The China shock may not shrink the American empire. It may force America to integrate a much larger one.

A few days ago, I thought the emerging American strategy was relatively simple.

China had become the only country capable of challenging the United States across industry, technology and military power.

So America would narrow its perimeter.

It would stop trying to manage the entire postwar world and concentrate on the countries most useful for competing with China.

Japan would move inward.

Australia would move inward.

Mexico would become the low-cost production floor.

Canada would supply energy and resources.

Europe, meanwhile, would become increasingly secondary.

That was the argument I made in my previous essay. I imagined a harder American core centered on the United States, Canada, Mexico, Japan, Australia and Britain, with continental Europe sitting farther outside the deepest layer.

I increasingly think that is wrong.

Not because Europe has suddenly become more useful militarily against China than Japan.

It hasn't.

The mistake was thinking America can afford to compete with China as America.

It probably cannot.

The real competition is increasingly one of scale.

And once you look at the numbers that way, Europe becomes almost impossible for Washington to abandon.

The more plausible American objective is not:

Shrink the empire until only the most strategically useful allies remain.

It may instead be:

Turn the entire advanced allied world into something capable of acting like one economic system—while making sure the United States remains its command center.

That produces a much larger bloc than I previously imagined.

But it also produces a much more hierarchical one.

And strangely, it may mean America squeezes Europe harder while allowing Japan to become stronger.

America Has a Scale Problem

For most of the postwar era, the United States did not really have to think this way.

The Soviet Union could threaten America militarily.

It could build missiles, tanks, satellites and nuclear weapons.

But it never created a civilian economic system remotely comparable to the American one.

China is different.

China is simultaneously:

• a continental-scale economy;
• the world's largest manufacturing system;
• a huge consumer market;
• an increasingly sophisticated technological power;
• and now one of the two largest scientific systems on Earth.

The last part may be the most important.

In 2024, U.S. research and development expenditure was approximately $1.01 trillion in purchasing-power-adjusted terms.

China was approximately $1.03 trillion.

By that measure, the two countries have essentially reached parity. The OECD itself now says China's R&D expenditure caught up with and slightly surpassed America's in 2024, although the exact comparison varies depending on the purchasing-power methodology used.

And research output is moving in the same direction.

In the 2026 Nature Index rankings, based on 2025 research output in the journals the index tracks, China ranked first overall with roughly twice the fractional research share of the United States. China also ranked first in natural sciences, chemistry, physical sciences and applied sciences.

This does not mean China has already surpassed America in every meaningful dimension of science.

It clearly hasn't.

America still dominates many elite institutions, commercial research networks, biotechnology ecosystems, AI companies and highly influential journals.

But the scale shift is unmistakable.

America is no longer competing with a country that possesses:

30% of American research capacity.

It is increasingly competing with another civilization possessing roughly comparable aggregate research resources.

That changes the strategic problem completely.

America Alone Is No Longer the Relevant Unit

Now add Europe.

The European Union spent about $612 billion PPP on R&D in 2024.

Japan spent about $234 billion.

South Korea spent about $162 billion.

Taiwan spent another $77 billion.

Put those together and the picture changes dramatically.

R&D system, 2024Approx. PPP-adjusted R&DChina$1.03TUnited States$1.01TEU-27$612BJapan$234BSouth Korea$162BTaiwan$77B

America against China is roughly:

$1 trillion versus $1 trillion.

But an integrated American system incorporating Europe and the major advanced East Asian allies approaches:

$2 trillion versus $1 trillion.

Suddenly the competition looks very different.

The same logic applies elsewhere.

China has population scale.

America has alliance scale.

China has a continental industrial ecosystem.

America has the ability—at least potentially—to combine:

• American software and capital;
• European science and wealth;
• Japanese machinery and materials;
• Korean semiconductors;
• Taiwanese fabrication;
• Australian and Canadian resources;
• Mexican manufacturing.

That may be America's single largest remaining structural advantage.

Not that America itself is larger than China.

It isn't.

But America sits at the center of a network that can be larger than China if the network behaves coherently.

