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CAN THE WEST RECOVER - WHAT NEXT AFTER MAGANOMICS

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We drift towards dictarship - is the state capable of rebuilding itself to serve the interest of the nation its peoples and the interests of other actors in a multi-polar world, or does the cure require tearing down state and empire?

Fast Track

A familiar left-wing critique argues that neoliberalism stripped Western states of the will and the means to govern, and that only revolution can restore them. MAGAnomics was America's attempt at a recovery from the right. It diagnosed much of the problem correctly, but in LITA's view it was captured by an Israeli lobby with a handful of technology and defence billionaires. Voters judged it on the Iran war, Israel's influence over US policy, the cost of living and corruption, and on 3 November 2026 they handed both houses of Congress to the Democrats. 

This article argues that recovery without revolution is possible, but only if it keeps MAGA's diagnosis, drops its methods and makes fairness visible. Seven pillars show what that could look like, in America and in Europe.


Seven steps to recovery

Introduction

Every so often a reader's comment says something an article missed. This one came in response to Professor Glenn Diesen's essay The Fragmenting West & Europe's Failure to Adjust to a Multipolar World. Diesen argues that the unipolar era held the West together and that a multipolar world will keep pulling it apart. A reader agreed with the geopolitics but said the analysis lacked a dimension: it explained the politics but not the economics.

That critique, common on the left, deserves a proper hearing, because it overlaps with much of what LITA has written. Our 2025 series on globalisation, reserve currencies and the "three problems haunting the West" reached a similar diagnosis from a different direction. Where we part company is the cure. The left-wing critique concludes that the political class has been so thoroughly captured that only revolution, or some new political form, can return power to ordinary people.

America has just run an experiment that bears on that question. MAGAnomics was a recovery plan from the right, built by insiders who shared much of the same diagnosis. It has now been rejected at the ballot box. The puzzle this article investigates is whether that failure proves the critics right, or whether it points to a better-designed reform that the existing system could still deliver.

WHY IT MATTERS

If the critics are right, the West faces a long period of instability before anything improves. If they are wrong, a practical programme exists that governments in Washington, London, Paris and Berlin could adopt within their normal powers. The answer affects wages, housing, pensions and the risk of war for hundreds of millions of people. It also matters for investors: a reform path and a revolutionary path lead to very different markets.

1. The left-wing charge: the missing economics

The critique argues that the unipolar era had two faces. One was American military power, presented as the defence of "universal values". The other was a single economic creed, neoliberalism, which held that deregulated global markets would meet human needs better than any state.

In this account, Britain followed the creed faithfully. Whatever could be privatised was. Taxes were cut, especially for the rich. Austerity moved resources upwards while being described as "trickle down". The state shrank to police, contract law and the military, and even those were partly outsourced. Its main job became signing over its own powers to private firms.

The critique then makes its most interesting claim. When markets replace politics, the citizen becomes a consumer and the voter a fossil. Fifty years of this produced a political class trained to do the least and step aside, which cannot suddenly rediscover the arts of government and diplomacy. Europe is therefore flailing, and the war in Ukraine continues partly because it is profitable for arms makers. The proposed remedy is to take power back from those who profit from war, by reclaiming democracy or through revolution.

2. The diagnosis LITA already shares

Much of this matches LITA's own reading, reached through economics rather than politics. In Globalisation and Ricardian Economics we argued that David Ricardo's idea of comparative advantage was sound but was pushed too far. Unrestrained flows of goods, capital and people offshored industrial work, held down wages and sent asset prices beyond the reach of ordinary families.

Ricardo's elegant theory became a trap, as financials overtook physicals

In Can Singapore Avoid the Reserve Currency Curse? we traced the mechanism. Foreign surpluses were recycled into US Treasuries, which made borrowing easy. Easy borrowing encouraged fiscal laxity and financialisation, with capital flowing into financial assets rather than factories. Asset owners gained while wage earners and debtors fell behind.

Singapore: stay small, stay smart, stay physical

IN PLAIN TERMS: WHAT IS THE "RESERVE CURRENCY CURSE"?

Other countries keep their savings in dollars, it's safe and stable, it pays interest, and it's needed for trading operations - it's their bank. That steady demand lets America borrow cheaply and import more than it makes. It feels like a privilege, but over decades it pushes up house and share prices, weakens manufacturing and lets debts pile up without the immediate pain a household would experience.

