Leveraging History

Great Britain at Twilight

It is doubtful that Great Britain ever set out to become a global hegemon. Rather, it seems to have arrived at its position of prominence as the unintended consequence of a series of policy decisions.⁴ Colonial interests compelled Great Britain to build a complex economic system that funneled resources and wealth to the home islands. Britain also championed the concept of free trade throughout the 19th century, despite the fact that most of the world continued to follow protectionist policies.⁵ Trade stimulated Great Britain to build the world’s largest navy and to create a series of naval resupply bases strategically located throughout the globe to protect key lines of commercial and military communications.⁶ 

As Britain pursued these policies throughout the 19th century, its power increased accordingly. By 1870, Great Britain’s per capita gross domestic product (GDP) was $3,190, the highest in the world (the United States’ GDP at the time was $2,445 and China’s was $530), and Britain maintained an annual economic growth rate of 2 percent from 1820 to 1913.⁷ The island empire was also aided by another policy success: the adoption of the British pound as the global reserve currency, giving Great Britain the ability to set international economic rules and norms.⁸ Great Britain also backed up its commercial empire throughout the 19th century by building and maintaining the largest navy in the world. It was stated British policy to have a navy larger than the next two navies combined.⁹ Britain triumphed in the 19th century by avoiding costly land wars, preferring instead naval competitions or short expeditionary conflicts ashore.¹⁰ This allowed the British government to avoid the costs associated with long combatant operations and instead remain focused on economic growth and global administrative governance.¹¹ 

This series of policies, with their synergistic advantages, combined to establish Great Britain as the pre-eminent global power even in an era dominated by balance-of-power geniuses such as Prince Klemens von Metternich and Prince Otto von Bismarck. Yet, Great Britain’s time as the central organizing great power came to a rapid end, with the United States filling that central role. Some have characterized the period of transition as a peaceful passing of the baton of power, while others have viewed it as a near violent act of thievery.¹² Neither characterization is quite true, but before one can consider the years of transition, we must first consider the moment of the United States’ rise.

The United States at the Dawn of the American Century

The United States approached the 20th century with tremendous energy and momentum. Having hemorrhaged both blood and treasure during the American Civil War, the nation passed the remaining three decades of the 19th century settling and incorporating its western frontier.¹³ Simultaneously, the Industrial Revolution boosted the nation’s economy. The American steel industry, drawing upon the vast natural ore resources of the nation and modernized production methods, which drove down cost but increased quality, helped to expand the American economy at an exponential rate.¹⁴ Having reached the natural limits of the North American continent with a full head of economic steam, the nation, not unnaturally, began to look to the sea and access to a rapidly growing global economy, with both export and import markets, as an outlet for its considerable energies.

The early 1880s witnessed a shift in the United States’ maritime position. With American manufacturers looking to foreign markets as an outlet for their booming production, leaders in the White House and on Capitol Hill began to invest in an expanded Navy. The first modern ships, the “Squadron of Evolution,” included the steel-hulled cruisers Atlanta, Boston, and Chicago along with the packet-dispatch ship Dolphin.¹⁵ Construction of these ships stimulated key sectors of the American economy to invest in specialized, cutting-edge manufacturing techniques. Rolled rails quickly gave way to pressed plate steel and stamped fixtures that were critical to building of a combatant warship. Innovations in steam propulsion, hydraulics, and electricity quickly followed. These first steel ships, along with the numerous cruisers and battleships that followed them, heralded a brief moment of imperialism.¹⁶ The imperial “aberration” centered on the brief 1898 Spanish-American War, which witnessed the defeat of Spain and seizure of Cuba and the Philippines. Cuba was granted its independence with caveats in 1905, but the Philippines remained an American colony until the 1930s. It was not territory that the Americans desired so much as it was overseas markets for their manufactured goods and bases for the naval ships that protected the shipping routes.¹⁷ 

At the beginning of the 19th century, the American population comprised approximately 1 percent of the world’s population, but just one century later the number approached 5 percent due to immigration. More importantly, the nation’s gross domestic product increased at a near constant rate of 4 percent throughout the 19th century while those of the leading powers of Europe hovered at 2 percent. This 2 percentage-point advantage, compounded annually, translated into a $5,000 per capita income for the average American in 1900, outpacing the Europeans, including Great Britain, whose aristocratic past continued to restrict property rights and economic mobility.¹⁸ Foreign direct investment in the United States rose accordingly as overseas interests sought to invest their wealth in growing markets where governments supported stable property rights. Under these conditions, the United States, Canada, and Australia all became investment targets of British wealth.¹⁹ Also, the United States resisted trends elsewhere to debase its currency and continued to back dollars with gold until the early 1970s, providing a stable environment for international exchange.²⁰