And that creates the central political problem of the next era:

Having allies is not enough.

America increasingly needs those allies to behave like parts of the same system.

The Difference Between an Alliance and a Political-Economic Unit

This does not necessarily mean a literal United States of America and Europe.

There does not need to be one parliament.

There does not need to be one flag.

Europe does not need to become American territory.

The relevant integration can occur one layer above ordinary domestic politics.

Imagine Europe retaining:

• its own welfare states;
• its own tax systems;
• its own elections;
• its own languages;
• its own local industrial policies.

But on the questions determining global power, the system increasingly behaves as one.

One technology perimeter toward China.

One semiconductor export-control architecture.

One military command framework.

One broadly interoperable defense-industrial base.

One favored capital and investment zone.

One AI and cloud ecosystem.

One sanctions system.

One privileged internal market.

One broad foreign-policy orientation.

That would amount to something approaching political unity at the strategic layer even if constitutional sovereignty survives below it.

And if America is the military, financial and technological center of that system, Washington does not need to formally annex anything.

It needs to ensure that the most important decisions converge.

Europe Is Already Deep Inside the American Capital System

This is where my previous thesis becomes much harder to sustain.

I had imagined America potentially deciding Europe was no longer sufficiently useful and narrowing the strategic perimeter toward the Pacific.

But American capital is already extraordinarily concentrated in Europe.

At the end of 2025, the entire U.S. direct-investment position abroad was approximately $7.14 trillion.

The four largest European destinations alone were:

DestinationU.S. direct-investment positionUnited Kingdom$1.115TNetherlands$1.044TLuxembourg$645BIreland$512B

Together:

about $3.32 trillion.

That is roughly 46% of all U.S. direct investment abroad, sitting in only four European economies.

And that doesn't include Germany, France, Switzerland, Belgium, Spain, Italy or the rest of Europe.

There is an important accounting qualification.

Almost 46% of total American outward direct investment is booked through holding companies, so a trillion dollars booked in the Netherlands or Luxembourg does not mean there are literally a trillion dollars of American factories physically sitting there.

But that actually makes the point more interesting.

Europe is not merely an American manufacturing partner.

It is deeply embedded in the ownership architecture of American capitalism.

The region contains:

• corporate subsidiaries;
• holding structures;
• intellectual-property entities;
• financial operations;
• acquisition targets;
• pharmaceutical operations;
• manufacturing affiliates;
• enormous pools of consumers and corporate cash flow.

And the relationship is still deepening.

Of the $438 billion increase in America's outward direct-investment position during 2025, $350 billion was in Europe.

Meanwhile European companies are enormous investors in America too.

Europe accounted for $116.6 billion, or just over half, of all new foreign direct-investment expenditures in the United States in 2025.

So this is not a loose alliance sitting on top of separate economies.

It is already an unusually dense transatlantic ownership system.

Why Would America Abandon an Asset Base Like That?

This changes how I think about European military disengagement.

Suppose Washington simply says:

Europe no longer matters. Defend yourselves. We're going to Asia.

Europe then has an obvious response.

Build autonomous defense.

Build autonomous capital markets.

Build European cloud infrastructure.

Build European AI champions.

Build independent semiconductor capacity.

Create a stronger euro.

Keep European savings in Europe.

Develop a foreign policy independent of Washington.

Trade with China wherever European interests dictate.

From a European perspective, that would be rational.

But look at the result from America's perspective.

Washington would have voluntarily helped create:

another autonomous advanced economic pole.

And this happens precisely while America is struggling to match Chinese scale.

That makes less sense the more serious the China competition becomes.

If America needs aggregate scale, Europe is not something it can casually discard.

Europe contains too much:

• capital;
• income;
• scientific capacity;
• high-end consumption;
• industrial capability;
• accumulated wealth;
• human capital.

More importantly, American corporations already own enormous claims on that system.

Why would Washington voluntarily convert a deeply integrated capital zone into an independent rival financial and technological pole?

The China Shock Is Different From the Japan Shock

America has experienced something like this before.

