We are not witnessing the last days of the American empire. Its crisis is real, but its trajectory of decline is likely to be protracted and uneven.

After the fall of the Soviet bloc in the early 1990s, the United States stood at the apex of the unipolar world, unrivalled both politically and economically. Some 35 years later, it has become a struggling superpower and has no one to blame but itself for its current deep crisis. 

The American empire unleashed two major drives in the last three decades, and the consequences of these initiatives have come back to gnaw at its entrails.

The first was neoliberalism, an effort to restructure the US economy and the global economy on free market principles and place few constraints on making profit.  The second was termed “nation-building,” a new collar for an old dog called “imperialism.”  

There were three major prongs to neoliberalism.  One was structural adjustment—placing as few political and social constraints on the movement of market forces. The second was financialization—making the financial sector the cutting edge of the economy.  The third was globalization—doing away with political, cultural, and social barriers to the free flow of trade and capital.  I will focus my remarks on the third.

TNC-China economic partnership

The main thrust of globalization was to incorporate China into the global capitalist system, an objective on which the US corporate elite was united. The US-China partnership lasted until 2017, when Donald Trump came to power.

China was important to US transnational corporations (TNCs) because in the early 2000s, the hourly manufacturing wage there was less than 5% of that in the US.  Investments in China, along with neoliberal restructuring and financialization at home, halted the decline of TNC profitability. Profit rates for US firms rose from 6% in the early 1980s to 9% in the early to mid-2000s. The so-called “China Price” saw US stock investments in China balloon from $30 to $40 billion a year in the mid-1990s to $107.6 billion by 2019.

US big business soon became China’s closest foreign ally. Under President Bill Clinton, big business lobbying overcame objections from pro-Taiwan right-wing elements, human rights advocates among Democrats, and a Pentagon that was convinced that China would be the US’ principal strategic competitor. 

The TNC-China nexus was a “devil’s bargain” that would remain strong through succeeding administrations until the Trump presidency. The TNCs were out to exploit Chinese labor for superprofits. China agreed to this, but with the goal to gain the investment and technology needed to develop its economy. 

The Chinese state was not like previous client regimes that had been integrated into global capitalism. It was the product of a successful popular national revolution. It confronted US forces in Korea in the 1950s, and played a role in the Vietnamese victory over US forces in the 1970s. It was also stronger than the South Korean and Japanese states, whose capacity to resist US demands was limited by their subordination to US strategic interests. Beijing was thus able to manage foreign capital.

The cost of China’s willingness to have its workers exploited was considerable. For the period 1960–2018, China suffered a loss in terms of value transfer—or unequal exchange—of approximately $19 trillion. But from Beijing’s perspective, this cost in return for economic development was a devil’s bargain that was worth making. 

The TNCs accepted the devil’s bargain in order to improve their bottom lines. Former US Treasury secretary Hank Paulson remarked that many US firms “accepted the Faustian bargain of maximizing today’s earnings per share while operating under restrictions that jeopardize their future competitiveness.” 

The US clearly got the short end of the Faustian deal. Its industrial heartland has been largely deindustrialized, with factories moving to China.  By the end of the second decade of the 21st century, the relative power of China’s foreign corporate allies had been reduced by a decade-long stagnation in the US economy, a Covid-19 recession, and China’s rapid technological advances. 

The US economy had also been shaken by a social and political upheaval characterized by job losses, rising inequality, and growing indebtedness. To be sure, China also has crises, including rising corporate debt, overinvestment in real estate, and the demographic crisis. China’s crises, however, stems from its unbalanced growth, unlike the US crises of decline. 

China has now become the world’s biggest economy in terms of purchasing power parity, the center of global capital accumulation. As The Economist acknowledged: “Over the past 20 years China has been the biggest and most reliable source of growth in the world economy.” 

The Middle East quicksand

The second development that undermined the US empire was its misadventures in the Middle East. A chain of events started with Osama bin Laden’s assault on the World Trade Center on Sept. 11, 2001. Bin Laden saw this attack as exposing the vulnerability of the “Great Satan,” and inspiring Muslims to join his jihad against it. 

Bin Laden’s plan, however, horrified most Muslims, who distanced themselves from his terrible deed.  Still he was in luck, thanks to George W. Bush and the neoconservatives that came to power in 2001. For them, his assault was a God-given opportunity to teach both America’s enemies and friends that the empire was omnipotent. 

Bush drove the US into two unwinnable wars against highly motivated insurgents in the Middle East. Prolonged occupation demanded boots on the ground; thus, most of the US Army’s brigades were overseas, and those left in the country were too few to maintain the contingency reserve or the necessary training base. Military morale plummeted, as tours of duty were extended and casualties mounted. 

This led to the overextension of US political and military power from which Washington is still reeling.  Eventually, the already limited public support for the Middle East expeditions went up in smoke. This impossible situation forced Joe Biden to withdraw all troops from Afghanistan in August 2021, in a disorderly, chaotic departure that brought US prestige to a new low, even among America’s allies.

During those 20 years (2001-2021) when Washington was tied up in the Middle East, China concentrated on its drive to develop its economy and unfold an economic diplomacy that gained it much friendship, support, and sympathy in Africa, Asia, Latin America, and even Europe.

