US Power: Past and Prologue

1 US Power: Past and Prologue Evidence for US primacy used to be less contestable. Financial and strategic support from the US notwithstanding, Europe and Japan required decades to rebound from the devastation of World War II. Their later economic “challenge” eventually would succumb to the US revolution in information and communication technology (ICT), in the one case, and a protracted economic stagnation in the other. While sleeping giants India and China had self-selected out of global capitalism, US-headquartered transnational corporations roamed the world uncontested even as US manufacturing exports boomed. Systemic defects spelled, first, implosion, then dissolution, for the US’s main strategic rival, the former Soviet Union. As long as a looming threat from Islamist extremism remained beneath the radar, the Western state-centered international system appeared unassailable. The US seemed to straddle this world like a colossus – militarily, economically, politically and culturally. Yet the world, and the US’s position within it, looks rather different today compared to 1950, 1991 and 2001. Do recent shifts in the global system’s tectonic plates augur secular decline for the world’s preeminent power? The rest of this chapter is organized as follows. To help situate the perspective advanced in this book, the section “The popular literature on ‘decline’ ” provides an overview of today’s controversy over US decline. The section “Globalization and global power” discusses the relationship between global power and globalization, and its implications for the nature and scope of US power today. Against this analytical and historical backdrop, the section “Maintaining primacy in a turbulent era” introduces the basic contours of the argument advanced in the book. The section “Structure of the book” concludes with a brief overview of the remaining chapters. The popular literature on US “decline” National “decline” for a preeminent global power refers to a (composite) reduction in economic dynamism, military prowess, political-cumdiplomatic clout and cultural impact.1 Influencing the argument in this 11 S. S. Brown, The Future of US Global Power © Stuart S. Brown 2013 12 Global Power: Key Issues book have been scholars and pundits who have addressed the question of US decline directly or indirectly, partially or comprehensively, and from varying vantage points. Leading credit in particular goes to Yale historian Paul Kennedy for his magisterial The Rise and Fall of the Great Powers. Certain core constructs he invoked a full generation ago continue to frame the contemporary debate (Kennedy, 1987). Still, Kennedy’s “imperial overstretch” construct and much of the subsequent commentary it spawned can sound mechanistic and over-determined today. Less celebrated but more persuasive is Harvard political scientist, Joseph Nye, in his 1990 publication Bound to Lead (Nye, 1990). Nye’s argument, that overstatement of US power in the immediate post-war period inflated perceptions of its subsequent descent, remains a cautionary tale on biased historical comparison. His early analysis also captures core qualities that still differentiate the US from lesser “great powers.” Yet, much has changed in the 20 years since its publication, notably the dissolution of the former Soviet Union, prolonged stagnation in Japan, the rollercoaster of European monetary integration, September 11th and the invasions of Afghanistan and Iraq, the sub-prime financial crisis, macroeconomic stabilization and take-off in key emerging markets, and the marked re-ascendancy of China. Since much of this change lies at the intersection of economics and international affairs, an updated analysis of today’s global economic forces and their implications for national power is needed. In the writing of this book, the wide-ranging reflections of historian Niall Ferguson have proved especially thought-provoking. For example, Ferguson has been ahead of the curve in locating a major constraint on the exercise of US power in its ominous fiscal trajectory (Ferguson and Kotlikoff, 2003). Still, he may be overzealously stretching an otherwise sensible description of US vulnerability through analogies with the likes of much smaller, endemically profligate states such as Greece (Ferguson, 2010). For the time being at least, the Eurozone sovereign debt crisis reaffirms the US dollar and treasuries as uncontested sources of reserve currency status. Ferguson’s (2008) skepticism about the sustainability of US global power is epitomized in the metaphor “Chimerica.” The latter views the global financial system through the lens of an unstable co-dependency between the US and China (Ferguson, 2008). “Global imbalances” appear to capture the coexistence of macroeconomic overstretch on the one side and systemic mercantilism on the other. As the discussion in Chapter 4 outlines, however, alternative, structural explanations for global payment imbalances have moved the discussion well beyond simple caricatures of over- and under-consumption. Ferguson’s (2004b) admonition that a world deprived of an activist, predominant state remains vulnerable to a generalized anarchy merits deeper reflection. The latter theme lies squarely in the tradition of hegemonic stability theory, as pioneered by economic historian Charles Kindleberger. In the US Power: Past and Prologue 13 spirit of Mancur Olson (1971) on collective action problems, Kindleberger maintained that global economic stability requires the backing of a singularly powerful state architect and defender of global trade and financial institutions. Central to this role was setting the trading and monetary rules of the game and the use of its reserve currency as the leading medium of exchange, unit of account and store of value (Kindleberger, 1973). This notion of hegemonic stability can be extended beyond economic regimes to areas ranging from nuclear non-proliferation, through the protection of vital sea lane traffic, to maintaining the balance of power in strategic regions. Yet, it remains an open question as to how indispensable hegemonic leadership of the Kindleberger variety in fact is and whether enhanced cooperation can substitute in a situation of hegemonic decline. Moreover, those who highlight how the US furnishes core governmentaltype services on a global scale (Mandelbaum, 2005) increasingly question what the US can afford given mounting fiscal pressures (Mandelbaum, 2010). An unresolved tension therefore pervades this literature. Is US coordination and financing so critical to render a more collective furnishing of public goods inadequate or unlikely? If so, what motivates the US to assume this burden? The paradox is explained if the US can be shown to gain, sometimes disproportionately, if not always economically per se then in terms of global clout and leverage. The example international trade provides is instructive. Classical trade theory posits that countries can benefit from trade even when trading partners resort to export subsidies and other trade barriers. This perspective in effect recommends setting out a welcome sign to (cheaper) imports without requiring reciprocity for the country’s own exports. The US has not generally adopted this “liberal unilateralist” position. US trade policy has instead often mirrored the assumptions of more recent trade theory, which includes an element of rivalry in addition to the more traditional focus on mutual gains from trade. Utilizing its leverage as the reserve currency country and the single largest goods market, the US has deployed its bargaining power to wrest trade concessions on behalf of its industries and firms. It has leveraged its military clout to enhance the protection and perquisites afforded its corporations abroad while lowering the effective risk premium on foreign investment in the US through credible protection of the homeland and its assets (see Norrlof, 2010, pp. 67–72). The US has hardly been laissez-faire toward aggressive import pricing or foreign state promotion of market share for national champions. And US officials have vociferously condemned such foreign practices as intellectual property infringement, discriminatory government procurement practices, “currency manipulation” and “endogenous innovation.” It has readily resorted to administered protection – including World Trade Organizationsanctioned non-tariff barriers, notably the anti-dumping and countervailing duty laws. 14 Global Power: Key Issues The upshot is that the hint of altruism underlying the metaphor of “benevolent hegemon” can mischaracterize or exaggerate US practice. In certain contexts the “selfish hegemon” (Bhagwati, 2008) seems a more apt description of US