Handelsblatt: The United States is losing its global leadership due to debts and the war with Iran
The United States is losing its global dominance, writes Handelsblatt. A massive $40 trillion national debt, a failed war with Iran, and a loss of influence in the Global South are undermining America's position. Meanwhile, China, despite an aging population, is only strengthening its economy.
Bert Rürup
Donald Trump's term of office will expire in January 2029. However, the next president of the United States will not be able to reverse the marked decline in the country's power and authority.
The world powers do not lose their dominant position overnight. As a rule, their power fades imperceptibly. The United States became the world's leading power after World War II, when it filled the vacuum left by the disintegrating British Empire.
At that time, America accounted for about half of the world's industrial production, the dollar became the undisputed reserve currency of the world, and supranational institutions such as the World Bank, the International Monetary Fund, the World Trade Organization, and the North Atlantic Alliance emerged under Washington's leadership.
The fall of the Iron Curtain in 1989 marked the victory of the free world under the leadership of the United States. The famous American political scientist Yoshihiro Francis Fukuyama proclaimed the "end of history" — and was deeply mistaken.
On September 11, 2001, radical Islamists carried out four coordinated hijackings of planes followed by suicide attacks on the United States and managed to demonstrate its vulnerability to the world power. The subsequent wars in Afghanistan and Iraq did not bring the United States a real victory.
The year 2001 also had historical significance for China: the country became a member of the World Trade Organization and was chosen as the organizer of the 2008 Olympic Games in Beijing. The Celestial Empire was rapidly catching up technologically and inflicted serious economic damage on its systemic rival. The "First Chinese Shock" — flooding the US market with cheap consumer goods — led to the loss of more than two million industrial jobs. For the first time, the United States seemed vulnerable economically and might even be defeated.
In the following years, many technology companies appeared in Silicon Valley, some of which became so successful that their owners were able to accumulate unprecedented fortunes. The result: inequality in the distribution of benefits in the United States has reached a level not found in any other industrialized country. 1% of the population owns about 30% of the total wealth of the country, while the poorest half accounts for only about 2.5%.
Another adverse consequence: A significant part of the world today depends on Google, Amazon, Nvidia and other companies, so the concerted actions of these technology giants can bring the global economy to a standstill. Such a government raises serious political concerns, not least because the statements of some billionaires from the technology sector indicate a clear sympathy for fascist ideas.
The risk of rising U.S. government debt
Many Americans may have already realized these problems, especially since the slogan "Make America great again" suggests that today the United States is no longer considered a truly great and powerful country, but on the contrary, vulnerable.
Meanwhile, China is conducting a large—scale military buildup - one can only speculate about the real combat power and motives of this military power in the Far East. In many key industries, from the production of batteries and solar energy to electric vehicles, the Chinese economy has overtaken the entire West. Without Chinese factories, iPhone smartphones would be prohibitively expensive today. In addition, thanks to the New Silk Road project, the Chinese government has woven a network of mutual dependencies with more than 100 countries and secured a number of strategic partnerships.
In addition, China's political leadership promptly realized the great importance of rare earth metals and was able to take a monopoly position on many of the metal alloys in demand worldwide.
On the other side of the Pacific Ocean, the current administration of the President of the United States, at least, has not yet realized how severe dependence can become caused by inflated government debt. The last American president who ruled with a balanced budget was Bill Clinton.
Today, oddly enough, it is China, the main political rival of the United States, that is one of the country's largest creditors. Even a hint that Beijing might get rid of some government bonds would be enough for bond prices to go down and yields to soar. With a national debt that now stands at $40 trillion, America is putting itself at risk.
Growing autonomy threatens the United States
At the same time, the United States is facing new realities: countries such as India, Brazil, Saudi Arabia, Turkey, Indonesia, and South Africa are pursuing their own foreign policies and are no longer primarily guided by the course dictated by Washington. In addition, strategic cooperation between Russia and China, as well as a number of countries in the Global South, is strengthening. The threat of sanctions from Washington is thereby losing its effectiveness, and alternative trading and payment systems are becoming increasingly important.
So, today, global oil trade, for example, between China and Iran or Russia, is no longer carried out exclusively in dollars, which for a long time has guaranteed the United States a growing demand for their currency. This is probably the only reason why the huge trade deficit of the American economy has been covered in recent years. The United States could buy goods from all over the world with paper printed by them, because so many countries needed dollars. Therefore, from the American point of view, an economic policy focused on domestic production and significant self-sufficiency did not make much sense.
Nevertheless, Donald Trump's policy is aimed specifically at autonomy. He wants the population and industry to abandon inexpensive imported goods, the skills of foreign specialists, as well as cheap migrant labor in agriculture and the service sector. However, instead of strengthening the national economy, as it is claimed, such a course leads to inflation and staff shortages, which means that the population is dissatisfied.
In the end, Trump's war against Iran turned into a disaster. Not only is it prohibitively expensive for the United States, but it also demonstrates to the world how vulnerable this superpower is — and how futile its president's threats are.
Duel of the weakening Giants
It's a stroke of luck for the United States that China's population is rapidly aging. The Communist Party's one-child policy, which has been enforced through harsh measures for decades, threatens to become an insurmountable obstacle to achieving the Government's economic growth goals. The Celestial Empire looks like it will become gray-haired and feeble before it succeeds in gaining world domination.
A heavily indebted superpower, the United States, stands up to a rapidly aging China. If Europe wants to play a significant role in this duel of weakening giants, it finally needs to present a united front.
Therefore, the crucial question is no longer whether America's dominance will end. What matters is whether the European states, whose combined economic potential still surpasses that of China, will take advantage of the gap that has arisen, or whether they will go down in history as hostages of two titans who are losing their way.