But it is important to remember what the Japan shock actually was.

It was not simply:

Japanese companies are taking market share from American companies.

By the late 1970s and 1980s, Japan was producing a much more uncomfortable possibility:

What if a non-Western society had built a better-performing version of modern industrial civilization?

That was the real shock.

Consider life expectancy.

In 1960, Americans still lived longer on average: about 69.8 years in the United States versus 67.7 in Japan.

But Japan closed the gap astonishingly quickly. By roughly 1964–65, Japanese life expectancy had crossed above America's for the first time. By 1980, Japan was at about 76.0 years versus 73.6 in the United States. (countryeconomy.com)

A country that had emerged devastated from war only thirty-five years earlier was now keeping its citizens alive several years longer than the richest country in the world.

Education produced an equally uncomfortable comparison.

In the Second International Mathematics Study around 1981–82, Japanese lower-secondary students averaged about 63.5% correct, compared with 46.0% for American students.

The gaps appeared across essentially every major area:

Among advanced secondary students, Japan also substantially outperformed the United States in algebra and calculus. (ERIC)

This was not a marginal difference.

The median American teenager was living inside a country with vastly more accumulated wealth, famous universities and a much longer industrial history—and yet Japanese mass schooling appeared to be producing considerably stronger mathematical competence.

That fact went directly into America's national anxiety. The 1983 A Nation at Risk report opened by warning that America's “once unchallenged preeminence” in commerce, industry, science and technological innovation was being overtaken, and international mathematics and science comparisons were among its central pieces of evidence. (National Center for Education Statistics)

Then there was research.

Japan was not merely assembling technology invented elsewhere.

Its R&D intensity rose from about 2.0% of GDP in 1980 to roughly 2.9% by 1990.

The United States went from about 2.3% to 2.7% over the same period.

By the end of the decade, Japan was devoting a larger share of its national economy to R&D than America. (ERIC)

And the industrial results were becoming impossible to dismiss.

In semiconductors, American firms held about 57% of the world market in 1980, compared with 27% for Japanese firms.

By 1989 the positions had nearly reversed:

• Japan: 52%
• United States: 35%

Japan had become the world's largest semiconductor producer. (GAO)

The same broad story appeared in automobiles, consumer electronics, machine tools, robotics and manufacturing quality.

Japanese factories became global models for lean production, statistical quality control and continuous improvement.

American companies began importing not merely Japanese products, but Japanese methods of organizing production.

And this is what made the moment psychologically unusual.

Japan was not simply saying:

We can manufacture your inventions cheaply.

It was increasingly saying, through demonstrated outcomes:

Our factories may work better.
Our children may learn more mathematics.
Our people may live longer.
Our infrastructure may function better.
Our firms may invest more patiently.
Our national institutions may be better adapted to the next stage of industrial society.

That is why Ezra Vogel could publish a book in 1979 literally called Japan as Number One: Lessons for America.

The intellectual question was no longer simply:

How can Detroit beat Toyota?

It was:

What does Japan know about running a modern society that America does not?

That was a genuine civilizational-performance shock.

And America reacted accordingly.

It created SEMATECH.

It pressured Japan intensely over semiconductors and market access.

American firms imported Japanese production methods.

Education reform became explicitly linked to national power.

Industrial policy, technological competitiveness and the quality of the American workforce became national-security questions.

But there was one thing Japan could not do.

It could not scale its superior performance into a replacement world system.

Japan had roughly half America's population.

It depended heavily on American military protection.

It had no comparable alliance network.

The yen could not replace the dollar globally.

Tokyo's capital markets could not organize the world's financial system.

Japan could demonstrate that a non-Western society might outperform America on surprisingly fundamental measures of modernity.

But it could not plausibly organize the world around itself.

China changes that.

The Japan shock asked:

What if another society is doing modernity better than we are?

The China shock adds a second question:

What if that society is also large enough to build an alternative world system?

That is the discontinuity.

Japan forced America to become more competitive.

China may force America to become larger than America.

