Can you elaborate a bit on the US during the 1930's? So if China is capable, why wouldn't it be willing, if it wants to be seen as a leader? And why is that scary?

Drezner is referring to an argument put forth by Charles Kindleberger in the 1973 book "The World in Great Depression: 1929-1939" (for a Wikipedia summary see here). It goes something like this: for the world economy to be stable, there has to be a stabilizer country in the system, which would provide what Kindleberger calls "distress goods...a rediscount mechanism for providing liquidity when the monetary system is frozen in panic."

The UK provided this up until the Great Depression, at which point it was far in decline as a "hegemon." The U.S. had the capability to play this role in the 1930s, but chose not to. Hence the parallel that Drezner is making vis-a-vis US and China. Clearly China has the means to inject liquidity, but it is not willing. I'm not sure about the reasons for China's position, perhaps someone else can answer that.

It is scary, because last time the "emerging" stabilizer (i.e. the U.S. in the 1930s) did not intervene, it ended up being pretty bad for everyone. Of course as Drezner points out, the parallel with the 1930s is premature, but it is worrying nevertheless.

(Hmm, so this is where my IPE seminar comes in handy).

For more on this, see below materials(h/t Yoram Haftel):

* Mancur Olson. 1965. The Logic of Collective Action Chapters 1-2.

* Stephen D. Krasner. 1976. State Power and the Structure of International Trade. World Politics 28 (3): 317-347.

* Charles Kindleberger. 1981. Dominance and Leadership in the International Economy: Exploitation, Public Goods, and Free Rides. International Studies Quarterly 25 (5): 242-254.

* David Lake. 1993. Leadership, Hegemony, and the International Economy: Naked Emperor or Tattered Monarch with Potential? International Studies Quarterly 37 (4): 459-489

What's disturbing is the way in which the US decline has been so inflicted. In retrospect, we'll probably see that the inattention to the economy of the Reagan and Bush I years, the reckless deregulation of the Clinton era, and the recklessness in every single government function of the Bush II era amounts to a situation where no power so strong slit its own wrists so quickly in world history.

It's particularly true of Bush II. The fact is, despite all the mistakes of Reagan and Bush I and Clinton, we still had the money and the power to fix them with a click of the president's fingers if they should blow up. And in one presidency, Bush II vaporized that resource.

Vitaliy, thanks, interesting stuff. That clarifies it for me.

Yeah, me too :).

No, seriously, that was a excellent summary.

Though I think historical analogies are overused, this one has two interesting elements.

First, the criticism of the American international role in the 1930s assumes a degree of interest in the world outside the United States that just wasn't there at that time. It might not have been there even had the Great Depression hit the United States harder than it did most other regions of the world, but in any event the great majority of Americans were concerned primarily with their own country's domestic affairs. Internal Chinese politics and economic matters are also the preoccupation of the government in Beijing today. It has founded its own legitimacy on continuing rapid economic growth at home; take that growth away, and existential questions arise for Chinese leaders at all levels as they don't for leaders in Europe and North America. China will help out Pakistan if its government sees something in it for China.

The other thing has to do with what, exactly, is in Pakistan for China. What was in it for America to be concerned about Europe in the 1930s seems obvious now, but it wasn't then, even though Europe was the most economically developed area of the world. Pakistan today is not. The central argument being made by Islamabad for financial help without conditions appears to me that the financial crisis threatens to weaken the Pakistani government's own authority and increases the risk that terrorists based in Pakistan will kill even more people than they are doing now. In the first place, these terrorists haven't been targeting many Chinese. But the Chinese must also be asking themselves if sending money to a government that will probably steal some of it in order to keep that government's own citizens from blowing things up is the kind of world leadership they aspire to.

After all, the United States has sent large quantities of aid to Pakistan for years; maybe some of that was the wrong kind of aid, and maybe it should have been attached to different conditions than it was, but in any event America now finds itself blamed in Pakistan for most of the things that have gone wrong in that country, including rampant terrorism. The Chinese would want to assume that burden...why, exactly? Better to let the IMF and the Americans bear the burden of telling the Pakstani government all the things it should have done 20 years ago.

How exactly would a Pakistan collapse affect China anyways, aside from the general worldwide issue it would cause in the economy from more instability in that region? It's not like China has a serious border issue with people from Pakistan moving over it into China, and the only major muslim populations in China are in Xinjiang, which most of the Islamic World doesn't really seem to care about.

I am actually STUNNED that China did not help out Pakistan here and worried in another way. Pakistan-China alliance is an all weather relationship aimed mainly against India and borne out of Cold war necessities.

But then again, the Chinese Govt may be itching for a return to military rule in Pakistan and refusing to help the democratically elected Govt to possibly undermine it. The amount that Pakistan is asking for is peanuts compared to the support it has already received from China (including nuclear weapons program co-operation)

Also, I think Prof.Drezner is over-estimating China's capability to be a "global" leader. China has a huge demographic challenge ahead because of its gorwing number of seniors as well as its One Child policy. And its banking system is pretty shaky.

