There’s a lot of confusion about the end of the American empire, and the fall of neoliberalism. Many people think the US will just be in “second place” and it’ll be OK.
No.
The problem is the nature of America’s decline. Since 1980 the US economy has been progressively financialized. Profits are all that matters, not what is done to make profits. In properly functioning markets the idea is that products fill a need, on net improve human welfare and lead to more growth of real products.
If a company doesn’t make a profit, that means it isn’t growing the real economy with products which are a net positive. In such a case it goes out of business.
This is approximately how the Chinese economy works. It’s how the US economy worked for much of its history. It’s how the British economy worked up till about 1890 or so.
It’s not how the US economy works.
You could say that the US economy is currently auto-catabolic. The more money that is made, the more the real economy is damaged. You see this most purely in Private Equity. They buy up companies, loot the company, load it up with the debt (including all the debt used to buy the company), then the company goes out of business. This is what happened ToysRUs, it is also, contrary to the current storyline, what happened to Blockbuster. The company was trying to pivot to online, but all profits were drained out by PE owners.
This happened to, literally, tens of of thousands of company.
The sort of monopoly roll-ups which Matt Stoller so ably covers increase prices without increasing product quality. Health care price increases provide no utility (you can get a CT or MRI scan in China for under $100.) All of this damages the economy. Headline GDP goes up, but the actual strength of the economy decreases. I would estimate that fully half of US GDP is essentially “fake”, driven entirely by increased prices and fake profits. The US economy has been smaller than China’s, in real (not PPP adjusted, but “how much do we produce”) terms for at least ten years.
This process continues till there is no muscle left to consume.
The only possibility of the US avoiding the UK’s fate, despite being a continental power, is for the oligarchs to lose power and for there to be a huge compression of asset and service prices. This process will be extremely painful and is currently politically impossible, due to the control of the duopoly. Both parties are owned by oligarchs, the tech bros are rising and none of them have the least interest in creating a good economy when it’s so much more profitable to loot America.
Real innovation is moving to China and will increasingly do so. They are at least equal in pharma and will soon be ahead in biotech. Their markets prioritize increased production (which westerners complain about as “over-capacity.”) The Chinese government does not want high GDP numbers or high profits, they want increased human welfare and a more powerful state and country. So their markets are organized, well, as actually competitive markets, the most “free” in any major economy.
So Americans who are patting themselves on the back, figuring “well, how bad can it get? We’ll still be number 2” are underestimating how bad the economy is going to get. India is effectively a continental power too, and it punches way below its geographical weight.
This isn’t to say there is no hope for the US, but decline has a long way to go yet because reversing it requires the most powerful people in society to give up massive profits, and many of them, in the process, would lose their fortunes. Meanwhile many ordinary Americans are still doing “OK” if not great, and they don’t want radical (change from the roots) change either.
All of this is not a worse case scenario either, it’s the default—maybe even slightly optimistic. The worst case scenario involves some form of civil war, not like the War between the States, but low grade shit wafare that slowly drives a country into the dirt.
The bottom is not yet close.
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