The End of Pax Americana: How Western Decline Became Inevitable

The crisis of the 1930s culminated in what historian John Lukacs called "the last European war." But it didn't remain a European war. Germany's defeat could be secured only with American military and economic power and the heroic exertions of the Soviet Union. Meanwhile, the war quickly spread to the Pacific, where Western colonial redoubts had come under intense military pressure from Japan.

World War II reshaped international politics in three fundamental ways. First, it resulted in what historian Hajo Holborn termed "the political collapse of Europe," which brought down the final curtain on the Eurocentric epoch of international politics. Now an economically prostrate Western Europe was unable to defend itself or revive itself economically without American assistance. Second, the wartime defeats of the British, French and Dutch in Asia--particularly the humiliating 1942 British capitulation in Singapore--shattered the myth of European invincibility and thus set in motion a rising nationalist tide that within two decades would result in the liquidation of Europe's colonies in Asia. This laid the foundation for Asia's economic rise that began gathering momentum in the 1970s. Finally, the war created the geopolitical and economic conditions that enabled the United States to construct the postwar international order and establish itself as the world's dominant power, first in the bipolar era of competition with the Soviet Union and later as the globe's sole superpower following the 1991 Soviet collapse.

Thus do we see the emergence of the new world order of 1945, which now represents the Old Order that is under its own global strains. But we also see the long, agonizing death of Pax Britannica, which had maintained relative global stability for a century before succumbing to the fires of the two world wars and the Great Depression. This tells us that periods of global transition can be chaotic, unpredictable, long and bloody. Whether the current transitional phase will unfold with greater smoothness and calm is an open question--and one of the great imponderables facing the world today.

As the United States emerged as the world's leading power, it sought to establish its postwar dominance in the three regions deemed most important to its interests: Western Europe, East Asia and the Middle East/Persian Gulf. It also fostered an open international-trading regime and assumed the role of the global financial system's manager, much as Britain had done in the nineteenth century. The 1944 Bretton Woods agreement established the dollar as the international reserve currency. The World Bank, International Monetary Fund, and the General Agreement on Tariffs and Trade fostered international commerce. The United Nations was created, and a network of American-led alliances established, most notably NATO.

It is tempting to look back on the Cold War years as a time of heroic American initiatives. After all, geopolitically, Washington accomplished a remarkable double play: while avoiding great-power war, containment--as George F. Kennan foresaw in 1946--helped bring about the eventual implosion of the Soviet Union from its own internal contradictions. In Europe, American power resolved the German problem, paved the way for Franco-German reconciliation and was the springboard for Western Europe's economic integration. In Asia, the United States helped rebuild a stable and democratic Japan from the ashes of its World War II defeat. For the trilateral world of Pax Americana--centered on the United States, Western Europe and Japan--the twenty-five years following World War II marked an era of unprecedented peace and prosperity. These were remarkable accomplishments and are justly celebrated as such. Nevertheless, it is far from clear that the reality of the Cold War era measures up to the nostalgic glow in which it has been bathed. Different policies might have brought about the Cold War's end but at a much less expensive price for the United States.

The Cold War was costly in treasure and in blood (the most obvious examples being the wars in Korea and Vietnam). America bears significant responsibility for heightening postwar tensions with the Soviet Union and transforming what ought to have been a traditional great-power rivalry based on mutual recognition of spheres of influence into the intense ideological rivalry it became. During the Cold War, U.S. leaders engaged in threat inflation and overhyped Soviet power. Some leading policy makers and commentators at the time--notably Kennan and prominent journalist Walter Lippmann--warned against the increasingly global and militarized nature of America's containment strategy, fearing that the United States would become overextended if it attempted to parry Soviet or communist probes everywhere. President Dwight Eisenhower also was concerned about the Cold War's costs, the burden it imposed on the U.S. economy and the threat it posed to the very system of government that the United States was supposed to be defending. Belief in the universality of American values and ideals was at the heart of U.S. containment strategy during most of the Cold War, and the determination to vindicate its model of political, economic and social development is what caused the United States to stumble into the disastrous Vietnam War.