The Americans went forth into the world with something more than a capitalistic urge. There was also an underlying political philosophy of individual liberty and self-determination. The concept of Manifest Destiny, the idea that the United States was fated to expand liberty across the American continent, evolved when it reached the Pacific Ocean to take on a broader meaning.²¹ This idea found expression in the Monroe Doctrine, which sought to exclude European influence from the Western Hemisphere, creating, by extension, an American “sphere of influence” in the region.²² The United States entered the 20th century poised for greatness.

Great Britain approached the 20th century from a position of advantage. It possessed a thriving, industrialized economy, a globe-spanning colonial-economic empire, and the largest navy in the world. Britain was the author of a global system of laws and accepted norms and held the reserve currency of exchange used by most trading nations. It also was largely at peace, gently and persistently “administering” its system with its navy and interconnected network of naval and trading stations scattered throughout the globe. However, nearly all of these factors were soon to undergo significant challenges. 

First, the United States surpassed the population of Great Britain in the latter half of the 19th century and never slowed. The American population, backed by industrialization and the most efficient agricultural techniques, overtook Britain economically. The United States maintained a series of tariff barriers to foreign goods throughout this period. American policymakers made a strategic decision to continue a protectionist policy despite Britain’s free-trade example because from a governance perspective, limitations on taxation that had been built into the American Constitution meant tariffs represented the most significant form of government income. This mercantilist approach to trade allowed the United States to export its goods while collecting large amounts of foreign reserve currency, largely in the form of gold, slowly sapping British strength.²³ 

Second, Britain’s global empire became an anchor upon its growth. Canada and Australia possessed advanced economies and when they gained their independence around the turn of the century, they increased trade with the United States, boosting the American economy at the expense of Britain’s.²⁴ India remained a great source of raw materials and cheap labor, but the productivity of workers in the subcontinent was never as high as those in the home islands. Further, India and China, despite their large populations, never transformed into the expected markets for British goods. As economies shifted to higher technological methods of production, the United Kingdom’s remaining colonies lagged in their ability to transform, becoming a complicating factor for Britain.²⁵

Next, Great Britain’s adherence to a “next two navies combined” standard for its fleet ran into difficulties as the Americans began to put their economic and political capital behind the creation of a “navy second to none.”²⁶ The rapid upbuilding of the American fleet at the technological crossover point from sail to steam allowed the United States to ride a wave of technological improvements involving steel, steam, optics, electricity, and hydraulics.²⁷ Great Britain, heavily invested for a century in its attempt to keep the Royal Navy larger than the next two navies combined, had tremendous “sunk costs” in older ship designs. Abandoning them, as Britain eventually did, also meant abandoning the “next two navies” standard, which dealt a psychological blow to the British people.²⁸ Increasingly preoccupied with rising security challenges in Europe, Britain went so far as to tacitly cede the protection of British interests in the Western Hemisphere and the Far East to the United States and Japan respectively, further indicating to the population that the nation could no longer maintain its previous position of greatness.²⁹

Finally, Britain was not able to abide by its policy of avoiding large land wars, first in South Africa with the Boer War, and then ultimately and most tragically in World War I.³⁰ These conflicts led Britain to invest for the first time in a large, expensive, standing army and to alter its foreign policy and military grand strategy away from “splendid isolation.”³¹ The results of World War I – the millions of casualties, the billions spent, and the incalculable ruin on the continent – shook Britain’s self-confidence to its core. That the United States was more than ready to step in only hastened Britain’s decline.

Woodrow Wilson, for his part, was not particularly anti-colonial so much as he was committed to self-determination. Having earned a doctorate in political science from Johns Hopkins, Wilson wrote extensively on governance and constitutional formulation while rising to the presidency of Princeton and had arrived at the White House well-prepared to discuss global governance and reform.³² With America entering World War I and assisting the Allies to bring the war to its conclusion, Wilson earned a seat at the table as the victors discussed the terms of the Treaty of Versailles. He had delineated the U.S. position previously with his “Fourteen Points” statement of January 1918, in which he called for a postwar world governed by free trade, open agreements, democracy, and self-determination.³³ During the actual negotiations in Paris, Wilson pressed hard to liberate colonies. Victorious European powers wanted to absorb the defeated nations’ colonies into their own holdings, but Wilson pressed to set them on the road to freedom. While unsuccessful, Wilson’s idea did begin to gain traction in the years that followed the war. 

