by Fabio Seferi
The realm of international relations has always been a system of power and balance. Power, indeed, is intended not only as military power or the pure use of force, but also as the ability to pursue and to enforce one’s will in a certain domain. Or, to say it in a more comprehensive way, “power is the ability to attain the outcomes one wants” (Nye Jr 2010). Of course, to assess the nature of the international system we do not have to take into account all the actors involved. The system is defined by the most important actors in terms of their capabilities. Thus, the distribution of economic and/or military power among these actors will play a key role in assessing the type of system.
However, as countries – with their respective economies – have become more interdependent, the world system has become more integrated. An important feature of the international system in recent years is that it is facing a globalization trend. A first definition of globalization could be “the increasing integration of national economies into a global one” (Milner 1998). Indeed, economies have opened to each other, national boundaries have become faded in relation to the movement of capital, goods and labor, and corporations often delocalize to other countries to take advantage of cheaper labor force – to name a few characteristics of the globalized system.
The champion of this global liberal economy has been, of course, the United States. Since the end of WWII, the US has shaped the global liberal order, especially in its economic facets (e.g. the Bretton Woods agreement in 1944). Many in the literature have stressed the fact that for a system of liberal world economy to develop and stabilize, a leader country is needed (Kindleberger 1981; Gilpin 1987). A country that has three main attributes: 1) a large and growing economy, 2) dominance in a leading sector; 3) political/military power. Due to the particular historical phase and to its great capabilities, the United States rose as the system’s leader.
However, the global dominance of the US has not always been uncontested and undisputed. Of course, not many countries have (had) the characteristics to face the challenge. Overthrowing the US from its leader position has never been an easy task due to its giant economy and military power. Another American feature is its technological leadership: i.e. the United States is always among the first countries to innovate and to push forward the technological frontier. Therefore, the challenger has to be a country that can rely on great military power and on a flexible and technologically advanced economy. In the last 70 years, therefore, the discussion about American leadership and (possible) relative economic decline has gained increasingly more importance.
The system of liberal world economy, however, poses a dangerous threat to US strategy and foreign policy. With the increasing interdependence and need of strategic foreign goods (such as raw materials or soft-wares) used for military purposes, the position of the system’s leader is heavily undermined. Thus, “an increased American reliance on foreign goods, technology, and capital and the increased worldwide diffusion of strategically significant technologies could impose subtle but powerful constraints on U.S. freedom of diplomatic and military action” (Friedberg 1989). Obviously, as the global economic system becomes more interdependent, all states (even large, powerful ones) will find it harder to ensure prosperity on their own (Ikenberry 2011). If this will be the case, the United States will not be able anymore to dominate completely the world economy and to maintain their leader position without tackling these issues.
Notwithstanding, the XX century was the American century. No other country could face the problems of decay and loss of power better than the United States.
To say it with Samuel Huntington:
Successful societies […] are those that find ways short of their own destruction to sustain the dynamism of their youth. The structure of such societies will presumably encourage competition, mobility, fluidity, pluralism and openness – all qualities that prevent a society from becoming mired in a network of collusive deals in which everyone benefits to everyone’s disadvantage.
[…]
The ultimate test of a great power is its ability to renew its power. The competition, mobility and immigration characteristic of American society enable the United States to meet this test to a far greater extent than any other great power, past or present. They are the central sources of American strength.
To these characteristics, other ones should be added; for example, the multidimensional aspect of American power – which comes in various forms and from different sources – and the benefits coming from being geographically distant from most conflict areas (Huntington 1988).
The end of the century, therefore, saw the overwhelming victory of the United States. Nevertheless, the new millennium so far has managed to shuffle the cards in play.
In the beginning of the XXI century, there was a very unequal distribution of power resources in the world (Nye Jr 2010). The United States accounted for: 1) nearly 5% of world population; 2) almost 25% of the world’s economic output; 3) nearly 50% of total global military expenditure. It was not only the most powerful country in the world, but it also had the most extensive network of soft-power resources. All over the world, U.S. actions could rely on a certain degree of legitimacy by other countries. The American “way of life” was still appealing to many people across the globe. This Brobdingnagian creature strongly held the dominant position in the system.
We can describe the position of the United States considering it as domino tiles, with every piece put standing vertically next to the other one. This fragile composition needs a lot of accuracy to thoroughly put all tiles at place, creating a progressive line. However, despite of how well the dominoes were displayed, in the recent years they seem to have started falling one after the other.
