A single American carrier strike group managed to exhaust nearly nine months’ worth of missile production while lobbing ordnance at Houthis in flip-flops. This rather embarrassing arithmetic reveals a fundamental problem. America’s industrial decline has reached the point where a regional skirmish can drain national stockpiles faster than a Black Friday sale.
The numbers tell a story that Pentagon briefings prefer to avoid. In 2023, China generated approximately 9,500 TWh of electricity, while America produced roughly 4,500 TWh. This energy gap translates directly into manufacturing capacity.
And manufacturing capacity determines who wins wars that last longer than a Hollywood blockbuster.
From arsenal of democracy to arsenal of mediocrity
During World War II, American factories churned out 300,000 aircraft while simultaneously building the world’s largest navy. Today, the same industrial base struggles to produce 150 F-35s annually. Meanwhile, China’s shipbuilding capacity exceeds America’s by a factor of roughly 230. In fact, a single large Chinese shipyard, such as Jiangnan, has more capacity than all U.S. shipyards combined. These figures suggest that America’s industrial decline has progressed from concerning to catastrophic.
The Heritage Foundation notes that one carrier strike group fired 770 munitions at the Houthis, including 155 SM-series missiles—nearly matching America’s entire annual production. When a single naval deployment can exhaust national ammunition reserves, perhaps it’s time to question whether the current system actually works.
China’s approach differs markedly. Beijing treats industrial capacity as a strategic asset rather than a quarterly earnings opportunity.
The result? A defense industrial base that can scale production rapidly while America’s eight remaining major defense contractors debate profit margins with Pentagon procurement officers.
Wall Street’s war on manufacturing
America’s industrial decline stems largely from what economists politely term “financialization.” Translation: making things became less profitable than trading pieces of paper. Between 1970 and 2012, the finance sector’s share of GDP grew from 4.2% to 6.6%. Its share of corporate profits jumped from 24% to 37%. This transformation created perverse incentives. Harvard Business Review research demonstrates that publicly traded companies invest roughly half as much in physical assets as their private counterparts.
The reason? Wall Street rewards companies that minimize assets to maximize return on net assets (RONA). A metric that sounds impressive in boardrooms but proves useless when missiles start flying. Boeing’s trajectory illustrates this industrial decline perfectly. Before merging with McDonnell Douglas in 1997, Boeing maintained an engineering-driven culture focused on building superior aircraft.
Post-merger, financial metrics dominated decision-making. The 787 Dreamliner became a case study in outsourcing gone wrong—designed to minimize Boeing’s asset base rather than maximize aircraft quality. The results speak volumes. Massive cost overruns, years of delays, and quality issues that would embarrass a startup. Yet Wall Street applauded because Boeing’s balance sheet looked prettier, even as its production capabilities withered.
The Goldman Sachs government
America’s industrial decline receives political protection through what Washington insiders call “cognitive capture.” The past six Treasury Secretaries demonstrate this phenomenon beautifully. Jack Lew (Citigroup). Timothy Geithner (Warburg Pincus). Hank Paulson (Goldman Sachs). John Snow (Cerberus). Larry Summers (D.E. Shaw). Robert Rubin (Goldman Sachs/Citigroup). This revolving door ensures that financial sector priorities dominate economic policy. Manufacturing gets lip service while banking gets bailouts.
The result? An economy optimized for quarterly earnings rather than strategic competition. Corporate executives understand these incentives perfectly. Surveys reveal that 78% of CFOs would sacrifice economic value to meet Wall Street targets. 55% would cancel profitable projects to smooth earnings.
When corporate America prioritizes financial engineering over actual engineering, industrial decline becomes inevitable.
Beijing’s masterclass in strategic patience
Chinese scholars no longer view America as a “beacon of democracy.” They see a dysfunctional political system approaching collapse. This assessment, while harsh, reflects observable reality. Zhang Weiwei of Fudan University argues on Guancha.cn that America’s constitutional structure, designed by “smugglers and slave owners,” creates systemic gridlock that prevents necessary reforms. More importantly, Chinese policymakers recognize America’s industrial decline as a strategic opportunity.
