Deindustrialization in the West is a great example of how short-term thinking can lead to great troubles. Western countries saw an immediate benefit in moving production to cheaper labor markets and benefited greatly from exploiting low-cost labor for several decades. However, we now see how this resulting lack of industry has turned into a strategic vulnerability, leaving the West unable to produce key materials such as rare earth metals on its own.

The imperative to maintain military-industrial parity with the West compelled the Soviet Union to divert immense resources into its military sector at the expense of its civilian economy. The state that justified itself by surpassing capitalism was instead consumed by it, as chronic civilian shortages eroded its ideological legitimacy and material base from within.

Today, the roles are strategically inverted. China is now the one wielding an economic advantage, using its state-backed, low-cost, and rapidly expanding energy grid as the primary strategic lever. Its cheap, abundant, and growing energy supply provides a solid basis for powering the unfolding technological revolution.

This puts the U.S. in a crippling dilemma. As we’ve established, U.S. leadership has no choice but to pursue AI; it is seen as the only technological equalizer for its deep structural disadvantages. Yet, as we’ve also seen, the U.S. has no path towards massively increasing its domestic energy output in order to keep up.