The Greengrocer Who Doesn't Understand Exponential Growth

On Tuesday at the World Economic Forum in Davos, Canadian Prime Minister Mark Carney delivered what many observers considered a bold speech about the end of the rules-based international order and the need for middle powers to unite.

Reading the full text, however, reveals something far more concerning: a sophisticated articulation of precisely why Canada and similar nations are structurally incapable of adapting to the AI-driven transformation that will define the 2030s.

Carney's speech deserves detailed analysis because it perfectly encapsulates the delusion gripping Western middle powers—the belief that historical patterns, coalition-building, and appeals to "values" can substitute for raw technological and economic power in an era of artificial superintelligence.

Let me be direct: Carney is right that the old order is dead.

He is catastrophically wrong about what comes next and what middle powers must do to survive.

What Carney Got Right: Admitting the Lie

To Carney's credit, he begins with brutal honesty using Václav Havel's metaphor of the Czech shopkeeper who places Communist slogans in his window—not because he believes them, but to avoid trouble.

Carney correctly identifies that middle powers have been "living within the lie" of a rules-based order that no longer functions:

 

 

This admission is valuable.

The Bretton Woods system, NATO guarantees, and assumptions of perpetual American partnership were a comfortable fiction.

As we explored in our previous analysis, these arrangements reflected a specific historical moment—post-WWII reconstruction and Cold War containment—that has passed.

Carney deserves credit for acknowledging this openly rather than clinging to nostalgic fantasies about restoring the post-war order.

But his honesty ends there.

What Carney Should Have Said at Davos: The Brutal Truth for Middle Powers

 If Carney genuinely wanted to prepare Canada and similar nations for what is coming, his speech would have been radically different.

It would have begun not with historical metaphors but with technological reality: 

"Fellow leaders, we are entering an era of discontinuous change.

Within the next decade, artificial intelligence will transform the global economy in ways that render our current strategies obsolete.

The United States and China are the only nations with the capital, talent, infrastructure, and political will to compete at the frontier of AI development.

This means they will capture essentially all of the economic value from what may be the greatest wealth-creation event in human history.

Middle powers like Canada face a stark choice: accept explicit economic and strategic subordination to one of these AI superpowers, or undergo wrenching transformations so rapid and painful that they may trigger political collapse.

I will be honest: there is no third option.

The comfortable assumptions of the past 70 years—that we could maintain high living standards, generous social programs, strong environmental protections, and progressive social policies while remaining economically competitive—were only possible under the unique conditions of American hegemony and Cold War alliance management.

That era is over.

We must now tell our citizens the truth: their living standards will decline, possibly dramatically.

 The social programs they consider birthrights will be cut.

The environmental regulations they prefer will be relaxed.

The work-life balance they expect will deteriorate.

The alternative is rapid economic irrelevance and potential absorption into more competitive economic blocs.

This is not a desirable outcome. It is simply reality.

The choice before us is not between comfortable options.

 It is between honest preparation for a difficult future, or delusional speeches about 'middle power coalitions' while our economies sink into irrelevance."

 

That speech would have been truthful. It would also have been political suicide.

 And there lies the fundamental problem: democratic systems in comfortable, prosperous societies cannot make the necessary choices until crisis forces their hand.

By then, it is usually too late.

The Fatal Flaw: Linear Thinking in an Exponential World

The fundamental problem with Carney's analysis is that it treats the current moment as another chapter in a familiar story of great power rivalry, something Thucydides would recognize.

He invokes historical patterns: the strong do what they will, the weak suffer what they must, and middle powers must form coalitions to survive.

This framework is not merely incomplete—it is catastrophically wrong for the era we are entering.

Carney's entire speech operates within what we might call "GDP-as-usual" assumptions.

He speaks of trade diversification, defense spending, strategic partnerships, and resource development as though we are facing a marginally more competitive version of the 20th century international system.

Carney completely fails to grasp that we are entering an era of discontinuous, exponential technological change that will render these approaches irrelevant.

The United States and China are not merely competing for market share or geopolitical influence.

They are racing toward artificial superintelligence (ASI)—AI systems that will create autonomous manufacturing, design and build their own successors, and generate economic abundance at scales that make current GDP comparisons meaningless.

