State of denial

The Pax Americana of the last half-century is collapsing. Here's the debate we need to have as a nation now

Topics: Foreign policy,

State of denial

We Americans are not good at thinking in terms of national and global strategy. That is no surprise; Madison’s America, with its checks and balances and decentralized federalism, is not Bismarck’s Germany or Colbert’s France. But this inability to think in terms of the whole is a handicap, especially when the whole is collapsing.

Today we have economists rethinking American economic policy and national security experts pondering American military policy. But that is like assigning one team to fix the crack in the kitchen floor and another to work on repairing the bedroom wall, while ignoring the fact that the entire house is sliding into a sinkhole that has opened up beneath it.

The America-centered world order of the last half-century is collapsing. No, that does not mean that America is doomed. As long as it holds together and grows moderately, the U.S. will be a major military power and one of the world’s leading economies for generations or centuries to come. And even slow growth, if it is equitably distributed, can ensure that future Americans are richer and healthier. But the fact remains that a particular system of world security and trade centered on the United States is crumbling around us.

That system has been called the Pax Americana, after the Pax Romana — the American Peace. The Pax Americana originated during the Cold War, when the U.S., rather than rehabilitate West Germany and Japan as independent military powers, made them American military protectorates. Under the terms of the bargain, the two former Axis nations would specialize in civilian manufacturing for export, with Germany targeting the markets of its European neighbors and Japan relying on access to American consumers. Make cars, not wars. The U.S. agreed to protect not only the territories but also the vital interests of Japan and Germany, like access to Middle Eastern oil.

To use the terminology of political science, the post-1945 United States was a hegemon — the Greek word for leader (pronounced with a soft “g” by American social scientists and with a hard “g” by show-off classicists). As the hegemon of the Free World alliance (the anti-communist bloc that contained many Latin American and Asian dictatorships that were hardly free), the United States provided three public services to its allies and client-states: military security, access to the American domestic market, and the use of the dollar as the world’s reserve currency.

This system came under strain by the 1970s, as Japan and Germany recovered from World War II. Japan in particular exploited America’s offer of open markets, by manipulating its currency to subsidize its exports, and protecting its national market for its corporations while they enjoyed access to American consumers. America’s companies also suffered because they had grown complacent, during the generation in which they had enjoyed unearned success in a war-ravaged world. At the same time, the American public rebelled at the cost of the Vietnam War, which, like the Korean War, was intended to demonstrate American credibility to America’s protectorates, of which Japan and Germany were the most important.

President Richard Nixon sought to replace the Pax Americana with another system that imposed fewer strains on the U.S. The “Nixon Doctrine” stated that in the future, allies were primarily responsible for their own defense. Nixon tried to replace overly expensive U.S. hegemony with a balance of power system, pitting the Soviet Union against China. And he favored relying on regional hegemons — notoriously, the Shah’s Iran — as an alternative to direct American policing of regions like the Middle East.

Nixon’s policy of retrenchment was rejected as too Machiavellian by liberals and conservatives alike. Jimmy Carter announced a crusade for human rights. The Carter Doctrine set the U.S. on the road to ever-deeper military involvement in the Middle East. Then Ronald Reagan announced that it was “morning in America” and reasserted America’s hegemonic role. The American people were no more willing to pay for hegemony than they had been under Nixon. But Reagan and his successors found that they could pay for an over-extended military policy by borrowing money from countries like Japan, which recycled the dollars they earned from perpetual trade surpluses with the U.S.

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The end of the Cold War should have brought a reconsideration of America’s economic weakness and strategic over-extension. But under Bill Clinton, the opportunity was missed. Instead of pursuing strategic retrenchment, Clinton worsened America’s strategic over-extension, expanding America’s permanent military commitments into the Balkans and into Eastern Europe up to the borders of post-Soviet Russia. In the Middle East, the U.S. presence has constantly expanded — first with the Gulf War, then with the Iraq war, and now with the Libyan war, along with the endless war in Afghanistan. Like Britain in the 1920s, the U.S. is trying to re-create the Ottoman Empire even as its domestic economic engine is sputtering.

In the 1990s Japan’s unsustainable, export-driven growth ended in collapse and stagnation, while German unification was accompanied by years of slower growth. The fact that Japan and Germany suffered at the same time that the late-1990s American stock market bubble ballooned was taken as a sign by neoliberal Democrats and conservative Republicans alike that the U.S. was charging ahead of the rest of the world, pioneering a magical, technology-driven “new economy.” The utopian new economy myth disguised the sordid reality. Americans, suffering from stagnant wages at a time when a rich few were reaping most of the gains from growth, were relying more and more on debt to keep up with the Joneses.

Meanwhile, post-Maoist China had embarked on the experiment of following Japan and developing its economy by exporting manufactured goods to the unprotected markets of the U.S. But even if all American domestic manufacturing were sacrificed, the U.S. consumer market is not big enough to absorb more than a fraction of the exports that can be produced by the next three biggest industrial nations — China, Japan and Germany. When American consumers were spooked by the crash of 2008 into lower levels of spending, the export superpowers found themselves with too few customers and too much industrial capacity.

The U.S. can no longer afford to be the world’s consumer-in-chief. There goes one of America’s three hegemonic roles. What about the other two pillars?

The dollar is still the world’s reserve currency; indeed, in a turbulent world, it remains the safest asset. But the dollar’s reserve currency status may end, if future U.S. presidents and Congresses decide to inflate away the debt overhang from the present crisis.

That would leave only one pillar propping up the tottering Pax Americana — America’s military forces, which remain unsurpassed. But it is clear that any long-term efforts to return America to solvency must include substantial cuts in military spending. Those cuts can take the form of hollowing out an over-extended military, or rethinking the missions, withdrawing from some regions to concentrate on others. Either way, America’s rivals and allies alike will know that Uncle Sam will be considerably less powerful, if still more powerful than others.

If the multipolar world is not yet a reality, it is in sight. The national debate should be about American strategy in a world no longer organized as a Pax Americana system under American hegemony. The United States can no longer afford to look the other way while countries like Japan and China practice industrial policies targeting American industries, on the utopian theory that offshoring and American deindustrialization will benefit all sides in a harmonious global market policed by the U.S. military. Nor can America any longer afford to waste lives and money on adventures in peripheral countries that are greater threats to their neighbors than they are to us. The alternative to the Pax Americana is not a combination of protectionism and isolationism. It is a combination of strategic trade and strategic retrenchment.

These are the subjects that we should be debating as a nation. By avoiding them, we are only postponing the day of reckoning, when we will finally be forced to address the real challenge that lies under many of our problems — the need to downsize and rethink America’s role in the world.

Michael Lind is the author of Land of Promise: An Economic History of the United States and co-founder of the New America Foundation.

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