Javier Benegas
The Great Rebalancing
For years, we were told that the unease spreading across Western societies had more to do with perception than reality. Nostalgia, resistance to change, a failure to adapt to a more complex world. Public services were not deteriorating, we were simply more demanding. Industry was not vanishing, it was ‘evolving.’ We were not poorer, just living differently.
That explanation becomes harder to sustain once discontent turns into daily experience: wages that no longer cover basic costs, housing drifting out of reach, energy prices that never quite come back down, infrastructure that quietly ages, and an increasing reliance on external suppliers for things that once seemed trivial. At that point, the problem looks less psychological and far more political, in the broadest sense of the term.
A growing number of observers now concede as much. What we are facing is not a temporary downturn, but a deeper rebalancing of the economic and geopolitical order that took shape after the Cold War. The sense that ‘everything feels like it’s breaking’ is not a collective hallucination. It is what a system under strain looks like when it is forced to redistribute costs, power and opportunity in a harsher, more fragmented environment.
This argument has circulated recently in a widely shared essay by The Long View (@HayekAndKeynes), titled The Great Rebalancing. Its central claim—that today’s instability is not accidental, but the logical outcome of an exhausted model—is a useful place to begin, even if it should not be the place where the discussion ends.
The previous order rested on a set of exceptional conditions. In Europe, three of them sustained the illusion of open-ended prosperity. Cheap labour, with China acting as the world’s factory. Cheap energy, supplied by Russia. And abundant credit, public and private, increasingly used as a substitute for productivity rather than its consequence. To this was added the so-called peace dividend: the belief that history had settled into a permanent equilibrium, allowing defence to be cut without serious risk.
Europe optimised relentlessly for efficiency and treated resilience as a secondary concern. That trade-off worked for a while. Eventually, it stopped. Systems pushed too far in one direction tend to become brittle.
The diagnosis itself is not controversial. What remains more uncomfortable is the implication that this rebalancing is not some impersonal force of nature. It is shaped, often decisively, by political choices, dominant ideas, and institutional incentives. Those choices determine who absorbs the losses and who is shielded from them. And the distribution is anything but random.
Europe increasingly finds itself on the losing side. In a relatively short period of time, factories have closed, industrial employment has declined, and energy costs have risen in a way that now appears structural. At the same time, dependence on external suppliers—for components, raw materials and technology—has deepened. The issue is no longer that others can produce more cheaply. It is that producing in Europe has become uncertain, administratively dense and, in many cases, simply unattractive.
China, meanwhile, has moved in the opposite direction. While Europe has dismantled industrial capacity in the name of energy transition and moral ambition, Beijing has reinforced its manufacturing base, secured control over critical raw materials and positioned itself as a near-indispensable supplier of technologies now labelled ‘strategic.’ Solar panels, batteries, electronic components: much of what Europe requires to meet its own policy targets is imported from Chinese factories.
The result is difficult to dispute. Productive capacity, employment and economic leverage are shifting away from Europe and towards Asia. To describe this as an inevitable outcome of globalisation is misleading. Markets did not drift here on their own. Policy choices mattered, and they still do.
As Will Durant once noted, civilisations rarely collapse solely under external pressure. More often, they weaken themselves first.
From production to administration
Over time, Western economies have shifted their centre of gravity away from making things and towards managing processes. Less industry, less autonomy. More intermediation, more compliance, more dependence on supply chains engineered for maximum efficiency and minimal slack.
The economy increasingly resembles an administrative apparatus rather than a workshop. Procedure replaces production. Risk is displaced by regulation.
This shift is often described as a natural move up the value chain. In practice, it has meant a steady erosion of productive capacity and a growing exposure to actors who do not operate under the same constraints or assumptions.
Regulatory complexity plays a central role here. Large firms can absorb it, navigate it and, in many cases, influence it. Smaller producers cannot. For them, each additional layer of regulation brings higher fixed costs, legal uncertainty and new barriers to entry. Growth becomes harder; survival itself becomes conditional.