And That Changes Europe's Role

This is where I now depart most sharply from my previous argument.

I previously thought Europe's distance from China made Europe less important.

That remains true militarily.

Germany does not sit beside Taiwan.

France does not control the First Island Chain.

European factories cannot substitute for Japanese geography.

But the conclusion I drew was wrong.

Europe being strategically behind the front line does not necessarily mean America abandons Europe.

It may mean America treats Europe differently from the frontier.

America needs European scale.

But it may not need European strategic autonomy.

In fact, autonomous European capability can directly compete with American power.

Consider several hypothetical European successes.

A European Nvidia strengthens the West.

But it weakens Nvidia.

A European AWS strengthens Western cloud resilience.

But it weakens Amazon.

A deep European capital market strengthens Western finance collectively.

But it reduces New York's centrality.

A powerful euro makes the Atlantic world financially more diversified.

But it weakens the dollar.

An autonomous European defense command makes Europe militarily stronger.

But it reduces American control of the alliance.

A European technology policy independent of Washington gives Europe more options.

But it makes containing Chinese technology harder.

That produces a tension that did not matter nearly as much in the 1990s.

America wants Europe strong enough to add to the system.

But perhaps not so autonomous that Europe becomes another center of the system.

The Ideal American Outcome Is Not a Weak Europe

This distinction matters.

America does not benefit from Europe becoming poor.

A poor Europe:

• buys fewer American products;
• generates less investment income;
• produces fewer scientists;
• contributes less to defense;
• accumulates less savings;
• becomes politically unstable;
• requires more American resources.

The ideal Europe is wealthy.

Possibly extremely wealthy.

But it is wealthy in sectors that do not challenge the American command layer.

Europe could remain world-class in:

• tourism;
• luxury goods;
• specialized machinery;
• cultural industries;
• professional services;
• high-value property;

Its households could remain affluent.

Its historic cities could become even more valuable as global wealth increases.

Its real estate could attract enormous pools of foreign capital.

Its tourism economy could earn substantial external income.

Its governments and companies could borrow from Japanese and other global savings pools.

Europe could remain one of the world's most desirable places to live.

But the highest-rent scalable platforms increasingly sit in America:

• AI;
• software;
• cloud;
• frontier biotechnology;
• capital markets;
• venture capital;
• defense architecture;
• reserve currency;
• strategic intellectual property.

In that arrangement, Europe is not poor.

It is rich but increasingly subordinate at the commanding heights.

America Wants the European R&D System Too

This is another reason Europe cannot simply be discarded.

Remember the research numbers.

Europe's R&D system is roughly 60% the size of America's in purchasing-power terms.

That is enormous.

If Europe becomes strategically independent, America competes with China using approximately one trillion dollars of domestic R&D.

Europe's $600 billion becomes an independent pool.

Some European researchers cooperate with America.

Some cooperate with China.

Some build European competitors.

But suppose the Atlantic technology system becomes much more integrated.

Then European R&D increasingly feeds:

• American-owned companies;
• American cloud infrastructure;
• American AI platforms;
• American capital markets;
• American acquisitions;
• American defense systems.

The scientist does not even need to move to California.

A laboratory in Munich can create value that ultimately accrues through an American corporate ownership structure.

A French biotech company can be acquired by an American pharmaceutical company.

A Swedish startup can scale through U.S. venture capital.

A British AI company can run on American compute and eventually list in New York.

That means America can capture some of Europe's research capacity without physically importing every researcher.

This potentially solves one of America's other emerging problems.

The Old Talent Model May Be Becoming Harder

For several decades, America solved domestic human-capital shortages through an extraordinary mechanism:

recruit from the entire planet.

The best Chinese graduate student could go to Stanford.

The best Indian engineer could move to Silicon Valley.

The best European scientist could join an American laboratory.

This dramatically increased American technological capacity.

But a hard geopolitical division with China eventually makes that model harder.

Chinese students and scientists become security-sensitive.

India may remain strategically autonomous.

Immigration itself becomes politically contested.

The fully global talent market begins breaking apart.

