The End of Empire
For their own reasons, the major trading partners are reluctant to disrupt the status quo. The current arrangement allows them to have it both ways--gaining a greater share of markets under the shadow of US hegemony. Privately, they recognize that the US economic position is steadily ebbing. But it seems wiser to let the Americans keep their delusions for now. The space for self-interested maneuvering is much greater if the United States carries the burdens and costs alone. Despite occasional whining, Japan and Germany are not eager to claim a prominent share in global leadership (both once had a go at running the world and it ended badly). Far better to prop up the United States financially without forcing awareness of the shifting power.
Their reluctance resembles the American attitude early in the last century, when it was the ascendant economic power but did not wish to become a "Great Power" itself, with responsibility for maintaining world order. Instead, the United States propped up Britain for many years as the failing empire sank into unsustainable debt. British power was fundamentally eclipsed in 1914, but the United States provided the financial nurture to keep it upright, as a kind of dummy leader in world affairs, until after World War II. Washington decisively pulled the plug in 1956, when Britain (along with France and Israel) invaded Egypt to capture the nationalized Suez Canal. It was the last gasp of British colonialism, and Washington disapproved. By withholding an IMF loan to London, the United States crashed the pound, forced Britain to withdraw from war and its prime minister to resign in disgrace. The Brits were finally relieved of their delusions.
It is most unlikely, of course, that the US drama will play out in a similar way--we are far too big and powerful by comparison--but Britain's humiliation might serve as a cautionary tale for power-drunk American statesmen. Other nations, when they feel their global market power is sufficiently stronger and we have become still weaker, might organize a transition of gradual adjustments that allows the United States to climb down gracefully from its long-held role. This would be very difficult to accomplish, however, without a real blow to the US standard of living, not to mention national pride.
More likely, the United States and the global system are going to encounter harsh bumps and ugly surprises. Japan, which has the most to lose if the United States taps out as "buyer of last resort," suggested privately a few years back that it would accept a discreet ceiling on its trade surpluses with the United States--a "managed trade" deal the free-market Americans rejected on principle. Richard Medley, a global financial consultant with inside connections in Tokyo, told me afterward, "One of the Japanese strategies is to keep us from doing anything rash for the next decade and a half--until they have become self-sufficient in Asia and can go along without us."
The European Union, meanwhile, is patiently assembling the economic girth and institutional confidence to act as the leading counterpoise to Washington. That is the essential idea of the euro--a competing world currency other nations can use for trade and as a reliable storehold of wealth. As the euro establishes its durability and comes into wider usage, the dollar will no longer be the only option. At that point, it will be easier for Europe or others to exercise their financial leverage against the United States without damaging themselves or the global financial system as a whole. Europe is not quite there yet, but the euro is rising and so is European anger. The Saudis' financial withdrawals this summer may be a hint of what Americans can expect--episodes of veiled pressure until Washington gets the message.
The Bush warriors' reckless American unilateralism can only hasten the day when the creditors' conclude that they must assert their leverage over us, perhaps in order to defend peace and stability in the world. How will Americans react when they discover that "U-S-A" is a lot less muscular than they were led to believe? Assuming Americans do not really yearn to become latter-day Roman legions, many people may be relieved to learn the truth. Stripped of imperial illusions, this country could concentrate on building a different, more promising society at home. But while we can hope that the transition ahead will be gradual and without national humiliation, it's more plausible that America's brave new imperialists will plunge ahead blindly, until one day they encounter their own intense reckoning with the bookkeepers.