In the last three years, Washington shifted to diplomacy to shore up its deteriorating position in the Middle East. Washington tried to regain control of events by brokering a diplomatic rapprochement among Israel, Saudi Arabia, and the smaller Arabian Gulf states like Qatar. 

The Hamas offensive into Israel on Oct. 7, 2023, however, blew up Biden’s plan for regional stabilization, with the Saudi government and other Arab states scorning a deal with Israel while the latter was slaughtering another Arab people, the Palestinians. Today, with a defiant Israeli tail wagging the American dog, the US stands even more isolated than ever, condemned by most of the world, except Western Europe. 

Meanwhile, China allied itself with the global South and promoted a peacemaking diplomacy that contrasted with Washington’s unqualified moral and military support for Israel’s genocidal offensive.

The US is equally losing control in Europe, with the Ukraine situation deteriorating.  Washington’s aid lifeline to Kyiv is now threatened by congressional Republicans’ opposition. With the threat of an isolationist Donald Trump regime coming back to power in November, the US’ European allies are increasingly worried that Washington can’t be trusted with providing their “security.”

Containing China

Washington’s rhetoric comes across as simply preventing Beijing from becoming No. 1. But Beijing disclaims seeking to be No. 1 and has shown unwillingness to replace the US as global hegemon. Taking their cue from Biden’s increasingly provocative pronouncements, US military leaders have become more confrontational in their language, as shown by statements from Gen. Mike Minihan, head of the US Air Mobility Command, and Adm. Michael M. Gilday, chief of US naval operations.

The US military edge over China, however, is overwhelming. The US military posture is offensive while China adopts a strategic defensive stance which even the Pentagon acknowledges. Though it has raised military spending and might be re-orienting its force posture, Beijing is not engaged in an arms race with the US, which has spent thrice more than China in recent years. 

China’s nuclear arsenal remains puny in comparison to that of the US. China has only one overseas base, in Djibouti, compared to the scores of US military bases and installations in Japan, South Korea, the Philippines, and Guam, in addition to the Seventh Fleet patrolling the East and South China Sea. China’s offensive capabilities are limited, its naval force provided by three Soviet-era aircraft carriers that are lightyears away from the capabilities of the US supercarriers. 

The main site of confrontation between an aggressive US and a defensive China is the Asia-Pacific region, particularly the South China Sea.  Three points need to be made here.

On Taiwan, Washington has been rattling about responding to a Chinese “invasion.” Beijing’s long-time policy has been to integrate Taiwan through economic ties which have strengthened in the last 25 years.  While Beijing reserves the option of military action against Taiwan, it would be crazy to do so since the US could wipe out most of the Chinese Navy within 24 hours of hostilities.  

Second, Washington’s declared intent in obtaining more military bases in the Philippines is to support Taiwan in the event of an invasion by China. The reality is that defending Taiwan against a nonexistent Chinese military threat is a smokescreen for the real goal of using the Philippines as a springboard from which to contain China.

Third, China’s motivations for its South China Sea encroachments are primarily defensive: to expand its defense perimeter against attack from US bases in the Western Pacific and the Seventh Fleet. Beijing’s main intent in the maritime formations it has seized is installing missiles to shoot down missiles aimed at China’s industrial infrastructure in Southeastern China.

Beijing, however, has blundered in its defensive goal by unilaterally claiming 90% of the South China Sea and appearing as a big bully. But it can rectify its frayed relations by negotiating with Asean and proposing a demilitarization and neutralization of the South China Sea in return for the withdrawal of US bases from the Western Pacific and the abrogation of military agreements with the US. 

Hegemonic transition or vacuum?  

With an economically strong but militarily disadvantaged China facing off against an economically and politically weakened United States seeking to shore up its position by bannering its military superiority, can one really speak about a hegemonic transition? 

Perhaps what is emerging is a hegemonic vacuum rather than a transition akin to the post-World War I era when a weakened Western Europe could no longer restore its prewar global hegemony. At the same time, the US did not follow through on Woodrow Wilson’s push to assert hegemonic political and ideological leadership. 

Within such a vacuum, the US-China rivalry continues to be critical, but with neither power able to decisively manage trends, such as extreme weather events, growing protectionism, rising global wealth disparities, the decay of the US-imposed multilateral system, the volatilities in the Middle East and Eastern Europe, the resurgence of progressive movements in Latin America, and the rise of authoritarian states and their likely alliance to displace a faltering liberal international order. 

Traditional policymakers argue that the situation still requires a hegemon, with Western analysts having the US in mind, not China. 

On the other hand, the crisis of US hegemony can be viewed as offering, not anarchy, but opportunity. Despite the risks involved, a hegemonic stalemate could lead to a world where power is decentralized, where there could be greater freedom of political and economic maneuver for smaller, traditionally less privileged countries which could play the superpowers against each other, and where a truly multilateral order could be constructed through cooperation rather than imposed through either unilateral or liberal hegemony.

Walden Bello is co-chair of the Board of Focus on the Global South and adjunct professor of sociology, State University of New York at Binghamton. This piece is abridged from his speech at a forum at the University of the Philippines Diliman on “The US Empire: The Beginning of the End?” on Feb. 23, 2024, organized by the UP CIDS Programs on Alternative Development and Strategic Studies and the University Student Council. The forum can be viewed at the UP CIDS YouTube channel: https://www.youtube.com/watch?v=8ONsBzifPSE