Introduction
This book takes as its starting point the most discernible pattern in international relations that has been observed throughout the millenniaâthe rise and fall of great powers. The question that presents itself today is whether we are witnessing the demise of American preponderance and a return to a competitive bipolar system with the USA and China as the two main protagonists? As far back as the fifth century B.C., Herodotus had noticed this waxing and waning of wealth and power, such that âthe cities that were formerly great, have most of them become insignificant; and such as are at present powerful, were weak in olden timeâ. 1 But more than this, the strongest state in the system will seek to establish an international environment that favours itself and its allies, but such arrangements have, thus far, never been permanent in nature. The growth in strength of a hitherto less powerful state, it is argued, will lead to that state challenging the prevailing international conditions that favour others at the expense of its own ambitions. At some point, the status quo will be challenged by the rising power. This usually occurs when the costs of confronting the status quo powers and disrupting the international order are outweighed by the benefits of reconfiguring such international arrangementsââthose actors who benefit most from a change in the social system and who gain the power to effect such change will seek to alter the system in ways that favour their interestsâ. 2
The problem for great powers alluded to by Edward Gibbon in his The Decline and Fall of the Roman Empire formed the basis of Arnold Toynbeeâs argument that hegemons confront two major problems, âthe threat of decay from within and the ever-present danger of overextension abroadâ. 3 Similar arguments can be found in the general literature, such as, Paul Kennedyâs The Rise and Fall of the Great Powers and his warning that the USA was in danger of overextending itself. But, what also lies behind the rise and fall of great powers is the uneven and combined development of these states. Those that are less economically developedâtrailing statesâstruggle to catch up with those that lead. When endeavouring to do so, they have one important advantage for, in the lead state(s), they see not only the reflection of their future but also the means through which they can attain such status. By emulating the technology of the lead state, they may leapâfrog several intermediate stages of development and close the economic gap that exists between themselves and the vanguard.
The challenge for the vanguard state, on the other hand, is how to maintain its economic lead in an international environment in which others can short circuit the path of development by emulating its very success. Although this has been one of the few constants throughout history (the copying of Carthaginian ship designs by the Romans during the First Punic War to the detriment of Carthage, is one of the more pertinent historical examples in the military sphere), it has been greatly exacerbated by the nature of the modern capitalist system. Inter-capitalist competition, overcapacity and declines in the rate of profit impel the industrialist to look overseas for new markets leading to greater trade and/or the establishment of production units in other markets. The latter may occur for two reasons. Overseas production may be used as a substitute for trade, enabling companies to tap overseas markets. At the same time, cheaper labour and land (and possibly energy) lower costs of production overseas not only helping to restore rates of profits but also enabling companies to temporarily overcome the problem of market saturation. The paradox of power for the USA is therefore that the very economic system that has propelled it on to the world stage also contains within it the potential seeds of its own destruction. Of course, trade acts as a conduit for technological transfer, but more fundamentally the construction of production sites in the pursuit of lower costs provide others ample opportunity to catch up through technological leapfrogging.
Yet, what marks the period of US dominance from previous historical epochs is the conscious design of an international economic architecture that is now worldwide in its nature, the objective of which is the facilitation of a global free market. Whether the USA can use the global institutions and rules created at its instigation to prevent the rapid rise of a challenger is the key question that this book sets itself. In so doing, the book traces the post-war economic recovery arguing that the USA was rather successful at preventing the rise of a new challenger amongst its allies, but whether it can repeat this success in relation to China is yet to be seen.