behavior. Crucially, however, the US commitment to broadly open trade among other core rules of the liberal global order ostensibly benefits other actors sufficiently to forestall any broadside against the US-led system. Yet, among the underlying themes of the current debate over decline, is a widening perception that US leverage has weakened in recent decades. The end of the Cold War, in particular, marked a diminution in the need for US-provided security and economic services. This coincided with a decline in inter-state violence and accelerated growth in key emerging countries, lowering dependence on US markets and military prowess. Is the US less advantageously positioned as “privilege taker” today owing to a less prominent role as global public goods provider (Mastanduno, 2008)? Have we entered a world in which core transnational challenges demand greater multilateral problem solving efforts? If progressive diminution in US leadership effectiveness is a reality, the less than stellar recent track record of international coordination under the auspices of the G-20 and other multilateral organizations is cause for concern (Frieden et al., 2012). Nobel laureate Paul Krugman’s insights have significantly shaped the central argument advanced in this book. In particular, his 1994 article “Competitiveness: a Dangerous Obsession” appropriately questions the meaning and utility of ranking countries – as opposed to individual companies – according to an aggregate competitiveness score built up from disparate and wide-ranging micro-criteria (Krugman, 1994). National performance need not reflect uniformly high rankings across such minutiae as per capita cell phone usage or median mathematics scores.2 Sustained predominance presupposes rather a robust level and sustained pace of national (average) productivity growth underpinned by entrepreneurial innovation and a skilled and flexible labor force. As argued more systematically in later chapters, the preoccupation with national competitiveness seems more often a subtext for a “national security” view of the world rather than one premised on ongoing improvements in living standards. Early on, Krugman also warned sensibly against hyperbolic parallels between the US and other fiscally challenged countries, like Greece (see e.g. Krugman, 2010a). In other contexts, however, he plays down US resiliency, invoking comparisons instead with the lost decades of Japan (Krugman, 2010b). While drawing certain warranted parallels, such comparisons underemphasize the decidedly distinct structural underpinnings of these two national economies. Meanwhile, Krugman’s (2010c) preoccupation with Chinese exchange rate “manipulation” downplays the global structural factors that, arguably, better explain payment imbalances. Yet he is hardly alone US Power: Past and Prologue 15 here. Influential analysts, ranging from Fred Bergsten at the Peterson Institute of International Economics to Martin Wolf of the Financial Times and numerous others, have overplayed the significance of yuan undervaluation, even if such views continue to represent the conventional wisdom (see e.g. Wolf, 2008). Already foreshadowed in this introduction to the debate over US decline is the tug-of-war between, on the one hand, traditional systemic advantages the US has enjoyed – including rapid technological progress, entrepreneurialism and flexible markets – and, on the other hand, the macroeconomic instability associated with mounting indebtedness and chronic underemployment that are currently buffeting the country. Some would contend that the national debt overhang threatens to overwhelm or dissipate the country’s endemic microeconomic strengths. Alternatively, an erosion of microeconomic foundations – reflected in structural “headwinds” such as longer-term unemployment and an impaired credit system – may be impeding macroeconomic adjustment, threatening a protracted Japan-like stagnation. In recent years, for example, Bill Gross and Mohammed El-Erian of leading bond firm PIMCO have invoked the metaphor “the new normal” to describe a prolonged decline in trend growth based on a future of deleveraging, re-regulation and heightened protectionism (see e.g. Gross, 2010). In their facetiously titled This Time is Different, economists Carmen Reinhart and Kenneth Rogoff (2009) cite ample precedent for prolonged sub-par recoveries from financial crisis-triggered debt overhangs. Meanwhile, the fallout from the debt-fueled housing and consumption boom–bust cycle leads Nobel laureate Joseph Stiglitz (2010), among others, to question whether a bloated, under-regulated financial system has added anything of value to the national economy in recent years. In a succession of accessible works, Kevin Phillips (2006, 2008) argues that the onset of secular US decline was triggered by a confluence of distinct structural developments. These include a crisis of petroleum import dependency, necessitating an exorbitant military apparatus for securing oil supplies and requiring a costly campaign in Iraq to counteract the stranglehold of stateowned oil companies over global petroleum reserves and pricing. Phillips then links this energy security theme to an impending dollar crisis: a deinvoicing of oil from US dollars approaches, he argues, to be accompanied by widespread currency de-pegging and accelerated diversification out of dollar foreign exchange reserves. The oil-cum-dollar equation is then linked up to endemic financial instability via current account deficit financing, excessive financialization (declining manufacturing), the concurrent explosion in economy-wide indebtedness and the onset of the sub-prime credit crisis.3 A complicated and bold thesis indeed, albeit with many analytical holes (see Chapter 4). On the other side of the intellectual barricades are stalwart defenders of US-style capitalism, such as Nobel laureate Gary Becker and Judge Richard 16 Global Power: Key Issues Posner, who worry about heightened impediments to growth emanating from overzealous regulatory reform. Their preoccupation lies with maintaining the characteristic dynamism of the US economy based on flexible labor markets, lower marginal tax rates, less intrusive regulation and a more limited welfare state compared with the US’s European peer group (see e.g. Becker, 2010). In Seeds of Destruction, Glenn Hubbard and Peter Navarro argue that the key to overcoming secular stagnation and returning the US to the path of robust growth is the removal of core structural imbalances perpetuated in the main by overreaching federal public policies combined with foreign (Chinese) mercantilism. Such policy-induced distortions are reflected in overconsumption, underinvestment and trade deficits (Hubbard and Navarro, 2011). These stalwart believers in lightly regulated capitalism see the US as dangerously close to a “tipping point” unless core market-friendly reforms are adopted in the areas of taxation, financial regulation and macroeconomic policies. Other staunch believers in the underlying virtues of “Anglo-Saxon” capitalism, such as Nobel laureate Ned Phelps, have grown increasingly skeptical about the prospects for regaining dynamism in the midst of long-duration unemployment and stagnant investment. While such reflections provide a cautionary tale concerning the strengths and weaknesses of alternate models of modern capitalism, the analysis of Amar Bhidé of the Columbia Business School appears particularly insightful. In contrast to the usual preoccupation with “overconsumption,” he stresses the continual feedback and stimulus of the “venturesome” American consumer to US corporate innovation (Bhidé, 2008).4 Moreover, his work highlights the important distinction between innovation and invention, capturing the misconceptions surrounding preoccupation with growing technological competition from the East. Adam Segal (2010), Senior Fellow at the Council of Foreign Relations, writes perceptively about the growing Asian challenge to the US’s traditionally commanding lead in innovation. While hardly underplaying the gains in Asian innovativeness over recent decades, his book, Advantage, provides a sober antidote to exaggerated claims that the US confronts an across-theboard assault on its dominance of the technological frontier. No one should question that the US has much to improve in the areas of education, taxation, immigration and health care, to mention a few central reform priorities to maintain robust productivity growth. As discussed at length in Chapter 3, however, much of the US public discourse on “competitiveness” is marred by misguided notions about what is most needed to maintain a dynamic, innovative and entrepreneurial economy. The debate over competitiveness would likewise