Whatever questions could have been raised about the wisdom of America's Cold War policies faded rapidly after the Soviet Union's collapse, which triggered a wave of euphoric triumphalism in the United States. Analysts celebrated America's "unipolar moment" and perceived an "end of history" characterized by a decisive triumph of Western-style democracy as an end point in human civic development. Almost by definition, such thinking ruled out the prospect that this triumph could prove fleeting.

But even during the Cold War's last two decades, the seeds of American decline had already been sown. In a prescient--but premature--analysis, President Richard Nixon and Secretary of State Henry Kissinger believed that the bipolar Cold War system would give way to a pentagonal multipolar system composed of the United States, Soviet Union, Europe, China and Japan. Nixon also confronted America's declining international financial power in 1971 when he took the dollar off the Bretton Woods gold standard in response to currency pressures. Later, in 1987, Yale's Paul Kennedy published his brilliant Rise and Fall of the Great Powers, which raised questions about the structural, fiscal and economic weaknesses in America that, over time, could nibble away at the foundations of U.S. power. With America's subsequent Cold War triumph--and the bursting of Japan's economic bubble--Kennedy's thesis was widely dismissed.

Now, in the wake of the 2008 financial meltdown and ensuing recession, it is clear that Kennedy and other "declinists" were right all along. The same causes of decline they pointed to are at the center of today's debate about America's economic prospects: too much consumption and not enough savings; persistent trade and current-account deficits; deindustrialization; sluggish economic growth; and chronic federal-budget deficits fueling an ominously rising national debt.

Indeed, looking forward a decade, the two biggest domestic threats to U.S. power are the country's bleak fiscal outlook and deepening doubts about the dollar's future role as the international economy's reserve currency. Economists regard a 100 percent debt-to-GDP ratio as a flashing warning light that a country is at risk of defaulting on its financial obligations. The nonpartisan Congressional Budget Office (CBO) has warned that the U.S. debt-to-GDP ratio could exceed that level by 2020--and swell to 190 percent by 2035. Worse, the CBO recently warned of the possibility of a "sudden credit event" triggered by foreign investors' loss of confidence in U.S. fiscal probity. In such an event, foreign investors could reduce their purchases of Treasury bonds, which would force the United States to borrow at higher interest rates. This, in turn, would drive up the national debt even more. America's geopolitical preeminence hinges on the dollar's role as reserve currency. If the dollar loses that status, U.S. primacy would be literally unaffordable. There are reasons to be concerned about the dollar's fate over the next two decades. U.S. political gridlock casts doubt on the nation's ability to address its fiscal woes; China is beginning to internationalize the renminbi, thus laying the foundation for it to challenge the dollar in the future; and history suggests that the dominant international currency is that of the nation with the largest economy. (In his piece on the global financial structure in this issue, Christopher Whalen offers a contending perspective, acknowledging the dangers posed to the dollar as reserve currency but suggesting such a change in the dollar's status is remote in the current global environment.)

Leaving aside the fate of the dollar, however, it is clear the United States must address its financial challenge and restore the nation's fiscal health in order to reassure foreign lenders that their investments remain sound. This will require some combination of budget cuts, entitlement reductions, tax increases and interest-rate hikes. That, in turn, will surely curtail the amount of spending available for defense and national security--further eroding America's ability to play its traditional, post-World War II global role.

Beyond the U.S. financial challenge, the world is percolating with emerging nations bent on exploiting the power shift away from the West and toward states that long have been confined to subordinate status in the global power game. (Parag Khanna explores this phenomenon at length further in this issue.) By far the biggest test for the United States will be its relationship with China, which views itself as effecting a restoration of its former glory, before the First Opium War of 1839-1842 and its subsequent "century of humiliation." After all, China and India were the world's two largest economies in 1700, and as late as 1820 China's economy was larger than the combined economies of all of Europe. The question of why the West emerged as the world's most powerful civilization beginning in the sixteenth century, and thus was able to impose its will on China and India, has been widely debated. Essentially, the answer is firepower. As the late Samuel P. Huntington put it, "The West won the world not by the superiority of its ideas or values or religion . . . but rather by its superiority in applying organized violence. Westerners often forget this fact; non-Westerners never do."

