09.07.2026

From independence to empire

The history of the United States can be divided into four distinct stages. Michael Roberts takes a panoramic look at what is now a descaling hegemon. China is its main rival

July 4 2026 marked 250 years since the 13 British colonies in North America declared independence from the British colonial power at a congress in Philadelphia. Since independence, the United States of America, as it came to be called, expanded to the west to encompass the whole continental area and later built an overseas empire in the Americas and on to the Pacific.

By the end of the 19th century, the US had become a major economic and industrial power and, following World War II, it became the dominant industrial, financial and military power globally. ‘Pax Americana’ epitomised the period from the mid-20th century to its end. However, in the three decades of the 21st century, that dominance began to give way (relatively) to new emergent economic and political rivals.

The rise of US capitalism over 250 years mirrors almost exactly the rise of capitalism to become the dominant mode of production globally. In the mid-18th century, capitalist accumulation was still very much confined to trade and farming. Industrialisation was not the motive force of growth and the vast majority of the population in the Americas, Europe and Asia lived and worked on the land.

1776 was the year that the Scottish enlightenment economist, Adam Smith, published his still famous book, The wealth of nations, which provided the theoretical and empirical foundation for the ending of feudal and semi-feudal restrictions on growth and prosperity.¹ Smith argued that the wealth of nations should and could be built on free markets for buying and selling, with minimal government interference and with the ending of state-controlled monopolies. Such freedom would enable increased ‘division of labour’ to maximise productivity and the accumulation of capital. The rise of US capitalism has personified Smith’s expectations - but it has also starkly revealed the faultlines and contradictions in the capitalist mode of human social organisation.

The rise (and fall?) of US capitalism can be divided into four historical periods:

(1) 1776: independence from British colonial power and the expansion of the US empire;

(2) 1861-64: the Civil War that forced the submission of the slaveholding states to federal power and accelerated industrialisation and capitalist markets throughout the continent, along with the expansion of the US empire into the Americas and the Pacific;

(3) 1941-45: after two world wars, US global hegemony was confirmed and the international rules of trade, order and institutions came under US control;

(4) from 1991: the cold war ended, as the Soviet Union collapsed, but ironically, far from the US sustaining total global dominance (with the ‘end of history’), US imperialism went into relative decline, both economically and politically, even if it is still by far the most powerful nation on the planet.

Divisions

The Founding Fathers, who signed the Declaration of Independence on July 4 1776, did so first and foremost to obtain ‘home rule’ from Britain, in order to gain specific political and economic rights denied by the British crown (which had also denied such rights to Ireland at the same time). But the Founding Fathers in no way wanted a systemic restructuring of society.

Led primarily by the wealthy planter and mercantile elite, their goal was to eliminate British interference, while preserving established social hierarchies and property traditions. However, to succeed in their aims, the elite had to enlist the support of the poor farmers and the multitude in the coastal towns. So, as in any such rebellion or revolution, the War of Independence developed into class divisions within the ‘national’ struggle for freedom from British rule. Apparently, “all men are created equal” (of course, not women, not slaves or indentured white servants, not native Americans), said the Founding Fathers. So even in a highly unequal society that was the 13 colonies, some encouragement had to be given to the poor multitude.

Indeed, from the Boston Tea Party in 1773 through Yorktown in 1781 and the Treaty of Paris in 1783, the Revolution became a civil war. By 1780, about a third of the roughly 2,100,000 free citizens of the British colonies that became the ‘United States’ would have described themselves, with mixed idealism and self-interest, as Patriots. But another third stayed loyal to the British empire. Threatened with being tarred and feathered, having their property seized, about 60,000 of these roughly 700,000 Loyalists decamped to Canada or Britain.

The final third of the colonists occupied the uneasy middle. They were not willing to pledge their lives and fortunes to a bloody, collective war with the British empire, but neither would they sustain a fierce and also bloody loyalty to the British king and country.

