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National decline always manifests itself in
the mind of a nation's citizens before it shows itself in any practical way. Perceptions often then shape the reality - much like in economics, these expectations define behaviour to such an extent that they become self-fulfilling prophecies. Pew centre research
last year indicated that 70% of Americans believe that their nation’s influence
around the world is declining. Perhaps more significantly, 48% of respondents
believed that China was the world’s largest economy. This is well wide of the mark. Whilst Chinese GDP, in purchasing power parity (PPP) terms, is set to overtake the USA
by the end of this year, PPP is little more than an indicator of
relative prices – in dollar terms Chinese GDP is still $5-6 trillion
less than the US figure of $17 trillion. Of course it is hard not to see China,
with its population of 1.2bn, one day consuming an equal number of goods and
services as the USA (population 300 million), but this is not an imminent
event. There is clearly a deep sense of unease amongst Americans about how their nation's global standing has changed since 2007; it is indistinct and difficult to pin down, but two of the elements are as follows:
The first way in which perception has
started to alter the national psyche is the attitude of Americans towards China. In
many ways China has replaced the USSR as the necessary ‘other’ in the American
national psyche. Like the USSR it is seen as authoritarian, a threat to the
American way of life, mysterious and powerful. However, this time it is
different. China – through trade – is seen as already having infiltrated
the USA more successfully than Soviet spies ever did. I have had a series of increasingly
bizarre conversations with American friends and relatives about China; the crux
of these is ‘I don’t trust the Chinese but I don’t know why’. They then
promptly pop along to Walmart to stock up on cheap, well-made Chinese goods. Like the
USSR, China is seen as capable of surpassing the USA in the areas in which it
prides itself (global influence, power and productive might). Essentially, they
think Chinese strength will come at the expense of American weakness; that
China will win this one. Americans are viewing the US-China relationship
through cold war lenses partly because of a fickle and increasingly balkanized media.
The American public has rarely been kept well-informed by its media, but the
current media landscape is absurdly partisan. The truth is that no two
nations have been so economically entwined in history as the US and China.
Despite the barely credible headline growth figures, the truth is that China
has struggled since 2008 to plug the gap created by weakness in its main export
market and has resorted to a historically unprecedented fiscal and monetary
binge in response.
Essentially, a prosperous China = a prosperous America. Of course the
relationship is far from plain sailing – bumps have been caused by cyber
hacking and spying - but it is a great trading partner. Americans shouldn’t
feel guilty when buying Chinese-made goods, but nor should they be jumping for
joy at the prospect. It is a reality to be accepted like queues at airport
security or the person in lectures who won’t stop asking
questions.
Secondly, there is a recognition that US political institutions, which were once the envy of the world, are in a deep malaise. Congressional deadlock is nothing new, but it is believed to be worse than ever - this is borne out by the facts. According to the Brookings Institute, during the 80th Congress (1947-8) fewer than 30% of significant issues were left unlegislated as contrasted to 70% in the 112th Congress (2011-12). There is a strong anti-political narrative that holds that all politicians are corrupt, selfish
and in the pockets of donors. This is often an excuse for people to justify their
disengagement and intellectual laziness. However, it is
fair to say that the money and backing required to run for office does place an
enormous strain on any legislator’s independence. Whatever the facts, people are clearly discontented with national politics.
Yet, in contrast to the widely believed narrative that the US has been in decline since 2007, in some ways it has actually increased its global dominance over the last five years. In recent years, the
USA has strengthened its hold over the financial markets. Since November 2010 the Fed has added almost $2.9 trillion to
its balance sheet; it is an interesting point in itself that this hasn’t been
hugely inflationary, but significant also for the dependence on dollar
liquidity that this has engendered. One only needs to remember the stock market
crashes in Asian markets during the summer of 2013, the so-called ‘taper
tantrums’, when the Fed first threatened to slow its monetary injections. Furthermore, the US has maintained its ability to
police the financial markets. For those unversed in international finance, it
is truly startling that US District Judge Thomas Griesa has been able to stop
the payment of interest on non-US law denominated Argentinian sovereign debt from a New York courtroom.
In fact the explanation is simple - because of the continuing dominance of US domiciled investors and the abject fear of commercial banks that their ability to clear dollar transactions might be suspended, US courts effectively exercise
a worldwide jurisdiction. And, finally, it remains the world’s pre-eminent
military power by quite a distance. Even if Chinese military spending exceeds
its officially reported level, which it almost certainly does, they are several
hundred billion dollars behind the US’ 2014 budget of $801.3bn. It speaks volumes
for US power projection that the F-22 Raptor – developed in 2007 – was seen by
military chiefs as too powerful for use until its recent debut in Syria. Of
course there are pressing issues for the US military to address – such as its
inability to close military bases or the cosy relationship between the Pentagon and arms manufacturers - but the perceived
loss of US military might has much more to do with the choices of its
Commander-in-Chief than any change on the ground.
That said, the picture has not been
uniformly positive. The US has seen a marked decline in its soft power in
recent years. Where once only words were needed to influence, cajole and
prohibit, actions are now required. Take
the UN Security Council: although the USSR was by far the most common user of
the veto, since its fall the Russian Federation has used the power very
sparingly – however its recent persistence in blocking resolutions on Syria and
Ukraine has been notable. Unsurprisingly, these are the two crises over which
Obama has drawn red lines or made threats about consequences without any desire
to back up his threats with military deployments. Furthermore, institutions crafted by
the US at the Bretton Woods conference in 1944 have largely failed to reform
and are rightly viewed with distrust in many parts of the world. The position
of managing director of the IMF is still, somewhat bizarrely, reserved for a
European, whilst European countries retain a massively disproportionate
influence through the quota system – which determines votes and contributions.
Both the IMF and the World Bank are seen as rigid adherents to austerity and
fiscal discipline when it comes to third world nations, but far more willing to
accept laxity in the developed world. In the face of Congress’ refusal to
reform the IMF, efforts by Brazil, Russia, India, China and South Africa to
create an alternative development bank should be applauded. If soft power has
at its basis respect for cultural, political, governmental and societal
systems, then dysfunctional Bretton Woods era institutions deserve their slide
into irrelevance.
In sum, the prescription is clear: the US
must use hard power sparingly but more wisely and regain some of the moral
credibility lost in Iraq. This must begin with extricating itself from what is
shaping up to be a brutal war between Shias and Sunnis across the Middle East.
Whatever their limited involvement might be in airstrikes against ISIS, Qatar
and Saudi Arabia continue to fund ISIS as a bulwark against Shia Iran. Western
countries can only further play into the narrative that they are against Islam
by their participation. The comparisons between the Nazis and ISIS continue to
pile in: whilst the massacring of innocents is always a justification for
humanitarian intervention, the US has felt no great need to stop the Lords
Resistance Army – which continues to kill with abandon in eastern Congo – or
numerous other thugs around the world; why is this any different? On the domestic
front, the separation of powers between the judiciary, legislature and executive needs re-examining in light of the partisan environment. However, in a land where the constitution is sacrosanct and rarely amended, such a fundamental change looks impossible. Thankfully
the vitality of the economy is largely out of politicians' hands and instead spread
across 300 million shoulders.
The world is moving towards an era with no clear
global hegemon, but the US looks set to remain a first among equals for a while
yet.