Certainly, the Chinese have not forgotten. Now Beijing aims to dominate its own East and Southeast Asian backyard, just as a rising America sought to dominate the Western Hemisphere a century and a half ago. The United States and China now are competing for supremacy in East and Southeast Asia. Washington has been the incumbent hegemon there since World War II, and many in the American foreign-policy establishment view China's quest for regional hegemony as a threat that must be resisted. This contest for regional dominance is fueling escalating tensions and possibly could lead to war. In geopolitics, two great powers cannot simultaneously be hegemonic in the same region. Unless one of them abandons its aspirations, there is a high probability of hostilities. Flashpoints that could spark a Sino-American conflict include the unstable Korean Peninsula; the disputed status of Taiwan; competition for control of oil and other natural resources; and the burgeoning naval rivalry between the two powers.

These rising tensions were underscored by a recent Brookings study by Peking University's Wang Jisi and Kenneth Lieberthal, national-security director for Asia during the Clinton administration, based on their conversations with high-level officials in the American and Chinese governments. Wang found that underneath the visage of "mutual cooperation" that both countries project, the Chinese believe they are likely to replace the United States as the world's leading power but Washington is working to prevent such a rise. Similarly, Lieberthal related that many American officials believe their Chinese counterparts see the U.S.-Chinese relationship in terms of a zero-sum game in the struggle for global hegemony.

An instructive historical antecedent is the Anglo-German rivalry of the early twentieth century. The key lesson of that rivalry is that such great-power competition can end in one of three ways: accommodation of the rising challenger by the dominant power; retreat of the challenger; or war. The famous 1907 memo exchange between two key British Foreign Office officials--Sir Eyre Crowe and Lord Thomas Sanderson--outlined these stark choices. Crowe argued that London must uphold the Pax Britannica status quo at all costs. Either Germany would accept its place in a British-dominated world order, he averred, or Britain would have to contain Germany's rising power, even at the risk of war. Sanderson replied that London's refusal to accommodate the reality of Germany's rising power was both unwise and dangerous. He suggested Germany's leaders must view Britain "in the light of some huge giant sprawling over the globe, with gouty fingers and toes stretching in every direction, which cannot be approached without eliciting a scream." In Beijing's eyes today, the United States must appear as the unapproachable, globally sprawling giant.

In modern history, there have been two liberal international orders: Pax Britannica and Pax Americana. In building their respective international structures, Britain and the United States wielded their power to advance their own economic and geopolitical interests. But they also bestowed important benefits--public goods--on the international system as a whole. Militarily, the hegemon took responsibility for stabilizing key regions and safeguarding the lines of communication and trade routes upon which an open international economy depend. Economically, the public goods included rules for the international economic order, a welcome domestic market for other states' exports, liquidity for the global economy and a reserve currency.

As U.S. power wanes over the next decade or so, the United States will find itself increasingly challenged in discharging these hegemonic tasks. This could have profound implications for international politics. The erosion of Pax Britannica in the late nineteenth and early twentieth centuries was an important cause of World War I. During the interwar years, no great power exercised geopolitical or economic leadership, and this proved to be a major cause of the Great Depression and its consequences, including the fragmentation of the international economy into regional trade blocs and the beggar-thy-neighbor economic nationalism that spilled over into the geopolitical rivalries of the 1930s. This, in turn, contributed greatly to World War II. The unwinding of Pax Americana could have similar consequences. Since no great power, including China, is likely to supplant the United States as a true global hegemon, the world could see a serious fragmentation of power. This could spawn pockets of instability around the world and even general global instability.

The United States has a legacy commitment to global stability, and that poses a particular challenge to the waning hegemon as it seeks to fulfill its commitment with dwindling resources. The fundamental challenge for the United States as it faces the future is closing the "Lippmann gap," named for journalist Walter Lippmann. This means bringing America's commitments into balance with the resources available to support them while creating a surplus of power in reserve. To do this, the country will need to establish new strategic priorities and accept the inevitability that some commitments will need to be reduced because it no longer can afford them.

