US hegemony in global political economy


Mahrukh A Mughal

THE importance of a hegemonic power in stabilizing the global economy was initially indicated by Kindleberger in the 1970s. He argued that the world economic recession in 1929 was mainly because of the lack of “last resort”. At the time when the global economy was in a deep slump, the UK power was on the decline and no longer capable of reviving the global economy. Meanwhile, the US was hesitant about taking up the leadership role. There was thus a vacuum which needed to be filled by big powers. Though reluctant initially, the US subsequently took the leadership role of democratic and capitalist countries by establishing World Bank and IMF right under their nose to finance needy and poor countries to exercise and use their leverage in doing so to extract decisions which suited and favoured the US. The end of World War-II marked the start of a new global order.
The UK economic power in the world since the 19th Century was evidently replaced by the US in the 20th Century. Instead of simply being the dominant economic power with its highly developed capitalist economy, the US has even been able to exercise its political ascendancy over all capitalist nations. Nonetheless, the arrival of US as a global power did not make the world economy to be developed more stably. According to Perroux, because of IDE’s “superiority” in economic performance and industrial production, its influence on a dominated country is quite significant and irreversible. The principal methods that an IDE exerts on a dominated nation are the modification in the investment or trade volume, leading to an improvement or deterioration of dominated nation’s commercial balance. The development will thus inevitably become a confrontation between the two countries because the improvement in the trade balance of a country is considered as a deterioration of the trade balance of the other one. In terms of global governance, Perroux indicated the unsuccessful Bretton-Woods system was due to the incompatibility between its semi-liberalism and America’s strong dominant characters in the world. The Bretton-Woods system that sought to avoid repeating the financial crisis in the 1930s actually resulted in more gaps between the countries (Perroux 1987). The hegemonic state’s character was further visualized by Keohane’s theory of hegemonic stability. According to Keohane, hegemonic powers must have control over raw material, sources of capital, control over market and competitive advantages in the production of highly valued goods (Keohane 1984).
Unlike the Marxist’s focus on the class interest and production relations in a hegemonic system and the liberalist’s emphasis on the institutional power of the hegemony, the realist theories highlight the indispensable role of the hegemony in maintaining the world order. During the Cold War era, the US constructed an economic interdependence framework with its major allies in both Europe and Asia within which the global economy functioned. The security interest and alliance cohesion further provided political glue that held the world economy together and facilitated compromise of important national differences over economic issues (Gilpin 2001). However, history has proved that the global power is not forever the same one. Wallerstein‘s Modern World System (MWS) theory pointed out that before the arrival of the nation-state political system in early modern Europe, the international system had been characterized by successive world empires.
The world-empire was a centralized political unit that guaranteed economic flow from the periphery to the centre by force and by monopolistic advantages in trade (Wallerstein 1974). Similar to MWS, Modelski’s long cycle theory also showed the entrances and exits of different world powers since about 1500. The global leaders were often chosen by the wars though it may not always be the necessary condition for selecting the future leader (Modelski 1987). According to Gerbier, the unavoidable decline of the IDE is attributed to both internal and external reasons. Via outward investment and exports, the IDE transferred the technology to the other countries that benefited their development. Besides, the IDE’s higher resource distribution on the military made its capacity to maintain the competitiveness in civil economy into question (Gerbier 2007). The international relationships are built on the process of fight and competition for “global leader” between the uneven and diverse state economies.
With the end of Cold War, the US political leadership and close economic ties with its traditional allies waned. Part of the reason was due to former communist countries’ transformation towards the market-oriented economies that altered the Cold War global capitalist economic system. Following this new wave of development, much of the debate has been centered on the sustainability of the US dominance in managing this new global political economy. Some predicted the unavoidable decline of the US power presence while others argued that there is no better alternative than the current system led by the US. The theory of hegemonic stability has also encountered critics from a number of scholars on theoretical, historical and political grounds. Some of the critics rose due to the rising assertiveness of China. By proposing “offensive realism”, Mearsheimer argued that because of international anarchy, each power looks for opportunities to gain influence at each other’s expense. Their ultimate goal is to become a hegemon. As such, there is an intense security competition among great powers. If a potential hegemon emerges and local powers cannot contain it, US troops are likely to come to the region to balance against that rising threat (Mearsheimer 2001).
— The author, a freelance columnist, is based in Lahore.