The more evidence we have that the American century of international hegemony is waning because of an increasingly weaker economy, the more scholars and analysts of international political economy insist that the 21st century will not witness China’s global ascendancy. From prominent academics to journalists there is a refusal to acknowledge structural shifts in the global economy from West to East means that the US will be taking a back seat to China. Skeptics point to everything from China’s aging population to business debt and shadow banking problems, to political and social challenges for the ruling Communist Party as proof that China’s ascendancy is a myth and the American century will continue from the 20th to the 21st without a serious Asian challenge.
Evolving since the 15th century, capitalism as a world system lacked coordination under the aegis of international institutional structures. To manage the world economy under its hegemony, in the mid-1940s the US established mechanisms such as the International Monetary Fund (IMF), International Bank for Reconstruction and Development (IBRD now part of the World Bank Group) followed by the General Agreement on Tariffs and Trade (1948) GATT now World Trade Organization (WTO). Leadership within the international institutional structure mitigates the effects of cyclical expansions and contractions through coordination of central bank monetary policy but also trade and fiscal policies, thus essential to achieve a modicum of equilibrium rather than exacerbating the contraction.
America’s withdrawal (1 June 2017) from the Paris Climate Accord raised serious concerns within the country’s political and business elites and among allies worried about President Trump’s unilateralism (pursuing a policy and/or acting upon it without coordination and collaboration of other countries). The concern among allies relying on American leadership reflects general uneasiness because the government extends unilateralism beyond the climate agreement and into economic nationalism. He demonstrated when he rejected the Trans-Pacific Partnership (TPP) trade agreement not because it was a bad deal for workers but because it did not provide favorable terms of trade for the US.
No matter the finger pointing at China, Mexico, Canada, Germany and other countries, de-capitalization, which clearly hurts the national economy and public finances, starts with policies designed to concentrate capital especially in speculative sectors where nothing is produced and money is made by recycling investment in financial markets benefiting the wealthiest Americans. Decrying Chinese currency, trade, and fiscal manipulation by the US which has its own manipulation issues may be politically receptive rhetoric for frustrated populists and economic nationalists, but it does not alter any empirical realities of how capital accumulation on world scale works and it does nothing to slow down China’s ascendancy.
As Western Europe and Japan began to reindustrialize while USSR and China developed massive defense sectors during the early Cold War (1945-1960), American decline began to take place. In 1958, the IMF warned President Eisenhower about chronic balance of payments deficits impact on the dollar’s artificially high value as a reserve currency. Although Eisenhower warned the nation about the military industrial complex, the US pursued “Military Keynesianism”, massive defense spending as a means of stimulating economic growth while also strengthening its defense alliances to keep its superpower status.
Not just those immersed in the imperialist ideology of “American Exceptionalism”, but militarists and economic nationalists would argue that unilateralism is best suited to serve national security and economic interests. One problem is that US-based multinationals operate in an international arena where US policies intended to achieve advantage over other nations could undercut US corporate interests. This is precisely the case with NAFTA partners Canada and Mexico that the Trump administration has singled out as unfair competitors. In fact, US-based corporations and portfolio investors in Canadian and Mexican stock exchanges have benefitted from the regional trading bloc.
On June 1, 2017, the EU declared that along with China it would fill the leadership role against the background of the vacuum the US is leaving by withdrawing from the Paris Accord. The three main goals are: 1. The global average temperature increase held below 2 °C above pre-industrial levels, while temperature increase 1.5 °C above pre-industrial levels; 2. Lower greenhouse gas emissions without threatening food production; 3. Financial decisions to be made consistent with a pathway towards lower greenhouse gas emissions and climate-resilient development.
Coordination and macro-management of the world economy in consultation and cooperation with the rest of the world seems to be in doubt under Trump when compared with the previous administration. Nevertheless, there is a debate among America’s political, business, media, military and academic elites whether the future of US policy is toward greater unilateralism that many equate with strength and the glory of Pax Americana or a multilateral approach that reflects the new realities of the global power structure.