American power is declining as Barack Obama begins his presidency. American power has been declining through the entirety of my conscious life.
The first presidential election I remember with any clarity was in 1960. Part of the argument John F. Kennedy made against Richard Nixon and the record of the Eisenhower years was that a “prestige gap” had left the United States at a disadvantage relative to the Soviet Union, not to mention the alleged dangers of a missile gap. By the late 1960s, the United States was suffering its first-ever military defeat and was estranged from many of its allies because of the Johnson-Nixon policies in Vietnam, not to mention being torn apart by the worst domestic disturbances in more than a century.
It is by now a cliché to observe that Barack Obama took office facing the greatest challenge of any United States president since Franklin Roosevelt. The US economy had been in free-fall since the northern summer of 2008, the nation’s image around the world had taken a beating over the previous eight years. Obama inherited a losing war in Iraq, a deteriorating situation in Afghanistan and a wide array of unresolved foreign policy problems. No president in living memory had taken office with so much to solve and such limited room to manoeuvre.
In the first half of 2008, the United States headed into what seemed to be a normal business downturn triggered by a doubling of energy prices, although a few perspicacious analysts warned that something more fundamental was happening, at least in housing prices. They were correct: a bubble had pushed up housing prices for a decade—not only in the US, but across most advanced economies—drawing in many of the large institutions that provide finance in the US and much of the world to create and purchase highly leveraged securities based on bubble-inflated mortgage values and their unregulated derivatives.
When Barack Obama was talking to about 200,000 Berliners during the United States presidential campaign in 2008, he said “that the problems of the world were too great to be solved by one nation alone”. Well, most of us always knew that. But Obama was recognising more than the United States’ need for the European alliance. He was acknowledging the profound, irreversible redistribution of power in the world that actually has far more to do with China and India than with the Europeans. History suggests a precedent for adapting diplomatic practice to such changes—a precedent to which Obama appears intuitively oriented.
For more than a century, Pacific Asia has profoundly shaped the Australian-American relationship. By the mid-19th century, elites in both countries were defining themselves as Pacific nations, and the lands and societies of Pacific Asia provided important ingredients of the geopolitical identity of each. Asia was seen as a new frontier for these young and vigorous settler societies, which as the century wore on identified themselves and each other as representatives of the “Anglo-Saxon race” that had taken possession of the most productive temperate territories outside of Europe.
The rise of China will be one of the great dramas of the 21st century. According to some observers we are witnessing the end of the American era and the gradual transition from a Western-oriented world order to one increasingly dominated by Asia. The historian Niall Ferguson argues that the bloody 20th century is in fact a story of “the descent of the West”; a “reorientation of the world” in which the Atlantic powers ceded their mastery of the world to the East.
In recent decades, every financial crisis that has had cross-border dimensions or implications has brought forth widespread calls reform of the international financial system. Such calls have often featured suggestions that it is time for a new Bretton Woods, referring to the United Statesled conference in New Hampshire in July 1944 that gave rise to the post-war monetary system and its institutions. Less grandiose, but with similar intent have been calls for changes to the international financial architecture.
For more than a decade, the modus operandi of United States-China relations has been pragmatic, interest based and disciplined. Both sides have focused squarely on economic win-wins, managing down their lurking geopolitical rivalries and keeping a lid on potentially incendiary political disagreements and military tensions. Presidents Hu Jintao and Barack Obama have already signalled their strong intentions to keep relations between their two countries on this path.
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