benefit from a more careful assessment of the benefits and costs of state capitalism, Chinese-style, specifically as it impacts global standing, national security and the innovation process. US Power: Past and Prologue 17 Another recent book that focuses on a core secular advantage favoring the US is Joel Kotkin’s The Next Hundred Million: America in 2050 (2010). He lasers in on the US’s relatively buoyant demographic outlook with its comparatively stable fertility rate backed by projected immigration trends. These relatively bullish demographics should attenuate the old age-dependency challenge confronting the US among many other (advanced and certain emerging) countries today. Kotkin reminds us of the enormous welfare gains garnered from foreign students, on the one hand, and immigrant workers and entrepreneurs, on the other. This emphasis stands in contradistinction to those pundits who decry the dangers of US openness (see e.g. Buchanan, 2002). Such structural advantages as emphasized by Becker, Bhidé, Kotkin and Segal notwithstanding, the conventional wisdom appears to favor the declinist over a more primacist perspective on US power. The anemic economic recovery from the sub-prime credit crisis despite significant macroeconomic stimulus has fueled a deep-seated pessimism. Superimposed on the cyclical realities, moreover, are longer-standing concerns: notably a “hollowing out” of the middle class reflected in stagnant median wages, increasing income and wealth inequality, the unmitigated rise in medical and education costs and an increasing average duration of unemployment and underemployment. Nor does the sense of endemic gridlock in Washington help to instill optimism concerning the political capacity to meet the country’s core challenges, such as stabilizing the ominous public debt trajectory. Such sober observations provide ample grist for the declinist mill. In terms of their impact on public opinion – both American and nonAmerican – the declinists also appear to hold the upper hand on geopolitical and other extra-economic dimensions of the power debate. A representative example is Boston College professor Andrew Bacevich (2002, 2008). Speaking with authority from some 20 years of experience in the armed forces, he makes a cogent case that the US suffers from military overstretch, reflecting a structural disequilibrium between the supply and demand for boots on the ground in Iraq and Afghanistan among myriad other global assignments. Bacevich would resolve this imbalance not through expansion of military personnel but by scaling back most military commitments. He argues persuasively that nation building efforts lie beyond the core capability and justifiable deployment of the armed forces and that the George W. Bushinitiated “long war” against Islamist extremism represents an unlimited, hence wholly unrealistic, war posture. According to Bacevich, the utility of military power today has receded relative to other instruments of power, and US military power is overstated in any case. He favors rolling back what he deems to be US imperial adventurism. When he moves beyond the appropriate deployment of troops to a more generalized Kennedy-esque macroeconomic overstretch argument – for 18 Global Power: Key Issues instance, the US faces a cultural “crisis of profligacy” – Bacevich’s argument stands on shakier grounds. While it is justified to raise the twin (trade and fiscal) deficits and military “expansionism” as legitimate policy concerns, relating them to the broader question of national decline requires a more careful economic analysis. Still, his contention of a deep-seated crisis of citizenship merits closer scrutiny in the context of strains on the US political system as it copes with the twin pressures of globalization and global power. Bacevich’s antidote to ostensible national decline is to arrest chronic (as distinct from cyclical) debt-financed overconsumption, conscientiously pursue energy independence and scale back US power projection. Another contribution from the popular declinist literature comes from the New America Foundation’s Parag Khanna (2008a, 2008b). His The Second World is one of a spate of publications heralding the arrival of a multipolar world, in which US geopolitical stature has already irreversibly plunged. Khanna views the US in decline across virtually every dimension, throwing it into competition with Europe and China for influence in the “second world” in Latin America, the former Soviet Union, the Middle East and Asia. In acknowledging the rising clout of would-be regional hegemons as well as other, populous powers, Khanna is on to an important development. Yet he overstates the influence exercised by China today and almost certainly exaggerates the power of Brussels, even prior to the onset in 2010 of the debt crisis in the European Monetary Union’s (EMU) southern periphery. The criteria for judging who is rising and who is falling can sometimes be puzzling. For example, while rightly highlighting Russia’s disastrous demographics, Khanna’s low expectation for (a much younger) India seems surprising. While showcasing the increasing influence of certain regional powers, such as a Brazil, Turkey and Iran, has merit, Khanna, and others of similar persuasion, arguably lack a sense of proportion in situating countries along the spectrum of geopolitical influence relative to the US. Comparably bullish outlooks on US hegemony in the more popular literature seem somewhat more difficult to locate. A notable exception is the view of historian Robert Kagan (2012), who, like Joseph Nye, cautions against exaggerating the global influence and autonomy the US exercised at the supposed height of its power (e.g. immediately after World War II or the Cold War). Referring to the “mythical past of overwhelming dominance,” Kagan seems on point in arguing that in the past the US often failed to “get others to do its bidding.” Moreover, he asserts: “During the first three decades after World War II, great portions of the world neither admired the United States nor sought to emulate it, and were not especially pleased at the way it conducted itself in international affairs.” Among others who reject the claim of hegemonic decline are geopolitical strategists George Friedman and Thomas Barnett.5 In an iconoclastic forecast of the next 100 years, Friedman (2010) stresses geographical certainties. Among these is the unrivaled spatial position of the US as a trans-continental US Power: Past and Prologue 19 superpower bordering two oceans – the Atlantic and the Pacific. Given a confluence of developments, namely ongoing disunity in the Eurasian continent6 and the shift of commercial gravity to the Pacific Rim, US naval power affords virtually unassailable protection for the US homeland while perpetuating East Asia’s reliance on US patrolling of the sea lanes. Friedman’s overall assessment of US power is captured as follows: Whatever passing problems exist for the United States, the most important factor in world affairs is the tremendous imbalance of economic, military, and political power. Any attempt to forecast the twenty-first century that does not begin with the recognition of the extraordinary nature of American power is out of touch with reality. But I am making a broader, more unexpected claim, too: the United States is only at the beginning of its power. The twenty-first century will be the American century. (2010, p. 18) Another uncompromising prediction of sustained predominance comes from Thomas Barnett (2009). His is an unwavering belief in the power of globalization, backed by the US “military Leviathan,” as the leading antidote to failing states and anti-modernist forces. He welcomes China’s more active role in Africa and Latin America, “simply because America cannot hope to govern the emerging global security environment on its own” (2009, p. 69). Moreover, given their inability to replace the stabilizing and security role of US military power, ample scope exists for strategic co-dependency between the US and emerging states. For Barnett, European enlargement also plays an important role in integrating countries on the periphery of the European Union (EU). Although Barnett worries about military overstretch, unlike Bacevich, he embraces large-scale stabilization and nation building in conjunction with European and Asian allies. His reflections (Barnett, 2004, 2009) stand out as a systematic effort to relate US power to ever-expanding globalization. In contrast, the thesis to be developed in this book describes a more complicated dialectic between US power and globalization with the necessarily positive correlation presumed by Barnett less assured. Former Council on Foreign Relations