Wilson’s assistant secretary of the Navy, Franklin D. Roosevelt, had spent World War I building the president’s “navy second to none.” In a 1928 essay in the Council on Foreign Relations’ Foreign Affairs journal, Roosevelt stated that morality must govern U.S. foreign policy and that colonial systems ran counter to the founding principles of the American republic.³⁴ Roosevelt became president in March 1933, at the depth of the Great Depression, and spent most of his early efforts trying to shore up the American economy. That changed when the Second World War broke out in Europe. Roosevelt took strategic advantage of Winston Churchill’s desperation for American support to undermine the strength of the British Empire. Notably, in November 1940 Roosevelt demanded an accounting of Britain’s financial resources and then requested payment in gold from the British government for U.S. military supplies. Roosevelt proposed lend-lease only after the last Krugerrand of gold had been shipped from South Africa to the American depository at Fort Knox. The United Kingdom then “leased” British colonial possessions, Newfoundland, Bermuda, and other islands in the Caribbean, to the United States in exchange for ships, tanks, and aircraft.³⁵ This action had the secondary effect of removing the British pound sterling as the global reserve currency of international exchange, another support structure of British global leadership.³⁶

In August 1941, as Roosevelt contemplated Europe’s future and America’s role in it, his administration penned the Atlantic Charter. The charter defined the Allied powers’ postwar goals for the international community. Those goals fit well with Roosevelt’s earlier “Four Freedoms” State of the Union address, in which he stressed that free speech, freedom of religion, freedom from want, and freedom from fear should be guaranteed, “everywhere in the world.” Roosevelt, remembering Wilson’s problems at Versailles and later with the Senate at home in the United States, sought and received assurances before the United States’ entry into the war. Churchill, desperate to receive American assistance against Hitler’s Germany, agreed to Roosevelt’s demand that the Allies commit to a postwar world characterized by self-determination and lowered trade barriers. 

Britain, which had been brutalized by World War I, was broken by World War II. The events of the first half of the 20th century exhausted the once globe-spanning empire. Maintenance of a large standing army had placed additional financial burdens on the British imperial systems just as it lost financially net-positive colonies in Canada, Australia, and New Zealand to self-determination initiatives – all the while retaining, at least initially, its net-negative colony in India. Britain’s decision to pursue a large-scale social welfare and universal health care system immediately after World War II, along with the pound’s loss of reserve currency status, completed the cycle. By 1947, facing a severe winter, a disastrous economy, and growing challenges abroad, the British foreign ministry sent a high-priority note to the U.S. State Department informing Washington of Britain’s intention to withdraw its financial and military support for Greece, a British foreign client-state that was then facing a communist insurgency.³⁷ The era of British world leadership had come to an end, and in the passing of its diplomatic note, Britain also passed its tacit recognition of the United States’ assumption of its mantle, a role Washington was remarkably well-suited for at that moment.

The Apex of the American Century

The United States arrived at its moment of leadership with a large and expanding population, a thriving economy committed to free trade, a technological edge as evidenced by its recent investments in atomic energy and aviation, and a dedication to a new global order based upon democracy, self-determination, and multilateral security. It set about to create a modern international system, first with the United Nations to bring countries of the world together to diplomatically work out their differences in a “parliament of man.”³⁸ Second came the creation of a innovative international system of finance created at the Mount Washington Resort at Bretton Woods, New Hampshire, when representatives from 44 allied nations gathered to establish the rules and procedures to govern international financial transactions.³⁹ Last came the multilateral security arrangements: first the North Atlantic Treaty and then the Rio Treaty; the South East Asia Treaty; the Australia, New Zealand and U.S. Treaty; and the U.S. treaties with Japan, the Philippines, and South Korea. All of these pacts were focused on containing the expansion of Soviet communist influence and tied the security of a vast portion of the world to the United States and its arsenal of conventional and nuclear weapons.⁴⁰ 

Some have characterized the passing of the baton of leadership from Great Britain to the United States as peaceful. This is not true. The United States aided Great Britain in its hours of need in World War I and World War II. But it provided its aid at a cost that purposefully undermined Britain’s traditional colonial foreign policy and global system of governance, a system that the United States, with its belief in democracy and self-determination, could not abide. Some have also characterized the transition as being one of movement between two governments of similar governing philosophies. To the extent that both nations domestically practiced democratic principles and commercially promoted free trade that necessitated an adherence to international law, this was true, but the colonial system that Great Britain instituted does not closely resemble the international order that the United States created after World War II. Britain’s avoidance of permanent alliances and land wars during the 19th century also does not resemble the United States’ current network of commitments and near addiction to expeditionary operations in Korea, Vietnam, Lebanon, Haiti, Panama, Iraq, Yugoslavia, Afghanistan, and Iraq again. 