These national imperatives will force the United States to craft some kind of foreign-policy approach that falls under the rubric of "offshore balancing"--directing American power and influence toward maintaining a balance of power in key strategic regions of the world. This concept--first articulated by this writer in a 1997 article in the journal International Security--has gained increasing attention over the past decade or so as other prominent geopolitical scholars, including John Mearsheimer, Stephen Walt, Robert Pape, Barry Posen and Andrew Bacevich, have embraced this approach.

Although there are shades of difference among proponents of offshore balancing in terms of how they define the strategy, all of their formulations share core concepts in common. First, it assumes the United States will have to reduce its presence in some regions and develop commitment priorities. Europe and the Middle East are viewed as less important than they once were, with East Asia rising in strategic concern. Second, as the United States scales back its military presence abroad, other states need to step up to the challenge of maintaining stability in key regions. Offshore balancing, thus, is a strategy of devolving security responsibilities to others. Its goal is burden shifting, not burden sharing. Only when the United States makes clear that it will do less--in Europe, for example--will others do more to foster stability in their own regions.

Third, the concept relies on naval and air power while eschewing land power as much as possible. This is designed to maximize America's comparative strategic advantages--standoff, precision-strike weapons; command-and-control capabilities; and superiority in intelligence, reconnaissance and surveillance. After all, fighting land wars in Eurasia is not what the United States does best. Fourth, the concept avoids Wilsonian crusades in foreign policy, "nation-building" initiatives and imperial impulses. Not only does Washington have a long record of failure in such adventures, but they are also expensive. In an age of domestic austerity, the United States cannot afford the luxury of participating in overseas engagements that contribute little to its security and can actually pose added security problems. Finally, offshore balancing would reduce the heavy American geopolitical footprint caused by U.S. boots on the ground in the Middle East--the backlash effect of which is to fuel Islamic extremism. An over-the-horizon U.S. military posture in the region thus would reduce the terrorist threat while still safeguarding the flow of Persian Gulf oil.

During the next two decades, the United States will face some difficult choices between bad outcomes and worse ones. But such decisions could determine whether America will manage a graceful decline that conserves as much power and global stability as possible. A more ominous possibility is a precipitous power collapse that reduces U.S. global influence dramatically. In any event, Americans will have to adjust to the new order, accepting the loss of some elements of national life they had taken for granted. In an age of austerity, national resources will be limited, and competition for them will be intense. If the country wants to do more at home, it will have to do less abroad. It may have to choose between attempting to preserve American hegemony or repairing the U.S. economy and maintaining the country's social safety net.

The Constellation of world power is changing, and U.S. grand strategy will have to change with it. American elites must come to grips with the fact that the West does not enjoy a predestined supremacy in international politics that is locked into the future for an indeterminate period of time. The Euro-Atlantic world had a long run of global dominance, but it is coming to an end. The future is more likely to be shaped by the East.

At the same time, Pax Americana also is winding down. The United States can manage this relative decline effectively over the next couple of decades only if it first acknowledges the fundamental reality of decline. The problem is that many Americans, particularly among the elites, have embraced the notion of American exceptionalism with such fervor that they can't discern the world transformation occurring before their eyes.

But history moves forward with an inexorable force, and it does not stop to grant special exemptions to nations based on past good works or the restrained exercise of power during times of hegemony. So is it with the United States. The world has changed since those heady days following World War II, when the United States picked up the mantle of world leadership and fashioned a world system durable enough to last nearly 70 years. It has also changed significantly since those remarkable times from 1989 to 1991, when the Soviet Union imploded and its ashes filled the American consciousness with powerful notions of national exceptionalism and the infinite unipolar moment of everlasting U.S. hegemony.

But most discerning Americans know that history never ends, that change is always inevitable, that nations and civilizations rise and fall, that no era can last forever. Now it can be seen that the post-World War II era, romanticized as it has been in the minds of so many Americans, is the Old Order--and it is an Old Order in crisis, which means it is nearing its end. History, as always, is moving forward.

This article originally appeared at The National Interest, an Atlantic partner site. Follow @TheNatlInterest on Twitter.

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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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