president Leslie Gelb (2009) employs an illustrative pyramidal metaphor with the US singularly occupying the “Penthouse” and with remaining states situated on successive rungs below.7 The US remains the sole power with the global reach to play an indispensable role in resolving transnational problems, backed by an equally necessary coalition of allies. Channeling Bacevich, Gelb decries the increasing disutility of military solutions to regional and global problems while citing the rising centrality of economic power. The US still leads other singular states economically even if the financial crisis has diminished its former luster.8 Yet, according to Gelb, expanding crevices in the US power arsenal are evident in the squandering of resources, including international goodwill 20 Global Power: Key Issues in hopeless nation building efforts while neglecting investment at home. An increasingly fractious and deadlocked political system completes this sobering picture. “The US is at the point of declining as a nation and as a world power . . . I count myself among those who think the situation is serious but reversible . . . ” (Gelb, p. 278). Notable among accessible, constructive accounts of US power is Fareed Zakaria’s The Post-American World (2008a). As a highly successful immigrant to the US, he keenly appreciates the opportunities that US society affords. He is equally mindful of the US economy’s enduring structural strengths. He finds much less to admire, however, in the US political system’s glaring ineffectualness in addressing fundamental challenges.9 While such arguments resonate in today’s polarized political climate, Zakaria walks an exceedingly narrow tightrope in highlighting the residual assets of the US alongside the striking advances among emerging states. He sometimes seems to want it both ways by heralding “the rise of the rest” while denying US decline, even as he relegates the US to the less-than-predominant rank of “first among equals.”10 Precisely where the US stands in Zakaria’s view arguably remains fuzzy.11 After all, even as a mere “chairman of the board,” the US retains an outsized capacity to reshape global institutions (2008a, 2008b). So much of today’s debate over US decline centers on the prospects for China to eventually challenge the US for global predominance. The literature is voluminous and covers a wide spectrum of opinion about China’s potential to rival the US. One end of this spectrum sees China eventually supplanting the US as global hegemon (see e.g. Fishman, 2005; Jacques, 2009). Arvind Subramanian (2011a) provides a more rigorous economic defense of this claim. In contrast, in her China Fragile Super Power, Susan Shirk portrays China as a rising economic power, albeit one with significant internal political tensions.12 A decidedly less optimistic view is captured in Jonathan Watts’ When A Billion Chinese Jump (2010).13 Coming full circle with our panoramic critique of the more popular literature on US decline, Nye’s (1990) early, even-handed portrait of the range of US power assets still seems particularly prescient, even if the internal and external forces buffeting US power have evolved significantly since its publication. In his latest in a lifetime of work exploring the nature of power, Nye concludes: Because globalization will spread technical capabilities, and information technology will allow broader participation in global communications, American economic and cultural preponderance will become less dominant than at the start of this century. But that is not a narrative of decline. The United States is unlikely to decay like ancient Rome or even to be surpassed by another state, including China. The first half of the twentyfirst century is not likely to be a “post-American world,” but the United States will need a strategy to cope with the “rise of the rest” – among US Power: Past and Prologue 21 both states and non-state actors. The United States will need a smart power strategy and narrative that stress alliances, institutions, and networks that are responsive to the new context of a global information age. In short, for success in the twenty-first century, the United States will need to rediscover how to be a smart power. (Nye, 2011b, p. 234) Globalization and global power US power in historical context Historians of empire have analyzed the succession of great Western powers beginning in the 15th century, including Venice, Spain, Holland and the UK. While her global position today exceeds the reach of any prior historical precedent, the US arguably confronts a more complex and intractable world. For example, the awesome British Empire for which “the sun never set” still coexisted with a Germany that dominated continental Europe, a rising US that had surpassed it in industrial productivity, and a Russia that hamstrung British maneuverability in Asia. Yet, notwithstanding such powerful rivals, the British presided over the crumbling of the Ottoman Empire; and (initially at least) walked all over a fragmented Indian sub-continent. With the collapse of its principal rival, the Soviet Union, in 1991, the US appeared to face only one potential peer challenge in the distant future – a still developing China. Meanwhile, a rich, albeit inwardly focused Europe, exhibited scant inclination to project extra-regional power remotely comparable to that of the US. Meanwhile, the much heralded economic challenge from Japan had begun to recede.14 Yet, the world has changed significantly in the two decades since the end of the Cold War. While enjoying fewer resources and lacking anything approaching the US’s strategic superiority, in its heyday the British Empire arguably faced nothing approximating the cluster of regional and transnational trials roiling the US and world today. Citing just one example among multiple regional and transnational challenges, the ever turbulent (Greater) Middle East comprises an aspiring regional nuclear power in Shiite Iran, an extremist Sunni global jihadist movement in al Qaeda and its offshoots, and an Israeli-Palestinian stalemate that at any point could explode into renewed violence. More recently, there has been the democratic promise but also greater turbulence wrought by the Arab Spring. Punctuating this revolution is the sectarian civil war and human tragedy in Syria. As the deaths of US diplomats in Benghazi and recent protests elsewhere in the region remind one, anti-American terrorism remains a threat. Nevertheless pockets of regional support for the US remain, notwithstanding its historical backing of Middle Eastern dictators. Add to this equation the protracted wars and expensive state building exercises in Iraq and Afghanistan. And if this were not enough, there remains the 22 Global Power: Key Issues ever present threat of an Islamist takeover of nuclear Pakistan and renewed conflict with its “mortal” enemy, India. More generally, the global system has altered profoundly since the seemingly simpler days of bipolar US–Soviet rivalry. Power has increasingly dispersed from West to East and North to South, to non-state or suprastate actors including non-governmental organizations (NGOs), regional and international organizations, transnational corporations, and terrorists and drug traffickers, plus aspiring regional hegemons and other emergent powers (Haas, 2008). The ICT revolution and the rise of key emerging markets have transformed a globalization process hitherto identified almost exclusively with the US. States like Venezuela and Russia wield energy as a foreign policy weapon. And last but certainly not least, there is the re-ascendancy of China. In sum, while it boasts historically unprecedented resources and an outsized power differential with other actors, the gamut of capabilities the US ostensibly requires to confront today’s strategic challenges also seems to have proliferated exponentially. This confluence of unparalleled capacity, on the one hand, and the scale of strategic predicaments it confronts, on the other, epitomizes the underlying dialectic that so complicates the assessment of US power today. Its unprecedented material wealth, military power, and cultural and political sway aside, can the US withstand the mounting pressures from a burgeoning number of challengers and challenges? Can US predominance survive the forces that threaten to spawn a new “anarchic” phase of global history (Ferguson, 2004b)? In contrast to herculean attempts to stretch the notion of “empire”15 beyond recognition, “hegemony” offers a more value-neutral construct for capturing the underlying character of US global power. In international relations theory, a hegemon represents a disproportionately powerful state capable of imposing some order on an