The world after the trade war: a new era in the economy is beginning
Anyone familiar with George Orwell’s 1984 is familiar with the fragmented world it depicts. In this world, major economies operate as separate, fortress-like islands, grouped into three geopolitical superpowers: Oceania, Eurasia, and East Asia. These structures engage in constant conflict and negotiation, not to achieve decisive victories, but to strengthen internal control, to spend excess funds and resources, and to maintain scarcity. This situation is reminiscent of Charles Tilly’s theory of “permanent inequality,” in which strong hierarchies are maintained through exploitation and constraint. Today’s global order, with its ongoing trade wars and economic reshuffles, seems to be moving toward a similar scenario. Agreements and disputes over resource allocation and economic shocks indicate a state of constant tension, in which control is more important than resolution. This tension is further heightened by the rise of militarization around the world, while big technologies play an increasingly important role in shaping economic and political power.
From the perspective of capital, countries like the US, China, Russia, India are not rivals, allies, or independent entities defined by emotional or ideological ties. Capital acts coldly, flowing to where profits are highest, not constrained by borders or emotional ties. Looking at the world from this perspective shows that current tensions such as trade wars, sanctions, or negotiations are more related to the mechanics of global capitalism, which has reached a critical point of imbalance than to national interests. This imbalance is manifested in the growth of debt, the transformation of trade patterns, and the increasing importance of technology as a tool for political, economic, and strategic influence.
Every major crisis in the world economy essentially turns into a liquidity crisis, a lack of cash flow. The United States, once the absolute leader of global financial capital, is now on the verge of default. Since the 2008 global financial crisis, the United States has been printing dollars to manage its domestic financial crisis. As a result, by the beginning of this year its debt had tripled in relation to GDP. The main reason for this is that the dollar is still the world's main reserve currency. Therefore, no matter how much the United States increases the money supply by printing dollars, its value will not decrease accordingly. Because other countries rush to buy dollars to stabilize their currencies. As a result, the value of the dollar remains high, despite the excess supply. The increase in the supply of dollars has increased the prices of goods and financial assets, including real estate, stock markets, and especially companies related to artificial intelligence.
In traditional capitalism, large companies would hire workers, pay them wages, and produce and sell products. But in today’s era of finance capital, the largest companies don’t necessarily produce products in this sense. Instead, they profit by extracting various rents from controlling currencies, commodities, natural resources, and even digital platforms. This system is called rent capitalism, and finance capital is at its core. At the same time, the average person’s income has stagnated, as most investments are directed toward automation rather than jobs. The cost of living, the cost of social reproduction, is rising, pushing people to a certain limit. This contradiction is increasingly destabilizing the global economy. Economic history shows that as long as credit flows, the system survives; but when it stops, a crisis begins. We are seeing signs of this stagnation all over the world.
Today, global capitalism is facing a deep crisis, with the United States and China at its center. The problems in the two countries are different but complementary. The United States needs to increase production, reduce consumption, cut spending, and eliminate its trade deficit to reduce its huge debt. China, on the other hand, needs to reduce its surplus, reduce production, increase domestic consumption, and reduce its debt. In other words, although the United States and China are pursuing opposing monetary and trade policies, both countries face the same fundamental problem of capitalism: excessive debt and a liquidity crisis. This has destabilized the entire capitalist system.
China's liberalization was gradual and state-led. Initially, it used cheap labor to attract rural workers to urban production. Socially formed capital drove this labor system in the early stages, but foreign investment was soon welcomed. Then came the liberalization of land and housing, which created a huge real estate "bull" market that raged for two decades. This resulted in the emergence of new types of capital formations. Subsequently, inefficient state-owned or even private enterprises were closed or merged into large corporations to consolidate capital. Eventually, the state's absolute control over resources such as minerals and energy was relaxed to make way for private capital. However, China never fully embraced financial liberalization. It still strictly regulates capital flows, investment, and monetary policy. As a result, speculative financial bubbles in China have burst less frequently than in the United States, and the state's control over the economy has become much stronger. This control is leading China on a path to transforming from a state based on rent-seeking financial capital to one focused on advanced technology.