Historians calculate that 25,000 to 70,000 Patriots died directly because of the war, killed by camp fever and musket fire. Some 7,000 Loyalists did too. An additional 130,000 Americans were killed by a spike in smallpox that the movement of populations during the war exacerbated. The American revolution was hell. Nearly as many died relative to the population as in the civil war of the 1860s: ie, almost four percent of the free population. By comparison, about one-third of one percent of Americans died in World War II. The revolution for ‘democracy and independence’ was a bloody business.

The struggle for independence became a war and a civil war first because of the deteriorating economic situation for the British empire after it managed to defeat the French in the so-called Seven Years War of 1756-63, in which many colonists and native Americans fought. From the early 1600s, British settlers in North America had relied on overseas trade for their wellbeing. Trade furnished the colonists with clothing and blankets, nails and firearms, cooking implements and metal goods, and other tools and materials that could not be produced locally. Without these imports, their standard of living might have suffered so much that they would not have stayed.

But after the French war, booty from the French and revenues from British troops stationed in North America disappeared. Interest rates soared, forcing real estate prices ever downward, eventually to a half or even a third of their highest point. The colonists appealed to the ‘mother country’ for aid, but at every turn, the British crown and its parliament in Westminster looked to get the colonists to pay for the war against France.

First came onerous trade restrictions that cramped intra- and intercolonial trade. Cut off from traditional trading partners abroad, the colonists could not earn sufficient foreign exchange (coin) abroad. Next came the Currency Act, which made it unlawful for the colonies to issue any more fiat paper money. Then came the straw that broke the camel’s back: the Stamp Act, which required colonists to pay a tax on any printed material (encompassing everything from legal documents to newspapers). The Patriotic elite roused the population to oppose ‘taxation without representation’ - somewhat ironic, given that back in Britain much of the people had to pay taxes decided by a parliament that elected members from just 1% of British adults.

The call for ‘democracy’ sounded the bell for independence. In January 1776, Thomas Paine, a poor artisan who had immigrated from Britain, wrote a pamphlet called Common sense, presenting in an exciting and impressive fashion the case for an independent republic, not just representation under the British crown. It was a massive best seller (100,000 copies) and spread across all classes and especially to the rank and file in the Patriot army.

But democracy in Paine’s sense was not the aim of the Founding Fathers. Throughout the war against the British, they were determined to ensure that any radical democratic movements and proposals were supressed. Military leader George Washington, one of the richest men in the colonies, with thousands of slaves and many acres of land, tried to stop the recruitment of slaves to the army - the British were offering freedom to them if they joined the crown’s ranks. Eventually, Washington had to give way. But he still crushed any rebellions and mutinies in the army, just as Oliver Cromwell had done in the 1640s English Civil War. In America, the most famous of these attempts to turn independence into economic equality was the so-called Shays Rebellion in 1780, after the war against the British had been won.

Such rebellions frightened the merchant and slave-holder elite and encouraged them to ensure that the loose confederation of colonial states was solidified, using a constitution deliberately designed to curb any democracy for the many over the few. It was modelled on the ancient Roman republic, which had a constitution designed to ensure power rested with the aristocratic landowning elite through so-called ‘checks and balances’. There was to be a president with executive powers to replace the British monarch (the revolution’s military leader, Washington, was elected by acclamation as the first). And there was to be a Senate composed of the elite to ensure no anti-business, anti-slavery and anti-land majority would hold sway. The president would be elected not by a mass adult vote, but by an ‘electoral college’ that strengthened the slave states and weakened the most populous states in the north. And there would be a Supreme Court of appointed-for-life judges that could block any measures that were ‘unconstitutional’.

Those who looked to rebel against this ‘stitch-up’ of democracy were greeted with vicious repression or the cry, “Go west, young man” - ie, go beyond the Blue Ridge mountains to seek your fortune. From the very beginning of the revolution, both the elite and the multitude in the colonies looked to gain lands in a massive continent as the way to increase their prosperity. The British had blocked this and assigned those lands to the native American nations. With the defeat of the British, the flood to the west began - acting as a powerful safety valve against rebellion within the ex-colonies. The native American tribal nations were subject to relentless policies of genocide (similar to what is now being repeated in Gaza), with their populations decimated and their food sources (buffalo) annihilated. Meanwhile, slavery in the southern colonies was cemented, despite the British attempts to end it globally.

