The U. S. Will Not Dominate the World of the Future and Neither Will China

The Era of American Domination of World Trade is Over

The United States will never again be as powerful as we we were in the years after World War II, but China will not replace us. We will never be as powerful as we used to be because the conditions that allowed us to be so powerful no longer exist. China will not replace us because today's world is not the world of 1945.

Our Power Was Due to Unique Circumstances

We became uniquely powerful at the end of World War II because we were the only major, industrial power left standing at the end of the war. The others had been pretty thoroughly flattened and/or bankrupted by the war. We produced more than half of the industrial production in the world, and unlike all of the other major, industrial countries, we were a creditor nation. That situation allowed us to dictate the terms of world trade in the post war economy.

The U. S. is No Longer in Control

People who are over 40 today grew up in the world that the United States created after World War II. We are used to thinking of the world as united under the leadership and control of our country, but the world has changed. The world that we grew up in no longer exists, and we are no longer in control. We no longer produce the bulk of the world’s manufactured goods. There are many other successful manufacturing countries. The most important of them is, of course, China, but others are growing in importance. We are also no longer a creditor nation. We are a debtor nation, and servicing our national debt is the second largest item in our federal budget succeeded only by Social Security. The annual cost of the interest on our national debt now exceeds our military budget.

So, our power has declined, and we can no longer dictate the terms of the world’s economy. Moreover, other countries no longer have to conduct their foreign trade in dollars, and that makes them less dependent on us. They have alternatives. The dollar will continue to be important internationally for a long time, but changes are coming. Oil can now be purchased in Chinese yuan instead of dollars, and China has developed a system called “CIPS” that allows countries to use yuan instead of dollars to settle international accounts. Other countries are also developing systems that bypass the dollar.

We still have the world’s largest military forces, but military power cannot really substitute for economic power because we cannot go to war every time someone does something that we do not like. So, our power is waning. There is nothing that we can do about that because the decline in our power is due to causes that are outside of our control. We must adjust to living in a world that we cannot dominate.

China Will Not Replace Us

Many people believe that as our power declines, China will take our place, but that will probably not happen. China will be a major economic power - perhaps the most important in the world - but China will not dominate the world as we did for many years. The reason is that China faces a world that is very different from the world that we faced in 1945. 

In 1945, we were able to dictate the terms of international trade because we were the only major, industrial power still standing at the end of the Second World War. China has no such advantage in today's world. Today, there are many, strong industrial nations pursuing their own interests. China cannot wave a magic wand and eliminate the dollar from world trade. The dollar will continue to be used, and the United States will continue to be important even if it cannot dominate the world. China cannot eliminate the growing manufacturing power of countries like Brazil or India. Nations like Japan, Canada, Germany, Mexico and the BRICS countries will insist on pursuing their own interests, and they will wield significant power to do so.  Canada's leader Mark Carney is actively pursuing alliances that will allow what he calls the "middle powers" to retain their economic independence from China and the United States. At the same time, the European Union is working to strengthen its military and economic power.  So, China will not be able to dictate the terms of world trade as we did for many years. China will have to get used to living in a world with many economic powers, and so will we.