At first glance, that looks disastrous for American science.

But Europe offers an alternative.

Instead of importing every scientist individually, America can integrate a whole allied research ecosystem.

That would still probably reduce the extreme selection intensity of American universities.

America would no longer be drawing as freely from the best people produced by every rival civilization.

But the system-level R&D capacity could remain enormous.

And strangely, that might improve the labor-market position of merely very good Americans.

The American Upper Middle Class Could Actually Benefit

The hyper-global talent system was excellent for maximizing American frontier output.

It was not necessarily excellent for every American professional.

A competent American engineer did not compete merely with other Americans.

He competed with the strongest people willing to migrate from:

• China;
• India;
• Russia;
• Iran;
• Eastern Europe;
• everywhere else.

That raises the quality of the American technological system.

But it also raises the threshold for participating in it.

Now imagine a different arrangement.

America captures more European R&D organizationally.

American companies gain access to an enormous integrated allied market.

Chinese labor-market competition is reduced.

Some Indian competition is reduced.

European researchers increasingly remain in Europe but work inside American-controlled corporate systems.

The quantity of American-controlled high-value activity becomes much larger.

Suddenly there may be more room for the merely excellent American rather than only the globally exceptional one.

The engineer who is clearly above average but not a world-class mathematician.

The technical manager.

The process engineer.

The laboratory operator.

The product engineer.

The defense technologist.

The person capable of participating in sophisticated systems without personally inventing the frontier.

That could regenerate a surprisingly broad high-tech upper-middle class.

Even the Ordinary Worker Might Gain

There is a second domestic effect.

Suppose America not only captures the high-rent technological layer but increasingly insists that strategically important goods sold into the allied market be produced within the trusted system.

Then European demand can support American:

• factories;
• defense plants;
• aerospace production;
• energy exports;
• semiconductor facilities;
• chemical plants;
• data centers;
• machine production.

The mechanism by which an ordinary American worker benefits is not that a high-school diploma magically becomes valuable again.

It is that industrial labor becomes scarce.

If America forces more production into the domestic economy while simultaneously limiting easy replacement through offshoring, companies have to bid for workers.

A completely ordinary worker can earn a strong wage when embedded inside an extremely productive, capital-intensive system.

That was one of the hidden foundations of the old American middle class.

The factory worker did not need to be a genius.

The productive system around him was extraordinary.

So the political economy of a harder American bloc could become surprisingly attractive domestically:

GroupPotential source of gainsCapital ownersPlatform, financial and monopoly rentsScientists / elite engineersLarger integrated research systemOrdinary-good professionalsMore high-value positions inside protected industriesSkilled workersDomestic reindustrialization and labor scarcitySome high-school workersManufacturing, logistics, construction, energy and defense demand

That is a much broader coalition than simply Silicon Valley.

It begins to explain how economic nationalism and continued American hegemony could coexist.

But Why Would Europe Accept This?

This is the obvious problem.

Why would Europeans voluntarily agree to become a rich but subordinate economic zone?

They wouldn't necessarily.

Which brings us to the asset America possesses that Europe still cannot easily reproduce:

military power.

Europe remains deeply dependent on the United States for parts of:

• nuclear deterrence;
• intelligence;
• strategic airlift;
• command architecture;
• missile defense;
• long-range strike;
• satellite infrastructure;
• military logistics.

At the 2025 Hague summit, NATO members committed to moving toward defense and security-related spending equal to 5% of GDP by 2035 while deepening transatlantic defense-industrial cooperation.

Europe is becoming militarily stronger.

But there are two entirely different ways that can happen.

One is:

Europe builds a militarily autonomous third pole.

The other is:

Europe supplies much more military capability inside an American-centered architecture.

Those outcomes are not equivalent.

America should strongly prefer the second.

Because then European taxpayers provide more of the resources while Washington retains much of the strategic leverage.

Military Protection Can Be Converted Into Economic Leverage

This is where the relationship becomes more openly imperial.

Suppose Europe needs continued American deterrence.

America needs Europe to align export controls against China.

