The World Steps into 2026 Amid Upheaval and Challenges
The global order that shaped modern prosperity is breaking apart.
The End of a Long Economic Era
The year 2025 closed with a major shift in the global economic system. An order that supported 80 years of postwar growth no longer holds. No new international economic roadmap exists today. As 2026 begins, nations search for fresh rules. They look for a new starting point. The influence of two powers, the United States and China, has only intensified.
A Century-Long Perspective
To understand today, we must step back 100 years.
In 1930, during the Great Depression, economist John Maynard Keynes wrote Economic Possibilities for Our Grandchildren. He made two bold predictions. First, technology and capital would raise living standards eightfold within a century. Second, people would need to work only three hours a day to meet basic needs. That milestone year, 2030, is now close.
Progress, but at a Cost
In 2024, IMF Managing Director Kristalina Georgieva reflected on Keynes’ vision. She noted that his forecast proved strikingly accurate. Global population quadrupled.
Per capita income rose eightfold. Over the last 30 years, 1.5 billion people escaped poverty. Hundreds of millions entered the middle class. Life expectancy improved. Education expanded, especially for girls. Yet every gain casts a shadow. After Keynes wrote his essay, World War II erupted.
That conflict reshaped the world. It led to an order based on democracy, rule of law, and free trade.
A System Under Strain
Today, history shifts again. Democracy weakens. The rule of law erodes. Free trade faces a deep crisis. Great-power rivalry has returned. Imperial-style competition dominates global politics.
The US–China Duopoly
The United States and China now produce 43 percent of global GDP. Together, they drive the world economy. Neither offers a perfect model. China continues its hegemonic behavior. The United States has stepped away from cooperative global leadership. Under President Donald Trump’s second administration, Washington imposed broad tariffs.
It turned its back on free trade.
No Clear Winner
Economist Richard Baldwin, in The Great Trade Hack, offers a sobering view. The US and China confront each other with rival forms of capitalism. Neither will emerge victorious.
America’s Strengths and Fault Lines
The United States produces about one-quarter of global GDP. It dominates the dollar-based financial system. It leads in innovation, especially artificial intelligence. Companies like Nvidia alone account for nearly 20 percent of global market value. The dollar handles 60 percent of global financial transactions. It covers 80 percent of trade settlements. Yet inequality surges.
In a K-shaped economy, the top 20 percent earn half of all income. That share grows each year. Political divisions deepen. Crime worries communities. Healthcare punishes low-income families. Life expectancy stands at 78 years, low for a rich nation.
China’s Manufacturing Might — and Malaise
China runs a state-led capitalist system. It dominates global manufacturing. Subsidies, state-owned firms, and industrial policy fuel its rise. China now controls 35 percent of global manufacturing output.
That figure triples the US share. It dwarfs Japan and Germany. Such dominance has no historical precedent. Still, domestic frustration grows. Per capita income lags behind advanced economies. A long property slump fuels anger. Youth unemployment stays high. Birth rates fall. The population ages rapidly. Many young people now “lie flat.” They reject relentless competition.
A False Choice
Must the world choose between harsh American-style inequality and rigid Chinese state capitalism?
Such a choice betrays Keynes’ hope. The Trump administration has strained ties with Europe.
It has widened tensions with India. US power has declined compared to the past.
Washington needs allies to compete with China over the long term. Japan, the world’s fourth-largest economy, stands as a natural partner. The future depends on cooperation — not confrontation.