After the revolution, economic power remained firmly in the hands of the slave-holding elite. Large landowners and merchants constituted 1% of the population, but held nearly half the wealth of the country and had enslaved one-seventh of the population. The American revolution was thus a ‘bourgeois revolution’ (with some ‘peculiar’ institutions left intact - requiring further action later). Yes, the revolution had to mobilise the poorer classes to succeed, but only to establish an independent capitalist state that would eventually rule the world.

Transition

It took some time after independence and the defeat of the British before the new economy of the United States got going. War continued on and off with the British over Canada and through a short British invasion and the destruction of Washington DC in 1812.

During this period, trade was volatile, rising to over 20% of GDP after the revolution and then collapsing during the subsequent war with the British. After that though, the US economy started to expand fast. Trade as a share of gross domestic product stayed low only because domestic output rocketed, as agricultural production exploded.

The US administration under its early presidents encouraged the settlement of the west and south at the expense of the native Americans, who were driven further and further west. The US expanded its territory by purchasing Louisiana from the French in 1803. With the Indian Removal Act of 1830, native Americans were forced to relocate, leading to the devastation of thousands in a ‘Trail of Tears’.

In 1823, president James Monroe proclaimed his famous ‘doctrine’ that the western hemisphere would be under American control and the old former European colonial powers were not welcome.

In 1846, the US expanded its territory by signing the Oregon Treaty with the British to allow settlements and went even further by launching a war against Mexican control of Texas, eventually taking over vast areas in the south-west right to the Pacific Coast.

But there was one important factor holding back the United States from becoming a major industrial and trading nation: slavery in the southern states. When they tried to secede from the Union, the north launched a long and bitter war lasting nearly five years. But the resulting victory for the industrial north with its much larger ‘free’ working population laid the basis for a huge expansion of output. The Civil War shifted political power to the Republican Party from the north, which instituted high tariffs to raise revenue and to protect domestic industry.

The US economy became more diversified, with a growing manufacturing sector that reduced the nation’s dependence on imported manufactured goods. By the end of the Civil War, the US had already become the largest capitalist economy in the world in GDP terms. In addition, the advent of the railway boom, which culminated in the transcontinental rail connecting east to west in 1869, was a huge step forward for domestic production and trade.

By 1900, US per capita income exceeded that of the then current (but declining) hegemonic power, the UK. So, in just one century, the American capitalists had overtaken their former masters.

Beginning in the 1850s, the United States took its first steps toward developing an overseas empire in the Pacific. In 1867, the US bought Alaska from the Russians. Trade with Asia now became possible and the US elite began to open their eyes to gaining control of the vast Pacific Ocean.

The new empire was driven by economic interests. When there was a commodity boom, entrepreneurs raced into Pacific islands to set up shop, creating farms and plantations or staking claims for mining. The first islands were annexed in the 1850s and 1860s, starting with Midway. By the 1870s, American citizens were effectively running the Hawaiian government, steering the course toward annexation. And by the 1880s the US government was directly administering Samoa and behaving like a traditional imperial power in cooperation with the British and German governments.

The late 19th century marked a transition from a continental nation to an established global power, largely galvanised by the Spanish-American War of 1898. Using the excuse of an unexplained explosion of the battleship, USS Maine, in February 1898, the US declared war on Spain and quickly took over Cuba. Soon after, the Philippines, Guam and Puerto Rico were occupied and the independent Republic of Hawaii was annexed by the US.

The construction of this American empire was riddled with racism from the start. For some in the elite, building an empire in the Pacific was a problem because it could lead to “polluting and weakening our system of government by taking to our bosom a horde of Asiatic savages”.² Others favoured a missionary approach. American control was necessary because Filipinos are “children utterly incapable of self-government”, in the words of Senator Albert Beveridge.³ The US role in the Philippines was a “divine mission” to establish a “system where chaos currently reigns”. Imperialists doubted the capacity of the Philippine people for self-government; they would “need the training of fifty or a hundred years before they shall even realize what Anglo-Saxon liberty is”.

