The epoch of American hegemony is drawing to a close. Evidence of America’s relative decline is omnipresent. According to the Economist, China will surpass the U.S. as the world’s largest economy in 2019. The U.S. relative power decline will affect international politics in coming decades: the likelihood of great power security competitions – and even war – will increase; the current era of “globalization” will end; and the post-1945 Pax Americana will be replaced by a new international order that reflects the interests of China and the other emerging great powers.
American primacy’s end is result of history’s big, impersonal forces compounded by the United States’ own self-defeating policies. Externally, the impact of these big historical forces is reflected in the emergence of new great powers like China and India which is being driven by the unprecedented shift in the center of global economic power from the Euro-Atlantic area to Asia. China’s economy has been growing much more rapidly than the United States’ over the last two decades and continues to do so.
The US decline reflects its own economic troubles
U.S. decline reflects its own economic troubles. Optimists contend that current worries about decline will fade once the U.S. recovers from the recession. After all, they say, the U.S. faced a larger debt/GDP ratio after World War II, and yet embarked on a sustained era of growth. But the post-war era was a golden age of U.S. industrial and financial dominance, trade surpluses, and sustained high growth rates. Those days are gone forever. The United States of 2011 are different from 1945. Even in the best case, the United States will emerge from the current crisis facing a grave fiscal crisis.
The looming fiscal results from the $1 trillion plus budget deficits that the U.S. will incur for at least a decade. When these are bundled with the entitlements overhang (the unfunded future liabilities of Medicare and Social Security) and the cost of the ongoing wars in Iraq and Afghanistan, there is reason to worry about United States’ long-term fiscal stability – and the role of the dollar. The dollar’s vulnerability is the United States’ real geopolitical Achilles’ heel because the dollar’s role as the international economy’s reserve currency role underpins U.S. primacy. If the dollar loses that status America’s hegemony literally will be unaffordable.
In coming years the U.S. will be pressured to defend the dollar by preventing runaway inflation. This will require fiscal self-discipline through a combination of tax increases and big spending cuts. Meaningful cuts in federal spending mean deep reductions in defense expenditures because discretionary non-defense – domestic – spending accounts for only about 20% of annual federal outlays. Faced with these hard choices, Americans may contract hegemony fatigue. If so, the U.S. will be compelled to retrench strategically and the Pax Americana will end.
The Pax Americana is already crumbling in slow motion
The current international order is based on the economic and security structures that the U.S. created after World War II. The entire fabric of world order that the United States established after 1945 – the Pax Americana – rested on the foundation of U.S. military and economic preponderance. The decline of American power means the end of U.S. dominance in world politics and the beginning of the transition to a new constellation of world power. Indeed, the Pax Americana is already is crumbling in slow motion.