Q: Why is the USA empire in decline? What situation has brought this about? Are we entering an era of 3 global powers, Russia, China, and the USA (a multipolar world)?

A:

An empire has to devote its economic outcome in two parts: one part is used to maintain its running, and another part is to accomplish what it wants. The first part is like the blood pumped out of the heart that flows back to the heart to keep the heart pumping; the second part is to supply every else in the body. Just like the calories we take from food, the first part of the calories is to keep every organ alive, and the second part is our strength to do our daily jobs. A business takes in many resources, the first part of the resources is used to manage the business, and the second part is to produce the goods or services. An empire has a revenue, be it tax tariffs, or whatever revenues it can get. When the revenue is used increasingly the first parts that keep the society running: government, schools, healthcare, the empire’s strength deceased, and fewer and fewer resources are available for its external strength.

One branch of economics is Institutional economics. The first part of the economic outcome used is called institutional cost, the cost for the system to live. Defense expense belongs to institutional costs. The defense expense is needed to keep the empire alive. When the marginal cost is larger than the marginal gain, the empire is declining. For example, the US occupied Afghanistan for 20 years, costing taxpayers $2 trillion, that’s $300 million per day for 20 years. What’s the US gain? $7 billion Afghan money confiscated by Biden. The marginal cost is 276 times larger than the gain. We haven’t counted the cost to Afghan yet. If the US is the world leader, if the US is the keeper of the world order, the coat and gain of all stakeholders of an event should all be counted. Because the world order is dominated by the US.

The trade deficit of the US already become a norm for more than two decades. It means the US economy cannot sustain the normal function by its own economic output. It has to take goods from somewhere else in the world. The US government debt is skyrocketing. It means the US government spends more than its revenue. The middle class shrinks. Inflation become a norm. Now the interest rate is reduced back to 3.7% percent. Interest rate is the value of blowing money, the time value of money. If an investment can get a high return, the interest rate should be high. In the last decade, the US had a zero-rate policy. If the interest rate for an economy is zero, it means the economy has no growth.

We observe that the US economy always reports positive growth. That doesn’t mean the US is getting stronger. It just means that the first part of the expense, the institutional cost grows faster and faster. Like a man ages. He may eat more, but his strength getting weaker. Because the system is less effective and needs more calories for physiological processing.

Or we can view the world economic system as one entity. The first part of the world economic output is for the US to take because it is the empire dominating the world and keeping the world running. It costs more to protect freedom of navigation in the South China Sea. This is the institutional cost of the world economy. Is the cost needed? If the US stops sending carrier fleets to the South China Sea, then China cannot trade with the world because the South China Sea will have no freedom of navigation. When the empire wastes money on things ridiculous, the empire declines because it increases the institutional cost. Protecting freedom of navigation from whom? From China. But China needs the freedom of navigation of the South China Sea the most because the South China Sea is the door of China. China is the largest stakeholder in the South China Sea. The freedom of navigation is vital for the trade between China and the rest of the world. The best design of the system is for China to protect the freedom of navigation in the South China Sea. The empire is declining when it dominates the world and runs the world like a child playing in the sandbox.

Of course, the freedom of navigation is just rhetoric. The real agenda is to contain China. But why? Why contain China? China is the biggest manufacturer in the world. China produces cheap goods. After the US implements the decoupling or later, derisk with China, it has to purchase elsewhere to pay more for less, making the US more deficit In trade and finance. Containing China accelerates the decline of the empire. Just like the occupation of Afghanistan, containing China also has a marginal cost several hundred times larger than the marginal gain.

Because the US is a world hegemon, its policy affects many countries in the world. When its policy is harmful to itself, declining of the empire, is also harmful to its allies who have to implement the US’s policy at the expense of their national interest. So it is not only the US that has debt, homelessness, inflation, and housing affordability problems, all its allies have the same problems too.

Now, let’s discuss the Why. Why the empire declines. The US is in the sage of financial monopoly capitalism. The US finances the world economy. In classic economics, finance does not create wealth. Wealth is created by laboring and working on natural resources. But finance is the most profitable industry in the US. The global south creates the wealth and the US gets a share of the wealth by financing the manufactures. The US also has income from monopoly high tech. Monopoly is bad for the market economy and bad for consumers. Every economist knows that. They just cannot announce this basic economics principle to the public. The empire dominates the narratives. It enforces its financial and high-tech monopoly in the name of national interest and national security. The enforcement, of course, added to the institutional cost. So the US GDP, counties as economic activities, are mostly service industry: finance, lawyers, retail, hotels and restaurants. It is called a trickle-down economy. The monopoly siphons the wealth from the world economy through the surplus monopoly profits and distributes wealth into the US society through the service industry. Virtually, the world creates wealth and the US cuts the cake. Geopolitics is the tech monopoly politics and dollar politics. The US invaded Iraq because Iraq wanted to use the Euro to settle the oil trade. That’s not allowed by the empire. NATO bombed Libya because Gadaff championed the African currency and the Africa Central Bank. All these military interference and 800 overseas US military bases cost the empire system.

For every problem, the US opts to use military solutions first. After the 2008 financial tsunami, Obama initiated the Pivot to Asia strategy, making the South China Sea the hot spot of military conflicts. The objective is to drive capital out of China to fill the void left by the 2008 tsunami. China would like the capital to flow into Africa through BRI. So the US established Africa Command, to strengthen the military presence in Africa. The US created the economic problem of the 2008 tsunami, and the 2008 financial crisis was not caused by China. Yet it triggered a series of military strategies of the US aimed at China. China created the largest chunk of wealth in the world economy and the US wants the wealth.

However, the marginal cost of the empires’ operations overwhelmingly surpassed the gain the empire got. That caused the decline of the empire.

When the empire tries to keep its tech monopoly position, it disrupts the world supply chains, and reduces the efficiency of the world economy, resulting in inflation in many countries in the world.

The US has the largest GDP. This GDP does not create much wealth, but it takes more wealth from the world economy. That’s the decline of an empire. Its institutional cost increased, and the economic output stagnated. The system of the empire dysfunctions. It is not only the empire's decline. It drags many countries into economic difficulty, creates world refugee crises, destroys ecosystems, and increases carbon emissions. The empire creates conflicts, chaos, wars, refugees, and hunger.

As Lenin said, monopoly capitalism is imperialism, and imperialism is war. The empire is doing nothing good for the American people and the people of the world. It abuses its hegemony power and deteriorates the morale of the society. The rhetoric supporting wars is the rhetoric that resorts to violence. The whole society understands this war propaganda as “get what we want by violence”. That’s why the US has the most gun violence and violent crimes.

The message the US sends to the public, by waging a new cold war against China and waging a trade war against China, is that “we don’t need to work to live a luxury life, all we need is violence”. The rhetoric to smear China is to legitimate a criminal mindset.

The empire is declining, and it should.