Although the US economy expanded throughout the 19th century, it did not do so in a steady and harmonious way. The ‘boom and bust’ cycle of capitalist accumulation operated, engendering a long depression from 1883-97. Even as late as 1880, nearly half of all American workers were still farmers, with only about 15% working in manufacturing.

But in the next 40 years that ratio was reversed. By the 1920s, the US was the world’s manufacturing powerhouse and financial centre. The American working class was now the largest in the world. But, as ‘going west’ was no longer an option if you were unemployed or on low wages, trade unions were formed and class struggles intensified in the cities.

The weakening and destruction of large parts of Europe and Asia during the two world wars put the US firmly in the driving seat of global capital. In 1945, the US was dominant in manufacturing, finance and military power (only the Soviet Union could rival the latter). The US controlled the post-war institutions set up at the Bretton Woods meeting in the US that established the United Nations, the World Bank and the International Monetary Fund. The world entered a period of ‘Pax Americana’.

As the term suggests, it was world ‘peace’, only on America’s terms: the cold war continued against the Soviet Union; and the US intervened to stop leftist governments gaining power, not only across South America, but also in the Middle East and in Asia - not always with success, as the war in Vietnam proved. Indeed, that ignominious defeat coincided with the beginning of an underlying decline in America’s economic power: first with the rise of European industry from the ashes of war; and then with Japan’s meteoric industrial revival in the 1970s. The dollar began to lose its almost total dominance in world markets and was devalued in 1971, as US manufacturing declined and was forced to shift overseas to find cheaper labour. The Vietnam disaster led to the economy running trade deficits and the US government running budget deficits for the first time since World War II. The profitability of capital had begun to fall and the ‘Golden Age’ of US investment was over.

The fall of the Soviet Union in the early 1990s was supposed to give US imperialism complete control forever. It would be ‘the end of history’. Ironically, it was just the start of US decline in the face of an even stronger new economic rival: China.

Decline

In just some 200 years since winning independence from the British empire in 1776, the United States had become the most successful capitalist state, leading all the major economies in the world in national output, income per head, productivity of labour, financial dominance and military power.

That total hegemony in global capitalism was not to last. The Marxist theory of capitalist crises argues that, as capitalists invest more and more into technology in order to lower the costs of production and boost the productivity of labour, the overall profitability of capital will tend to fall, because profits come only from labour. If investment in labour power declines relative to the investment in plant, equipment and technology, profitability will eventually fall. And so it did with a vengeance from the mid-1960s, generating the first simultaneous international slump in 1974-75, followed by the deep manufacturing double recession of 1980-82.

During this period, the first signs of a decline in US hegemony were exposed. Europe’s industry - based on cheap labour, American credit and the latest technology - started to gain a global market share from US industry. In the 1970s, Japan also began to eat away at US manufacturing’s global output and export share. Politically, America’s defeat in Vietnam and the fall of Saigon weakened their international dominance. Throughout the 1960s, the US current account surplus was gradually eroded until, by the early 1970s, it registered a deficit. The US began to leak dollars globally not only through outward investment, but also through an excess of spending and imports, as domestic manufacturers lost ground.

The US became reliant for the first time since the 1890s on external finance for the purposes of spending at home and abroad. By the 1980s, the US was building up net external liabilities that have now reached 90% of GDP.

In 1971, president Richard Nixon announced that the US was going to devalue the dollar and end its peg to the gold price. In effect, this was the end of the Bretton Woods agreement that had established a framework committing all to fixed exchange rates for their currencies and set in terms of the US dollar. With Nixon’s announcement, the US abandoned Bretton Woods and, with it, the whole post-war Keynesian-style international currency regime.

The fall in profitability in the major economies, the accompanying stagflation in the 1970s and the slumps of the early 1980s led to a complete change of economic policy. From the 1980s, during the so-called neoliberal period, capitalists ended macroeconomic management and moved to cutting public spending, privatising state assets, deregulating finance, weakening trade union power and, above all, switching manufacturing out of the US into Asia, in particular China, to take advantage of cheap labour.

