This week, we conclude our series by describing what we view as a new model for the superpower role, the Malevolent Hegemon. We will discuss the differences between this model and the previous one. With this analysis in place, we will examine the potential outcomes from this shift and conclude with potential market ramifications.
What is to be done?
Distortions to the U.S. economy have occurred as a result of its role as the global hegemon. U.S. policymakers must decide how to address the inequality issue without triggering high inflation. One solution to this dilemma is to exit the superpower role. This would allow the U.S. to put up trade barriers and run trade surpluses; although potentially inflationary, it would likely increase employment opportunities for the bottom 90%.
This chart shows the income shares of the top 10% and the bottom 90%. Essentially, the top 10% receive just a bit more than the bottom 90%.
The other alternative is to change how the U.S. manages its hegemony. If foreign nations face stipulations for acquiring the global public goods that the U.S. provides, it may be possible to improve the lot of the bottom 90% without abandoning the superpower role.
The Malevolent Hegemon
We have postulated that U.S. foreign policy has been adrift since the Cold War ended in the early 1990s. It is likely that future historians will mark the First Gulf War as the last major act of the Cold War policy regime. That’s because President Bush honored the established borders; when allied troops pushed Iraqi forces out of Kuwait, the allies didn’t continue on to Baghdad. As we stated previously, American policymakers during the Cold War made a conscious decision not to change the borders in the Middle East, fearing that such a move would unleash impossible to control forces of ethnic, religious and tribal “cleansing.”
After 1991, the Hamiltonian archetype of foreign policy was mostly replaced by Wilsonian or Jeffersonian archetypes. The Wilsonian archetype conducts policy based on moral imperatives. The NATO bombing of Serbia in 1999 was designed to prevent Serbs from attacking Albanians in Kosovo. There was no obvious imperative for the superpower to become involved but Wilsonians believe that the superpower should exercise power to prevent genocide. The Iraq War began as a response to the threat that Saddam Hussein held weapons of mass destruction, but it was subsequently justified as an incursion to remove a tyrant. Later, the war became a tool to spread democracy. Although it wasn’t the first time the U.S. had participated in the removal of a Middle East leader, this was the first time that U.S. troops forcibly and overtly brought down a government in the region.