The End of Pax Americana: How Western Decline Became Inevitable

The Euro-Atlantic world had a long run of global dominance, but it is coming to an end.

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President Obama walks the Great Wall of China. Reuters

When great powers begin to experience erosion in their global standing, their leaders inevitably strike a pose of denial. At the dawn of the twentieth century, as British leaders dimly discerned such an erosion in their country's global dominance, the great diplomat Lord Salisbury issued a gloomy rumination that captured at once both the inevitability of decline and the denial of it. "Whatever happens will be for the worse," he declared. "Therefore it is our interest that as little should happen as possible." Of course, one element of decline was the country's diminishing ability to influence how much or how little actually happened.

We are seeing a similar phenomenon today in America, where the topic of decline stirs discomfort in national leaders. In September 2010, Secretary of State Hillary Clinton proclaimed a "new American Moment" that would "lay the foundations for lasting American leadership for decades to come." A year and a half later, President Obama declared in his State of the Union speech: "Anyone who tells you that America is in decline . . . doesn't know what they're talking about." A position paper from Republican presidential candidate Mitt Romney stated flatly that he "rejects the philosophy of decline in all of its variants." And former U.S. ambassador to China and one-time GOP presidential candidate Jon Huntsman pronounced decline to be simply "un-American."

Such protestations, however, cannot forestall real-world developments that collectively are challenging the post-1945 international order, often called Pax Americana, in which the United States employed its overwhelming power to shape and direct global events. That era of American dominance is drawing to a close as the country's relative power declines, along with its ability to manage global economics and security.

This does not mean the United States will go the way of Great Britain during the first half of the twentieth century. As Harvard's Stephen Walt wrote in this magazine last year, it is more accurate to say the "American Era" is nearing its end. For now, and for some time to come, the United States will remain primus inter pares--the strongest of the major world powers--though it is uncertain whether it can maintain that position over the next twenty years. Regardless, America's power and influence over the international political system will diminish markedly from what it was at the apogee of Pax Americana. That was the Old Order, forged through the momentous events of World War I, the Great Depression and World War II. Now that Old Order of nearly seven decades' duration is fading from the scene. It is natural that U.S. leaders would want to deny it--or feel they must finesse it when talking to the American people. But the real questions for America and its leaders are: What will replace the Old Order? How can Washington protect its interests in the new global era? And how much international disruption will attend the transition from the old to the new?

The signs of the emerging new world order are many. First, there is China's astonishingly rapid rise to great-power status, both militarily and economically. In the economic realm, the International Monetary Fund forecasts that China's share of world GDP (15 percent) will draw nearly even with the U.S. share (18 percent) by 2014. (The U.S. share at the end of World War II was nearly 50 percent.) This is particularly startling given that China's share of world GDP was only 2 percent in 1980 and 6 percent as recently as 1995. Moreover, China is on course to overtake the United States as the world's largest economy (measured by market exchange rate) sometime this decade. And, as argued by economists like Arvind Subramanian, measured by purchasing-power parity, China's GDP may already be greater than that of the United States.

Until the late 1960s, the United States was the world's dominant manufacturing power. Today, it has become essentially a rentier economy, while China is the world's leading manufacturing nation. A study recently reported in the Financial Times indicates that 58 percent of total income in America now comes from dividends and interest payments.

Since the Cold War's end, America's military superiority has functioned as an entry barrier designed to prevent emerging powers from challenging the United States where its interests are paramount. But the country's ability to maintain this barrier faces resistance at both ends. First, the deepening financial crisis will compel retrenchment, and the United States will be increasingly less able to invest in its military. Second, as ascending powers such as China become wealthier, their military expenditures will expand. The Economist recently projected that China's defense spending will equal that of the United States by 2025.

Thus, over the next decade or so a feedback loop will be at work, whereby internal constraints on U.S. global activity will help fuel a shift in the distribution of power, and this in turn will magnify the effects of America's fiscal and strategic overstretch. With interests throughout Asia, the Middle East, Africa, Europe and the Caucasus--not to mention the role of guarding the world's sea-lanes and protecting U.S. citizens from Islamist terrorists--a strategically overextended United States inevitably will need to retrench.

Further, there is a critical linkage between a great power's military and economic standing, on the one hand, and its prestige, soft power and agenda-setting capacity, on the other. As the hard-power foundations of Pax Americana erode, so too will the U.S. capacity to shape the international order through influence, example and largesse. This is particularly true of America in the wake of the 2008 financial crisis and the subsequent Great Recession. At the zenith of its military and economic power after World War II, the United States possessed the material capacity to furnish the international system with abundant financial assistance designed to maintain economic and political stability. Now, this capacity is much diminished.

All of this will unleash growing challenges to the Old Order from ambitious regional powers such as China, Brazil, India, Russia, Turkey and Indonesia. Given America's relative loss of standing, emerging powers will feel increasingly emboldened to test and probe the current order with an eye toward reshaping the international system in ways that reflect their own interests, norms and values. This is particularly true of China, which has emerged from its "century of humiliation" at the hands of the West to finally achieve great-power status. It is a leap to think that Beijing will now embrace a role as "responsible stakeholder" in an international order built by the United States and designed to privilege American interests, norms and values.