US imperialism had seen the collapse of the Soviet Union, but in the 1990s it was losing relatively in trade and output to other major economies, particularly China. Europe had integrated further into the euro zone and widened towards eastern Europe, using the cheap labour supply available there. And the Asian tigers leapt forward with new technologies. China took over as the manufacturing and trading global power (partly driven by US multinationals, which had located there in the 1980s).

Neoliberal policies helped to raise the profitability of capital in the major economies, including the US, for nearly two decades, during which the new technologies of computers, digital software and eventually the internet were applied to boost productivity. But again, Marx’s law of profitability eventually exerted its downward pressure and by the end of the 20th century, all the major economies struggled to sustain the economic growth rates they had achieved in the 1990s (let alone the 1960s). They entered what I have called a ‘long depression’, particularly after the global financial crash and the ensuing ‘great recession’ of 2008-09. In the first three decades of the 21st century, the major economies have experienced slowing economic growth, falling investment and productivity growth, along with the two largest slumps in the 250 years of US capitalism: 2008-09 and 2020.

But at 250 years old, the United States still generates 26% of global GDP and is home to 59 of the world’s top 100 firms. The US dollar is still the main reserve currency internationally. Roughly 90% of global foreign exchange transactions involve a dollar leg; approximately 40% of global trade outside the US is invoiced and settled in dollars; and almost 60% of US dollar banknotes circulate internationally as a global store of value and medium of exchange. Over 60% of global foreign exchange reserves held by foreign central banks and monetary authorities remain denominated in dollars.

Having said that, the underlying relative decline in US competitiveness has gradually worn away the strength of the US dollar against other currencies, as the supply of dollars outstrips demand internationally. Since Nixon’s momentous announcement, the US dollar has declined in value against other currencies by 20% - a good barometer of the relative decline of the US economy.

Dangerous rival

In the 21st century the US empire now faces a rival much more dangerous to its hegemony than the Soviet Union, Japan or Europe. China began expanding its industrial capacity in the 1980s, then ramped it up on a large scale in the 2000s, surpassing the United States in the share of global manufacturing output in 2010. China is now the world’s manufacturing superpower. Its production exceeds that of the nine next largest manufacturers combined.

It took the US the better part of a century to rise to the top in manufacturing, while China took about 15 or 20 years. In 1995, China had just 3% of world manufacturing exports. Now its share has risen to well over 30%. While China runs a surplus on payments and receipts with other countries of around 1%-2% of GDP a year, the US runs a current account deficit of 3%-4%.

All attempts to restrict China’s expansion into tech products, semi-conductors, etc have miserably failed. China is catching up in the ‘chip war’ and has launched its own ‘open source’ AI models like DeepSeek that are seriously undercutting the likes of ChatGPT and Claude, America’s expensive AI models. China also dominates the entire range of renewable energy manufacturing.

And China leads by far in the use of robots, with installations rising at 7% a year, while in the US they are falling by 9% a year. China now has more robots in industry than the rest of the world put together.

There is still a long way to go before the mighty US economy will be on its knees. It may have the largest net liabilities globally, but it can manage that because it is also the only country that can issue dollars - and the dollar is still the international currency for trade, investment and reserves. Trade surplus nations like Germany, Japan and China must use most of their dollar earnings to buy dollar assets. So the ‘exorbitant privilege’ of the dollar keeps the US empire ticking over.

Moreover, US investments abroad may be less in value than foreign investment into the US, creating the negative investment position, but foreigners earn less income on those US assets than US investors do on their foreign assets. So there is a net surplus in income for the US of at least 0.5% of GDP on average since 2008, to add to its domestic economy.⁴ The US has not yet reached a ‘tipping point’, where the size of its net liabilities to foreigners is so high that its net income surplus disappears.

In the 21st century, geopolitics increasingly boils down to a battle between a weakening hegemonic power, the US, and a rising economic giant, China. The US still dominates in military prowess, spending more on armed forces than the rest of the world put together. It runs nearly 800 foreign bases worldwide - while China has one. But, even here, the war in Iran has exposed the inability of the US military to impose its will over a third-level economy and state, which has no nuclear weapons (shades of Vietnam over 50 years ago).