No country which would like to be a global power can face the kind of demographic problem that China faces over the next 3 or 4 decades.

China should never be under-estimated but it does not help overstating their influence/power either.

I think the US is in clear decline as a hegemon, but it's not yet over. I would put the parallel at somewhere between 1880 and 1900 in the UK timeline, not 1930.

The US still has the largest GDP by a ways even today, and by 1930 the UK had been eclipsed for 30 years or more. First by Germany and then by the US - although neither took over as the hegemon.

One other point; it seems everyone assumes that when the US is taken over as the hegemon it will be by China. I'm not as sure of that, because China is facing as steep a demographic crisis as any country this side of Japan in coming years due to it's one couple - one child policy followed since the 60's. So it seems to me that China will be facing an enormous labor shortage and pensions crisis in the forseeable future.

There are three alternate scenarios: The Europe as hegemon scenario, India as hegemon, and the no hegemon scenario.

If Europe is to take over I'd say the future is now. The trouble is that the euro is a stressed currency because in order to make it as universal as possible they added Italy, Greece, Ireland, Spain, and other not quite so economically stable countries to the eurozone. Plus they have required many of the recent countries added to the EU to follow euro-track monetary and fiscal policies.

There has already been a lot of pain in Italy, Greece, and in a number of the Eastern European euro-track countries; the upcoming recession may raise this to the boiling point and see some of them go off the euro. Can the euro become the reserve currency with this kind of stress on it?

The ironic thing is that a small eurozone (Germany, France, UK, Belgium, Luxemborg, and Nederlands) may well have been able to give the dollar a run for it's money in this crisis. Of course the UK isn't on the euro - but could a 'small-eurozone' policy have made it seductive enough to the UK? We'll never know.

India is behind China in economic growth of course, but has the distinct advantage of lacking the demographic overhang facing China. India is also distinctly more entrpeneurial than China is, and much stronger in the global services sector. Banking is a service, not an industry, so I could easily visualize India overtaking China over the next 30-40 years and emerging as the global leader.

The third alternate scenario is the no-hegemon scenrio,. I have no idea what this would look like; perhaps regional blocs of currencies with the dollar, euro, remembi, and rupee taking regional supremacy?

A fourth scenario might be a 'weak hegemon' much as the UK was between 1900 and 1929.

When I read about the US Hegemony, it seems to imply--or I infer?--soft power. Do any of these possible "new" Americas circa 1930 have the blue water navies and ability to project power and hard power?

Obviously, hard power is only so effective in any given situations, but could China be the Next Big Thing (tm) without this power projection--or even knowledge--tied to it?

What's disturbing about the current situation is that our politicians seem to have no grasp of it; they seem to want more and more entanglements and foreign responsibilities. I sense that Obama is smart enough to eventually see this (McCain is definitely not), although I hope he gets over this notion that we have a responsibility to intervene wherever there's 'genocide'.

I think this move by China shows a certain degree of wisdom on their part; it's not clear what these billions would have gotten them. The current government in Pakistan is very weak, unable to cope with its burgeoning Islamist movement, and to a certain extent, only propped up by US arms and military training. Why throw billions into a bad investment that nets you little in positive externalities?

While I agree with the thesis that US power is in decline, I'd suggest that a good deal of this has to do with the decline in power of our allies in Europe and the fact that generations of Europeans have now been indoctrinated in anti-Americanism. Britain, for example, can no longer lay claim to much in the way of serious military strength, and the default mode of a majority of Europeans seems to be to blame the US for every negative that happens in the world. (How weird, and perhaps telling, is it that Russia thought, a mere few months after invading Georgia, that it could advance a European-Russian alliance against the US?) These countries are having a very hard time integrating millions of Muslim immigrants, and they don't seem to have an economic model that will create the jobs necessary for some sort of social harmony. Also, I think we're one or two financial shocks away from the potential destruction of the euro. As far as the financial summit, this just fits into the Bush second term foreign policy, which has been very deferential toward Europe in most areas outside Iraq.

The US is still the only country that can project serious power any place on the globe, but it's an open question as to whether we can afford to do so. It'll be very interesting to see how China, Russia, and Iran react to a dove in the White House. I suspect we're entering an era where there is no clear hegemon, although I think this depends a lot on what happens in Europe. Collectively, it's the richest 'country' in the world, but its future is very uncertain.

you guys lost!

Couldn't they meet at Bretton Woods? Worked fine last time. Or is it booked up for ski season?

[...] it was the United States’ position in the international system to lead the global economy. As Dan Drezner notes: In the good ol’ days the U.S. would have completely stiff-armed this kind of suggesion from the [...]