otherwise “anarchic” system – that is, a world in which neither global government nor advanced global governance prevails. Hegemony reflects a qualitative state in which one power gets its way somewhat more often than not and whose positions on key global concerns carry a preponderance of weight. Although a hegemon can lead in the provision of global public goods, in acknowledging the numerous ways in which the US has supported the global system since World War II, one need not accept the expansive claim that it “acts as the world’s government” (Mandelbaum, 2005). For (global) hegemony to be interpreted meaningfully, predominance in one dimension does not suffice. Hegemony presupposes disproportionate influence across multiple spheres – military, political/diplomatic, economic/technological and cultural/ideological. Militarily this presumes “command of the commons” (Posen, 2003), especially control of the oceans and the ability to project power into any region – in a word, global US Power: Past and Prologue 23 reach. It means serving as the “go to” power, uniquely positioned to provide troops, naval power and airpower to stabilize a war-ravaged hotspot or to credibly broker regional conflict resolution. At a minimum, it implies the ability to credibly function as an “outside balancer.”16 While precluding the subversion of sovereignty implied by empire, hegemony can neither be wholly de-territorialized. A residual quasi-imperial element is reflected, for example, in the network of US military bases, carrier battle groups, expeditionary force capability, Special Forces and military trainers in client states (“imperial grunts”)17 ; as well as a periodic willingness to interfere in the internal affairs of “sovereign” states.18 In addition to its military dimension, hegemony presumes disproportionate clout within multilateral institutions created to manage leading global challenges, such as development and financial crisis. A hegemonic role involves the assumption of leadership in alleviating the suffering from natural disasters or to combat global threats to human security, such as HIV-AIDS, ethnic cleansing and international terrorism. Hegemony thus incorporates a vanguard role in stemming the regional and global fallout from ungoverned regions. In today’s globalized economy a leading feature of hegemony involves the guardianship of relatively free product and services trade, and broadly mobile capital, buttressed by widespread circulation of the leading state’s currency that serves as the anchor and numeraire for the international monetary system.19 A vital cultural and ideological dimension also underpins hegemony. A hegemon exerts influence through the “soft power” reflected in the attractiveness of its institutions, belief systems and cultural trappings (Nye, 2004). A world that embraces the predominant state’s values more likely will be one in which the international community considers it, despite all of its warts and missteps, fundamentally legitimate. A further requirement underpinning hegemony is that the predominant state can broadly reconcile the international “rules of the game” with its own “national interests” (Ikenberry, 2002). The sustainability of hegemony depends on other national governments believing that their interests are broadly advanced under such (hegemonically safeguarded) international conventions (Mead, 2004). In the absence of global government, the security, economic infrastructure and values espoused and underwritten by the predominant state can help provide the glue cementing enhanced global stability. And yes, this involves an overriding effort on the part of the hegemon to secure its own predominance by thwarting the efforts of aspiring global powers, particularly those that seek to overhaul the rules of the game underpinning the liberal hegemonic order. Last but not least is the material foundation of hegemony. Since this dimension receives detailed attention throughout this book, it will suffice here to say that material prosperity and the technological dynamism, 24 Global Power: Key Issues entrepreneurialism and openness with which it is closely allied provides the sine qua non of latent US power. In sum, as defended more expansively in Chapter 2, given the pervasive influence it exerts across multiple facets of power today, the US represents history’s most complete global hegemon. The likes of Venice, Holland, Spain, Napoleonic France and even the UK at its apex possessed far more limited degrees of influence. Thus, notwithstanding its long-standing application to previous great powers, global hegemony is only fully realized with the rise of the US and most evidently in the aftermath of the Cold War. Globalization and US power When the history of the late 20th and early 21st centuries is written, two overarching themes are likely to dominate. The first involves the evolution of US global reach. The second concerns a qualitative change in the contours of globalization. Among other features, the latter includes revolutionary advances in telecommunications and transportation, increasingly intricate global supply chains and a shift in the locus of economic activity and influence toward Asia and emerging markets more generally. After World War II, globalization constituted a principally US project and one which continually reenergized and reinforced US influence. Do globalization and US power remain compatible and mutually reinforcing today? According to one school of thought, having long since exported its patented “marketplace society,” the US triggered forces that are now exerting economic “blowback” on an ill-prepared American society (Agnew, 2005). Values the US has long promoted – free trade, capital mobility and liberal immigration – have come home to roost. The integration of China, India and the former Soviet Union into the global economy produced “three billion new capitalists,” flooding the global labor pool and pressuring workers throughout the industrial West with super-competitive manufacturing costs (Freeman, 2005a, 2005b; Prestowitz, 2006). Flush with financial wealth, these rising economic powers, according to many, will prove increasingly reluctant to subsidize US “overconsumption” (Faiola, 2009). Others who envision a growing incompatibility between globalization and US global power forecast ongoing political blowback, reflecting payback for a cumulative history of neo-imperial interventionism (e.g. Bacevich, 2002; Chomsky, 2004; Johnson, 2004). Less a backlash against prior intrusion, other observers would ascribe counter-US opposition to the proclivity of states to exploit any opportunity for gains in relative power to enhance security in an uncertain world (Waltz, 1979). After all, structural shifts in the world economy have placed emergent players in a position to make opportunistic claims on the global system and to more ably ensure their own security. However one spins it, according to this perspective, cumulative economic and geopolitical change over the past half-century now spells the eclipse of US predominance. In globalization the US created US Power: Past and Prologue 25 its Frankenstein; the tidal wave it spawned now engulfs the country: “ . . . Globalization is not synonymous with Americanization; in fact, nothing has brought about the erosion of US primacy faster than globalization” (Khanna, 2008b, p. 62). Against this narrative stands an alternative perspective which projects a more synergistic relationship between globalization and US power. In this view, the US remains at once the principal power promoting free mobility and exchange, and the main enforcer of financial and security arrangements that safeguard international transactions. The US continues to constitute the main “go to” power whenever a pressing regional or global threat to the system emerges. Through its provision of core public goods, including maintenance of a liberal trading system, provision of global liquidity and “safe haven” financial assets, securing of strategic commodity flows, and coordination of opposition to “rogue” actors, the US effectively safeguards the economic, technological and cultural interchange that constitutes contemporary globalization (Mandelbaum, 2005). According to this second perspective on the nature of US power, flexible labor and financial markets, and superior innovativeness and entrepreneurialism allow US policymakers to reconcile competing social demands at home with mounting pressures from globalization and technological change. The intrinsic dynamism and resiliency of US capitalism has allowed it to cope with new structural developments and emerging competitors (Friedman, 1999). Meanwhile, judicious use of US power ensures that globalization can