THE world entered 2026 amid intense upheaval and uncertainty. The year that just ended, 2025, saw the international economic order that had sustained 80 years of postwar prosperity undergo a significant shift. There is no new international economic roadmap.

The year now beginning will likely be an essential step as nations search for a starting point for creating new rules. The power of two major countries, the United States and China, has grown even stronger.

Let us consider our current position from a 100-year perspective. John Maynard Keynes’ essay Economic Possibilities for Our Grandchildren, written in 1930 during the Great Depression, remains a favorite among economists and others to this day. Keynes made these two predictions: One hundred years later, technological innovation and capital accumulation would raise living standards by up to eightfold.

Moreover, three hours of work per day would be sufficient to obtain the necessities of life. That 100-year mark, 2030, is now approaching.

In a 2024 column, International Monetary Fund Managing Director Kristalina Georgieva marveled, “His forecast proved to be remarkably accurate: even as the global population has quadrupled over the past century, per capita global income has risen eightfold.” Georgieva praised global economic progress, noting: “In addition to the massive leap in living standards, the world saw unprecedented poverty reduction. Over the past three decades alone, 1.5 billion people lifted themselves out of poverty, and hundreds of millions entered the middle class. Consider also the dramatic improvements in life expectancy, infant mortality rates, literacy rates, and education levels — especially for girls — that have taken place.” But every advance also casts a shadow. After Keynes’ essay, World War II broke out, beginning a chain of events that ultimately led the world to develop under an interlinked order of the rule of law, democracy and free trade.

How would Keynes view the world today? Today, history is shifting its direction again. Democracy and the rule of law are faltering, and the free trade system faces a crisis. The world is reverting to an era of imperialistic rivalry between great powers.

Today, history is shifting its direction again. Democracy and the rule of law are faltering, and the free trade system faces a crisis. The world is reverting to an era of imperialistic rivalry between great powers.

Today, the United States and China together account for 43pc of global GDP. The two powers, the United States and China, drive the world. Neither of them is an ideal global model. China’s hegemonic behavior remains unchanged, but the United States has also lost its ideal of leading the world through mutually beneficial development with other countries. The second administration of US President Donald Trump has indiscriminately imposed high tariffs and turned its back on the free trade system.

In his book The Great Trade Hack, international economist Richard Baldwin points out that the United States and China, with their different capitalist systems, are facing off against each other, but neither will emerge as the winner.

Both the United States and China have political and economic systems with intense shades of light and shadow. The United States accounts for about a quarter of global GDP, benefits from the dollar system and leads in innovations such as artificial intelligence. US tech companies, such as Nvidia, now account for roughly 20pc of the world’s market capitalisation. Dollar settlements account for about 60pc of international financial transactions and 80pc of trade transactions.

Meanwhile, inequality is growing at an alarming rate. In what is termed a K-shaped economy, people in the top 20pc of income brackets command 50pc of total income, a proportion that rises annually. Domestic political divisions are deep, and crime is said to be rampant. The health insurance system is harsh to low-income earners, and despite the country’s high gross domestic product, the average life expectancy is only 78 years, which is low by developed-country standards.

China, with a state-led capitalist system, different from what exists in the United States, has become overwhelmingly strong in manufacturing. It has risen to become a manufacturing superpower through unfair subsidies, state-owned enterprises and state-led industrial policies. Baldwin notes that China’s share of total global manufacturing output is 35pc, three times that of the United States, six times that of Japan and nine times that of Germany, a level that is historically unprecedented.

However, its domestic politics are marked by a sense of stagnation, no less than those of the United States. Its per capita GDP still lags far behind that of developed countries. A prolonged real estate slump has only increased public discontent, and the unemployment rate among young people is high. The birth rate is declining, and the population is aging rapidly. Turning their backs on the fierce competition known as “involution,” a young generation of people who “lie flat” has emerged.

Must we choose between American-style fierce, unequal competition and Chinese-style state capitalism ruled by one party? That choice betrays Keynes’ hope for the future. The Trump administration has openly displayed hostility toward Europe and deepened conflicts with India. Compared to the past, US national power has declined, and it needs partners to engage in the medium- to long-term competition with China. As the world’s fourth largest economy, Japan should be the United States’ best partner in confronting China.

Published in Dawn, January 5th, 2026