At Devos, the World Economic Forum shows that the contemporary global order is crumbling. The debates and speeches at the WEF in January 2026 made it increasingly clear that the world is no longer operating comfortably within the assumptions of a US-led capitalist system that once promised stability, growth, and predictability. The central driver of today’s instability is the conduct of the United States as a hegemon increasingly shaped by fear-particularly fear of China’s rise. This fear has distorted US policy choices, weakened alliances, and exposed the limitations of a system that relies more on coercive leadership rather than cooperative governance.
At Davos 2026, world leaders did not merely discuss economic recovery or innovation; they openly acknowledged geo-economic confrontation, fragmentation of trade, and the erosion of multilateral trust. What emerged was a growing consensus that the old capitalist order, structured around American leadership and liberal globalisation, is no longer functioning as intended. Crucially, this breakdown is not occurring because the United States is withdrawing from the world but because the United States is engaging with the world in a deeply insecure, confrontational, and China-centric manner.
It reminds me of Condoleezza Rice’sarticle ” The Perils of Isolationism: The world still needs America- and America still needs the world”, where her argument rests on the claim that America is the anchor of global stability and, in turn, needs the world to sustain its prosperity. While this premise was largely valid during the Cold War and the immediate post-Cold War era, it becomes problematic when applied uncritically to the current moment. What Rice underestimates is how the nature of US engagement has changed. The problem today is not isolationism; it is hegemonic overcorrection driven by strategic anxiety about China. The China factor is central to understanding the unravelling of global capitalism’s governing logic. China’s rise as a technological, industrial, and financial power has fundamentally altered the balance of the international political economy, and the United States has increasingly framed China as an existential threat. This framing has translated into tariffs, sanctions, technological decoupling, and the weaponisation of supply chains. At Davos 2026, these policies were widely recognised as contributors to economic uncertainty and market instability rather than sources of resilience.
Historically, the capitalist system remained dependent on the United States not merely as the largest economy but as a provider of public goods: open markets, predictable rules, and multilateral institutions.
Ironically, China’s own posture at the WEF stood in sharp contrast to US rhetoric. Chinese leaders emphasised openness, development partnerships, and the global benefits of China’s growth. Whether or not one fully accepts this narrative, its discursive power matters. In a world already fatigued by crises, many states, particularly in Europe, the Global South, and middle powers, are increasingly receptive to alternatives that promise stability without coercion. This does not mean that China has replaced the United States as a benevolent leader; rather, it highlights how US fear-driven policies are creating political space for China to present itself as a responsible stakeholder.
This dynamic has had a corrosive effect on US alliances. One of the most striking features of WEF 2026 was the open criticism of US economic and strategic behaviour by its traditional allies. European leaders questioned tariff threats, unilateral trade measures, and aggressive posturing that undermines collective decision-making. Canada’s leadership went further by declaring that the old world order is not coming back and that nostalgia for US-led stability is not a strategy. Such statements would have been unthinkable a decade ago. Today, they reflect a deeper reality: US hegemonic behaviour, shaped by China’s anxiety, is eroding alliance cohesion. This is precisely where Rice’s argument becomes vulnerable. Her essay assumes that continued US leadership automatically translates into global stability. However, leadership that is exercised through pressure, exclusion, and zero-sum logic can become destabilising. The US insistence on presenting itself as indispensable, especially in economic growth narratives, as President Trump said, “The US is the engine of world economic growth”, appears increasingly disconnected from global perceptions. At Davos, the repeated emphasis by US officials on America’s necessity sounded less like reassurance and more like defensive self-justification.
Historically, the capitalist system remained dependent on the United States not merely as the largest economy but as a provider of public goods: open markets, predictable rules, and multilateral institutions. Today, many of these functions are being hollowed out. Protectionism justified in the name of national security, selective globalisation, and strategic decoupling are fragmenting the very system that once sustained American primacy. Financial markets, supply chains, and development trajectories are becoming increasingly regionalised, reflecting declining confidence in a unified global economic order.
China’s rise did not automatically necessitate this outcome. What has accelerated the strain on capitalism is the US response to China. By treating economic interdependence as vulnerability rather than strength, Washington has contributed to a crisis of globalisation itself. This was evident at WEF 2026, where geo-economic confrontation was identified as a top global risk. Such confrontation is not an external shock; it is the product of policy choices made by a hegemon struggling to adjust to relative decline. Importantly, the resistance to US policies is not limited to China or rival powers. It is emerging from within the Western alliance system. European and Canadian critiques signal a shift toward strategic autonomy, diversification of partnerships, and selective engagement with China despite US pressure. This represents a structural weakening of hegemonic consent, a key pillar of capitalist stability. When allies no longer internalise the hegemon’s worldview, the system it leads begins to fracture.
The broader implication of this global scenario is that capitalism is collapsing not because of China’s ascent alone, but because the transition from unipolarity to multipolarity is being mismanaged. The American arrangement fails to acknowledge that the form of engagement must change. The world does not need an engine of growth obsessed with preserving dominance; it needs adaptive leadership capable of managing interdependence in a pluralistic system.
As the discussions at Davos 2026 revealed, the future is likely to be characterized by shared leadership, issue-based coalitions, and reformed institutions rather than a single economic guardian. The insistence by the United States on reaffirming its indispensability, especially in reaction to China, appears increasingly out of step with this reality. The crumbling of the capitalist world should be understood as a crisis of hegemonic adjustment. The United States, constrained by fear of China and guided by outdated assumptions of indispensability, is making strategic mistakes that alienate allies and fragment the global economy. The speeches and debates at WEF 2026 reflect a growing recognition that transition is unavoidable. The question is no longer whether change is coming, but whether global powers, especially the United States, can adapt to a world where leadership is negotiated, not imposed.
The writer is a professor of Political Science at Punjab University, Lahore.