- NBR - The National Bureau of Asian Research

The Global Economic Crisis and U.S. Power

Ashley J. Tellis


This chapter examines both the effect of the global recession on the prospects of capitalism remaining the predominant mode of economic organization and the impact of the downturn on U.S. power and hegemony.

Main Argument:

Although the current capitalist system is acutely susceptible to crises, capitalism as a model of economic organization has been far from irreparably harmed by the current economic crisis. Instead, capitalism will continue to persist as it has for centuries, its capacity to evolve and ability to efficiently distribute resources being its greatest strengths. Though capitalism may not be at risk, its current form, fundamentally shaped by U.S. economic and political hegemony, could be challenged. These challenges will be greatest if China experiences a quick recovery while the U.S. economy languishes interminably. However, current projections of U.S. economic growth, combined with a Chinese stimulus package emphasizing increased production rather than consumption, make such disparate recoveries unlikely. In sum, the current crisis is not a watershed signaling the shift of hegemony from Washington to Beijing.

Policy Implications:

  • Sustaining U.S. hegemony over the long run will require engineering a controlled global adjustment of the international economic system that does not put the U.S. at an inordinate economic and geopolitical disadvantage.
  • Overcoming structural disincentives to avoid reducing budget deficits and devising a non-inflationary exit from present deficit spending are key medium-term challenges to preserving hegemony for the U.S.
  • Decreasing the current accounts and budget deficits through both lower spending and steady dollar depreciation is essential in protecting the dollar as the dominant international reserve currency. This exorbitant privilege of being the world’s banker is fundamental to the preservation of U.S. political hegemony.