Washim Raja
This essay explores the structural dynamics of capitalism and their potential long-term implications for the global dominance of the United States. It argues that mechanisms such as market concentration, declining innovation diffusion, financialization, and persistent trade imbalances contribute to systemic pressures within the U.S. economy. By examining concepts like monopoly of productivity, allocative inefficiency, the Triffin paradox, and geopolitical-economic strategies, the essay presents a perspective on how internal economic structures and external global roles interact. It further discusses how these factors may influence shifts in global economic power, particularly in comparison with alternative economic models that emphasize state involvement and diversified development.
1. Monopoly of productivity: A “monopoly of productivity”—often understood as the concentration of productive capacity, technological innovation, and market power—is considered by many economic theorists to be a systemic, long-term outcome of the capitalist system. While capitalism is often defined by “free competition,” that very competition drives larger, more efficient firms to outperform.
absorb, or merge with smaller ones, resulting in a concentration of capital and a higher “degree of monopoly” [1]. Similar to the USA, the production of electric cars, cloud services, AI, and semiconductors is dominated by companies such as Tesla, Google, Microsoft, Meta, and Nvidia. This monopoly
always has the intention to generate more and more profit with the increase of automation in its industrial complex. As a result of this, the workers will lose their bargaining power, and the entire system
will tend to concentrate the wealth. There will be a huge supply in the market but very little demand. For a larger economy, this results in a global economic crisis.
2. Decline of nationwide productivity:
The monopoly of productivity leads to a decline in the nationwide productivity. while frontier firms remain dominant over average firms, the benefits of their innovations do not spread across the nation.
and the competition becomes very low to improve the quality of production. Monopolistic firms prefer short-term profit rather than long-term transformative breakthroughs. National resources
like skilled labour and capital remain confined within the dominant firms rather than spreading throughout innovative competitors. Monopolies often restrict supply to keep prices high. This leads to allocative inefficiency [2], where the nation produces less than what is socially and economically optimal.
3. Economic bubble: The main difference between treasuries and products is that for treasuries, when its price becomes high, so does their demand, whereas it’s entirely the other way around for products, i.e., their demand decreases as the price becomes high. Because of the monopoly, as the nationwide
Productivity starts to decline; the only way left for these monopolies to gain more profit is through selling treasury bills by manipulating their demand in the global market. In 2013, China’s holdings of
The US Treasury had reached the highest peak of $1.32 trillion since the 2018 trade war, and a sharp decline took place. China started selling U.S. Treasury bills to stabilize its currency, the “yuan.” If the USA continues manipulating the demand for its treasuries in the global market, one day will come when an economic bubble will burst.
4. Triffin paradox: The Triffin paradox is the conflict of economic interests that arises when a national currency also serves as the world’s primary reserve currency (dollar); the issuing country will go into a trade deficit if it tries to maintain its demand globally [3]. To maintain the global demand for the primary currency, the price of the products of the issuing country will go high, which eventually declines its global demand for products. So it will become easy for its people to buy and use foreign products rather than produce and buying domestic products, which will lead to a shrinking manufacturing sector and persistent trade deficit. Currently, the U.S. is facing a $202.1 billion trade deficit with China.
5. U.S. imperial sabotage and its dilemma: In modern times, an empire does not only invade or capture its adversary nations through wars or military might. It can also work through its economic weapons and currency hegemony. By exporting its capital to other nations, exploiting their
resources, land, and cheap labour to maximize its profits and gain (imperialism is the highest stage of capitalism) [4]. China, in 1978, under the leadership of Deng Xiaoping, allowed the U.S. to do the same but simultaneously modernised its society and infrastructure and educated its large population with access to international firms and universities. But due to socialist policies in China, the monopoly did not grow like the USA, and by diversifying their economic sectors and firms, they managed to keep the competition and bargaining power of the workers intact in the market that had been maintaining the nation’s productivity as yet. So in the long run, whereas U.S. nationwide productivity is on the decline, in the case of China, it is growing very rapidly.
6. Future options for the United States: Under these circumstances, either the USA has to devalue its dollar and make space for the Yuan in the global market or, through military might, it has to capture other nations’ resources like Greenland and South American nations like Venezuela. Another thing
the US can do if they don’t want to devalue their dollar: devalue the Euro and replace it with the Yuan. Through these processes, the USA’s future policies will be built upon. Like forcing Europe to buy oil from the USA at a high price or leaving half of the globe under Chinese domination, the eastern side for China and the western side for the USA. If the USA can’t get rid of its monopoly in the market and profit-driven policies, its economic bubble will eventually burst due to more
automation, the monopolistic firms tend to make more profit through treasury bonds and get indebted, ignoring the nationwide productivity completely. China, due to its socialist policies, does many non-profit investments and maintains nationwide productivity. The Gulf countries do not invest in Chinese firms; if they have to do so, they need to make many non-profit investments in China, which is totally antithetical to their capitalist principles. So the only option left for Gulf countries to invest is the US market to make more profit.
________________________________________
References
[1] Industrial organization theory on market concentration and economies of scale in capitalist systems.
[2] Microeconomic concept of allocative inefficiency under monopoly conditions (P > MC leading to underproduction).
[3] Triffin, R. (1960). Gold and the Dollar Crisis: The Future of Convertibility. Yale University Press.
[4] Lenin, V. I. (1917). Imperialism, the Highest Stage of Capitalism.