When OpenAI or Anthropic achieves AGI, likely within the next 2-4 years, followed rapidly by ASI, the economic implications will be orders of magnitude larger than anything in human history.

We are talking about AI systems that can:

• Design and operate fully autonomous factories
• Discover and synthesize new materials and pharmaceuticals
• Generate essentially unlimited clean energy through advanced nuclear and fusion designs
• Create and optimize supply chains without human intervention
• Invent new technologies faster than human researchers can comprehend them

 Conservative estimates suggest this could generate $50-100 trillion in new economic value by 2035, with the overwhelming majority accruing to whichever nations control the underlying AI infrastructure.

Carney's speech never mentions AI once.

Not a single word about machine learning, autonomous systems, or the technological race that will determine which nations thrive and which become economically irrelevant.

This is not an oversight.

It is a fundamental failure of imagination.

The Coalition Fantasy: Organizing the Passengers on a Sinking Ship

 Carney's proposed solution deserves close examination because it reveals the depth of middle power delusion: 

"Middle powers must act together because if you are not at the table, you are on the menu...When we only negotiate bilaterally with a hegemon, we negotiate from weakness.

We accept what is offered."

 This sounds superficially appealing.

Unite with like-minded nations, pool resources, create coalitions that can stand up to great powers.

 It is classic balance-of-power thinking from any international relations textbook.

There is only one problem: it assumes middle powers have something valuable to contribute.

In an AI-dominated economy, what exactly will this coalition of middle powers offer?

• Canada has energy and minerals, but these become far less valuable when AI systems can optimize extraction and synthetic alternatives
• European nations have educated populations, but education becomes less relevant when AI systems exceed human capability across cognitive domains
• Traditional manufacturing becomes worthless when autonomous systems can build anything anywhere
• "Shared standards" and "complementarities" are irrelevant when the US and China each develop self-sufficient AI-powered economic ecosystems

Carney speaks proudly of Canada's "variable geometry" approach—forming different coalitions for different issues.

He lists Canada's new partnerships: the EU's SAFE defense procurement, strategic partnerships with China and Qatar, trade negotiations with India, ASEAN, Philippines, Mercosur.

This is madness.

He is forming partnerships with nations that are equally unprepared for the AI transition.

India's bureaucratic morass, ASEAN's fragmented markets, Mercosur's economic dysfunction—these are not viable partners for the technological race ahead.

They are fellow passengers on the Titanic arguing about how to rearrange the deck chairs.

The Canada Problem: Acute Dependency Meets Ideological Paralysis

Let's be honest about Canada's specific situation, because it perfectly illustrates the broader middle power crisis.

As noted in our original analysis, Canada has developed the most acute case of alliance dependency among Western nations.

Protected by geography and American security guarantees, Canada has maintained minimal military capacity, underinvested in technological leadership, and structured its entire economy around assumptions of perpetual American benevolence.

Carney acknowledges this obliquely when he says Canada is "amongst the first to hear the wake-up call" after the U.S. imposed tariffs.

But his proposed responses reveal how little he understands about the structural reforms required:

On Defense:

 Carney promises to "double defense spending by the end of the decade."

Even if achieved (doubtful given Canadian political culture), this would bring Canada to perhaps 2.5-3% of GDP—still far below the 4-5% that would be minimally necessary if American security guarantees become conditional.

And this spending must come from somewhere, likely gutting the social programs that Canadian voters consider sacrosanct.

On Energy:

 Carney calls Canada an "energy superpower," which is technically true but operationally misleading.

Canada's energy sector has been systematically undermined by exactly the kind of precautionary regulation and ideological opposition to resource development that makes rapid scaling impossible.

Even with policy changes, ramping up production faces years of delays from environmental reviews, Indigenous consultations, and regulatory approvals—none of which can be wished away by speeches in Davos.

On AI Leadership:

 Carney mentions forming coalitions with "like-minded democracies to ensure we will not be forced to choose between hegemons and hyperscalers."

This is fantasy. Canada has essentially zero presence in frontier AI development.

The country produced some early AI researchers (Geoffrey Hinton, Yoshua Bengio) who promptly moved to or partnered with American companies.

 Canada's AI industry consists largely of branch offices of U.S. firms and academic research groups with no path to commercialization at scale.

On Capital:

 Carney boasts of Canada's "sophisticated pension funds" as though this represents genuine economic strength.

