The Following blog post is adapted from a paper I wrote for university discussing changes to the international division of labour and how those changes have shifted global power dynamics. The paper provides some explanation for the degradation of the US empire as it relates to labour offshoring.

Following World War Two (WWII), the international division of labour changed substantially as part of a process often referred to as globalisation. These changes to our global economic relations have had vast consequences for various categories of stakeholders. Those stakeholders include nation states, business, workers and consumers. Globalisation has ultimately facilitated America’s decline; Offshoring production has brought about increases to supply chain instability, wealth inequality and unmanageable debt.

While globalisation has been notoriously difficult to define, the concept is largely concerned with the liberalisation of cross-border trade, finance and production (Altay, 2024; Panitch, 1993). This effort is principally driven by profit motivated multi-national corporations and enabled by the various Bretton Woods institutions (BWIs) (Brooks, 2005). The BWIs include the World Trade Organisation (WTO), the International Monetary Fund (IMF), the World Bank (WB) and the United Nations (UN).

The liberal world order

Political theorists often refer to this arrangement as the liberal world order. The liberal world order developed post WWII, largely under the dictate of the United States; their raison d’etre being the implementation of a capitalist market-based system of international trade (Ikenberry, 2009). America emerged from WWII as the dominant economic power, having used the war to transform the internal economy after years of turmoil and volatility (Ikenberry, 2009). America’s political hegemony chiefly arose from the development of a robust domestic industrial base, that is, localised production (Stubbs & Underhill, 2006).

While the US ostensibly maintained its position as the predominant military and economic power, the WTO was able to facilitate trade throughout the global supply chain with relative ease (Council on Foreign Relations, 2023; Handley, Limao, Ludema & Yu, 2024). This has meant American capital, and the West more generally, has been able to, for a short time, enjoy the benefits of industrial production in a financialised economy at the expense of the Global South (Brett, 1985).

The Global South’s WTO compliance has been substantively contingent on the Structural Adjustment Programs (SAPs) imposed by the WB and the IMF (WTO, 1996; Dohnal, 1994). SAPs coerce the adoption of market deregulation and privatisation through the terms attached to development loans (Dohnal, 1994). These terms often require austerity policies, widening wealth inequality at a nation state and citizen level (Dohnal, 1994). The purpose of this arrangement was to secure low-cost materials and labour early in the value chain for the pursuit of short-term profits (Kaplinsky, 2000).

A new alternative

SAPs are ultimately unsustainable and thus unattractive, though participating nations had little alternative until recently. China now offers far more attractive development financing, particularly through the Belt and Road Initiative (Tudoroiu, 2023). Just as the US found itself in a dominant economic position arising from strong domestic industry, China has too. This shift in power has produced extreme trade policy tensions, fragmenting and concentrating complex supply chains (Handley, Limao, Ludema & Yu, 2024). As volatility builds throughout the supply chain, particularly for the West, price increases will only worsen the already widening wealth gap (Waldenström, 2024).

The US trade deficit is substantial, reaching a record high of USD$130.7 bn (approx. AUD$207.5 bn) in January of 2025 (Trading Economics, 2025). The largest deficit lies with China and in a bizarre attempt to reconcile this gap the Trump administration has implemented a regime of blanket tariffs (Trading Economics, 2025; Partington, 2025). These considerable trade deficits are illustrative of larger issues with the US economy arising from the offshoring of industrial production specifically around the administration of debt from the US bond market to commercial lending and household credit (Partington, 2025; Kelly, 2024).

US dollar decline

Not only does there appear to be a substantial sell off in the US bond market in response to Trump’s tariffs, but there has also been a broader push to move away from the US dollar (USD) more generally (Partington, 2025; Pistilli, 2025). US trade deficits with major manufacturers disincentivise those outside America to maintain USD reserves and by extension US debt (treasury bonds) as they will simply have little use for them; the US does not produce high-quality cost competitive goods in sufficient enough numbers to warrant foreign institutions storing USD in significant amounts (Pistilli, 2025).

American domestic instability

Moving US production offshore has also severely impact commercial lending in the US. As demand for US debt declines, interest rates rise right along with delinquencies, particularly in commercial real estate having never recovered post pandemic (Peterson, 2024). US firms have simply been hiring less employees, thus do not require the commercial space (Center on Budget and Policy Priorities, 2024).

As employment opportunities have dissolved in the US, so to has the ability for most American consumers to borrow and repay their debts (Lui, 2025). As disposable income dwindles so will demand for superfluous good and services. As it currently stands there does not appear to be any avenue to reprieve for the US as dominance rapidly declines. Globalisation, as driven by American dominance has poetically led to its own downfall. The most violent empire in human history has been hoisted by its own petard.

References

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