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China’s own preferences. It also believes that it should be playing a much larger role in that system.

      China is thus partially dissatisfied, as well as partially satisfied, with the system. To date, it has mainly sought to increase its role within the existing order and institutions, rather than to overthrow or even radically reform them. It has behaved as a revisionist, rather than a revolutionary superpower.

      China has also, however, flouted key rules and norms of the traditional system even while loudly proclaiming support for it. Its massive currency manipulation in the first decade or so of the new century totaled several trillion dollars and destroyed millions of jobs in the United States and other countries (Bergsten and Gagnon 2017). Its subsidies, theft of intellectual property and forced transfers of technology cost other countries tens or even hundreds of billions of dollars annually; Schadlow (2020) reports that “experts estimate that since 2013 the United States has suffered over $1.2 trillion in economic damage as a result of China’s egregious abuses.” China has helped to defend the open international economic order on several crucial occasions but has also undermined it severely, as its growing importance heightened the impact of its pervasive cheating and the growing backlash against it from other countries.

      China has also led the creation of new institutions that magnify its clout, some of which (like the Asian Infrastructure Investment Bank [AIIB]) fit well into the extant order, and some of which (like the BRI) may not. It is pushing to establish new international rules in domains where none now exist – such as the Internet, and cybersecurity more broadly – that would favor its state-centric preferences rather than the traditional market-oriented approach of the West. It is seeking opportunistically to enhance its role, and to alter the rules and norms in directions more to its liking, with an eye to protecting the CCP and eventually catching up (at least) with the United States. It could make a “dash for dominance,” as will be discussed in chapters 4 and 8.

China appears to believe that it is getting the best of both worlds from the present international economic order. It gains hugely from the order’s openness while cheating on the rules – without eliciting much pushback before President Trump’s (ineffectual) tariffs – when it sees advantage in doing so. The basic systemic question is whether China believes it can continue to get away with this strategy without undermining the system itself, which it risks through generating backlash against its practices from the United States and other countries that both defend the system and suffer from China’s exploitation of it. To modify its behavior sufficiently to alleviate this threat to systemic stability (and thus to its own interests), China will have to be persuaded – preferably through its internal debates and by Asian neighbors, rather than by the United States or close US allies – to accept key principles of the regime.

The United States as Incumbent Power

      The United States is not a declining power in any generalized sense, as will be seen in chapter 5. It has in fact grown faster than most of the other high-income countries over the three decades since the end of the Cold War, and thus expanded its economic lead over them. Its share of the world economy has obviously declined sharply from the early postwar period, when most countries were still recovering from the Second World War, but remains about where it was in 1990. Any US decline is only against China and a very few other emerging markets, and is a reflection of their rise against everybody rather than its own demise.

      For all its many problems, and the need to greatly improve its performance across a wide range of issues – from productivity growth to fiscal sustainability to better income distribution to political dysfunction – the United States seems likely to continue growing at a respectable pace for the foreseeable future when measured against both its own historical record and the prospects for other industrialized nations. It has the capability to maintain a major share of global economic leadership as far ahead as the eye can see. China’s relative rise has been mainly at the expense of countries other than the United States.

Moreover, US leadership has traditionally been strongly supported by a powerful set of reliable allies – the “hegemonic coalition.” The group has included all of Western Europe (and, since the end of the Cold War, most of Eastern Europe), Japan, South Korea, Canada, Australia, New Zealand, and indeed most of the OECD (Organisation for Economic Co-operation and Development) club of high-income nations. The GDPs of these countries, taken together, roughly equal that of the United States and thus double the global weight of the coalition. We will see in Part II of this book that they extend the “US lead” over China by several decades on many of the relevant metrics of international economic capability.

      The rise of China makes it more important than ever for the United States to maintain the support of these countries. China fears isolation and is much more likely to alter its policies when faced by a strong international coalition than by unilateral pressure, even from the powerful United States: “Beijing views the Biden Administration’s forays into exclusive multilateralism – issue based coalitions in opposition to China – as the most serious external threat to its political security and the biggest obstacle to its national rejuvenation” (Yan 2021). Perhaps the greatest of all the errors of the Trump presidency was to alienate, rather than coalesce with, the traditional US allies, forgoing the potential for mounting multilateral support in the effort to induce the substantial Chinese reforms that will be necessary to alleviate the main international economic tensions.

      But the will of the United States to exercise global economic leadership, in Administrations and Congress and the public more broadly, as described in chapters 2 and 6, has been declining for about 25 years. Domestic hostility to globalization, and especially the “China shock,” has risen sharply because of their (greatly overstated) roles in generating wage stagnation and income inequality, and thus in much of the political polarization and dysfunction that now characterize American society. At the same time, the end of the Cold War eliminated the historical security rationale for such leadership.

Under President Trump, this decline was accelerated as America largely abdicated its traditional leadership role. His Administration itself violated fundamental rules and norms of the international economic order (and of its domestic order as well). It adopted blatantly protectionist trade, investment, and technology policies. It trashed the international institutions – both formal like the World Trade Organization (WTO) and World Health Organization (WHO), and informal like the G-7 and G-20 – that have fostered cooperative governance of the world economy. It attacked its allies as well as its adversaries, isolating itself from the rest of the world rather than leading, and producing “America alone” rather than “America first.” It utterly failed to promote any significant US interests, while inflicting severe damage on the global system. It got China’s attention, but was totally unable to achieve its goal of suppressing China’s rise or even to alter Chinese policies in meaningful ways. Its erratic and counterproductive behavior during the coronavirus pandemic further tarnished America’s standing around the world, and China’s respect for the United States has declined further.

      The global leadership competition and the world economy will be crucially, perhaps decisively, affected by US policy under President Biden and his successors. Even a partial return to America’s traditional global economic leadership would roll back at least the most extreme costs of the Trump abdication. But continued United States slippage in the face of China’s continuing rise, even if conducted in more civil tones, would confirm that the problem was not simply President Trump but rather a more deeply rooted bipartisan tendency that the rest of the world would have to recognize was long-lasting. The possible future return of Trumpism, or even of President Trump himself, adds to such possibilities.¹

      The allies, of course, will have to accept a return of US leadership if that leadership is to be restored. Some of the allies have disagreed mildly with some US leadership, and disagreed strongly

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