But Canadian pension funds are already desperately seeking returns by investing in... American tech companies.

They are not creating competitive alternatives; they are funding their own displacement.

On Immigration:

 Canada's immigration system, while more functional than many, cannot compete with American compensation and opportunity for top AI talent.

A machine learning researcher can earn $500,000-$1M+ at an American AI lab, work with the world's best researchers and largest compute clusters, and see their work deployed at planetary scale.

Or they can move to Toronto, earn $150,000 CAD, work on smaller projects, and watch as their breakthroughs are commercialized by American competitors.

This is not a difficult choice.

 

Perhaps most damning, Carney's speech reveals a psychological inability to accept subordinate status

He speaks of "sovereignty" and avoiding "performance of sovereignty while accepting subordination."

But Canada's relationship with the United States has always been subordinate.

The difference is that during the Bretton Woods era, America was willing to pretend otherwise because Cold War alliance management required it.

That era is over.

As the U.S. enters what we have termed the AI-powered economic explosion, it no longer needs to maintain these fictions.

Canada can either accept explicit subordination and hope for generous terms, or it can delude itself with talk of "middle power coalitions" while watching its economy and influence shrink.

The Mind Virus Problem: How Comfortable Prosperity Bred Cognitive Incapacity

There is a deeper issue that Carney's speech both exemplifies and cannot acknowledge: the psychological and ideological damage inflicted by decades of unearned prosperity.

As Canadian evolutionary psychologist Gad Saad has extensively documented, Western societies including the United States have become infected with what he calls "idea pathogens" or "mind viruses"—ideological frameworks that prioritize feelings over facts, equality over excellence, and precaution over progress.

These are not random cultural developments.

They are the predictable result of multiple generations growing up in historically unprecedented safety and prosperity, insulated from the competitive pressures and existential threats that force clear thinking.

 Consider the pathologies now dominant in Canadian political culture:

Precautionary Principle über Alles:

Every major project faces years of impact assessments, consultations, and approvals.

This approach made sense when you were rich enough to afford delay.

It is catastrophic when you are in a technological arms race.

Equality as Ultimate Value:

Canadian discourse treats inequality as the supreme social evil, requiring massive redistribution and regulation.

This ensures that high performers emigrate to jurisdictions that reward excellence, leaving behind those who prefer security to achievement.

Climate Ideology Over Energy Reality:

Canada's energy sector—potentially its greatest economic asset—has been systematically strangled by ideological opposition and regulatory paralysis.

Even as other nations recognize that AI infrastructure requires massive, reliable energy, Canada remains committed to feel-good renewable targets that cannot support serious industrial activity.

Therapeutic Governance:

Canadian political culture increasingly treats citizens as fragile beings requiring protection from discomfort, stress, and offensive ideas.

This creates populations psychologically incapable of the sacrifice and competition required for technological leadership.

Colonial Guilt Complex:

Canada's intelligentsia has embraced a narrative of perpetual historical guilt requiring endless accommodation and special treatment for designated victim groups.

This ensures that national projects face interminable negotiations and protests from any group claiming historical grievance.

These are not primarily moral failures.

They are the psychological consequences of comfort—the cognitive equivalent of muscles atrophying from disuse.

A society that faces no serious external threats naturally develops internal obsessions and self-imposed handicaps.

The problem is that this comfort was purchased with the security and prosperity provided by the now-dead Bretton Woods order.

As that order collapses and genuine competition returns, these ideological indulgences become fatal.

Carney speaks of Canadian "values" and being "a pluralistic society that works" as though these represent strategic assets.

They do not.

They represent the luxury beliefs of a wealthy society that no longer faces serious competition.

When that competition arrives—in the form of AI-powered American and Chinese economic juggernauts—these "values" will be revealed as handicaps.

 

Recommendations for Middle Powers: Navigating the Intelligence Singularity

Unlike Carney's vague talk of coalitions and diversification, here are concrete recommendations for middle powers facing the twin challenges of American and Chinese AI supremacy:

 

For Canada Specifically:

1. Acknowledge American Dependence

Stop the charade of "strategic autonomy." Canada's prosperity, security, and technological future are inextricably tied to the United States.