Three Problems Haunting the West drew these threads into a "three-cornered hat": economic hollowing out, mass immigration and social strain, plus lost sovereignty with imperial overstretch. The central rule is that strategy begins with diagnosis and vision.

Root causes of the West's decline

So the left-wing critics and LITA agree on the current problems and the causes - symptons and diagnosis. The difference lies in their assumption that the patient's own institutions cannot treat it - the cure.

Agreeing on the disease is not the same as agreeing on the cure.

3. MAGAnomics: the right diagnosis, captured by the few

The most serious attempt at a cure came from the American right. In MAGAnomics we described it as a three-legged stool. The first leg was the "3-3-3" plan: deficits below 3% of GDP, 3% real growth and roughly 3 million more barrels of oil a day, so that the economy would outgrow its debt. The second was tariffs to bring factories home. The third was a proposed "Mar-a-Lago Accord" to weaken the dollar in an orchestrated way, as the 1985 Plaza Accord had done.

MAGAnomics - hijacked by the deep state on behalf of the elites

In What Does MAGA Mean in Practice? we set out the vision: reindustrialisation, energy independence, restrained foreign commitments and fiscal discipline. We also listed the obstacles the administration expected, from bureaucratic resistance and lobbying to court challenges and public backlash.



The diagnosis was close to LITA's. The execution was not. In LITA's view the programme was not undermined by a simple split among elites. The executive had been captured by a narrow group of them: the Israeli lobby with the technology and defence billionaires , those who hold the strongest political and economic cards. Reindustrialisation for workers sat somewhat awkwardly beside tax cuts and high margin high tech trading.

Voters noticed, and four grievances of roughly equal weight emerged. The first was the Iran war: in exit polls 74% of voters called it a crucial or major factor in their vote, and 62% said using force was the wrong decision. The second was Israel's influence over US policy: in a March 2026 poll, 56% of voters said the war benefited Israel more than America, and the pro-Israel lobby AIPAC was the biggest outside spender of the campaign. The third was the cost of living, strongly connected to the energy wars, which swing-state voters ranked as their top priority. The fourth was corruption, a president and his circle enriching themselves in the billions.

The result was decisive and overwhelming. On 3 November 2026 the Democrats won control of both the House and the Senate. President Trump remains in office until January 2029 and has said he will veto Democratic legislation, so Washington now faces two years of divided government.

MAGAnomics failed less because its diagnosis was wrong than because it asked the many to pay for a cure that rewarded the few.

4. Is revolution the only way out?

A left-wing critic would read this as proof of the case: even a programme aimed at the system's flaws was captured or defeated by its elite. That is a fair interpretation, but it is not the only one.

History offers several examples of systems that reformed themselves under pressure without revolution. Bismarck introduced social insurance in the 1880s partly to undercut the socialist movement. Roosevelt's New Deal in the 1930s rebuilt American capitalism while radical alternatives were gaining ground. Britain's post-war settlement after 1945 created the welfare state and nationalised key industries through ordinary elections. In each case, a credible threat from below pushed existing institutions to change.

Revolutions, by contrast, have a poor record of delivering what their supporters wanted. They tend to concentrate power rather than spread it, and the people the critics want to protect usually bear the cost. The midterm result also cuts against the claim that voters are powerless fossils. American voters have just removed a governing majority, peacefully and on schedule.

The better reading may be this: the critics' anger is the pressure that makes reform possible, while reform remains the preferred channel for it.

5. A recovery plan in seven pillars

If the Democrats hope to win the presidency in 2028, they will need more than opposition to Trump - look out to Britain where an overwhelming vote against the Tories put labor in power only to see Labor's new prime minister flailing as the previous. A credible programme could keep MAGA's diagnosis but change its methods. Here is one version of a MAGA 2.0, drawn from LITA's earlier work.

1. Build back production, this time with precision. Keep the goal of reindustrialisation, but use subsidies tied to domestic jobs and narrow tariffs on strategic sectors rather than blanket tariffs that raise household costs. The Singapore article's rule applies: use industrial policy to steer capital into productive sectors and firms, not into financial assets that benefit only the already-rich.

2. Rein in finance. Keep the financial sector from growing too large relative to the economy (GDP). Regulate speculative inflows and property bubbles, and tilt taxes towards long-term productive investment.