The USA and International Order
At the close of the Second World War, America set about establishing a global economic order based on multilateralism and a truly international system of sovereign states using its structural power to frame these arrangements. With its commitment to the independence of hitherto colonial states, the Atlantic Charter of August 1941 agreed by Roosevelt and Churchill at Placentia Bay, Newfoundland, augured in the handing over of world leadership from Britain to the USA. But it also heralded a new international order, with its commitment (in principle at least) to ârespect the right of all peoples to choose the form of government under which they will liveâ and to âsee sovereign rights and self government restored to those who have been forcibly deprived of themâ. 4 For the USA, the dissolution of former empires into newly independent sovereign states had the added benefit of ensuring that, outside of the Communist Bloc, its new form of hegemony would be effective throughout the world. According to one author on the subject, this dismantling of former empires represented âthe most important single change in world politics in recent centuries. The dominant nation-state-empires of the nineteenth and early twentieth centuries were overthrown. With them went the core of the inter-state systemâwhich lay in inter-imperial relations rather than in Westphalian ideas of sovereigntyâand the classic meaning of the nation-stateâ. 5
In addition, the USA established a set of multilateral institutions/regimes based upon an open world economy that provided for the inclusion of any state that wished to join. This, it is argued, was quite intentional. After two World Wars in the first half of the twentieth century, the USA attempted âto build a system that could at least potentially put an end to thousands of years of great power conflictsâ. 6 The result was the creation of a multilateral order that brought great benefits to its allies in the core industrialised states, spinning an economic web that âattracts othersâ and âmakes it hard for them to leaveâ thus promoting ever greater economic integration. 7
Certainly, throughout the period since the Second World War, the USA has been highly interventionist in terms of relatively short-term military campaignsâa trait that has only strengthened in recent decades. Moreover, as Rosemary Foot and Andrew Walterâs excellent analysis highlights, when it deems it in its interest, the USA often plays fast and loose with regard to the very international norms and agreements that it was instrumental in establishing. 8 Yet, the form of American Empire is markedly different because it is not an empire of territory, but an empire of capital. 9 The objective is to create an international order based on the free flow of goods and capital. Rather than seeking to achieve long-term possession of othersâ territory (at least after its initial expansionist phase), the objective has been to promote unfettered access to goods, resources and labour through the market, providing equal access for both ânationalâ and international capital.
Although the open economic system that the USA established certainly helped prevent antagonistic blocs within its sphere of influence, it was also very much in its interest to develop an open economic order because at the time it possessed a competitive advantage in almost every economic sphere. The position of the USA was therefore akin to that of the UKâs during its period of hegemonic dominance which, at the time, had reduced its tariffs on imported manufactures to zero, despite tariffs being retained by the other major powers. 10 Similarly, the UK endeavoured to establish a degree of multilateralism into its trading arrangements when, in 1860, it signed the Cobden-Chevalier Treaty based on the principle of most favoured nation status (MFN), that is, if either country agreed to tariff reductions with a third party, these concessions would automatically be granted to the signatories of the treaty. 11
Yet, this principle was not applied extensively, and by the inter-war years, the international economic order had dissolved into a series of economic blocs based upon bilateral or regional trade agreements. After the Second World War, the USA set about establishing financial, trade and security regimes based on multilateralism. It is this unique combination of this principle of multilateralism embodied in a set of global institutions and absence of long-term territorial acquisition that sets the American hegemonic order apart from all others. Although Britain promoted an order based upon free trade, it did not purposefully set out to establish a set of institutions that were global in scope and based on a foundational code that applied agreements to all member states. Multilateralism, âcoordinates behavior among three or more states on the basis of generalized principles of conductâ, something that neither a simple free trade system nor a set of bilateral agreements possess. 12 For example, the most-favoured-nation rule under which the General Agreement on Tariffs and Trade (GATT) operated meant that once an agreement to reduce tariffs on imports was made between two states it must apply to all member states.
Of course, despite many arrangements being multilateral and having âgeneralized principles of conductâ, these are not always upheld in practice. The form that these agreements take often favour certain countries over others (for example, GATTâs introduction of the 1974 Multifibre Arrangementâs quota system for imports of textiles and garments from industrially developing countries). 13 Greater power, more often than not, yields greater influenceâparticularly in relation to the IMF and World Bank where voting power depends on size of economy and the degree of financial contribution. In addition, bilateral agreements and aid have focused on some countries more than others.
Indeed, it is clear that Europe and East Asia, partly because of their strategic importance, have benefitted to a far greater degree from integrating into the US hegemonic order than most other countries. Churchillâs âIron Curtainâ speech is remembered mostly for it pointing out his concerns regarding the communist threat in Europe, but it also talked of the threat in East Asia. Mirroring these concerns, Dean Acheson, Under Secretary of State, argued for the construction of a âgreat crescentâ stretching from âthe Kurile Islands to the borders of Iran and Afghanistanâ that would serve as a bulwark against communism in the East. 14 It was envisaged that this âgreat crescentâ would involve âthe development of an interdependent and integrated counter-force to Stalinism in this quarter of the worldâ. 15 By May 1947, Acheson was publicly stating the need to ensure the economic revival of the alliesâ former enemies, arguing for the âreconstruction of those two great workshops of Europe and AsiaâGermany and Japanâupon which the ultimate recovery of the two continents so largely dependsâ. 16 A more appropriate metaphor to that of Churchillâs iron curtain would therefore be a âring of steelâ established to encase both the Soviet bloc and the newly established PRC in order to contain communism. Although Latin America and Africa would become the site of proxy wars between the two sides later on, the greatest importance was placed on containing communism within the territories that they possessed at the time through the establishment of this ring of steel.
Although Americaâs strategy was successful in c...