Standard & Poor’s downgrade of US sovereign debt is bound to weaken America’s financial standing in the world. Because no other country is in a position to supplant the US as the anchor of the international financial system, its reduced economic status may be temporary. The downgrade also signals the end of America’s infatuation with unipolarity, which must give way to the reality that the world is now multipolar. This process of adjustment, however difficult, is likely to be more enduring.
Reasonable people can disagree if it was dishonest or courageous for Standard & Poor’s to lower America’s credit rating from AAA to AA+. To economist Paul Krugman, it was pure chutzpah for a rating agency that had enabled financial institutions to peddle toxic mortgage-backed securities. For bond guru Bill Gross, S&P’s decision exhibited “spine.” Whether the US can recover the risk-free credit status it has enjoyed ever since Alexander Hamilton made it the country’s business to pay its Revolutionary War debts will depend on the willingness of Republicans, especially the radical right, and Democrats to put the nation’s interest before partisan politics.
Were the US the unipolar actor it imagined itself to be after the Cold War, the need to rebuild a bipartisan consensus might not be as urgent as it is. But the world has changed dramatically since the collapse of the Soviet empire two decades ago and still more since 1949, when the US truly was the indispensable nation. Partly because of its debilitating wars in Iraq and Afghanistan, partly because of its self-inflicted credit crisis, the US international position has markedly deteriorated. Americans pay lip service to global change yet fail to assess its strategic implications.
The US is no longer the global hegemon it was when it defended the free world against the menace of communism. The European allies, pace the Atlantic Alliance, no longer predictably align with the US on security matters, as tensions over the second Iraq war and differences on the Libyan intervention demonstrate, in part because they have lost confidence in American leadership. Today, they are two independent legs of an inchoate and quite unpredictable multilpolar world. To be sure, they continue to exercise legacy positions in the institutions established at the end of World War II to ensure international peace and stability. But that system is in flux because of the emergence of new powers and the influence that the US and, to a lesser extent, Europe wielded is eroding.
Because of its booming economy, which the IMF expects to surpass that of the US by 2016, China is casting a larger shadow in the world. As demonstrated by the collapse of the Doha Round of the world trade talks in 2008 and the Copenhagen climate control conference the following year, global decisions now require Beijing’s concurrence. Having asserted its indisputable sovereignty over the South China Sea, Beijing cavalierly rejects the competing claims of Southeast Asia states as well as US overtures to convene multilateral negotiations. Its relentless military buildup over the past two decades, including the development of a blue-water navy, poses a threat to its Asian neighbors and challenges US supremacy in the Western Pacific.
Coterminous with the end of the Cold War, India embarked on a massive political and economic transformation that dismantled the state-controlled License Raj system and opened the economy to foreign investment and business competition. Like the Southeast Asian states, who seek a larger American role in Asia to balance China, India has developed stronger ties with the US, including the 2008 civilian nuclear agreement. No less chary of alienating China, however, it has maintained its political autonomy and steered clear of a defensive alliance. Washington’s interests have not been served by Indian foot-dragging on the Kashmir dispute with Pakistan. Nor is the US happy that India continues to do business with Myanmar’s dictators and to exercise informal dominion over its South Asian neighbors.
The sands are shifting in the Americas as well. Although the US is still the colossus of the north, especially in Central America and the Caribbean, its clout in South America is not quite as colossal as it once was. Given its vast resources and its status as one of the world’s largest food and commodity exporters, Brazil has become a continental power, one that has gained increasing influence with other Latin American governments because it maintains good relations with everyone, including Venezuela and Cuba. Brazil played a pivotal role in the transfer of global financial discussions from the G8 to the G20, and it has not been reticent in criticizing the US for fueling currency speculation with its low interest rates or for the IMF’s preoccupation with Greek debt. Brazil has also angered Washington by opposing expanded US access to Colombian military bases and by it defense of Iran’s nuclear program.
US tensions with Russia persist over the contentious issue of stationing missile defenses in Eastern Europe and the competition, in which China also participates, for oil and gas reserves in Central Asia. Turkey is also reemerging as a center of power in the Middle East, where it aspires to play a central role comparable to that of China in Asia and India in South Asia. Although it has not abandoned hope of joining the European Union, Turkey has become increasingly independent. It has opposed sanctions against Iran and vigorously defended Palestinian rights, including the participation of its citizens in the 2010 Gaza flotilla incident, both of which created tensions with Washington. Having expanded its political, economic, and diplomatic ties in the region, including membership in the Arab League, Turkey has become a model for the Arab revolutions, the uncertain consequences of which could prompt further geostrategic shifts.
The S&P downgrade is a wake-up call. Rather than use it as a club to attack each other, Republicans and Democrats should transcend their partisan differences in the interest of restoring the nation’s financial standing, revitalizing its economic growth, and restoring the world’s confidence in its leadership. They should also jettison the anachronistic rhetoric of unipolarity and embrace the reality that America’s fate is ineluctably entangled with that of other powers in the new multipolar world order.
Hugh De Santis is a strategic analyst and international affairs consultant. He is a former career officer in the Department of State and chair of the department of national security strategy at the National War College.