The US is also seeking to achieve the same result, albeit through a different route. The Trump administration’s strategy involves a controlled depreciation of the dollar, thereby reducing the real value of debt owed to creditor economies such as the European Union, China, Japan, and Canada, and increasing demand for ultra-long-term Treasury bonds, which provide cheap borrowing. This would make exports more competitive, reduce the trade deficit, and help control inflation by importing cheap oil through OPEC+. The US appears to be following China’s strategy of selling ultra-long-term bonds. China has long pursued this strategy, although China has used state intervention and the US has used market control mechanisms. Although their paths are different, both countries are moving towards a new, technology-driven capitalist order. In this, the state becomes the owner or regulator of technology firms that centrally control production, finance, and information flows. It will become a techno-capitalist control state, where politics are centered around technological and information control. Economists like Yanis Varoufakis are calling this “techno-feudalism.”
But the system is based on a contractual debt that cannot simply be eliminated. To solve it, either the debt is canceled (which would disrupt global financial markets) or a new, more robust international agreement must be reached. The Plaza Accord of 1985 was exactly that: the US forced Japan and Germany to sell their dollar reserves, lowering the global value of the dollar and appreciating their currencies, thereby financing its debt by buying long-term Treasury bonds. While this was successful, it created a huge financial bubble in Japan. Today, the Trump administration is following a similar path, waging a trade war against the European Union and especially China. History shows that international agreements, such as the Bretton Woods system or the Latin American debt crisis, require long and extensive political negotiations. Organizations like the IMF and the WTO usually mediate such agreements, but they were created to distribute US debt around the world. Now, without changing this order, that is, without retreating from free market globalization, these countries will not be able to stabilize their economies and restore balance.
Thus, a new geopolitical order may emerge in the near future. In this seemingly imaginary but increasingly real world, superpowers will resemble walled islands with tight controls on capital flows and trade. It is increasingly likely that the United States will form blocs with neighboring countries, Russia will dominate Europe and Central Asia, and China will control East Asia. Each of these superpowers will develop separate economic systems, distributing capital and debt flows across its regions. Each bloc will have a dominant state at its center, and surrounding countries will act as vassal states, burdened with debt, unemployment, inflation, and cheap raw materials. The United States could build a consumer-driven, military- and fossil-fuel-dependent economy, with Mexico, Brazil, and Argentina supplying food and minerals, while the United States provides technology and security. Russia will trade gas, oil, and minerals with Europe and its neighbors. China is strengthening its domestic economy by increasing capital inflows and consumer spending to reduce its dependence on exports. Countries such as Vietnam, Indonesia, and Malaysia could become China’s manufacturing hubs. The US dollar’s monopoly position in the emerging world order could be weakened. Therefore, the US could maintain market confidence in the dollar and deliberately devalue it by tying it to a basket of commodities including gold and cryptocurrencies. If other countries reject this arrangement, it would not be surprising if a new neutral international currency, such as the Hong Kong or Singapore dollar, emerged, as they are not yet under the direct control of any superpower.
As for India, it plays almost no role in other areas, except for its huge market for cheap labor, because no country can compete with India in terms of cheap labor. As a result, India may join the American bloc, at least for now, in exchange for domination of the subcontinent. This will be at the expense of the future of millions of Indian workers employed in agriculture and small and medium-sized domestic enterprises. If the US regulates its financial capital to a certain extent, this capital may flow to India. While this will lead to a rise in the stock market in the short term, it will also increase instability and uncertainty in the Indian economic system.
The most frightening and distinctive features of this divided world will be large-scale militarization, continuous conflict, and artificial scarcity. Added to this will be surveillance technologies that control people. In this new world, big tech companies will become the real power holders. They will join state and corporate power to become the real driving force of a “superstate” that resembles an Orwellian surveillance system. At the heart of this new system will be technology – the technology of surveillance, control, and data management. Just as apps like WeChat in China record every action and conversation of citizens, companies like Palantir in the United States can predict who is likely to rebel and when. The ultimate manifestation of this technological surveillance will be a society in which the state views every citizen with suspicion.
But behind this whole system lies a systemic crisis, a deep concern about the growing number of "surplus population" who do not fulfill any function in the system of value creation. In the eyes of the state, they are seen as a "dangerous class" of the future, whose poverty, unemployment and deprivation may one day turn into a rebellion. This fear is pushing states to become more security-oriented, technologically dependent and oppressive. This is the constant internal fear that has haunted capitalism since its inception: what if the "surplus" created by the failure of the economic system rebels? Only time will tell. But the world is increasingly entering a new era.
Ananyo Mukherjee , political and economic analyst, PhD researcher