The age of American leadership has been completely swept away

Opinion

The miracle that was Pax Americana is past; the century of American stewardship of the free world is collapsing. The question is, what, if anything, will replace it?

Throughout the 20th century, the United States became the model of what a modern society should be. Its prosperous middle class, commitment to free trade, solid democracy and financial leadership both inspired the world and provided the institutional support for the greatest period of improvement the world had ever seen. America’s post-war leadership helped rebuild nations, liberalize economies and institutionalize global co-operation through multilateral organizations and rules-based systems.

That foundation is now crumbling. After a host of demeaning threats to former allies and the imposition of illegal tariffs on steel and aluminium imports, the voice of reason has vacated the highest levels of American leadership. The betrayal is profound; the loss of trust, complete. Where the U.S. was once viewed as a stabilizing force, it is increasingly seen as unpredictable, even hostile to the very order it helped build.

America’s moral authority rested on three pillars: a resolute adherence to the rule of law, belief in the sanctity of contract (with Americans voluntarily, rather than legally, meeting obligations), and, most importantly, ethical leadership that modelled liberal values through social reforms and systems of justice. These principles earned the respect of the global community and allowed America to lead not just by strength, but by example. All of this has been swept away in the blink of an eye.

Though it is tempting to blame one man for this reversal, the truth is that the nation has been trending in this direction for some time. American exceptionalism — the belief in being first and best in all things — bred expectations that could not be sustained. In the last presidential election, a frustrated public, angered by institutional gridlock and social divides, voted, albeit narrowly, to shatter the status quo. The results have reverberated far beyond American borders.

Global leadership is not simply a matter of power; it also depends on trust and moral credibility. In the 19th century, Victorian Britain and the City of London financial system embodied that trust. The pound sterling became the world’s most trusted currency, and British democratic institutions and the English language rose to global standards. In the 20th century, the U.S. inherited that role, and for a time fulfilled it admirably.

The collapse of American leadership is likely to trigger a realignment of global investment and trading patterns. The goal of bringing manufacturing back to the U.S. through punitive tariffs is bound to fail. Global investors will be alarmed by the erosion of legal predictability. Without the rule of law, contracts become bargaining positions, subject to political whims, hardly a climate that fosters trust or encourages foreign investment. Capital flight is a more likely outcome than new investment, as the full implications of this new reality set in. Companies and institutions that once considered the U.S. a safe harbour for capital may begin looking elsewhere.

More damaging still is the unravelling of American financial hegemony. Money is built on trust. For decades, global faith in American stewardship underpinned the U.S. dollar as the world’s reserve currency and made the U.S. the centre of global financial governance. Institutions like SWIFT, Wall Street and the New York Stock Exchange may soon feel the effects of that lost trust more acutely than expected. If financial actors begin to perceive the U.S. as politically erratic or legally uncertain, the foundation of the global monetary system could weaken.

The American public is in for a rough ride. Their economy, institutions and sense of national pride may not recover anytime soon. The free world, long accustomed to following Washington’s lead, will have to adapt and reinvent itself to preserve its independence, integrity and cohesion in the face of new uncertainties.

China seems poised to ascend to global leadership, but its authoritarian leadership is even more illiberal and untrustworthy than the now beleaguered United States. The world is not eager to replace one flawed hegemon with another that lacks even the pretence of democratic values or legal transparency.

A New West is forming: a coalition of free nations drawn together by shared values and institutions. In this transformation, Canada has a critical role to play. While not a major power, it offers assets that are vital to the future of the free world: a civil, multi-ethnic society and a deep respect for the rule of law and democratic institutions. Canada’s strong institutions, political moderation and multicultural civic fabric provide a template for inclusive, lawful governance at a time when such models are in short supply. These values will be vital in rebuilding global trust, preserving prosperity and shaping a more hopeful future.

» Robert McGarvey is an economic historian and former managing director of Merlin Consulting, a London, U.K.-based consulting firm. Robert’s most recent book is “Futuromics: A Guide to Thriving in Capitalism’s Third Wave.”

» Troy Media