Terms of Trade: The empire and its discontents | Hindustan Times
The midterm result in the US fits the proverbial logic: ‘success has many fathers but failure is an orphan’. It was the spike in the cost of living, President Donald Trump’s whims and his colleagues’ even more whimsical ways of governing, poor GOP candidates in some races, etc., that likely contributed to a historic surge for the Democratic Party in the elections. Trump dismissed the results with the easiest explanation: he was not on the ballot.
AP fileDoes November 2026 tell us something about November 2028? It is too early to say. What we can expect with more certainty is a lot of churning within both the Republican and Democratic camps and therefore the US itself. The binaries are many. Support Ukraine, not Israel. More Medicaid, less data centres. Less ICE hunting people on the streets and more Congressional enquiries against Trump and his acolytes. Lower tariffs and higher trade. Democrats moving to the left and Republicans asserting a centrist position. One could go on listing more such binaries. All of them are important.
But none of them capture the central contradiction facing the American body politic. It is the following: reconciling an empire in decline, a skewed super-rich population, and the worsening class anxieties and insecurities of the vast mass of people.
The US today is dealing with a fiscal situation that is unsustainable even in the medium term. Its deficits are high, debt is unprecedented and already tepid revenues face the prospect of a big hit via AI replacing white collar workers. It now pays more in interest payments to service its debt than in military spending; this is often cited as a critical threshold when a superpower starts declining. Its industrial base is extremely vulnerable to external (read China) global value chain dependencies. It is difficult to see how a change in political guard can solve these problems.
The ascendant super-rich in today’s America are a very small club: the tech-boom clique. The US must win the AI race to stay a superpower. The tech boom elite had the business intelligence to eat crow and cosy up to Trump after his 2024 victory. Collectively, they will unleash a financial sector apocalypse if they fail in their stated business objectives. If they succeed, they will unleash a fiscal and social apocalypse: job losses and a big tax hole. For now, they are making people angry with the negative externalities that data centres bring.
The people voted with their feet in these elections against what was considered an unbreakable red wall in US politics for decades. The GOP seems to have suffered attrition in almost every cohort compared to Trump’s 2024 coalition.
Author Stephen King put it best in two words on microblogging site X: “Buyers’ Remorse”. Trump was voted to enhance affordability, bring back jobs, end external wars and even long-term imperial commitments (read NATO). What they got was inflation, higher costs and lower profits even in farms, plus billions of dollars spent on what was supposed to be a quick surgical strike leading to regime change in Iran. Adding insult to injury for the common American are multiple allegations that a clique associated with Trump made billions through insider trading in financial and commodity markets and received kickbacks. Anger was a driving force in these elections.
Expect the Democrats to flex their new-found legislative muscle against every move the lame-duck President will try to make in government. Stalled appointments, more enquiries, possible government shutdowns or hostile deals etc. We will likely see a resurrection of the crisis which the GOP faced before Trump arrived on the scene in 2016. But will all this make a difference to the larger contradiction facing American political economy? It is unlikely.
The choices facing the US are stark --in capital letters.
It can abolish tariffs to reduce general inflation. But that also means even the pretense of reviving US manufacturing and jobs will have to be given up. It can withdraw from the West Asian war – this will cool down fuel prices almost immediately – but that will also entail kissing goodbye to the military power the US has exercised in the region for decades. It can also fundamentally alter the terms of trade between capital and labour to alleviate what looks like widespread economic precarity in the US population. This is what Mamdani or Bernie Sanders type of characters would do if they had the required power. But that would be a fundamental rupture in the neoliberal contract between the state and capital in America since the days of the neoliberal counter-revolution against the Golden Age of post-war capitalism. Unlike in the 1950s and 60s, American capital cannot compete strictly on merits against producers in the Global South, most importantly China. The US is a superpower because its capitalist base is the biggest in the world.
The short point is, there is nothing other than the voodoo economics and geopolitics Trump unleashed in his now clearly misplaced hubris to deliver on his promise of Make America Great Again. The US is now a power in decline. At the core of this decline is the diffusion of industrial prowess to the Global South, which American capital exploited for profit to the hilt until democracy back home could not manage the larger economic hemorrhage.
The rise of Trump as an angry, incoherent, and, most importantly, conveniently hypocritical politician was—and perhaps still is—capable of generating and exploiting some schadenfreude for electoral victories (what would the midterm results be had he not started the war against Iran is still an interesting counterfactual being sold by none other than the US Vice President). But it cannot even come close to solving America’s deeper problems and perhaps even worsens them.
It does not help the US that its main challenger, China is a country which does not have to deal with the political pressures that functional electoral democracies face. Imagine what would happen to a democratic government if it erased three decades of residential real estate capital gains.
Does it mean democracy is necessarily inferior compared to an authoritarian regime? Or does it mean that a democracy which starts resembling a plutocracy is doomed to this fate? What about the so called larger liberal alliance of countries which wants a status quo ante with the US as the gamekeeper of ‘rules-based-order’? Do they go from playing the vassal to the US to doing the same to China?
These are all questions which have no easy answers. They perhaps depend on another difficult to answer question. Can American democracy find a way to articulate and negotiate the end of Pax Americana, which is not as gullible as the MAGA zealots who thought Trump meant the end of counter-productive military interventions and a focus on internal problems? We are witnessing history in the making. Shock and awe is a cycle which will have multiple iterations.
Roshan Kishore is the Data and Political Economy Editor at Hindustan Times. He heads the newsroom's data journalism team, which produces Number Theory, a daily data-driven feature for the print edition and the HT app. Number Theory uses data analysis and story-telling based on it to add value to the newsroom’s daily coverage by putting stories in a larger context on a range of issues, including politics, macroeconomy, markets, global affairs and climate. Under his leadership HT’s data journalism work has established itself as a niche product in Indian journalism and pushed the boundaries of marrying academic rigour with news sense and speed. Along with writing and editing data stories, he has also been writing a weekly political economy column called Terms of Trade for HT Premium. A trained economist with an MPhil degree from Jawaharlal Nehru University, Kishore has also been a visiting fellow at the Centre for Advanced Studies of India (CASI) at the University of Pennsylvania. Along with his journalistic work, his writings have also appeared in journals such as the Economic and Political Weekly and working papers for CASI and UNESCAP.Read More