Those issues can become connected.

Europe wants access to American AI and semiconductor technology.

America wants European regulation to become friendlier toward U.S. firms.

Those issues can become connected.

Europe wants privileged market access.

America wants more European defense spending.

Connected.

Europe wants U.S. intelligence and military interoperability.

America wants European China policy aligned with Washington.

Connected.

None of this requires a written grand strategy.

It follows naturally from asymmetric bargaining power.

If one side controls something the other side cannot easily replace, that dependency becomes negotiating leverage.

The harsher word is extortion.

Not criminal extortion.

Imperial extortion.

Use a dependency in one domain to extract concessions in another.

And once America needs every marginal advantage it can get against China, why would it voluntarily refuse to use that leverage?

Now We Can Return to the British Empire

This is where the historical analogy becomes useful.

Empires do not treat every subordinate territory equally.

The relationship depends on what the imperial center needs from that territory and what alternatives the subordinate territory possesses.

British Canada and British India illustrate two radically different arrangements.

Not because Canada mattered and India didn't.

India was vastly more important economically.

But Canada sat beside something India did not:

the United States.

That mattered enormously.

Canada's Outside Option

British North America had a huge alternative trading system directly across the border.

The United States was growing rapidly.

Trade flowed across the border.

People migrated across it.

The 1854 Reciprocity Treaty substantially deepened commercial integration between British North America and the United States.

When Washington terminated that agreement after the Civil War, the resulting loss of American market access became one of the pressures encouraging Confederation.

Canadian historical accounts explicitly list fear of American expansion, the loss of U.S. reciprocity and Britain's desire to reduce its direct colonial obligations among the external pressures behind Canadian union.

That means Britain faced an unusual problem.

If London extracted too much from Canada, Canada had somewhere else to turn.

If Britain suppressed Canadian economic development too aggressively, the United States remained next door.

If imperial membership became sufficiently unattractive, the neighboring economy offered an enormous alternative.

The map itself created bargaining power.

So Britain gradually discovered that a locally capable, increasingly self-governing Canada could remain inside the British system more securely than a resentful, tightly controlled one.

Race, settler politics and local institutions obviously mattered enormously to the actual history.

But there was also a strategic logic:

The frontier had an outside option.

That increased the cost of direct control.

Japan Has China Next Door

Now look at Japan.

Japan cannot simply become a Chinese satellite.

The political and security barriers are enormous.

But China is permanently next door.

China is:

• a gigantic market;
• a manufacturing superpower;
• an important trading partner;
• a source of supply chains;
• an alternative technological ecosystem.

Japan can also hedge through:

• Southeast Asia;
• India;
• Australia;
• its own foreign investment networks.

The point is not that Japan can effortlessly defect to China.

It cannot.

The point is that Washington cannot eliminate Japan's surrounding Asian economic geography.

And America simultaneously needs Japan to remain extremely capable in exactly the location where a Chinese challenge would occur.

That combination increases Japan's bargaining power.

America Cannot Afford to Hollow Japan Out

This produces a different American policy toward Japan than toward Europe.

Imagine America successfully relocates every valuable Japanese industry into the United States.

That could increase American GDP.

But eventually the strategy becomes self-defeating.

A semiconductor plant in Arizona cannot defend Okinawa.

A Texas shipyard cannot instantly repair Japanese naval forces during a Pacific war.

An American robotics company does not substitute for an entire functioning Japanese supplier ecosystem sitting beside China.

The United States therefore needs real industrial depth to remain physically inside Japan.

Japan needs:

• shipyards;
• missile production;
• precision manufacturing;
• advanced materials;
• semiconductor equipment;
• energy resilience;
• military logistics.

That means America may have to tolerate exactly the kind of allied industrial capability that it once tried to constrain.

During the Japan shock, a powerful Japanese semiconductor sector primarily looked like a competitor.

During the China shock, a powerful Japanese semiconductor and defense-industrial sector can become part of the strategic balance.

The same capability has acquired a second value.

Commercially it may compete with America.

Strategically it strengthens the American system.

