Has the eagle crash-landed?

The financial crisis in the United States that has all but thrown the world's largest economy into recession is also prompting pronouncements that what had been dubbed “the American century'' is over.

From gleeful declarations in places such as Iran and Venezuela that the era of American superpower has ended, to the measured statements of European leaders about a new era of “multipolarity'', the conclusion is the same: A global power structure based on US predominance and leadership is in a shambles — never to rise again.

Such a conclusion follows the predictions of shrinking American global power that flowed from the Iraq occupation.
Yet others say, “Not so fast!'' and predict the American era will continue — in part because the world has devised no alternative to it.

If nothing else, the need for coordination in the face of the globalised economy's first epic financial crisis will provide a test of where America's power and leadership really stand, they add.

The first sign of a coordinated response to the crisis came with the US orchestrating a round of interest-rate cuts by the world's major central banks.

The American initiative was designed to begin restoring confidence in markets and ease fears of a global recession.

Economic calamity

Still, what seems clear is that the experience of the Bush years, now drawing to a close amid the worst economic calamity in eight decades, has bolstered those who long predicted a clipped American eagle.

“What George [W.] Bush did was turn a slow decline into a precipitous one,'' says the noted Yale University sociologist Immanuel Wallerstein, who has been predicting the end of the American empire since the 1980s.

“We've had two standout factors: the Iraq war, which not only demonstrated but actually accelerated this decline in power, and then the way this president put the American government in such deep debt,'' Wallerstein says.

“What we see playing out is the culmination of these actions.''
What that scenario doesn't consider is that the ongoing financial crisis is like a raging sea lashing all boats and not just the US, others counter.

That has been evident in the plunging markets in Europe and Asia and in the frantic efforts to prop up some tottering European banks.

Still others point out that the US economy will remain the world's largest for the foreseeable future, just as the American military will face no challenger to its global superiority for at least many years to come.

“The declinists predicting America's demise as the pre-eminent global power are in overdrive with the financial crisis, and the declinists are wrong once again,'' says Robert Lieber, professor of government at Georgetown University in Washington and author of The American Era.

The US, he says, maintains a list of strengths over its international partners and rivals that includes such quantifiable tangibles as military superiority and economic size and productivity — and intangibles such as flexibility and “a capacity for reinvention''.

America's “structural advantages matter much more than economic cycles'', Lieber says.

More diffuse power

Yet even as the debate goes on, a number of realities are accepted by all sides. One is that new powers — China, India, and Brazil, for example — are rising to make for a less monolithic and more diffuse global power structure. “Clearly, lots of other countries count in ways they did not before,'' says Lieber.

Another is that no other country or international institution appears ready to step into America's shoes.

By deciding recently to go for nationalist strategies rather than a common European approach to the credit crisis, for example, Europe's top finance ministers have suggested that even Europe is not ready for a role of unified leadership.

Still another reality: Broad adherence to the Washington-driven international economic prescriptions of recent decades, under which the market and private sectors took over for a reduced state, is a thing of the past.

“This crisis has finished off the Washington consensus,'' the standard package of free-market reforms promoted by Washington and the Bretton Woods institutions to replace the state-run economies of developing countries, says Anatol Lieven, a professor at King's College London and a senior fellow at the New America Foundation in Washington. “We're going to see greater state interventionism.''

Yet Lieven adds a caveat: “That doesn't mean there's a new economic model to replace the old one,'' he says. “It's still much too early to know if China's authoritarian capitalism, as one example, is the wave of the future — or if its export economy might yet collapse.''

Proponents of the shrinking-America thesis say it is much more than the end of the Washington consensus that supports their vision.

They cite everything from America's reduced leadership role in the Middle East to its fall from the lofty position as the world's most admired power.

“Look at Georgia,'' says Wallerstein of Yale, noting that Russian troops remain in that country two months after demands from Washington that it depart. “All the US can do is shout — and not even shout that loud.''

Yet it remains unclear exactly what Americans would be adjusting to — since in many key categories, the US remains rungs above any other world power.

“Keep in mind how extraordinarily broad and sweeping America's claim to global leadership has been,'' says Lieven of the New America Foundation.

“Whatever decline that leadership experiences will be relative to the weaknesses of others and likely to leave it with reduced but still unrivalled power for some time to come.''

That picture of reduced yet still unrivalled power is one that pops up in a wide variety of discussions.

As David Kay, a non-proliferation expert and former US weapons inspector, said at an Iran forum recently: “I hate to agree with [Iranian President Mahmoud] Ahmadinejad on anything, but the American empire is gone.''

He then added: “But we can lead,'' and on issues such as Iran's nuclear programme or international non-proliferation efforts, “We probably have the most important leadership role.''

How will the US and the world adjust?

Regardless of whether one sees an American eagle of clipped wings or one that is simply flying closer to the pack of world powers, much appears to ride on how America and the world adjust to the new era for world leadership ahead.

Global hegemony

On one hand, Wallerstein says, how the US manages its “descent'' from global hegemony will go a long way in determining how damage-free the process is for America and the world.

He finds the process has recently taken a promising tack: Compare, he suggests, the unilateral muscularity of President Bush's first term with a greater reliance on diplomacy in the second.

From another perspective, Lieber of Georgetown notes that many world powers still choose to “bandwagon'' with the US — take India and the watershed alliance it recently forged with America.

But for now, it is the financial crisis that is providing a gauge of America's enduring leadership capacity.

Many economists are citing international coordination as key to righting the global economic ship.