Yu Yongding, former member of China’s central bank monetary policy committee, advocates reducing Chinese holdings of U.S. Treasury securities. He views them as potential “hostages” in future sanctions. China’s foreign exchange reserves total between $3.1-3.29 trillion. Roughly fifteen times larger than Russia’s pre-sanctions holdings.
This massive dollar exposure creates vulnerability, but also leverage. Beijing pursues gradual diversification rather than dramatic de-dollarization. Understanding that sudden moves could destabilize the entire system. The strategy appears sound. China’s gold reserves increased from 3.4% to 4.9% of total reserves between 2022 and 2024. Simultaneously, Beijing expands renminbi payment systems across emerging markets while building alternative financial infrastructure through Belt and Road initiatives.
The choice Washington won’t make
America faces a binary choice that Washington pretends doesn’t exist.
Option A: Maintain Wall Street’s dominance and accept industrial decline.
Option B: Rebuild manufacturing capacity and challenge financial sector supremacy.
Wall Street’s model offers obvious advantages. Global financial dominance generates enormous profits with minimal physical infrastructure. American banks can move trillions with mouse clicks while Chinese factories require actual workers, raw materials, and energy. However, this model creates fatal vulnerabilities during extended conflicts. Financial dominance means little when missile stockpiles run empty and shipyards cannot replace losses.
China’s industrial decline strategy exploits precisely this weakness. The alternative requires confronting America’s most powerful lobby. Rebuilding industrial capacity means redirecting capital from financial markets toward manufacturing. It means accepting lower short-term returns for greater long-term security. Most importantly, it means telling Wall Street that national security trumps quarterly earnings.
Energy equals power, power equals victory
China’s energy advantage—approximately 9,500 TWh versus America’s 4,500 TWh—translates directly into manufacturing superiority. Energy powers factories. Factories build weapons. This simple equation explains why China can produce missiles faster than America can fire them. America’s industrial decline becomes more apparent when comparing current capabilities with historical performance.
World War II production levels seem almost mythical today. The same country that built 300,000 aircraft in four years now struggles to maintain 150 F-35s annually. Meanwhile, China’s state-directed model allows rapid scaling of defense production. When Beijing decides to build something, factories appear with remarkable speed. When Washington decides to build something, contractors appear with remarkable invoices. The Pentagon recognizes this problem but lacks solutions. Recent reports call for quadrupling missile production, yet America’s industrial decline makes such increases nearly impossible without fundamental systemic changes.
Market logic meets strategic reality
America’s industrial decline reflects market logic applied to strategic competition. Private companies optimize for profit, not national security. Wall Street rewards asset minimization, not production capacity. These incentives work brilliantly for generating shareholder value but prove disastrous for sustained military competition. China’s approach inverts these priorities. Beijing treats industrial capacity as a public good requiring state investment and protection.
The result? A manufacturing base capable of supporting extended conflicts while America’s industrial decline continues accelerating. The irony cuts deep. America created the modern global economy but now finds itself disadvantaged by the very market forces it unleashed. China learned these lessons and adapted accordingly, building state capacity while America celebrated market efficiency.
The moment of truth
America’s industrial decline has reached the point where regional conflicts can exhaust national stockpiles. China’s manufacturing surge continues accelerating while Washington debates financial regulations. The arithmetic suggests an uncomfortable conclusion. America may have already lost the industrial competition that determines military outcomes.
The choice remains binary. America can continue prioritizing Wall Street’s quarterly earnings while watching its industrial decline accelerate. Alternatively, it can rebuild manufacturing capacity and challenge the financial sector’s dominance. History suggests which option America will choose. The same country that outsourced manufacturing to reduce costs will likely continue prioritizing financial metrics over strategic capabilities. China, meanwhile, builds factories while America builds derivatives. The carrier strike group that exhausted nine months of missile production fighting Houthis provides a preview of future conflicts. When the shooting starts, industrial capacity matters more than financial engineering.
America builds derivatives. China builds missiles. In war, only one counts. Without industry, there is no power. Without power, Wall Street will have nothing left to defend.