The Frontier Gets a Better Deal

This suggests a general rule.

The closer an ally sits to the rival, and the more America physically depends on that ally's productive capability, the more autonomy Washington may have to tolerate.

Japan can become stronger.

Australia can build more military capability.

Possibly Korea and Taiwan can preserve unusually sophisticated industrial systems.

But there is a catch.

America may tolerate more autonomy of means while demanding less autonomy of alignment.

Japan gets more missiles.

More ships.

More defense production.

More industrial capability.

But those capabilities become increasingly interoperable with the American military structure.

Japan is not being made independent of the system.

It is being made more powerful inside the system.

The ideal frontier ally is not weak.

It is:

strong enough to fight, but sufficiently integrated that its strength reinforces the center.

Europe Faces the Reverse Incentive

Europe sits farther from the primary rival.

That means America gets less strategic benefit from European duplication of American commanding industries.

A Japanese shipyard may directly determine the balance near China.

A European cloud company does not.

A Japanese missile factory may strengthen the First Island Chain.

A European alternative to American financial markets mostly reduces American rents.

So Washington's tolerance for allied competition may increasingly depend on the military value of that competition.

That produces the seemingly strange outcome:

America may become more economically permissive toward Japan while becoming more economically demanding toward Europe.

Not because America likes Japan more.

Because Japan is the frontier.

Europe Could Become the Wealthy Rear

Under this system, Europe does not disappear.

It becomes economically indispensable in a different way.

Europe supplies:

• a gigantic affluent market;
• enormous savings;
• scientists;
• specialized industry;
• pharmaceutical capability;
• luxury goods;
• tourism;
• high-value property;
• professional services;
• complementary military capacity.

It may continue attracting foreign capital even while some of its most ambitious scientists and entrepreneurs move into American-controlled institutions.

It could increasingly finance consumption through:

• tourism income;
• foreign investment;
• wealthy immigration;
• property;
• borrowing;
• accumulated assets.

There is no reason such a Europe must become poor.

Many countries already maintain high living standards while owning less of the technological frontier than their consumption levels would suggest.

Europe could remain extraordinarily rich in assets and quality of life.

It could simply become less central to who owns the future.

East Asia Could Become the Creditor

There is another side to this system.

East Asian countries have spent decades accumulating foreign assets.

Japan in particular has one of the world's largest net foreign asset positions.

An aging creditor society eventually gains the ability to transform past industrial surpluses into future investment income.

Instead of every Japanese retiree depending solely on a shrinking Japanese workforce, Japanese institutions can own claims on production elsewhere.

European infrastructure.

American equities.

Foreign railways.

Energy projects.

Factories.

Government bonds.

That creates another possible division of labor.

America specializes increasingly in:

• financial intermediation;
• startups;
• frontier technology;
• platform ownership.

Japan and perhaps other mature East Asian creditor economies specialize more in:

• long-duration capital;
• infrastructure finance;
• foreign-asset income;
• selected strategic high technology.

Europe supplies more:

• labor;
• services;
• tourism;
• property;
• consumption markets.

Again, these are tendencies rather than clean categories.

But the architecture is economically coherent.

The American Empire Could Therefore Become Larger, Not Smaller

This is the largest change in my thinking.

My previous essay argued that America might respond to China by narrowing its empire.

I now think it may instead narrow the number of independent strategic decision-makers inside the empire.

That is different.

Geographically, the system could actually become larger and more integrated.

Economically, Europe remains inside.

Japan remains inside.

Australia remains inside.

Canada remains inside.

Mexico remains inside.

Korea and Taiwan remain deeply tied to it.

But their functions diverge.

RegionPossible roleUnited StatesCommand, finance, AI, software, frontier science, capital marketsEuropeR&D scale, affluent market, savings, talent, complementary industryJapanFrontline advanced industry, materials, machinery, shipbuilding, military productionKorea / TaiwanSemiconductors and specialized frontier productionAustraliaResources, military geography, strategic depthCanadaEnergy, minerals, continental redundancyMexicoLower-cost trusted manufacturing

The system is enormous.