Rather than pretending otherwise, Canada should:

• Negotiate explicit terms for subordinate partnership
• Offer the U.S. guaranteed access to Canadian energy, minerals, and Arctic territory
• Position Canada as America's reliable resource base and northern security buffer
• Accept that Canadian sovereignty in the traditional sense is effectively over
• Secure the best possible terms within this framework rather than deluding itself about alternatives

2. Emergency Energy Development

Canada's greatest asset in an AI-powered world is cheap, abundant energy:

• Declare energy development a national emergency requiring expedited approvals
• Bypass or override environmental reviews for critical projects
• Build massive nuclear capacity to power AI infrastructure
• Develop Arctic oil and gas at maximum speed
• Position Canada as North America's energy supplier for AI data centers and manufacturing

3. Radical Regulatory Reform

Cut the regulatory state by 70-80%:

• Single environmental impact assessment taking maximum 6 months
• Right to build in designated industrial zones with minimal approval
• Elimination of redundant federal-provincial overlapping regulations
• Accept that environmental protection is a luxury that must be subordinated to economic survival

4. Population Wake-Up Campaign

Prepare citizens for reality:

• National campaign explaining that living standards will decline
• Explicit communication that social programs must be cut
• Educational reform emphasizing STEM, competition, and achievement over equity
• Immigration policy explicitly targeting AI/tech talent with globally competitive compensation

5. Abandon "Middle Power Coalition" Fantasy

Accept that partnering with India, ASEAN, or EU will not create viable alternative to US/China:

• These nations are equally or more dysfunctional
• They lack capital, technical capacity, or political will for AI development
• "Diversification" among declining powers is not a strategy
• Focus efforts on securing best possible terms with the U.S. rather than building useless coalitions

 

For European Middle Powers (Germany, France, Nordic Countries, etc.):

1. Emergency EU-Level AI Initiative

Europe's only hope is to pool resources at continental scale:

• $500 billion immediate investment in European AI champion
• Suspend or dramatically reform EU AI Act and GDPR
• Create special economic zones with American-style regulatory environment
• Accept that data privacy is incompatible with AI leadership
• Focus on one or two large projects rather than scattering resources

2. Energy Policy Reversal

Europe's renewable fantasy must end:

• Recommit to nuclear power as primary energy source
• Build 50+ new nuclear plants over next decade
• Accept natural gas as necessary transition fuel
• Recognize that current energy costs make AI infrastructure impossible
• Prioritize energy abundance over climate ideology

3. Defense Reality Check

• Immediate increase to 4% GDP defense spending
• Accept painful cuts to social programs to fund this
• Recognize American security guarantee is conditional at best
• Build European defense capacity assuming U.S. withdrawal
• This requires generational sacrifice that current populations likely won't accept

4. Immigration Reform for AI Talent

Europe is losing the talent war catastrophically:

• Match American compensation for top AI researchers (requiring massive tax reform)
• Streamline immigration for technical talent
• Create European equivalent of Silicon Valley with tax breaks and minimal regulation
• Accept that this requires abandoning current labor market protections

5. Acknowledge Hierarchy

Stop pretending Europe is America's partner:

• Accept subordinate role in American-led technological order
• Focus on securing favorable trade terms rather than delusional "strategic autonomy"
• Recognize that European "values" are luxuries affordable only under American protection
• Choose between comfortable decline or painful reform

 

For All Middle Powers: Facing the Singularity

The broader challenge is that we are entering what Ray Kurzweil terms the "Singularity"—the point at which artificial intelligence exceeds human capability and begins recursive self-improvement.

Most middle power leaders show no evidence of understanding what this means.

By 2030-2035:

• Autonomous Manufacturing: AI systems will design and operate factories with minimal human involvement. This eliminates the advantage of cheap labor and renders most current manufacturing irrelevant.
• Energy Abundance: AI-designed nuclear and fusion systems will provide essentially unlimited clean energy. Current resource advantages become less valuable.
• Material Science Revolution: AI will discover and synthesize new materials orders of magnitude better than current options. Resource scarcity as we understand it may end.
• Biological Mastery: AI systems will crack protein folding, design custom pharmaceuticals, and potentially extend human longevity dramatically. Healthcare becomes a solved problem in advanced economies.
• Cognitive Automation: AI exceeds human capability across essentially all cognitive domains. Most knowledge work becomes automated.

