Talk about empire has become a cliché. Historians and economists busy themselves comparing America's contemporary role with Rome, Napoleonic France and imperial Britain. They assume that empire is the only model for a state seeking to project power and influence--ignoring alternatives from the business world. After all, businesses confront many of the same difficulties that states face. When competitors emerge, firms undergo pressure. A corporation may reduce the cost of its products by cutting the costs of raw materials and labor, increasing sales and finding new technological fixes--just as a state might try to increase economic growth, enhance productivity or develop new weapons systems. But if a company reaches the limits of its economic market, it may consider a merger with like-minded companies to cope with a competitor.

States reaching the limits of their viability as self-sufficient actors can adopt merger strategies, too. Indeed, to preserve its global influence throughout the course of the 21st century, this is a path the United States must consider.

Why do companies pursue mergers? Mergers give companies greater flexibility. They achieve greater scale without increasing production. If new products are involved in the merger, a combined firm can avoid anti-trust problems. Larger scale allows a company to maintain its position in the industry. Usually it can invest in new products, run higher advertising budgets and sometimes achieve lower prices. A large producer can get raw materials at reduced cost. Wal-Mart, the contemporary exemplar of corporate expansion, has not shrunk from plunging into new markets and cutting prices--thereby forcing the merger between K-Mart and Sears. Now Gillette is combining with Proctor and Gamble to offset Wal-Mart's domination in the household sector. Verizon's success in communications is provoking a connection between Nextel and Sprint, and Verizon is in turn seeking to acquire MCI. Oracle and PeopleSoft are merging to counter sap in enterprise software. Hewlett-Packard merged with Compaq to match Dell Computer's gains and is open to new merger strategies. Mergers give nations similar advantages in flexibility, and of course nations do not face anti-trust problems.

What are mergers among states? They are arrangements that combine political leaderships to project greater power and influence in the world at large. A new superstate is not necessarily created. Countries retain separate governments and legislatures. Internal elections and democracy continue. But merged nations also accept a common code of behavior that their electorates sustain. They create merged bureaucracies and common decision-making councils that give effect to their unity. Approval by democratic publics lends credibility to the merger commitment on all sides. The European Union, for example, has developed such institutions and has now become a merged entity of 25 states that boasts a population of 450 million and a combined GDP of over $12 trillion.

In the past, nation-states were usually content to form alliances forged through the balance of power. Ententes offered quick expedients in crises. Some arrangements, such as NATO, have endured even when the reason for their existence has passed. But even the most successful alliances face difficulties when situations change. In addition, alliances are vulnerable to public-goods problems. Why shouldn't countries "free-ride", letting someone else take the lead in opposing an aggressor? Within alliances, there are always attempts to shift burdens on to someone else, as NATO itself demonstrated. Thus, alliance ties may attenuate or become ineffective. The Franco-Russian alliance did not prevent Hitler from rewriting the map of eastern Europe. The Little Entente did not guarantee help for Czechoslovakia from either France or Britain when the German dictator upped the ante in 1938. Stalin's non-aggression treaty with Hitler did not prevent the German attack of June 22, 1941. Though allies rarely attack one another, typical alliances represent a temporary confluence of interest between parties which rests on shifting historical sands. The legal requirement--rebus sic stantibus, things remaining the same--may not always obtain.

Mergers among states are a different kettle of fish and have advantages over alliances. Because they are negotiated on the basis of contractual commitment and intended long-term relationships, they are not as vulnerable to public-goods problems. Instead, interstate mergers provide "club goods"--benefits that only members can enjoy. They emerge as much from historic commonalties as they do from oppositions. Common ideologies and democratic ideas solidify the union. Furthermore, one country cannot politically subsume another, and peoples of the merged states must agree before the union takes place. In fact, political mergers are in some ways more permanent than their industrial counterparts. Hewlett-Packard may sell Compaq. Time-Warner may jettison AOL. In contrast, the European Union reluctantly allowed Norway to opt out while sustaining its other membership commitments. The upcoming national ratifications of the new European constitution could go awry, but ultimately they would be repeated and reaffirmed, just as Ireland's acceptance of Maastricht was years ago. State mergers still retain an open-ended flexibility. They are partial and not complete. Other states may join. Participating nations retain sovereignty. Coordination of policy frequently remains incomplete.