But it is not egalitarian.

America remains the operating system.

The Real Battle Is Over European Autonomy

If this argument is right, the most important geopolitical question outside East Asia may be what happens inside Europe.

Can Europe turn its aggregate resources into autonomous power?

Can it build:

• its own cloud layer;
• its own AI champions;
• deeper capital markets;
• semiconductor capability;
• independent military command;
• an independent China policy?

Europe is already explicitly talking about technological sovereignty and reducing critical reliance on non-European suppliers.

If Europe succeeds, the world becomes genuinely multipolar.

America.

China.

Europe.

Three major centers capable of making independent strategic decisions.

That would be a large reduction in American power.

Not because America suddenly becomes weak.

But because America's greatest advantage over China—the ability to aggregate allied capital, science and market size—would weaken.

If Europe Fails, America May Remain the Center for Decades

Now imagine Europe fails to become strategically autonomous.

It remains wealthy.

It remains democratic.

It remains formally sovereign.

But:

• its defense stays deeply NATO-centered;
• its startups scale through American capital;
• its savings flow heavily into American markets;
• its AI industry relies on American compute;
• its cloud infrastructure remains largely American;
• its China technology policy converges with Washington;
• its most globally successful companies increasingly operate inside American-controlled capital and technology networks.

Then China's opponent is not really the United States.

It is an integrated system much larger than the United States.

That system could possess:

• roughly twice China's R&D resources;
• deeper global capital markets;
• most of the major reserve currencies;
• many of the world's strongest universities;
• major semiconductor chokepoints;
• enormous consumer purchasing power;
• a global military alliance network.

China would remain an extraordinary power.

But America would still possess something China does not:

the ability to make other advanced societies add their resources to America's own.

That could extend American primacy much longer than national GDP projections suggest.

The New Imperial Rule

This gives me a different way of describing the transition.

My previous argument was that America was replacing an empire optimized for reach with one optimized for control.

I still think that is right.

But I no longer think the new empire necessarily becomes geographically smaller.

It may become politically harder.

The key question becomes:

How much independent strategic choice does each part of the system retain?

And the answer may depend heavily on geography.

The frontline gets capability because weakness there threatens the entire system.

The rear gets squeezed because dependence there creates leverage.

So perhaps the deeper imperial rule is:

Empires extract where weakness is tolerable. They cultivate strength where weakness threatens the empire itself.

That is why Britain could eventually tolerate an increasingly self-governing Canada beside the United States while governing India through a far more extractive structure.

And it may help explain why America could eventually tolerate a surprisingly powerful Japan beside China while becoming less tolerant of an economically autonomous Europe behind it.

Japan becomes the armed industrial frontier.

Europe becomes the rich economic rear.

America tries to remain the place where their capital, science, technology and military power converge.

What to Watch Now

If this framework is right, several trends should appear together.

In Europe, watch whether higher defense spending creates European autonomy or simply more European capability inside NATO.

Watch whether European savings increasingly finance European startups—or continue moving through American capital markets.

Watch whether European AI and cloud policy produces genuine substitutes for American platforms.

Watch whether Europe can maintain a China policy materially different from Washington's.

And when European regulation collides with American technology and security interests, watch which side repeatedly compromises.

In Japan, watch almost the opposite.

Does Washington increasingly tolerate Japanese:

• defense exports;
• missile development;
• shipbuilding;
• advanced manufacturing;
• strategic industrial policy;
• independent technology partnerships?

Does Japan gain more economic room precisely as its military integration with America deepens?

If both occur simultaneously—Europe becoming more constrained while Japan becomes more capable—then what looks like inconsistent American policy may actually follow a coherent imperial logic.

America would not be choosing Europe over Asia.

Nor would it be abandoning Europe for Asia.

It would be assigning them different functions inside a much larger system.

And that changes the question I ended my previous essay with.

I previously asked:

Which part of the world does America intend to keep?

The more important question may be:

How much of the advanced world can America make behave as one system—and what role will each country be allowed to play inside it?