US isn’t key to economic stability – other actors, limited scope, and empirics

Another characteristic of today’s rules-based order is rising living standards facilitated by global trade. Governments have lowered tariffs and relaxed or removed barriers to foreign goods or foreign investment, producing enormous net benefits. For most of its history, the US government attempted to manage trade, especially by protecting privileged and politically well- connected US industries from foreign competition. But, coming out of World War II, US officials took the lead in promoting trade liberalization. They helped to establish new institutions, including the General Agreement on Tariffs and Trade and the World Trade Organization, that would make it easier for countries to trade with one another. The International Monetary Fund and the World Bank contributed as well, deepening countries’ economic ties, and generating desperately needed liquidity during crises. The United States also wielded its prodigious economic power unilaterally in the postwar years, especially the dollar’s dominant role in the global economy—and often for foreign policy aims that had nothing to do with expanding global commerce. Even US partners and allies were targeted. Immediately after World War II, for example, the United States extracted concessions from the United Kingdom as it sought loans to put its fiscal house in order. And, not quite ten years later, when the United Kingdom, France, and Israel conspired to take back the Suez Canal from Egypt’s Gamal Abdel Nasser, the Eisenhower administration compelled a humiliating retreat by threatening to sabotage the British pound. Such economic coercion would be far more difficult today. More broadly, trade and globalization are driven by a growing appreciation of the economic benefits that they deliver to a widening circle of beneficiaries, not by the implicit threat of US coercive power being employed against those who might disagree. Indeed, the US government has practically abandoned the field when it comes to promoting greater trade liberalization, explains Adam S. Posen, president of the Peterson Institute for International Economics, by attempting to insulate the US “economy from foreign competition, while the rest of the world has continued to open up and integrate.”43 The data bear this out. Trade’s share of global GDP has been steadily rising for decades, from 39 percent in 1990 to 61 percent by the time of the financial crisis of 2008. That prolonged recession took a toll on global trade, which has now nearly returned to pre-crisis levels. In the United States, by contrast, trade as a share of US GDP grew much more slowly than the rest of the world—from 20 percent in 1990 to 30 percent in 2008. It then fell at the same rate as other major economies during the global great recession but has not yet recovered. US policy is generally not driving the rest of the world to embrace liberal trade practices. Since 2000, Posen notes, the United States has negotiated a handful of free-trade agreements, but mostly with small economies, and not with an object of promoting greater economic engagement between Americans and others. The United States has isolated itself economically in other ways as well. “A succession of nationalist policies that have increased the threat of arbitrary restrictions on technology transfer and foreign ownership,” Posen explains, have discouraged many foreign companies from making major investments or opening new businesses in the United States. Such “greenfield investment” totaled $13 billion annually in 2000 but had fallen to $4 billion by 2019. And foreign money is not the only thing that has been frightened away. Many people are also less interested in coming to the United States; net immigration has been declining for decades.44 As noted, the global economy has mostly bucked these trends, embracing greater economic linkages even as Americans were cutting them. And the durability of the international economic order has proved itself in other ways. The types of major shocks that cast a pall over the global economy in the early 1970s (e.g., the Arab oil embargo) are less likely today because supplies are more plentiful and widely distributed, and consumers more adaptable. Meanwhile, the collapse of even major states or entire regions’ financial networks very rarely spiral into a global contagion. The collapse of the residential real estate market in the United States in 2007-2008 might be the exception to this pattern, which again calls into question the notion of the United States as a uniquely stabilizing economic force, or responsible for sustaining the global economy. On the whole, global trade does not depend on a single state connecting buyers and sellers; and supply chains have become considerably more diversified over the last half century. Major disruptions to global trade are rare and almost always short- lived. The international economic order is surprisingly robust, and the occasional shocks are unlikely to be mitigated by coercive threats and shows of force. In this context, US military power may be as destabilizing as it is stabilizing. Extremist groups, in particular, may seize upon feelings of resentment and humiliation caused by foreign domination to grow their ranks and draw support to their cause. And the wars in the Greater Middle East have devastated countries from Libya to Iraq to Syria to Yemen to Afghanistan and spread chaos far beyond the region as millions of migrants have fled the violence. Political scientist Daniel Drezner concluded in 2013 that the United States’ massive military power “plays a supporting role” in stabilizing the international economy but only when combined with the United States’ economic primacy.45 And that latter advantage, in particular, has been steadily eroding over time. According to the World Bank, the US share of global output, as measured by purchasing power parity, has fallen from 20.8 percent in 2000 to 15.8 percent in 2020.46 A less economically dominant United States should not expect that its still-dominant military alone will allow it to wield the same level of influence as before. In sum, while the US foreign policy establishment often imagines the United States to be at the center of the global rules-based order—the indispensable nation, as it were—a fair-minded reading of US policy reveals that the United States was not solely responsible for creating many of the favorable trends of the last half century. And, in several critical respects, US policy ran counter to, or actively undermined, global norms surrounding the use of force; respect for national sovereignty, self-determination, and human rights; and noninterference in global trade. The United States has often championed the foundational pillars of the post-World War II rules-based international order, but it has also engaged in activities that erode or violate these principles.