Still, mergers forge a relation among erstwhile nation-states that is stronger than alliances and much more enduring than ententes. Mergers are also superior to the imperial bond. Imperialism is based on force and ultimately on the capitulation of the desired colony. State mergers are sanctioned by the parties involved. Nor are mergers vulnerable to the ups and downs of the balance of power, with participants changing sides as power trends alter. Sustained by democratic ideas, political mergers have a kind of irreversibility. And war between merged units is unthinkable. In the European case, merger has ruled out military conflict between two long-time enemies, France and Germany. The Roman Empire collapsed because subordinate units were unequally treated and excluded from some of its benefits and Rome could not militarily discipline them. The returns from invasions did not rise to cover increasing military costs. This disproportion was axiomatic, as it was in the British rule of India. Political mergers--based on equality--confront no such problems. Thus, a Pax Americana is only one response--and an entirely disproportionate one at that--to a foreshadowed inadequacy in power. Farsighted corporations would aim instead to find a merger candidate to remedy the insufficiency. So should nations.

Merger as Grand Strategy

The European states found their way to merger after World War II. Confronting the two colossi, the United States and the Soviet Union, no single European state had sufficient scale to compete on an equal plane. The German historian Hajo Holborn then declared "the political collapse of Europe", in that individual European states acting separately could no longer achieve a self-sufficient balance of power. Thus, after 1957, European integration and then the European Union provided a make-weight to the superpowers. One must remember that the launching of Europe took place after the invasions of Suez and Hungary and (from the European point of view) reflected the unreliability of the alliance with America as well as the probable hostility of the Soviet Union.

Of course, it is fashionable to downplay the European achievement. Venus never prevails over Mars. But the European merger strategy has been surprisingly successful. In economics, the EU has achieved good if not stellar productivity, even though its rate of growth has not always kept up with the American one. Nonetheless, Philips, Thomson, Glaxo-Smith-Klein, Airbus, Ariane and the Galileo global satellite system have demonstrated key European gains in technology, comparable to those achieved in the United States. Biotechnology, too, is highly competitive. Banking and publications are becoming a European fief, with large European firms frequently swallowing up their American counterparts. And as the European Union admits new members to the east, it also acquires new markets, raw materials and labor to compete with other nations. As it expands further, admitting nations rich in natural resources, it will gain even greater strength. With the U.S. dollar now remarkably low in value, European concerns are engaged in a new buying spree in America, and the EU's GDP has surpassed America's.

The curious anomaly is that Europeans have reversed the centuries-old balance of power as it applies to them. Previously, a consolidating economic and political unit in the center of Europe provided an invitation to balance against it. Following such precepts, France aligned against the Hapsburgs, England countered France, and France once again opposed Germany--these formed the quadrille of diplomacy for more than 200 years. Yet, the agglomerating power of the European Union has occasioned no opposition. Instead of opposing the construction of Europe or tearing down the present edifice, large and small countries alike wait patiently in line to join. Indeed, the process of European integration since the 1950s seemed a triumph over improbability. Time after time, on admissions, a common currency or a two-speed Europe, progress has ground to a halt. The mid-1960s witnessed the French veto on British membership and other matters. Stimulated by the falling dollar in the 1970s, Europe generated the exchange rate mechanism and the "snake in the tunnel" to prop up and unify European currencies, but this did not succeed. When Britain dropped out and France and Italy sought greater bands of fluctuation around the keystone value of the German mark, many concluded that a common currency was beyond Europe's reach. But Europe achieved such a currency at the end of the 1990s. The pessimists who predicted that the euro would remain a low-valued currency and an unused stock of value for foreigners were proved wrong. China has sold dollars to buy euros. Almost every objective once deemed unattainable has been achieved. Countries that once held back or dropped out have rejoined the integrated group.

In adding new nations to the list, the European Union has negotiated more than customs unions or trade pacts. New members have to accept the acquis communautaire and the supranational obligations it imposes. Countries then must conform their domestic laws to European court decisions, pay into the Union budget and accept Council and Commission findings that they might have wished to avoid. Candidates for membership not only must be democratic states to join the "euroland area", they are supposed to limit government deficits, reduce inflation and keep their currencies stable. They must accept anti-trust decisions by the ubiquitous competition commissioner, who tells European and American corporations which industrial combinations are permissible. New members understand that as the European Union increases in size, qualified majority voting perforce will be employed, and it will be used on more important questions. Even large countries may find themselves in a minority on significant issues. Germany forewarned of this eventuality but has had to adjust to it.

Europe, perhaps without realizing it, has acquired a "manifest destiny" to expand its membership. Robert Mundell, the "father of the euro", once hypothesized that fifty countries might ultimately join the European Union. When courting outsiders, Europe seduces, rather than ravishing, new members. Nor is there a limit on the geographic definition of Europe. De Gaulle denominated the Urals as the eastern extremity of the European continent, but should one definitely exclude the Caucasus countries from membership? If Turkey joins, does that rule out all other countries in the Mediterranean, North Africa or the Middle East? American manifest destiny ended at the convenient boundary of the Pacific. For Europe, however, there is no obvious geographic limit beyond Asia Minor. And if Europe draws a final boundary, its influence will wither. So no line will be drawn at least for now. Romano Prodi occasionally opined that the Vistula was the practical limit, but it has already been exceeded with Ukraine beckoning as a prospective member.