3. Keep the 3-3-3 logic, but fund it fairly. Growing faster than the debt is still the right aim. The difference is who pays: fairer taxes at the top, not cuts at the bottom. This is the direct answer to the critics' "flood upwards". It means fiscal discipline without austerity.

4. Weaken the dollar by agreement, not coercion. A gradual adjustment negotiated with allies, in the spirit of the Plaza Accord, is more durable than an accord imposed through threats.

5. Practise restraint abroad. Push for negotiated endings to the "forever wars", in Iran as in Ukraine, and spend on deterrence rather than adventurism. Don't plan for hot war with China, plan for technology and commercial out-performance. Middle East policy should be set by American interests, not by lobbying money. If war is profitable for some, ending wars removes that incentive.

6. Give politics back its power. This is the critics' core point. Reform could include limits on lobbying and campaign finance, competition law that breaks up concentrated technology and defence power, a capable professional civil service rather than political loyalists and lobbyists, and a stronger voice for workers through unions and board seats. The objective is to break the elites' capture of the state.

7. Manage migration. Match admissions to skills shortages and to the pace at which housing and public services can expand. Admit labour on a visa-with-contract basis. Ignoring this issue of immigration just hands it back to those exploiting it and splits the country.

The same pillars apply on this side of the Atlantic. Britain and much of Europe face the same hollowing, the same housing crisis and the same pressure to fund defence, all while voters' living standards and purchasing power continue to fall.


Reform or revolution - what is it to be?

6. Where the plan could fail

This plan has weaknesses, and let's get to them. The Democrats have their own internal contradictions and partisan supporters. Parts of the party favour open trade, parts favour intervention abroad Ukraine rather than the Middle East) and its donors do include large financial firms, banks, hedge funds, tech billionaires.... Pillars 2, 5 and 7 would be the hardest to deliver.

Timing is another problem. With a presidential veto in place until January 2029, Congress can investigate and set out an agenda, but it cannot easily legislate one. Two years of gridlock and impeachment proceedings could deepen the cynicism the critics describe.

Finally, any recovery must avoid MAGA's central error. A programme that serves a few billionaires and asks ordinary people to bear the costs will fail, whichever party runs it. The industrial and China policies that now command support from both parties offer a base to build on.

Can The West avoid decline?

Bottom Line

The left-wing critics are right that the economics is missing from much of mainstream Western analysis, and right that a hollowed-out state cannot fix itself by doing less. But the fall of MAGAnomics is the success of the oligarchs who have captured the state but still does does not prove necessarily that only revolution can work - all we see is the failure of a recovery when a few asset-rich oligarchs capture the deep state and ordinary people are made to pay for it.

A recovery without revolution becomes possible, but on one demanding condition. It must win the popular vote somehow by the executive reasserting control over deep State and elite lobbies, so getting a fair and credible vote. 

With the result that workers see wages rise, capital pay its share, and negotiated ending to wars. 

The alternative is to seek justice in the streets, as is happening now. We know very well where this is leading - an increasingly authoritarian state meeting an increasingly violent populace. The institutions the critics have given up on can still deliver that change, as the New Deal and the post-war settlement did. They rarely do so, however, without this pressure from below.

The question now for Democrats in America, and for governments in Europe, is whether they will act before that pressure turns into something they cannot control.

Related Articles

This article builds on LITA's 2025 series, which first set out the diagnosis it relies on:

Glossary

Comparative advantage - David Ricardo's idea that countries gain by specialising in what they produce most efficiently relative to others, then trading.
Financialisation - The growing weight of finance and financial assets in an economy, often at the expense of industry.
Industrial policy - Government action, such as subsidies, tax breaks or tariffs, to build up particular industries.
Mar-a-Lago Accord - A proposed agreement under which the US would weaken the dollar in coordination with other countries while keeping its reserve status.
Neoliberalism - The economic approach, dominant since around 1980, favouring deregulation, privatisation, free trade and a smaller state.
Plaza Accord - The 1985 agreement in which major economies jointly intervened to weaken the US dollar.
Reserve currency - A currency that other countries and central banks hold in large amounts for trade and savings; today mainly the US dollar.
Unipolar moment - The period after the Cold War when the US was the world's only superpower.

References





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