As a result, economic activity increasingly depends on political rents: subsidies, transition funds, public contracts. Entire sectors cease to live by competitiveness and instead orient themselves around administrative priorities. Innovation follows the logic of compliance, not experimentation. Talent adapts accordingly.
Security followed a similar path. Years of underinvestment in defence reflected more than budgetary prudence. They expressed a deeper cultural assumption: that the international order was stable, guaranteed and, above all, someone else’s responsibility. That assumption did not survive the return of war to Europe.
The social consequences are corrosive. When economic viability depends on administrative discretion, autonomy erodes. Formal censorship becomes unnecessary. If material survival is tied to adherence to the dominant framework, dissent prices itself out. What is presented as ‘adaptation’ begins to look more like social reorganisation, with fewer avenues for independent advancement.
The politics of permanent emergency
Acknowledging that global temperatures have risen is one thing. Treating that fact as proof of an imminent, civilisation-ending catastrophe is another. Accepting the first does not logically compel acceptance of the second.
Beyond warming itself, uncertainty remains: about scale, timing, adaptation, and trade-offs. Yet political discourse gravitates towards worst-case scenarios. The incentive structure is obvious. The more dramatic the diagnosis, the easier it becomes to justify sweeping intervention in economic life.
Climate policy thus becomes a vehicle for economic reordering. Energy grows more expensive. Industrial activity contracts. Resources are redirected, at scale, towards sectors designated as ‘green’ through political processes rather than market discovery. The social costs are uneven. Those with higher incomes absorb them. Middle-income households do not.
Germany illustrates the problem. After enormous investment in its energy transition and the closure of nuclear plants, it has reverted to coal and increasingly precarious energy imports. Industrial competitiveness has suffered, employment has declined, and external dependence has grown. The global climate balance, meanwhile, remains effectively unchanged.
This process is framed as virtue. Sacrifice is recast as maturity. What is essentially a managed loss of prosperity is presented as moral progress. Here, the energy transition quietly converges with degrowth—not as an explicit doctrine, but as an implied endpoint: less production, less consumption, fewer expectations, administered by an expanding bureaucratic apparatus.
China and quiet influence
China’s rise has often been explained through comparative advantage. That explanation is not wrong, but it is incomplete. Competing with an efficient producer is one thing. Transferring strategic capacity to a geopolitical rival is another.
Energy systems, telecommunications, rare earths, batteries, solar manufacturing—the list of dependencies is long. Western decarbonisation strategies have reinforced them, concentrating production in a country whose leadership openly regards the Western order as past its peak.
Influence, in this context, does not require coercion. It operates by shaping the intellectual and moral frameworks within which policy becomes thinkable. As Joseph Nye observed, the most effective propaganda rarely looks like propaganda at all. When narratives that disparage industry, question growth and romanticise austerity align neatly with China’s competitive position, coincidence becomes an unsatisfying explanation.
This does not require a centralised plot. It reflects the exploitation of pre-existing weaknesses: technocratic overconfidence, a diminished concern for economic sovereignty and the belief that rules can substitute for strategy. The pandemic exposed how far those assumptions had hollowed out local capacity.
Choice, not destiny
There is a strong temptation to treat the present moment as historically inevitable: ageing societies, slowing growth, diminished ambition. This interpretation is convenient. It dissolves responsibility into fatalism.
But decline is not an act of nature. Civilisations lose influence when they abandon the principles that once sustained them—initiative, productive investment, innovation and a belief that the future can be better than the present.
Managing decline is not a strategy. It is abdication.
The alternative is not nostalgia, but recovery: renewed confidence in growth as the material foundation of social stability, political freedom, and genuine sovereignty. Without a productive base, no transition holds and no integration lasts.
The great rebalancing does not signal the end of globalisation, but its reconfiguration. Shorter supply chains. More reliable partners. Domestic capacity for essential goods. None of this is free. It requires accepting costs now to regain agency later—and intellectual honesty. Efficiency without sovereignty is not progress. It is dependency.
The rebalancing will produce winners and losers. The real question is whether Europe responds by rebuilding productive capacity and confidence in progress, or whether it continues down a path that elevates renunciation into virtue and dependence into habit. That outcome is not written into history. It is the result of choice.
