The Threat to Economic Hegemony is Economic Hegemony: Part II

12 February 2022, 2004 EST

This piece is the second in a three-part series grappling with the role of political economy in making a just, sustainable international order.

Writing about America’s economic strategy deficit got me pondering why the United States had such a stunted economic imagination. How could the government that many consider to be the global economic hegemon be inept at economic statecraft?  

For one thing, I think the popular impression of America as the world’s economic hegemon is overstated. Yes, the United States has many economic advantages. Its domestic market is still the destination of choice for manufacturing exports. It has the world’s reserve currency (which means it enjoys the “exorbitant privilege” of running crazy deficits). It has veto rights at the World Bank and International Monetary Fund (which it shouldn’t have, but that’s a separate argument). And it has unique control over the “pipes” of the international financial system.  

But in Asia — the world’s wealthiest and most populous region — China established economic centrality years ago. America’s economic throw-weight in Asia is far less than China’s, in part because of trade volume, but also because America’s large investments in Asia are not state-backed or centrally coordinated, which makes them somewhat un-leverageable. And US exclusion from Asia’s dense financial architecture makes it likely that things will continue trending in that direction.  That means what’s going on is the economic equivalent of “uni-multipolarity” or “multi-multipolarity” — system level hegemony, perhaps, but regional level contested hierarchy for sure.  

Nevertheless, pointing out that the United States isn’t as dominant as we think doesn’t answer the why-no-strategy question. It might be that the United States has a habit of overemphasizing the military as a tool of policy, which has diminished policymakers’ ability to think seriously about connections between security and political economy. As somebody who was a maker of strategy in the Obama era, I think there’s something to this.  

But the more compelling answer may well be that what we call American hegemony is really neoliberalism’s hegemony, which means neoliberal blind spots. And it’s the blind spots that are leading to hegemonic decline.  

Neoliberalism Runnin’ This Isht

The economic order that sustains neoliberal globalization is no longer politically popular, but it’s still the dominant mode of policymaking (and don’t tell me you don’t know what neoliberalism means — it’s the ideology of the primacy of capital, which necessarily puts the state in service of capital above labor and society).  

Some Keynesian stimulus and a pandemic emergency that temporarily overrides prescriptions for fiscal austerity does not mean the demise of neoliberalism. It doesn’t even mean the demise of austerity politics. Instead, the pandemic has worsened concentrations of wealth, capital is as mobile as it ever was, and the international financial institutions that constitute the prevailing economic order are alive and kicking.  

In fact, some of the most potent claims about the world having moved beyond neoliberalism into a form of “precarity capitalism” are simply arguing that the precarity induced by neoliberal policies afflicts almost everyone, even the “technocratic managerial class.”    

Why does it matter if neoliberalism is still hegemonic? Because what looks like non-strategy/bad strategy for the many might be good strategy for the few! In a system where capital has primacy, the interests of the owners of capital have primacy. Neoliberalism may not serve some woolly notion of the “national interest” or the majority of workers — precisely why it’s lost popularity — but it serves oligarchs, plutocrats, and many in the “technocratic managerial class” just fine.  

From Blind Spot to Hegemonic Decline

Put differently, the economic non-strategy of the hegemon has been working for the interests it’s supposed to work for. And in the meantime, America has had a large geopolitical margin for error because hegemonic order is favorable terrain for a hegemon to pursue whatever goals or foreign policy adventures it dreams up. “Don’t blow the lead” is the only strategic advice America has really needed since the end of the Cold War.    

If all this is true, then it explains why we haven’t seen any sense of urgency from the federal government on the things that non-plutocrats might want economic policy to do — reduce wealth inequality, rebalance relations between the Global North and South, make life less precarious for workers, facilitate a just energy transition for the developing world, slash carbon emissions globally, ensure the world gets vaccinated.  

These kinds of policies are clearly not priorities. Why not? Because they’re solutions to problems that exist in neoliberalism’s blind spot. Environmental degradation has been an acceptable price for neoliberal globalization. So has extreme wealth inequality, extreme capital mobility, extreme intellectual property rights, and extreme debt repayment enforcement. And allowing those problems to fester, ironically, is what has allowed dissatisfaction with the international order to grow.  

It’s the blind spots, then, that give us the hegemon’s relative decline. Just look at the unrest it’s causing around the world, or the neofascist politics it’s unleashing. And as Alex Cooley and Dan Nexon have argued, “the contemporary liberal order works better for authoritarian regimes than it does for liberal democracies.”  

How can policymakers take action against the problems of our age if they do not recognize the symptoms they worry about (e.g., protests, populism, polarization, extremist violence) as negative externalities of the worldview to which they’re in thrall?