 

The implications are staggering:

Nations that control frontier AI will see:

• GDP growth of 10-20% annually
• Elimination of most diseases
• Energy costs approaching zero
• Material abundance at scales previously impossible
• Life expectancy potentially doubling or more
• Essentially unlimited computing resources

Nations without frontier AI access will face:

• Stagnant or negative economic growth
• Widening gap in healthcare outcomes
• Continued energy scarcity and high costs
• Dependence on advanced nations for technology
• Declining living standards and competitiveness
• Potential political instability as populations recognize their declining trajectory

There is no "middle ground" in this scenario.

You either have frontier AI capability or you don't.

The gap between those who have it and those who don't will be larger than any wealth gap in human history.

 

Middle powers must choose:

Option A: Subordinate Partnership

• Explicitly align with either U.S. or China
• Accept technological dependence and junior status
• Secure access to AI systems developed by the superpower
• Maintain decent living standards through subordinate integration
• Abandon pretense of sovereignty or independent strategic posture

Option B: Desperate Catch-Up

• Pool resources at continental or regional scale
• Undergo wrenching economic and social reforms
• Accept decade or more of declining living standards to fund catch-up
• Recognize this probably won't work but try anyway
• Risk political collapse from population backlash 

Option C: Managed Decline

• Accept becoming technologically obsolete
• Focus on social cohesion and quality of life as economy shrinks
• Hope for generous treatment from AI superpowers
• Prepare for significantly lower living standards
• Likely political radicalization and instability

Most middle powers are currently pursuing Option D: Pretend nothing has changed, which is catastrophically worse than any of the above.

 

Conclusion: The Sign Carney Refuses to Remove

There is deep irony in Carney's use of Havel's greengrocer metaphor.

He claims middle powers must "take down their signs" and stop pretending the rules-based order still works.

But the sign that Carney refuses to remove is far more fundamental: the assumption that middle powers can remain relevant in an AI-dominated world through traditional tools of statecraft, coalition-building, and appeals to values.

This is the real lie that middle powers are living within.

Not the pretense that the Bretton Woods order still functions—Carney correctly identifies that fiction.

But the much deeper delusion that any amount of strategic partnerships, defense spending, or resource development can substitute for frontier AI capability.

Canada forming trade pacts with India and ASEAN, Europe building its defense capacity, middle powers "acting together"—all of this is fundamentally irrelevant to the technological transformation ahead.

It is sophisticated analysis of a world that is already disappearing.

As we argued in our previous analysis:

"The comfortable assumptions of the post-war era—that economic growth was perpetual, that American protection was guaranteed, that social programs were sustainable, that regulatory caution was cost-free—must be abandoned.

What replaces them will be determined by the willingness of populations and leaders to confront uncomfortable truths and make difficult choices."

 

Carney's speech shows that willingness does not yet exist

He can acknowledge the end of the old order while failing completely to grasp what the new order entails.

He can speak of "living the truth" while refusing to confront the most important truth: that Canada and similar middle powers are structurally incapable of competing in the era ahead.

The decades of peace and stability under Bretton Woods have created exactly the complacency and entitlement Carney claims to oppose.

They have produced populations psychologically incapable of the sacrifice required for technological competition.

They have bred political classes skilled at managing comfortable prosperity but utterly unprepared for genuine adversity.

Most damningly, they have created intellectual frameworks—like Carney's speech—that are sophisticated, historically informed, and completely blind to the discontinuous change ahead.

The old order is indeed not coming back. Carney is right about that.

But what is coming is not another iteration of great power rivalry that middle powers can navigate through clever diplomacy.

What is coming is a technological transformation that will divide humanity into those who control super-intelligent AI systems and those who depend on them.

Middle powers are not at the table. They are, as Carney himself warns, on the menu.

The only question is whether they can secure decent terms for being consumed, or whether they will waste critical years deluding themselves with coalition fantasies while the technological gap becomes unbridgeable. 

The hour is late. The gap is widening. And speeches at Davos change nothing.

 

This analysis is part of our ongoing coverage of the AI-driven geopolitical realignment.

For the foundational analysis, see "The Great Divergence: Is America Entering a New Expansionist Era While Leaving Its Allies Behind?"

 

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WatchUrl: https://www.youtube.com/watch?v=dqtDxkuvUdM