Twilight of Pax Americana

The international order that emerged after World War II has rightly been termed the Pax Americana; it's a Washington-led arrangement that has maintained political stability and promoted an open global economic system. Today, however, the Pax Americana is withering, thanks to what the National Intelligence Council in a recent report described as a "global shift in relative wealth and economic power without precedent in modern history" -- a shift that has accelerated enormously as a result of the economic crisis of 2007-2009.

At the heart of this geopolitical sea change is China's robust economic growth. Not because Beijing will necessarily threaten American interests but because a newly powerful China by necessity means a relative decline in American power, the very foundation of the postwar international order. These developments remind us that changes in the global balance of power can be sudden and discontinuous rather than gradual and evolutionary.

The Great Recession isn't the cause of Washington's ebbing relative power. But it has quickened trends that already had been eating away at the edifice of U.S. economic supremacy. Looking ahead, the health of the U.S. economy is threatened by a gathering fiscal storm: exploding federal deficits that could ignite runaway inflation and undermine the dollar. To avoid these perils, the U.S. will face wrenching choices.