respect for the United States has declined further.
The global leadership competition and the world economy will be crucially, perhaps decisively, affected by US policy under President Biden and his successors. Even a partial return to America’s traditional global economic leadership would roll back at least the most extreme costs of the Trump abdication. But continued United States slippage in the face of China’s continuing rise, even if conducted in more civil tones, would confirm that the problem was not simply President Trump but rather a more deeply rooted bipartisan tendency that the rest of the world would have to recognize was long-lasting. The possible future return of Trumpism, or even of President Trump himself, adds to such possibilities.1
The allies, of course, will have to accept a return of US leadership if that leadership is to be restored. Some of the allies have disagreed mildly with some US leadership, and disagreed strongly on a few occasions. Some Europeans talk frequently about “strategic autonomy” and fending more for themselves (but have done little to move in that direction and hence have subjected themselves to constant US hectoring to contribute more, not less). But most are probably inclined to repair the hegemonic coalition, at least to where it stood prior to the Trump Administration. A particularly key role in Asia will be played by the Quad – the United States, India, Japan, and Australia – that resides closest to China, which has been denounced by Beijing, and held its first summit (virtually) at the outset of the Biden Administration.
Once burned, however, twice shy. Any US return to global economic leadership must be credible and sustained if it is to be believed and accepted by the other key countries, in both Europe and Asia. This will require, among other things, domestic US reforms to strengthen US leadership capabilities, and especially to rebuild a sustainable domestic political foundation that will support such leadership, as will be outlined in chapters 5 and 10. This is particularly necessary because US leadership had already been eroding for some time, as we will see in chapters 2 and 6, and because some echoes of even the more extreme Trumpian proclivities – especially with respect to China – can be expected to reappear with some regularity. The initial Chinese reaction to President Biden has been disappointment – i.e., he continues to take a hard line toward them (Wang 2021; Yan 2021). President Trump will then have left a lingering, if not permanent, impact on US policy in this domain.
At a minimum, this means that any restoration of US global economic leadership will have to continue beyond President Biden, and probably across at least one Administration of each party. Skeptics will be on the lookout for Trumpian deviation on these issues, especially by non-Trumpian governments. Under the best of circumstances, it will thus take considerable time to restore anything like the alliance solidarity that was so crucial in supporting US global economic leadership over the past seven decades.
The Systemic Alternatives
The world economy is thus threatened by two potentially mutually reinforcing pressures: the rising capability of a new superpower, and the declining will of its traditional leader. The resulting leadership vacuum eerily inverts that of the early 1930s, when incumbent Great Britain no longer had the capacity to lead and rising America was not yet willing. That unique juxtaposition converted the national recessions of the day, via a downward spiral of trade and capital flows, into the Great Depression (Kindleberger 1973).
On this occasion, the incumbent power is still capable but may be losing its will, while the rising power does not yet have full capacity (and may not want to assert true leadership either). The world economy could thus succumb again to a “Kindleberger trap,” especially if faced with another shock like the global financial crisis of 2008–9 or the deep recession triggered by the coronavirus pandemic in 2020. At the same time, China – United States confrontation could presage a “Thucydides trap” conflict between the two superpowers.
There are several possible paths for future systemic evolution. As chapter 7 will show, the leaderless non-system could prove sustainable (G-0s) for at least a while if the key middle powers – notably, Europe and Japan – and the existing international institutions prove able to hold it together. This would be true especially if China would help to do so, which it should as it espouses multi-polarity and such an evolution would contribute to a reduction of American hegemony. But an unstable G-0u could also prevail if it turns out that a single dedicated leader is in fact required to produce systemic success.
China could make a dash for dominance to exploit the US abdication and seize leadership (G-1), as posited in chapter 8. This would require it to adopt important policy reforms and the rest of the world to accept at least some of its very different values. The United States could seek to reassert its traditional role, though it cannot restore dominance due to the rise of China. It is unlikely to try anyway, due to the underlying anti-globalization swing in its domestic politics and the lingering impact of Trumpism.
Or China and the United States could resolve to work together, at least on issues of sufficient importance to sustain the system, to provide effective co-leadership through what I will call conditional competitive cooperation. The strong form of this alternative would be a G-2 through which the two economic superpowers would exercise joint leadership of the world economy, radiating out through concentric circles of other countries (G-3/4, G-7/20, the formal multilateral institutions), as outlined in chapter 9.
The Current System
Before addressing these alternative systemic futures, we need to assess the record of the past and current international economic order, and the role that leadership or lack thereof has played in its successes and failures. The liberal order has been a centerpiece of the global peace and prosperity that has prevailed over the 75-year period since the end of the Second World War. Along with the military power of the United States and its allies that secured the peace, it has enabled an era of economic growth and poverty reduction that is unprecedented in history. This has in turn supported sufficient political stability, both within and across countries, to prevent the great-power conflicts that devastated the previous thirty years (and much of the previous centuries). The economic system played an important role in ending the Cold War (Ikenberry 2008).
The economic order was created in 1944 explicitly to avoid a replication of the chaos of the interwar period, whose competitive currency devaluations and trade wars (due, importantly, to the Kindleberger trap) played a central role in bringing on the Great Depression and the Second World War. It rested on several key principles. The most fundamental were the avoidance of beggar-thy-neighbor policies, the primacy of markets, the rule of law, and cooperative institutions to support them. The economics of the system were guided largely by the price mechanism and private enterprises, with extensive trade and (increasingly) investment liberalization among at least the major countries. Constitutions and legal systems provided assurances that these economic principles would be implemented in practice, generating confidence that the order would be sustainable and successful. A wide range of supportive international institutions were put in place and nurtured to maintain and further build that confidence. Democracy reinforced the economic and legal foundations in most – though not all – countries. It was no coincidence that these principles and their implementation corresponded closely with values held, if not always practiced perfectly, by the United States and its main allies.
The United States has a vital national interest in the stability and prosperity of the world economy, for both security and economic reasons. Maintenance of the global economic
