America as a retreating empire is making way for a conflict-ridden world, as well as a weakening America

Economic Times

17-06-2025

Good night, and good luck New York: History shows that end of an empire means collapse of imperial rules and their enforcement. Anarchy, warlordism, loot, and collapse of governance and prosperity follow - until a new hegemon arrives. William Dalrymple's 2019 book, The Anarchy, is, among other things, a good account of India's tribulations between end of the Mughal empire and formal establishment of British rule.The word 'empire' is tainted today by the memory of colonialism. But historians like Charles Tilly have highlighted the key role of empires through history in creating settled conditions and rules that created economic and physical security, key conditions for rising prosperity. Economic historian Deepak Lal made the same point in his 2004 book, In Praise of Empires, without exonerating colonial excesses.
Today, we're witnessing the end of American hegemony and its rules. Twist in the tale: the end this time is being driven not by a rival conqueror, but by the hegemon itself, in search of supposed reciprocity. This bodes ill for coming decades ahead. The unprecedented prosperity created by Pax Americana after WW2 looks certain to diminish, and local hostilities (like the latest Israel-Iran escalation) to expand, hitting security, investment, trade, GDP and social indicators. Indian foreign policy has long sought multipolarity, to give New Delhi more flexibility in foreign policy. Trump's actions point in that direction. Alas, what India is gaining through flexibility is far less than what it is losing through a flawed but very useful post-WW2 rules-based system. The US created this system to help itself, of course. But, in the process, it had created international public goods of unprecedented importance. Those public goods are now eroding. Trump's gyrations are the beginning of the end of economic rules established in the last 75 years.Pax Americana did not imply a formal American empire. Unlike earlier hegemons, the US did not conquer, or formally rule over what it called the 'free world'. But, along with allies, it established a new set of global rules under UN and international institutions such as World Bank, IMF and Gatt. The Marshall Plan - called 'the most unsordid act in history' by Winston Churchill - carried conditions along with free billions to Europe, such as economic opening up and a sustained move to globalisation. This created the most phenomenal improvement in the history of GDP as well as social indicators, human rights and democratic institutions.Pax Americana was far from an era of total peace. Small wars galore occurred, but no clash of titans. Conditions were peaceful enough for unprecedented harmonisation of rules in trade, investment, shipping, aviation, telecom, finance, and much else.The US dominated the post-WW2 world economy. It could afford both charity and a long view of its interests. It visualised globalisation through rules as both moral and economic imperatives. Starting rich, the US lowered its economic barriers more than others in negotiations in Gatt and other fora. It offered developing countries 'special and differential' treatment to help them along. This supplemented foreign aid. The US aimed to gain not by growing its own slice of the global pie, but by increasing the size of the pie, so that all allies and objects of charity in the Third World prospered too.It succeeded beyond all expectations. Historian Angus Maddison has given estimates of per-capita incomes since 1 AD in 1992 dollar terms. In 1 AD, per-capita income was $450 in India and China, and $400 in North America. Pax Romana under the Roman Empire gave Italy double the living standard of any other place at $809. This earlier hegemon also gained hugely along with ruled colonies through a rules-based system and relative - by no means absolute - peace.Economic progress was slow before the Industrial Revolution. In 1700 AD, per-capita income was just $550 in India, $600 in China, $527 in the yet-to-be-created US, and $997 in Western Europe. But in only 53 years between 1950 and 2003, it skyrocketed everywhere - from $619 to $2,160 in India; from $448 to $4,803 in China; from $9,561 to $29,037 in the US. The international public goods provided by the US were a key reason.The other big player in this period was the USSR. This was a Russian empire parading as a 'people's republic'. It had an internal empire consisting of central Asia and Caucasian provinces, along with conquered countries of Eastern Europe at the end of WW2. The USSR, too, had a set of institutional rules that benefited its own empire for some decades. Indeed, in 1950, many analysts expected communist hegemony to triumph over capitalist nations. This looked plausible when the USSR became the first to launch Sputniks and men in space. But superiority of US-promoted institutions soon became apparent. And the rest is history.Empires don't end overnight. They erode gradually. But the end of Pax Americana and rise of multipolarity looks like making the world nastier, more conflict-ridden place with less economic progress, and less camaraderie. (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.) Elevate your knowledge and leadership skills at a cost cheaper than your daily tea. Benchmarked with BSE 1000, this index fund will diversify your bets. But at a cost.
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