Trump is declaring bankruptcy on the post-war world order

Unable to see forward, British rulers yearned to restore a bygone age, to make Britain great again, only to destroy the flower of their youth. No sooner did Good-Bye hit the bookstands than governments responded to a financial crisis by throwing up trade barriers, turning currencies into weapons, plunging the world into depression, and then deporting, or later exterminating, foreigners as well as their own citizens.

With the election of Donald Trump to the presidency, the United States seems about to swerve in a similar direction, to go from leading the world as a stabiliser to leading the world as a destabiliser. What’s propelling this about-face is nostalgia for an earlier age of supremacy. In truth, that supremacy has long since passed.

America’s continued claim on global leadership is mostly an inheritance from the aftermath of World War II, when American leaders laid the multilateral foundations of what we now call globalisation. It rested on two pillars.

The first concerned cooperation in the world economy. To prevent a backslide into the protectionist, inward-looking policies that crushed the global economy in the 1930s and led to war in Europe and Asia, global rebuilders hitched national economies to norms, rules, and principles of free trade. The result was a boom.

The second pillar concerned national policies. To cope with the dislocations of free trade and interdependence, governments created safety nets and programs at home to manage the risks and to shelter the castaways.

Many of these programs extended to the dislocated who left home altogether, like those who departed Puerto Rico for the United States, Italy for Canada, Algeria for France, Cambodia for Australia. Education, workplace protections, and pathways to citizenship were part of a bundle of rights conferred on immigrants.

This was the global new deal that buoyed the post-war liberal order: a coherent, complementary set of policies that opened borders while protecting societies from the hazards of integration across those borders.

It was unsustainable. Both pillars eventually collapsed like Greek columns. Over seven decades, their foundations shifted beneath them. We are now witnessing, in Trumpism, its death throes. And there is no way to re-create the conditions that led to the original global new deal, and the years of relative stability and tolerance that came with it; we may never see it’s like again.

At the dawn of the Washington-led rebuild in 1945, the US economy was larger than all of Europe, Japan, and the USSR combined - the result of a global war that levelled the productive capacity of almost every other major power. The effects of the war yielded a global Leviathan unlike any we’d seen before - but one that did not impose itself, like Rome, on its neighbours. It did not have to.

This new deal didn’t depend on a hegemon to force others to get on board. It did, however, depend on one to coordinate the elaborate set of systems involved in managing currencies, to facilitate the negotiations involved in dismantling trade barriers and agreeing on standards - in other words, it required a leader to ensure all the pieces were in place for the new system to function as a whole. That liberal Leviathan, it was always clear, would be the United States. It is easy to lead when you are that dominant.

In short order, however, the success of this model began to eat away at that dominance - and thus, US ability to coordinate and lead. Post-war global integration was so successful that soon Japan, Germany, and eventually China, South Korea, and Brazil were scrambling for market share. By the 1960s, Ford had to compete on its home turf with Toyota.

The slipping dominance of the United States nearly caused this system to fall apart much earlier. In the 1970s and 1980s, the first great malaise set-in in the West, and the signs of a spreading precariat were everywhere.

The global Club of Rome think tank in 1972 predicted the end of growth and the beginnings of a dark age of scarcity.

Then, the global system got two, improbable lifelines.

One came in the form of credit. Money lending took off as banks got deregulated. After 1973, the global financial industry soared; within a decade, financial markets had grown 400pc. The value of daily trading on the New York Stock Exchange grew from $10m in 1970 to over $1bn by 2005. Now, it was not just commodities that sutured the world into one market, but capital.

An alarming amount of financial interdependence, however, took the form of debt - both household and governmental. Total credit market debt (public and private) in the United States doubled from 1970 to 1998. Then it soared and never looked back.

The second was cheap fossil fuels. The discovery of new crude oil reserves and rising use of natural gas licked the second oil crisis of the late 1970s, and, except for a brief spike during the presidency of George W Bush, energy prices continued their long-term decline.

At the same time, rising global competition ravaged national welfare states. Governments facing cheap imports still abided by treaties that barred them from turning to protectionist measures; instead, with the victories of Margaret Thatcher in Britain and Ronald Reagan in the United States, a drive to free up markets, dismantle labour protections, and slash taxes aimed to help industries best their rivals by slashing their costs. Despite economic growth, America’s working class braced for a 35-year stagnation in real hourly wages.

What had once been a comprehensive, integrated system of policies that allowed free trade and social safety nets to work in tandem became, in the absence of strong global leadership, a race to the bottom, sustained by carbon and credit.

Domestic safety nets got torn up in a fever to make economies more nimble. Deregulators, privatisers, and a free market orthodoxy took hold, shredding the pacts that once eased the effects of globalisation.

Trade unions, once key to manufacturing the consent behind the global new deal, got crushed. As supply chains outsourced automobile parts production to Indonesia and T-shirt-making to Bangladesh, dependence across societies produced greater inequality within them.

And yet the system bumped along: Public services and protections softened market risks before 1973; in the decades afterward they were replaced by the private comforts of combustion and monthly credit card bills.

If access to carbon and credit appeared to solve the problem for a time, there was an additional, sustaining shock. In 1989, American leadership got a new lease on life - at least for a while.

The fall of the Berlin Wall, the breakup of the USSR, and some gloating about the end of history created some sense of renewed American grandeur and the triumph of free markets.

This euphoria, however, masked underlying structural shifts that eroded US dominance still further; while the Soviet bloc collapsed, behind the scenes, there was a dramatic retooling of the Asian economies. Germany also upgraded its automobile, aircraft, and pharmaceutical prowess.

The reckoning could not be put off forever. The dual addictions to carbon and credit are now under assault. The bill for relying on fossil fuels is turning up in the form of climate change, while swaths of the unprotected precariat work part-time jobs in Walmart and Home Depot to cover the monthly interest on their Visa cards.

And now: Not since 1930 has the global trading order been more threatened. No one is coming to the rescue. David Cameron botched the Brexit campaign. Hillary Clinton stumbled through questions about the misunderstood Trans-Pacific Partnership and cringed whenever NAFTA came up. In the vacuum, wall-builders promise to revive a zombie version of American grandeur with more carbon, more credit, and a mercantilist crusade.

Global integration relied on the United States playing a vital stabilising role in an otherwise turbulent world. After a long life, the seven decade-long American-led order is now exhausted. It was running out of steam anyway.

But what comes next is not a simple process of slow sputtering out. In order to make America great again, a coalition of wall-builders and treaty-shredders will aim to upend the grand strategy that informed generations of thinking and policymaking since 1945.

What the new regime in Washington promises to do now is to become the single-most important source of global instability.

Meanwhile, the emergent world order will be one deprived of a dominant actor. The world has yet to master the idea of leadership without dominance. And the unique moment in global history that produced the liberal Leviathan and allowed it to cobble together wholesale a system that gave the world relative peace and prosperity for decades is giving way to a more uncertain, fragile successor.

The long cycle of integration and relative tolerance forged by US leadership since World War II is now headed in reverse.

Foreign Policy/The Washington Post Service