A New Economic World Order May Be Based on Sovereign AI and Midsized Nation Alliances

At the end of World War II America was the clear economic and military superpower and it imposed the idea of a rule-based world order implemented by international organizations like the UN. But, as Canadian Prime Minister Carney said, we all knew it was at least partially a lie, and that the powerful could always claim exemption when it suited them.

And then came U.S. President Donald Trump, who declared most of this world order to be a fraud. Privately, and with surprising uniformity, senior political leadership that I have talked with say that Trump’s policy actions have made them realize that they have lost their national sovereignty. They are no longer in charge of their digital infrastructure, their financial assets, or their military defense. Consequently, Carney’s call for a new world alliance of mid-sized nations that can compete against America and China is appealing to many leaders.  

A prime example of this newly emerging world order is the free trade agreement between the EU and India. After languishing for 17 years, this deal finally moved forward in January, creating an open market of almost 2 billion people and nearly one-quarter of world’s GDP.  Incidentally, it is rumored that India spent millions for this year’s World Economic Forum meeting in Davos, in part to promote their open-source Citizens Stack public digital infrastructure, modeled after their very successful India Stack. Citizen Stack, a collection of government-backed digital tools designed to allow citizens to prove who they are, pay money, store documents, and access services through their smartphones, claims to have already signed up to a dozen other counties.

Leaning into “Local” AI

Most smaller countries hope that AI can help them deal with all the political change and allow them to build thriving economies. However, they are not looking to the big frontier models of American hyperscalers, but to more focused “sovereign” AI agents for their nations’ trade, banking, government processes, and citizen services.   

For instance, India’s Citizen Stack is intended to be customized by each participating country to suit their particular needs, forming an interoperable digital trade area for AI agents. Similarly, China is dramatically increasing its investment into the Belt and Road trade alliance, its global infrastructure and economic development strategy connecting Asia, Europe, and Africa, which would provide another interoperable trade area for AI agents. 

Many companies, including those in the finance, health, and trade industries, are also following this path. Rather than uniform services across the entire world, they are deploying systems customized for local conditions, but interoperable to support international trade.

AI May Create a World of Small Businesses

Many nations and companies are looking for a practical vision of how AI might help deal with all this change and lead to a thriving economy. They recognize that the core competence of AI technology is to allow people to coordinate large amounts of information and enable large numbers of complex transactions, and they hope that AI’s capabilities may help their systems become far more sophisticated and efficient. 

As described in the recent book Flash Teams, written by my Stanford colleagues Melissa Valentine and Michael Bernstein, or my own recent book Shared Wisdom, AI tools already allow small teams of people to set up and run large, complex organizations. Consequently, CEOs and C-level managers that I talk to expect to have smaller in-house employee teams, but (perhaps surprisingly) they also expect to have many more personnel conducting localized project work across the globe, much like many of the big Indian software companies do today.

This suggests that we might be headed toward a world of distributed, less centralized companies and startups building and selling specialized and localized services. What might this world look like? Perhaps like San Francisco today: government statistics say that San Francisco has a working-age population of 600,000 people, 15,000 venture funded startups, and 90,000 small and medium size businesses (SMEs) including startups but also businesses like restaurants, stores, services, etc. Most citizens are part of a small, specialized, and localized business.

Income Equality in the Age of AI

A world of small, distributed, and changeable organizations may imperil social safety nets, which today are mostly funded through employment relationships. People suggest that we might need universal basic income (UBI) to help workers survive the continually churning economy that AI seems to portend. But raising taxes to pay for such universal income seems unlikely.

An interesting alternative is Universal Investment, where every company that is created deposits 10% of its founding shares in a sovereign wealth fund like the one that Alaska uses to spread funds from its oil wealth to all citizens. When companies are created, they are worth nothing, so giving up 10% of the valueless shares is not worth paying lawyers and lobbyists to avoid, especially if sharing the founding shares provides future tax certainty. If this scheme had been in force over the last 30 years, this 10% share of all new U.S. companies would be worth more than $9 trillion dollars and would have generated enough income to pay each U.S. citizen $3,000 a year — similar to the Alaskan fund in its best year. If AI improves productivity as expected, the yearly payment could quickly rise to a very decent living wage for every citizen.

Overall, nations are seeing fast changes in their economies thanks to AI and a changing geopolitical climate. What’s emerging is not simply a new set of trade agreements, but a new operating model for sovereignty: shared digital infrastructure, interoperable standards, and AI systems tuned to local markets. The countries that do best won’t be those that wait for the next superpower to set the rules; they’ll be the ones that deliberately build the rails.

Alex (Sandy) Pentland is Center Fellow at the Stanford Institute for Human-Centered AI working within the Digital Economy Lab and a professor of information technology at MIT.