The United States did not set out with a specific goal or strategy to acquire the mantle of global leadership. The preponderance of historical analysis suggests that the United States arrived in its current leading role much as Britain had before it, through a combination of policy decisions. While the United States in the early 20th century had consistently announced its opposition to the British imperial colonial system, it did not propose a coherently organized alternative system beyond broad pronouncements regarding self-determination and democracy. Even when the moment of transition arrived with the 1947 British note regarding Greece, there was still broad debate within the leadership of the United States regarding the advisability of the country increasing its role in the world. The enunciation of the Truman Doctrine and the accompanying Marshall Plan to rebuild Europe generated great debate within the American body politic.⁴¹ That being said, the nation did ultimately accept the mantle of “Leader of the Free World” and bore it proudly for more than half a century.⁴² However, today, after seven decades, there are questions regarding the pillars of American leadership, including about basic concepts of free trade, international finance, and mutual security agreements.⁴³ These conversations, taking place simultaneously with China’s rapid economic rise and challenge to traditional international norms, suggest that another transition might be in the offing.

The United States at Twilight?

The United States has not helped itself as of late. Participation in foreign land wars, coupled with increased health and social welfare spending, without commensurate tax increases, has dramatically raised American spending, resulting in rising annual deficits and accrued national debt.⁴⁴ This has had a net effect of weakening the American dollar and undermining its position as the international reserve currency of exchange.⁴⁵ Additionally, the U.S. military has shrunk dramatically since the end of the Cold War while investing heavily in advanced “offsetting” technologies in the expectation that the quality of American weapons will surpass the advantages of quantity among the nation’s enemies. The net result, however, is that the United States can no longer uphold all its commitments to international laws and norms. Gaps in attention to historical American commitments have opened the door for competitor nations, including China, to challenge U.S. leadership at the margins.⁴⁶ These, and several other factors, combine to help create a narrative of U.S. decline, but it is a narrative that should be critically considered.

The United States’ Economic Position

As with Great Britain, the argument can be made that many of the attributes of the American-led global system of governance that had been sources of strength became centers of weakness as time progressed. Much as the United States did in the 19th century, prior to the enactment of free-trade agreements, modern nations today that trade with the United States enact tariffs and restrict entry of U.S.-made goods in order to expand their own industrial capabilities while simultaneously taking advantage of the United States’ low trade barriers.⁴⁷ Allies and partners that participate in mutual defense arrangements have dramatically decreased their military spending, choosing instead to depend upon the United States as a guarantor of their security while investing in larger social welfare programs and higher qualities of life for their own people.⁴⁸ 

From an economic standpoint, the U.S. economy remains disproportionately strong. The U.S. population in 2016 was 324 million, just 4.4 percent of the world’s total, yet its gross domestic product of $18.3 trillion in 2015 represents 24.3 percent of the world economy in purchasing power parity. American citizens earn a per capita income of $54,000, among the highest in the world. While annual economic growth has slowed from its 20th-century average of 4 percent to around 2 percent, that percentage is of a much larger economy and hence has a larger impact in terms of real dollars.⁴⁹ The U.S. economy remains technologically innovative, and although it is no longer led by manufacturing, it is remarkably balanced across many sectors from agriculture to high-tech, and in the latter category remains the world’s leader.

The robust nature of the nation’s economy is also remarkable among all the leading economic powers. The United States is, was, and ever will be a trading nation, and yet, alone among nations, it possesses the ability to be economically independent. Its internal economic market is of sufficient size and vibrancy to maintain a prosperous society independent of exports, although economic growth would slow. It remains a net exporter of agricultural products, having produced enough food to feed itself.⁵⁰ Prior to the advent of fracking technologies the United States was perceived as being dependent upon foreign supplies of energy, but today the nation has an energy surplus and 264 billion barrels of proven oil reserves, surpassing both Saudi Arabia and Russia.⁵¹ The United States also possesses ample supplies of the ores necessary to produce basic commodities such as steel, although production capacity has fallen considerably as other nations found ways to produce more cheaply than U.S. manufacturers. Rare-earth metals, necessary to produce extremely strong magnets and energy storage devices, exist in the United States but are very expensive to refine.⁵² The bottom line is that the United States is not dependent on any particular external economic “empire” to succeed.