continue. For example, deploying his characteristically evocative imagery, Tom Friedman puts it so: The hidden hand of the market will never work without a hidden fist. McDonald’s cannot flourish without McDonnell Douglas, the designer of the US Air Force F-15. And the hidden fist that keeps the world safe for Silicon Valley’s technologies to flourish is called the US Army, Air Force, Navy and Marine Corps. And these fighting forces and institutions are paid for by American taxpayer dollars. With all due respect to Silicon Valley, ideas and technology don’t just win and spread on their own. (1999, p. 373) In contrast to the late 19th and early 20th centuries, globalization today involves not simply mobile capital in search of resources or the infrastructure needed to transport resources (e.g. railroads, canals and ports) but a profound fragmentation of the production process itself, creating an intricate global network of production input sourcing. Emerging in the 1950s, for example, was a form of overseas financial investment involving far more than the customary purchases of sovereign and utility bonds, namely direct investment in manufacturing facilities, acquisition of equity positions in foreign enterprises, and creation of truly multinational financial and service 26 Global Power: Key Issues Table 1.1 Emerging market external financing, 2007–2012 2007 2008 2009 2010 2011 2012 Emerging and developing economies Private capital flows Private direct investment Private portfolio flows Other private capital flows 694 441 109 145 264 485 −62 −158 337 317 125 −105 605 392 241 −28 503 462 130 −89 268 394 133 −259 205 175 68 −39 80 170 10 −99 192 104 58 30 407 224 101 83 303 218 42 43 113 167 42 −96 Developing Asia Private capital flows Private direct investment Private portfolio investment Other private capital flows All values are in billions of US dollars; positive figures indicate a net inflow of capital from the rest of the world. Source: International Monetary Fund, World Economic Outlook database, October 2012. establishments. In the 1980s and 1990s, that process deepened into a new international division of labor in which production, research and marketing were partitioned across enterprises worldwide, creating the geographically dispersed and intricate global supply chains witnessed today. The direction of capital flows has likewise changed dramatically. Orthodox economic theory predicts that capital will flow from the capital-rich North to the capital-deficient South. On cursory inspection, this is exactly what is happening; in recent years the emerging market countries, as a group, have been net recipients of private capital (see Table 1.1). Yet, many such populations still save more than they invest domestically. Their resulting current account surpluses, supplemented by net private capital inflows, have facilitated the amassing of unprecedented stockpiles of official capital in the form of foreign exchange reserves and sovereign wealth funds. This (public) capital has been largely recycled to the advanced industrial countries, mainly through purchases of government and quasi-government securities. A disproportionate share of these resources has flowed to the US as the principal reserve currency and location of the most liquid and sophisticated capital markets. As pointed out by numerous critics, the UK’s export of capital – its net creditor status – contrasts markedly with the opposite situation facing the US today. That in addition to this official capital the world’s wealthiest country still attracts steady gross inflows of private capital prompts an obvious question: why do foreign investors remain so willing to supplement their dollar-denominated assets in the immediate aftermath of a global economic crisis originating in the US? This counter-intuitive directional pattern of net capital flow has been maintained despite the anemic recovery and ominous longer-term debt outlook in the US. Notwithstanding US Power: Past and Prologue 27 structural shifts favoring leading emerging markets and despite a worrisome fiscal picture in the US, the persistent preference for dollar assets amid successive flights to quality testifies to the sharply declining volume of “safe” international assets and the anchor role the US still provides within the global financial system.20 While the expansion of markets and the rise of transnational corporations in Latin America and developing Asia have also been leading features of globalization, less discussed is the ongoing dominance of transatlantic trade and investment. Although media attention is more often focused on trade balances, worldwide sales by the foreign affiliates of European and US transnational corporations, combined with bi-directional, transatlantic foreign direct investment (FDI) flows, represents a significant multiple of US (and European) exports and imports today. Contrary to common perception, during 1990–2009, 55 per cent of the $2.9 trillion in US FDI outflows went to Europe, while (low wage) China received little over 1 per cent of total US FDI (Quinlan, 2011, p. 150). Yet this reality may be changing. Given the disparities between European and Asian trend growth, a structural shift in dominance from transatlantic to transpacific flows seems likely. More generally, changes in the costs of energy, transportation, and unit labor costs across countries, some post-financial crisis increases in trade barriers and heightened currency volatility, and the reappreciated advantages of agglomeration, customization and closer proximity to product and input markets, may be facilitating some rethinking of MNC location including the prospect for greater reshoring (On Point, 2012). Another noteworthy structural development in the global economy involves the increase in transnational transfers. Although comprehensive inter-country data are unavailable, it is widely accepted that the US leads the world in “non-state transnational transfers” to developing economies. These generally unrequited (non-quid pro quo) flows include, first, remittances and, second, the transfer of money, technical assistance and training services, and goods in kind from a variety of non-state actors, including philanthropies, religious charities, other NGOs, universities and corporations (Brown, 2012). Table 1.2 provides estimates of a sub-set of US transnational transfers compared to that of four other industrialized countries. Against this selective overview of recent global economic trends, which of our two overarching perspectives appears the more persuasive? Will the secular forces of globalization reinforce US primacy or precipitate decline? Is US society institutionally and culturally positioned to adjust and benefit from the wrenching change wrought by new competitive forces? And is the global system today any more likely to avoid the fate of prior episodes of globalization, when international rivalry reversed a profound economic integration that, as today, had been buttressed by the power of the leading state (see e.g. Friedan, 2006; O’Rourke and Williamson, 2001)? Such are among the core themes explored throughout this book. 28 Global Power: Key Issues Table 1.2 Transnational transfers, 2009 ODA Remittances Philanthropy Total 2009 US UK Germany France Canada 28.8 11.5 12.1 12.6 4.0 90.7 13.8 9.9 8.4 12.2 US UK Germany France Canada 30.4 13.1 12.9 12.9 5.3 95.8 13.3 7.3 8.7 14.7 37.5 6.3 1.4 1.0 1.3 157.0 31.6 23.4 22.0 17.5 39.0 4.2 1.5 1.0 1.9 165.2 30.6 21.7 22.6 21.9 2010 All values are in billions of US dollars. Source: Hudson Institute, Index of Global Philanthropy and Remittances 2011, 2012; Based on data from OECD (2011) DAC Aid Statistics, Donor Aid at a glance www.oecd.org/dac/stats/donorcharts. Maintaining primacy in a turbulent era That “declinism”21 has resurfaced so forcefully and so soon following the dawn of the US’s “unipolar moment”22 seems striking. The rapidity of the purported transition from a global system centered on US primacy to one based on a re-emergent “multipolarity,”23 non-polarity or state de-centered anarchy24 should thus provide pause for reflection. After all, as the late Samuel Huntington once remarked, already by 1988 “the United States [had] reached the zenith of its fifth wave of declinism since the 1950s” (Huntington, 1988, p. 76). Although a comprehensive overview of what is entailed by hegemonic decline is the focus of Chapter 2, we cannot proceed further here without placing the question of declining US power in broad perspective. For reasons discussed throughout the rest of this book, any notion of absolute decline in the sense of internal implosion or systemic decay is not at issue. Rather, what remains open to question is the nature and degree of