For the US ruling elites, China is the ultimate enemy and threat to its global hegemony. That applies to both the ‘Make America great again’ wing supporting Trump in the White House and the ‘globalists’ in America’s ‘deep state’ and ‘neo-con’ circles in government. The policy difference is that the Trumpists want to concentrate US power in the western hemisphere, with a view to taking on China across the Pacific, just as America did with Japan in the 1930s. For the Maga crowd, Europe can deal with Russia and Ukraine on its own, just as Israel can deal with the Middle East.

The globalists, on the other hand, still have serious ambitions to dominate globally. They want the war with Russia to continue until Moscow is brought to its knees and there is ‘regime change’; and they aim to back Israel and participate militarily until Iran’s regime falls. Trump vacillates between the two policies, currently swinging to the globalists over Iran. But both wings are agreed: China must eventually be ‘dealt with’; it must be weakened economically and finally forced to accept western policies and control.

The US empire has no official ‘emperor’, although Trump is increasingly trying to establish himself as one, as he rides roughshod over Congress, the courts, financial rules and the electoral process. But the US empire is in trouble. This is why a significant section of America’s ruling elite are prepared to accommodate Trump and his supporters in trying to ‘make America great again’: by ending international free trade rules and resorting to protectionist tariffs; by sharply increasing military spending; and by cutting taxes for the rich and mega companies, while reducing healthcare and public services for the rest. So the rich get even richer and the rest get poorer.

Bleak outlook

No wonder Americans now have a bleak outlook on the nation’s future after 250 years, with most saying the US has already seen its best days and a record-low number saying they are extremely proud to be Americans.

President Trump has the lowest approval level of any president, but he rolls on regardless towards the mid-term Congressional elections. He kicked off the 250th birthday weekend with an attack on what he called the “communist menace” in America, framing its supporters as “the enemy of July 4th, 1776”. (He was speaking in the Black Hills, Dakota which the US government illegally seized from the Sioux nation in 1877 after Congress forced the tribe to cede land it had been guaranteed under treaty.)

Apparently, communism is a greater threat to American liberty than both world wars (including the defeat of Nazism) and the September 11 2001 terrorist attack (made by Islamic fanatics previously funded by the US to defeat Russia in Afghanistan). Trump argued that communists do not love god or religion and have no respect for law, justice, principle, tradition or god-given rights (looking in the mirror here).

“You can be loyal to Karl Marx or you can be loyal to America. You can be a communist or you can be a patriot. You cannot be both.” Pledging to “vanquish communism quickly” and “send them into exile”, he told a cheering Maga crowd: “We will send them quickly away, and we will continue to build our country bigger and better and stronger than ever before. America will never be a communist country.”

The ancient Roman republic was the model adopted by the Founding Fathers for the US constitution. But its ‘checks and balances’ to share power were abandoned, when one of the elite achieved total power and Rome became an empire (with an emperor) around zero BC. The empire reached its pinnacle some 200 years later, but then began to decline through a combination of internal contradictions in its slave economy (no more slaves), hugely widening inequalities (land in the hands of an aristocratic elite) and externally from its weakening ability to police its empire from resistant forces (not least German tribes).

The same trends exist now for the US empire. Its capitalist economy is no longer a powerhouse of prosperous expansion; inequalities of income and wealth have never been so extreme in 250 years and are worsening. And the US has increasingly lost its power to police the world, as Vietnam, Iran, Ukraine and China show.

Rome took two centuries to decline and fall, but it will not be so long in the modern capitalist world. The US might yet become a ‘communist country’ well before the end of this century, or we shall all be driven into the dark ages, as the world was when the Roman empire collapsed - this time either by climate catastrophe or nuclear annihilation.

Michael Roberts blogs at thenextrecession.wordpress.com

1. See thenextrecession.wordpress.com/2026/03/14/adam-smith-250-years.↩︎

2. Second session, 55th Congress, June 11 1898.↩︎

3. history.house.gov/Exhibitions-and-Publications/APA/Historical-Essays/Exclusion-and-Empire/1898.↩︎

4. libertystreeteconomics.newyorkfed.org/2026/05/honey-who-shrunk-the-u-s-income-surplus.↩︎