From a purely financial standpoint, the nation’s continued deficit spending and long-term unfunded mandates are most certainly creating problems for the country. The national debt now exceeds the annual gross domestic product, and actors within the global financial community, including China, have broached the idea of replacing the dollar as the reserve currency.⁵³ Reserve currencies generally have two characteristics: They are issued by a large trading nation and the currency holds its value as compared to a set of commodities over time. These attributes cause other nations to “hold” that currency in reserve for the purpose of guaranteeing their ability to trade internationally.⁵⁴ While it is possible that a basket of currencies (as currently proposed by China and Russia) or even the yuan/renminbi will replace the U.S. dollar as world reserve currency, it is unlikely that this will occur soon due to the inability of these monetary vehicles to consistently meet the requirements to be a stable mechanism of international exchange.

The United States’ Military Position 

Militarily, the United States appears to be in a period of emotional exhaustion after nearly 15 years of continuous land combat in Afghanistan and Iraq. Despite pronouncements of “red lines” regarding Syria, Bashar al-Assad’s atrocious treatment of Syrian civilians, and the rise of the Islamic State group (ISIS) in the Middle East, there is no apparent appetite for large-scale American involvement in overseas ground wars at this point.⁵⁵ This is not anomalous. The United States experienced similar martial languor after World War I, Vietnam, and even after the Cold War. Such indications of retrenchment have given rise to pronouncements that the United States has lost the will to defend its interests and hence has tipped into decline, but such assessments would be mistaken.

The United States continues to possess considerable military strength. Today the U.S. military remains larger than the next eight militaries combined, and six of those nations are either allies or partners of the United States. The U.S. Navy currently fields 274 ships and possesses much more lethality in every ship than its predecessor fleets.⁵⁶ The rest of the world’s navies are smaller and far less capable. For instance, in the critical category of aircraft carriers, the U.S. Navy can currently deploy 22 aircraft carriers, 11 super carriers and 11 light amphibious carriers. The rest of the world’s navies combined field only 21 carriers.⁵⁷ However, it should be noted that even with 274 ships, the Navy is unable to cover its maritime commitments. It requires 355 ships to meet U.S. core national interests in the world’s 18 maritime regions.

Broadly speaking, the United States possesses a wide qualitative edge over its competitors. This is represented in its continuing strategy of investing in “offsetting” technologies that provide it with a strategic advantage militarily over its enemies. From investment in nuclear bombers, nuclear missiles, and nuclear submarines, to advanced digital communications, a global positioning system, and stealth, the United States made decisions that provided a tactical advantage for a generation.⁵⁸ While the United States does have a broad assortment of precision strike weapons and new stealth Joint Strike Fighters coming into the force, both China and Russia are making similar investments based upon copycat designs. However, the United States is seeking a “Third Offset,” which will combine present technologies in new ways while introducing still newer technological approaches to the security environment.⁵⁹ Stealth, directed energy, electromagnetics and hypersonic capabilities are creating a new “idealized” force of the future. Still, trends suggest that an increasingly complex military built around more capable weapon systems will also become either increasingly expensive or dramatically smaller.⁶⁰ Such investments in advanced technology will introduce new challenges for competitors such as China, Russia, and Iran, but they will pose problems for the United States’ allies as well.

The Strength of U.S. Alliances

All the United States’ allies have smaller economies, spend less as a percentage of their GDP on defense, and hence have significantly smaller defense budgets. Investments like $100 million Joint Strike Fighters are simply beyond the fiscal grasp of some allied powers.⁶¹ 

This inability to keep up with the United States has led to some questions regarding the value of organizations such as NATO.⁶² These arguments ignore the fact that the United States, since the end of World War II, has preferred to play away games rather than home games when it comes to its national defense. Bases in Germany, South Korea, and Japan have been the backbone of U.S. defense, and today Bahrain, Singapore, and Darwin, Australia, have joined the list. More than money (and some of the alliance partners, such as Japan and South Korea, contribute significantly in that category), alliance partners contribute something of inestimable value – their geography.⁶³ When confronting China, there is nothing that can replace an air base on Japan’s southern island chain or a port in Singapore. Without contributing a cent, these facilities help to bind the current global system and uphold the rule of law. The bottom line, however, is that the United States’ alliance structure in no way represents an “empire” in the way that Great Britain’s colonies did. The United States’ complex network of allied and partner nations has evolved over time and will evolve again in the future, but it remains voluntary and accessible to those who wish to join. This, in the end, is a demonstrable indication of strength.