Given that I just wrote about the dominant status of US on the global economy, it seems strange that I now write about the downfall of the US. Well, while the US is still ahead, I am also convinced that the danger is real. Financial Times recently published a long article by Daron Acemoglu titled “The real threat to American prosperity”. Here is why he is sounding the alarm.
For much of modern history, the United States has stood as the unrivaled leader of the global economy. From its post-World War II industrial dominance to its more recent technological ascendancy in artificial intelligence and finance, the country has long been seen as an unstoppable economic force. Yet, as economist Daron Acemoglu warns, prosperity is not an unshakable certainty. Institutions that once nurtured innovation, investment, and global influence can erode, and when they do, economic decline can follow more swiftly than anticipated.
Here is a doomsday scenario.
Looking forward to 2050, one can imagine a future where the American economy has faltered—not because of external competition, but due to self-inflicted wounds. The stagnation would not have been gradual but sudden, a dramatic collapse following years of institutional neglect and political mismanagement. What makes this scenario particularly alarming is that it could be entirely preventable, yet still plausible given current trends.
At the heart of this decline would be the breakdown of American governance. Prosperity depends not only on free markets and technological prowess but also on institutions that ensure fair competition, protect innovation, and maintain economic stability. The United States’ postwar success was built on such foundations: a functioning legal system, a reliable financial infrastructure, and a belief in democracy that fostered economic participation. However, as polarization deepened and trust in government waned, these very institutions began to crack.
The decay of trust was not a sudden event, but a process decades in the making. Economic growth in the late 20th and early 21st centuries was far from evenly distributed. While technological hubs flourished, large portions of the country saw wages stagnate and industries decline. Many Americans, particularly those without college degrees, experienced a real decline in purchasing power, while wealth at the top continued to accumulate at an unprecedented rate. The rise of billionaires and tech monopolies reshaped not just the economy but also the political landscape, as elites gained outsized influence over policymaking. Meanwhile, frustration among working-class Americans grew, fueled by the perception—often justified—that the political system no longer represented their interests.
As faith in government institutions eroded, populist movements took hold. The election of Donald Trump in 2016 was an early symptom of this disenchantment. His administration’s policies, particularly in his second term, would mark a critical turning point in American economic policy. Tariffs on U.S. allies triggered a global trade war, harming rather than helping domestic manufacturing. Tax cuts, intended to stimulate growth, instead ballooned the national debt from $36 trillion to over $50 trillion, placing unprecedented strain on government resources. Meanwhile, deregulation efforts, particularly in the tech sector, allowed corporate monopolies to tighten their grip on key industries, slowing genuine innovation and stifling competition.
By the 2030s, the economic consequences of these missteps became impossible to ignore. The technology sector, once the pride of American capitalism, faced an industry-wide crisis. With AI and cryptocurrency left entirely unchecked, speculation soared while productive investment stagnated. Large tech conglomerates, operating without regulatory constraints, absorbed or crushed their competitors, leading to an innovation bottleneck. The so-called AI boom turned into a bubble, and when it burst, trillions of dollars were wiped from the economy. The collapse of the cryptocurrency market further exacerbated financial instability, eroding public and investor confidence.
As the economic turmoil spread, the political landscape only deteriorated further. The federal government, increasingly controlled by political loyalists rather than qualified professionals, lacked the expertise to manage the unfolding crisis. A weakened civil service, hollowed out by years of partisan purges and budget cuts, was ill-equipped to handle economic downturns, public health emergencies, or cybersecurity threats. Institutional decay, once a slow-moving threat, now became an immediate crisis.
Meanwhile, on the world stage, the United States found itself increasingly isolated. Long-standing alliances, strained by years of tariffs, erratic foreign policy, and internal political instability, began to unravel. The U.S. withdrawal from key global agreements, such as the Paris Accords and NATO initiatives, alienated allies. Countries that once depended on the dollar as the global reserve currency sought alternatives, reducing American financial leverage. International trade, which had long been structured to favor U.S. economic interests, shifted away from its influence.
This convergence of economic mismanagement and political instability led to an undeniable shift: the decline of American prosperity was no longer theoretical, but a lived reality. With a stagnant economy, diminished global influence, and a fractured political system, the once-dominant United States found itself struggling to maintain its position in the world order. Innovators and scientists, seeing greater opportunities abroad, emigrated in growing numbers to Canada, Europe, and even China, further accelerating America’s brain drain.
The most tragic aspect of this hypothetical decline is that it would not be the result of an external force, but of internal failure. Economic mismanagement, the politicization of institutions, and the unchecked influence of corporate monopolies would have created an environment where innovation could no longer thrive, where economic opportunity was increasingly scarce, and where government could no longer be relied upon to act in the public’s best interest.
Acemoglu’s warning is not simply a prediction of doom, but a call to action. If the United States wishes to avoid this fate, it must take seriously the role of institutions in preserving economic vitality. Competition must be protected, not suffocated by monopolistic giants. Government must function as a stabilizing force, not a partisan battleground. Above all, faith in democracy must be restored—not through rhetoric, but through meaningful reforms that ensure all Americans benefit from economic growth, not just the wealthiest few.
The story of American prosperity is still being written. Whether it remains a success or becomes a cautionary tale will depend on whether its leaders recognize the fragility of the systems that support it. Institutions, once broken, are difficult to rebuild. It is far better to reinforce them now than to wait until their absence is felt through crisis and collapse.