Trump’s objection to NATO and the state-of-play it tries to maintain is primarily monetary. The US should not be paying a majority of the military bill to maintain the dominance of the Western block in Europe is what he is arguing. What would an American abandonment of this security project really entail?

Russia, no matter how hard the typical liberal voice in the West tries to vilify it, is not an ideological enemy of capitalism like its predecessor Soviet Union.

Today’s Russia, under Vladimir Putin, is an authoritarian regime ruling over a vast landmass. Its economic salience is rooted in rogue capitalism thriving on a huge natural resource endowment. It also has a disproportionately large military apparatus compared to its economic might, which is largely a legacy of the Soviet Union days. It is happy to cut deals over this endowment with other major economic powers irrespective of the ideological flavour of their regime.

Until the Ukraine war, countries in western Europe were happy to do business with this version of Russia, so much so that it became an integral component of their energy requirement calculus. Of course, Putin’s Russia has also been looking for opportunities for regional domination vis-à-vis the former satellites of the Soviet Union. But today’s Russian expansionism or quest for protecting its local hegemony is more to cater to old notions of Russian nationalism and maintaining Putin’s own legitimacy than even entertaining a strategic competition with major economic powers in the West.

For the West, the question is whether it should oppose the territorial expansionist ambitions of Russia even it requires an economic disengagement from its natural resource markets. Trump and his neo-right fellow travellers in more and more European countries are now openly advocating against this moral grandstanding at a significant material cost and tasting political success in doing so.

The Russia question, to be sure, is only a sideshow in the ongoing global political economy game. The US’s major strategic challenge today is from China rather than Russia. It is already the largest economy in purchasing power parity (PPP) terms. China’s GDP was 1.25 times that of the US in international dollars (2021 prices) in 2023. China has a significantly large manufacturing output, almost two times that of the US in 2021, the latest period for which data is available for both countries in the World Bank’s WDI database, even in current dollar terms.

While Chinese manufacturing boasts of a significant technological prowess today and is increasingly pushing the envelope on the technological front, the core of its competitiveness continues to be rooted in significantly low wages compared to the advanced capitalist world.

The ‘original sin’ in this case from Western standpoint, has been committed by advanced country capitalism, which, in order to cut down costs and maximise profits, started relocating production to low-wage countries (of which China has been the biggest beneficiary) and importing them back. Chinese manufacturing prowess we see today has been developed via a proverbial long march of toil in thousands of manufacturing sweatshops by working on this opportunity.

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Those who think otherwise would do well to read the excellent book House of Huawei: Inside the Secret World of China’s Most Powerful Company by Washington Post’s tech reporter Eva Dou. It gives a fascinating insight into how one of China’s most successful technological companies was developed on the back of inhuman working conditions.

What did this loss of manufacturing prowess entail for the West, especially the US? Three things can be listed in chronological order. First, it created an existential crisis for blue collar manufacturing workforce, which was an integral component of economy and politics in advanced capitalism. Second, it is increasingly threatening the market share of companies which are owned by capital in these countries. And, third, thanks to the proliferation of double-use technology today, it can lead to a massive infiltration in the military and security apparatus of the advanced capitalist countries.

The US establishment, which does not see eye to eye with Trump tried to prioritise the third and to some extent the second challenge without answering the first. Their democratic support collapsed before the ideological apparatus supporting this worldview.

To be sure, China’s per capita income levels are still significantly lower than that of the US or other developed countries. In current dollar terms Chinese per capita GDP was 15% of the US in 2023 and even in PPP terms it was just 30% of US per capita GDP. A situation where a country is a global leader in manufacturing but neither a leader in terms of overall GDP nor even among the top few in terms of per capita GDP is a first in history of capitalism.

Where does global capitalism go from here?

It is unlikely that China will replace the US as the leading economy as long as dollar continues to be the dominant currency in the world. A lot of US’s advantage in the service sector, which gives it its overall economic lead, is thanks to precisely that. The communist regime in China will never be able, or even willing, to create conditions which will make it a global leader in the world of finance. This will, essentially speaking, require the Communist Party of China accepting the hegemony of global financial flows. That is self-liquidation for a communist regime.

Trump’s theatrics around things such as tariffs are basically an attempt to leverage the dominance of the dollar to override some of the loss in American competitiveness. The rest of the world can do precious little to retaliate vis-à-vis American dominance in the world of finance as long as dollar is the dominant currency. Pushing too hard against the US can be self-destructive for a country like China because it has built its economy by squeezing domestic consumption to sell to the outside world.

Will this tug-of-war last forever?

The best answer to this question will be to borrow China’s first Premier Zhou Enlai’s ‘too early to say’ remark about the French revolution to a visiting French delegation in 1972. There are at least two objective reasons for this non-committal view, one from China and another from US.

Having realised that becoming the largest manufacturer in the world did not boost its mass income levels to required levels and now faced with demographic decline, China has now placed its bet on trying to ace the high-tech manufacturing game. Even if this technological bet were to be successful, the redistribution of the surplus created to maintain political stability will be anything but simple for the Chinese regime.

In the US, Trump’s coalition will face an increasing tension between the political tailwinds of schadenfreude by vilifying and destroying institutions which symbolised the post-cold-war order, which among other things perpetuated massive income inequalities and the headwinds of the fruits of ongoing political economy recalibration being usurped by capitalist rather than working class allies of the Trump regime. This was best articulated in a New York Times interview with Steve Bannon, one of the biggest faces of Trump’s populist movement.

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“(Marc) Andreessen and (Elon) Musk are smart enough to be able to get below the surface on the numbers and see the direction of the country and climb on board as the technofeudalists early on. They are hard-core technofeudalists. They’re not populist. I tease Elon all the time. If I could turn him from a technofeudalist globalist to a populist nationalist, we could make some progress here. He’s definitely a technofeudalist. One of the hardest-core technofeudalists. And so is Andreessen. With these guys you’re talking about genius-level intelligence. These are not dumb people. But they’re not with us when it comes to the little guy”, Bannon said clearly articulating the tension between the haves and have-nots constituencies of the Trump coalition.

The future of the Sino-US competition, and therefore the world at large, will depend on how these two contradictory trends play out in US and China. What does all this entail for a country like India? The sequence of events in Oval Office should disabuse India of any illusions that the US will have India’s back in case of a serious military conflict with China. Deals not ideals is what will decide the conduct of today’s US. This is reason enough to engage with rather than provoke China both economically and militarily. On the other hand, Chinese tension between the growth cloth continuously falling short in making the welfare coat should only make us more aware to a much bigger predicament India is likely to face on this front.

Capitalism, to put it bluntly, is not the end of history leading to an era of perpetual liberal democracy. It is closer to the Darwinian laws of survival of the fittest.

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Roshan Kishore, HT’s Data and Political Economy Editor, writes a weekly column on the state of the country’s economy and its political fallout, and vice-versa