relative decline in the US’s global position and reach. Economic convergence remains a powerful secular force that can steadily narrow the gap in average living standards between rich and dynamic, emerging economies. Given this natural process of the “rise of the rest,” a meaningful notion of decline for the preponderant state in the system requires one to think in terms of the core conditions for maintaining (global) hegemony. The challenge is to define a qualitative threshold below which the composite (multi-dimensional) power gap narrows to a point where “hegemony” US Power: Past and Prologue 29 no longer accurately conveys the underlying distribution of global power. While postponing further discussion of this complicated subject here, it bears emphasis that hegemonic decline involves a more fundamental challenge than that involving the (predictable) economic convergence of a few rising states or notable shifts in constellations of regional power. In the event, the transition to a multi-polar world may well prove less linear than some acute observers suggest. Questioning presumptions of a “post-America” world, this book highlights the relative robustness of US economic, military, political and cultural assets and the country’s enduring, composite power potential. Its focus remains on more durable, structural underpinnings of US power in contrast to certain admittedly worrisome but more immediate exigencies that preoccupy US policymakers today. In assessing the longevity of US power, one can recall precedents when the US engineered more dramatic reversals of fortune. Paralyzed by Vietnam and buffeted by a crisis of political legitimacy (Watergate) and OPEC supply shocks, the US found itself reeling from Soviet expansionism during the late 1970s and early 1980s. Simultaneously, the country faced a ferocious economic challenge as European and Japanese firms out-competed their US counterparts in advanced manufactures. Extending beyond the anticipated post-war (European and Japanese) convergence, this underperformance signaled deep structural weaknesses. By the 1980s the Reagan “twin deficits,” the developing-country sovereign debt crisis and unrelenting international competition all seemed to herald a deterioration in the prospects for US prosperity and influence. While observers fixated on the US productivity slowdown, American scientists, engineers, and “hackers” in the peninsula south of San Francisco were quietly preparing the foundations for the ICT revolution (Markoff, 2005). Much as the UK’s burst of creativity in the late 18th century in iron, textiles and shipping had laid the foundations for its political and military power (and the First Industrial Revolution), from US technological creativity came all of the components that would coalesce to launch the (third) ICT revolution. Having suppressed double-digit inflation, the 1979–1982 “Volcker shock” ushered in a generation-long expansion punctuated by two brief and mild recessions dubbed the “Great Moderation.” Meanwhile, the Soviet Union disappeared onto the “ash-heap of history;” and the Japanese economy never exhibited more than tentative signs of sustained recovery from protracted stagnation. Fundamental reforms over decades translated into a pronounced turnaround in US economic performance circa 1995. Investment in information technology proved especially critical in boosting the capital stock per worker and productivity growth. Expanding global market opportunities reinforced the competitive advantages of US firms in innovation-intensive sectors such as advanced services, high-technology products and the licensing of intellectual property. Having converged toward 30 Global Power: Key Issues US per capita income levels, the continental European economies subsequently failed to replicate a US productivity growth acceleration based on extensive ICT application in the workplace, reorganization of production processes, new product development and knowledge-augmenting investment. If the longer-term ICT revolution remains in its infancy, the US may enjoy unique potential to leverage her “first mover” status into successive applications of new technologies for years to come. This book makes a concerted effort to distinguish more carefully between two concepts – decline and overstretch – that have been misleadingly conflated in many prior accounts of national power. The record of arrested descent and reversal described above complicates any straightforward application of the “imperial overstretch” story to the US today. In Paul Kennedy’s account, the history of the rise and fall of great powers reflects first and foremost the inability to maintain equilibrium between national resources and foreign commitments. In this framework, once a country’s resources prove inadequate to meet ever-expanding external pursuits, scant prospect exists for priority reassessment, and subsequent realignment of objectives with resources. Instead, national decline ensues more or less inexorably from the presumed, virtual irreversibility of the incipient state of overstretch. A more fundamental question involves the ability to maintain the systemic capacity for sustainable wealth creation and competent governance. The British Empire’s decline, for instance, arguably concerned less an accumulation of excessive foreign entanglements, including exhaustion from two world wars, and more the erosion of internal dynamism and resource mobilization capacity. Likewise, the key issue for the US is less whether it faces temporary overextension abroad and more whether the very engine of economic growth confronts pervasive structural impediments. Concerted national decline would suggest a deep-seated crisis impacting the institutional basis for innovation and investment. Such an economic crisis would typically also be accompanied by erosion in the institutions and levers of governance needed to overcome it. As the reader no doubt suspects by this point, this work owes considerable debt to the insights of Joseph Nye on key issues: First, hyperbolic assessments of power allegedly achieved in the past can bias notions of the national trajectory today. Cycles of US declinism can involve dangerous extrapolation well into the future from periods of historical anomaly, such as the aftermath of World War II or the downturn triggered by the sub-prime crisis. Second, national power remains an exceedingly complex, multi-dimensional and contextual phenomenon; and resource capacity should not be equated with a capability to realize such potential in the form of specific outcomes. The latter reflects an ability to influence behavior through a spectrum of mechanisms including agenda setting, preference formation, asymmetrical structuring and deterrence. Alliances and networks provide critical, power multipliers for a preponderant state. US Power: Past and Prologue 31 Where this book may part company with Nye lies in how hegemony is defined in today’s fast evolving context. Nye describes a three-dimensional “chessboard” of global power. On the first dimension of military power, the US stands alone. In the dimension of economic power, he positions the US among several “major players,” notably China, Europe and Japan. On the bottom chessboard is a diffusion of players in the realm of transnational relations with no distinguishable sense of order, hierarchy or leadership (Nye, 2011a, p. 3). Conceding that US preponderance across particular dimensions of power has diminished relative to certain base-periods, this book maintains that the US’s singular position at the apex of the global power hierarchy remains qualitatively uncontested. While US influence can prove indecisive in particular instances, no other single actor, or groups of actors, possesses anything approaching the structural advantages that allow the US to influence the broader economic, security and ideological contours of the system. To use Nye’s chessboard metaphor, across dimensions of play there may be varying actors jockeying for higher position, yet the US holds the highest position of composite power overall. History shows that no previous power has sustained predominance indefinitely. A similar fate may well befall the US at some point in the distant future; but meanwhile, the evidence marshaled to forecast the US’s steady economic and geopolitical decline seems underwhelming. Contrary to much received opinion, core underpinnings of US dynamism persist; key dimensions of her power projection remain entrenched; and elements of a flagging international legitimacy seem reversible.25 While complex forces buffet the USA today, glib pronouncements that the BRICs, other ascendant state or non-state actors, or the forces of globalization writ large are poised to displace the US as the predominant power – the global hegemon – are not supported by the evidence.26 Structure of the book This rest of the book is organized as follows. Closing the section “Global Power: Key Issues” Chapter 2 addresses two major themes. First, it reviews the constituent components of US power. In particular, it revisits how the combination of technological dynamism, overwhelming military power, broad political-cum-diplomatic influence and the cultural attractiveness of a uniquely multicultural society has proved to be a potent package underpinning post-war US primacy and leadership. It argues that US hegemony – qualitative predominance across multiple dimensions of power projection – remains a durable feature of the global system today. But it is equally true that the rise of new global actors and forces creates the imperative to adapt perspectives, policies and institutions in order to maintain systemic primacy. 