These profound developments raise big questions about where the world is headed and America's role in the transition and beyond. Managing the transition will be the paramount strategic challenge for the United States over the next two decades. In thinking about where we might be headed, it is helpful to take a look backward--not just over the past seventy years but far back into the past. That is because the transition in progress represents more than just the end of the post-1945 era of American global dominance. It also represents the end of the era of Western dominance over world events that began roughly 500 years ago. During this half millennium of world history, the West's global position remained secure, and most big, global developments were represented by intracivilizational power shifts. Now, however, as the international system's economic and geopolitical center of gravity migrates from the Euro-Atlantic world to Asia, we are seeing the beginnings of an intercivilizational power shift. The significance of this development cannot be overemphasized.

The impending end of the Old Order--both Pax Americana and the period of Western ascendancy--heralds a fraught transition to a new and uncertain constellation of power in international politics. Within the ascendant West, the era of American dominance emerged out of the ashes of the previous international order, Pax Britannica. It signified Europe's displacement by the United States as the locus of global power. But it took the twentieth century's two world wars and the global depression to forge the transition between these international orders.

Following the end of the Napoleonic wars in 1815, at the dawn of the Industrial Revolution, Britain quickly outstripped all of its rivals in building up its industrial might and used its financial muscle to construct an open, international economic system. The cornerstones of this Pax Britannica were London's role as the global financial center and the Royal Navy's unchallenged supremacy around the world. Over time, however, the British-sponsored international system of free trade began to undermine London's global standing by facilitating the diffusion of capital, technology, innovation and managerial expertise to emerging new centers of power. This helped fuel the rise of economic and geopolitical rivals.

Between 1870 and 1900, the United States, Germany and Japan emerged onto the international scene more or less simultaneously, and both the European and global power balances began to change in ways that ultimately would doom Pax Britannica. By the beginning of the twentieth century, it had become increasingly difficult for Britain to cope with the growing number of threats to its strategic interests and to compete with the dynamic economies of the United States and Germany.

The Boer War of 1899-1902 dramatized the high cost of policing the empire and served as both harbinger and accelerant of British decline. Perceptions grew of an ever-widening gap between Britain's strategic commitments and the resources available to maintain them. Also, the rest of the world became less and less willing to submit to British influence and power. The empire's strategic isolation was captured in the plaintive words of Spenser Wilkinson, military correspondent for the Times: "We have no friends, and no nation loves us."

Imperially overstretched and confronting a deteriorating strategic environment, London was forced to adjust its grand strategy and jettison its nineteenth-century policy of "splendid isolation" from entanglements with other countries. Another consideration was the rising threat of Germany, growing in economic dynamism, military might and population. By 1900, Germany had passed Britain in economic power and was beginning to threaten London's naval supremacy in its home waters by building a large, modern and powerful battle fleet. To concentrate its forces against the German danger, Britain allied with Japan and employed Tokyo to contain German and Russian expansionism in East Asia. It also removed America as a potential rival by ceding to Washington supremacy over the Americas and the Caribbean. Finally, it settled its differences with France and Russia, then formed fateful de facto alliances with each against Germany.

World War I marked the end of Pax Britannica--and the beginning of the end of Europe's geopolitical dominance. The key event was American entry into the war. It was Woodrow Wilson who called the power of the New World "into existence to redress the balance of the Old" (in the words of the early nineteenth-century British statesman George Canning). American economic and military power was crucial in securing Germany's defeat. Wilson took the United States to war in 1917 with the intent of using American power to impose his vision of international order on both the Germans and the Allies. The peace treaties that ended World War I--the "Versailles system"--proved to be flawed, however. Wilson could not persuade his own countrymen to join his cherished League of Nations, and European realpolitik prevailed over his vision of the postwar order.

Although the historical wisdom is that America retreated into isolationism following Wilson's second term and Warren Harding's return to "normalcy," that is not true. The United States convened the Washington Naval Conference and helped foster the Washington naval treaties, which averted a U.S. naval arms race with Britain and Japan and dampened prospects for increased great-power competition over influence in China. America also played a key role in trying to restore economic, and hence political, stability in war-ravaged Europe. It promoted Germany's economic reconstruction and political reintegration into Europe through the Dawes and Young plans that addressed the troublesome issue of German reparations. The aim was to help get Europe back on its feet so it could once again become a vibrant market for American goods.

Then came the Great Depression. In both Europe and Asia, the economic cataclysm had profound geopolitical consequences. As E. H. Carr brilliantly detailed in his classic work The Twenty Years' Crisis, 1919-1939, the Versailles system cracked because of the growing gap between the order it represented and the actual distribution of power in Europe. Even during the 1920s, Germany's latent power raised the prospect that eventually Berlin would renew its bid for continental hegemony. When Adolf Hitler assumed the chancellorship in 1933, he unleashed Germany's military power, suppressed during the 1920s, and ultimately France and Britain lacked the material capacity to enforce the postwar settlement. The Depression also exacerbated deep social, class and ideological cleavages that roiled domestic politics throughout Europe.

In East Asia, the Depression served to discredit the liberal foreign and economic policies that Japan had pursued during the 1920s. The expansionist elements of the Japanese army gained sway in Tokyo and pushed their country into military adventurism in Manchuria. In response to the economic dislocation, all great powers, including the United States, abandoned international economic openness and free trade in favor of economic nationalism, protectionism and mercantilism.

Presented by

Christopher Layne is a professor at Texas A & M School of Government and Public Service. He is working on a forthcoming book, After the Fall: International Politics, U.S. Grand Strategy, and the End of the Pax Americana.

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