In fact, the century began with the 9/11 shock. The greatest power of history was on its knees for a terrorist attack. The following Bush Doctrine, founded on the principle of preventive war, made inevitable the display of huge American military forces in the Middle East. It looked like it was the beginning of the so-called imperial overstretch, i.e. the breakdown caused by the growing political and military commitments of the leader and the relative decline of its economic capabilities (Kennedy 1988). But that has not been the case so far. Many have argued in recent years that the United States could decline because of domestic under-reach rather than imperial overstretch: that is, losing the ability to influence events and to attain certain outcomes because of domestic crisis, such as economic stagnation (Nye Jr 2010). Other reasons could be the collapse of its political institutions or the curtailment of immigration backed up by a new isolationist view, caused by xenophobia or reactions to terrorist attacks or fear.
Economic recession (or stagnation) is a key issue of the last decade. Indeed, in 2007-08 the United States (and afterwards the whole world) faced the most severe financial crisis ever. This has paved the way for a new economic thinking and for a shift in international rules and norms. As Robert Wade argues in an article for New Left Review in 2008, the last crisis could be the beginning of a third regime change. Other two regime changes have previously shook the system of liberal world economy. The first one lasted from 1945 to 1975 and was governed by the Bretton Woods agreements and by Keynesianism. It favored market allocation but always inside a framework of political constraints, limits, and legitimacy. The second one began after the collapse of the Bretton Woods system and lasted until the recent crisis. It was governed by neoliberal economics, so that market allocation grasped a wider set of the economic life in the more classical form of laissez-faire. State intervention took a rollback, while the government had principally the task to liberalize, deregulate and privatize. Of course, this led to the 2007-08 financial crisis. As the same Robert Wade puts it:
The toxic combination of debt, asset bubble and securitization technology was itself enabled by lax regulation. The locus of the blow-up was not unregulated hedge funds, but supposedly regulated banks. […] It is no exaggeration to say that the crisis stems from the biggest regulatory failure in modern history.
The breakdown of the bubble and the following crisis doomed the global model of financial architecture built up from the ‘80s. The whole system collapsed due to the malfunction of its three main pillars: 1) regulation was not sufficiently strict; 2) the market meltdown was caused by complex financial engineering; 3) credit grew rapidly at the expense of monetary stability.
This second regime is also called the Washington Consensus to highlight once again the global American leadership, especially in the last decades. Again in Robert Wade’s words:
If the wars in Iraq, Kosovo and Afghanistan were one expression of American post-Cold War triumphalism, globalized finance, launched during the Clinton Administration, was another. The mainstream press boasted that the US financial system had broken through the sound barrier and was now operating in a new dimension, as it undertook more and more dazzling gambles.
This third regime change is accompanied by a large-scale loss of confidence in the “American” capitalism and the neoliberal economics that structured it. In addition, US soft power is not appealing anymore, due to the American loss of moral authority after the recent crisis.
The breakdown of the system, therefore, undermines also the leadership position of the United States. The world system has started to call into question a cluster of international liberal ideas such as the confidence in free and open markets, faith in democratization processes, and legitimacy and acceptability of US military power (Ikenberry 2011), leading all actors to an era of more uncertainty.
References
Friedberg A. L. (1989), “The Strategic Implications of Relative Economic Decline”, Political Science Quarterly, 104/3, pp. 401-431.
Gilpin R. (1987), The Political Economy of International Relations, Princeton University Press.
Huntington S.P. (1988), “Decline or Renewal?”, Foreign Affairs.
Ikenberry G.J. (2011), “The Future of the Liberal World Order: Internationalism After America”, Foreign Affairs, 90/3, pp. 56-68.
Kennedy P. (1988), The Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500 to 2000, Unwin Hyman Limited.
Kindleberger C.P. (1981), “Dominance and Leadership in the International Economy: Exploitation, Public Goods, and Free Rides”, International Studies Quarterly, 25/2, pp. 242-254.
Milner H.V. (1998), “”International Political Economy: Beyond Hegemonic Stability”, Foreign Policy, 110, pp. 112-123.
Nye J.S., Jr (2010), “The Future of American Power: Dominance and Decline in Perspective”, Foreign Affairs, 89/6, pp. 2-12.
Wade R. (2008), “Financial Regime Change?”, New Left Review, 55, pp. 5-21.