32 Global Power: Key Issues In addition, the chapter offers a fundamental critique of the meaning and relationship between national “decline” and (imperial) “overstretch” that have dominated much of the literature. It argues first that decline is the more primary and less remediable of these two, often conflated phenomena. Second, I argue that attempts to equate overstretch with (fiscal and trade) deficits and energy import dependence, are, misguided. A narrower notion of “military overstretch” is shown to be a more applicable, albeit a more readily reversible, phenomenon. The section “Material Underpinnings of Global Power” rejects the consensus view that US power rests, shakily, on an edifice of crumbling economic foundations. Highlighting the enduring strengths of the system, chapters 3 and 4 feature the more durable microeconomic and macroeconomic underpinnings of US power, respectively, placing in perspective significant vulnerabilities and challenges to these pillars of strength in the short and medium term. Chapter 3 examines prevalent concerns that the US risks relinquishing technological leadership, first to advanced country peer competitors and eventually to dynamic newcomers. While challenges remain, the chapter argues that the core institutions supporting superior US innovation, entrepreneurship and productivity remain well entrenched. Central to maintaining US prosperity and power, however, is an ongoing commitment to an open economy, including a progressive immigration policy. A leading theme of this chapter is also that the concept of national “competitiveness” has been poorly construed, encouraging erroneous approaches to reinforcing core US economic strengths. Chapter 4 focuses on the US current account deficit, and external “indebtedness” as purported symptoms of national overextension and decline. The standard “American profligacy” explanation for US trade deficits and capital flows is dismissed in favor of a more persuasive, global structural interpretation. Examined in this context is the regular drumbeat for accelerated Chinese renminbi appreciation as the key to redressing “global imbalances.” The chapter assesses the “balance of financial terror” argument, involving the threatened dumping of US dollars by (unfriendly) foreign creditors. I evaluate the ability of the US dollar to retain its central reserve currency status, particularly in light of the fissures within the EMU and the inconvertibility of the yuan. Finally, I weigh the contribution of foreign capital inflows to the Great Recession and consider whether US foreign debt is likely to engender a future crisis that can significantly alter the distribution of global power. The section “Global Public Goods and the Re-ascent of China” features the theme of US leadership in the provision of global public goods. This highlights the legitimacy as well as more tangible gains that leading states garner from leveraging their influence to meet the collective needs of the global community. I apply this theme to the perpetuation of a US-led world US Power: Past and Prologue 33 order founded on such core principles as the safeguarding of human security, an open international trading system and the maintenance of balance of power within core regions of the globe. Chapter 5 examines US leadership in the protection of human security with a focus on nuclear proliferation. US leadership takes the form of galvanizing international action behind nuclear counter-proliferation and, in particular, keeping weapons of mass destruction out of reach of rogue states and extremist non-state groups. Utilizing case studies on Iran, North Korea and Pakistan, the chapter grades the US on its leadership in the area of nuclear proliferation and examines the latter’s centrality to US power in the future. Chapter 6 adopts a regionalist perspective to US leadership, focusing on dynamic East Asia. US involvement in this region is analyzed through two distinct lenses. The first involves the success with which the US helps to maintain the balance of power within the region. The second assesses the success with which the US has reconciled intra-regional economic integration with its goal of maintaining a liberal multilateral trading and financial order globally. The discussion to this point leads naturally to confronting a leading policy issue of the 21st century – “managing the rise” of China. Chapter 7 explores this country’s prospects for rivaling the US. It recognizes China’s achievements to date while weighing its formidable future potential against its principal vulnerabilities. In assessing China’s prospective challenge to US predominance, the chapter explores the likely balance between cooperation and confrontation going forward. Will gains reaped from participation in the prevailing world order trump incentives to mobilize resources to scale back US power? Is China positioned to offer a viable alternative to US-championed global rules of the game? The section “Domestic Constraints on US Power” drives home a central argument of the book: the principal dilemma for the US lies principally in how to forestall (internal) decline and less so in how to avoid succumbing to (external) overstretch. As formidable as they may seem, the array of external challenges confronting the US as discussed earlier in the book ultimately poses a less fundamental risk to US primacy, as compared with two core domestic challenges. Chapter 8 assesses the strategic implications of US fiscal imbalances. Focusing on the central problem of excess health care cost inflation, other oft-cited contributors to fiscal distress are placed in perspective. While the challenge to the budget from medical care inflation is genuinely worrisome, the US starts with significant advantages that militate against an otherwise more explosive increase in the burden of debt. Still, these advantages can be trumped by a growing preoccupation in global capital markets 34 Global Power: Key Issues with unsustainable US indebtedness that appears to defy ready political resolution. The second of these core domestic challenges, explored in Chapter 9, gauges the ability of an ideologically polarized and gridlocked political system to offer bipartisan solutions to fiscal and other principal policy challenges. The US has engineered dramatic reversals to many economic and social threats in the past. Nevertheless, an increasingly fractious political system may mean that a sovereign debt crisis is required before decisive measures are taken to mitigate this overriding risk. If it comes to that, the edifice of US power would erode significantly. This chapter examines the political debate over fiscal stress and other core underpinnings of hegemony in the context of the 2012 presidential race. The potential for improved political efficacy is also assessed in light of American public opinion concerning pressures from globalization. The chapter asks whether policymakers face a growing disconnect between national policies and the tolerance threshold of the American people. Have missteps in Afghanistan and Iraq, and aggravation of anti-Americanism worldwide, dampened Americans’ appetite for global leadership? Does the flurry of legislative activity over tightening border controls auger a rising fortress mentality? While public sentiment remains fluid, the chapter presents evidence that Americans, with important caveats, continue to embrace the principles of an open economy and an active exercise of US power. Given the domestic and external challenges reviewed throughout this book, the Conclusion (Chapter 10) defines the core conditions that would allow the US to maintain its qualitative hegemony over the coming decades. In this turbulent era, what steps must the US take to maintain its current predominance?