Europe's success in enlargement does not create a unitary superstate. There is no single decision-making center or minister of foreign affairs. Secretary of State Condoleezza Rice still cannot pick up the phone or send an e-mail to contact her European counterpart. Foreign policy decisions absorb a great deal of time in the Council of Ministers and sometimes do not emerge at all. The need for real-time decision-making has not yet made a dent in the European consciousness.

This does not mean that Europe maunders aimlessly while the world turns. When the new constitution is adopted, there will be one European foreign policy representative. A consensus is emerging on European attitudes toward the outside world, including China, and Europe will have to take a stand on issues that matter. In support of greater involvement, the EU has already taken on the American role in Bosnia and Macedonia. Here as elsewhere the rapid reaction force is assuming a concrete form.

Imperial Interventions

The real difference between American and European policy is portrayed in the Balkans. When Russia retrenched and Yugoslavia collapsed, failed states began to emerge from the chaos. The United States intervened in Bosnia and then again in Kosovo, taking the military lead. Initially, the EU failed to recognize that UN peacekeepers could not possibly do the job. But when the dust settled, it was the possibility, if not the certain prospect, of EU membership that concentrated the east European mind. Slovenia's success in joining the EU will pave the way for Croatia and ultimately Serbia, working a transformation of internal politics in those two countries that U.S. military force could not accomplish.

Perhaps force--an imperial strategy--is a useful precursor to political change domestically. But force alone--leaving the task of state building to others--does not fit the bill. Outside interventions assisted by the United States did not reform African nations. In Haiti and Somalia, events returned to chaotic normalcy after the troops withdrew. With Rwanda in 1994, the United States would not even assist UN forces to find a solution. Exclusive reliance on force is like an on-off switch--it can be wrong either way.

In contrast, the process of European enlargement--involving peaceful mergers among previously independent states--has moved from success to success. This process has combined enlargement with deeper integration among previous members. For those who wish to join, enlargement of the EU has transformed the nations nearby, persuading them to become more open and democratic, and to develop more transparent economies. Poland's reforms were not fully consolidated until EU membership blessed them. Slovakia had to settle its dispute with Hungary even to qualify for EU consideration. Viktor Yushchenko was readying Ukraine for admission when he staged his Orange Revolution in Kiev. Even countries like Moldova that do not join are decisively influenced by EU membership criteria. And who's to say that Moldova could never become a member?

America has been dimly aware of the success of Europe's new strategy. The North American Free Trade Agreement (NAFTA), the Free Trade Area of the Americas (FTAA) and the Central American Free Trade Agreement (CAFTA) were the core of the U.S. response. NAFTA would tie Mexico to democracy and open it up internally. FTAA was designed to embrace Latin America as a whole, but Brazil and Argentina preferred to focus at least initially on MERCOSUR, their own trade bloc. But the conflicts within MERCOSUR--which consists of countries with similar economies--have been far greater than they would be with the United States. MERCOSUR was an association of sellers without an avid buyer. FTAA would include the buying power of the American market, and it cannot be ruled out for the future. CAFTA accords Costa Rica, Guatemala, Honduras, El Salvador and Nicaragua concessions within the U.S. market that will help those Central American economies.

But even a successful FTAA embracing the hemisphere does not represent a true merger of countries. In such pacts, foreign policy is not affected, and there is no common external tariff or welfare policy. To judge by Canadian as well as American complaints about their bilateral trade problems, there is nothing approaching free trade among the current members of NAFTA. Nor is there a Schengen-style agreement that facilitates a free flow of labor to mitigate the deficient flow of capital. There are few common political institutions that govern the development of an attempt at regional union.

Some believe that these difficulties are inherent in the American approach to world affairs, with the U.S. Constitution placing a bar on legal relationships with other nations. But as Supreme Court Justice Ruth Bader Ginsburg points out, international treaties are part of the "law of the land" and have themselves a constitutional status. The Constitution did not prevent the United States from joining the World Trade Organization (WTO), in which America has frequently been a loser in the dispute settlement mechanism. Through its constitutional processes, the United States can ratify any international treaty it wishes and subject itself to its strictures.

Will it do so? Not until the difficulties of America's current plight are further underscored. The invasion and occupation of Iraq underlined the uses and limits of military force. Victory was achieved in a few days, but establishing an internal democracy was a tall order--one that troops could not accomplish. There is no regional Arab institution that a fledgling Iraq could join to strengthen its democratic structure, because all Arab institutions--such as the Arab League--are composed of undemocratic nations. The possibility of merger with an enlightened regional federation does not exist.

But the United States now dimly understands that force, followed by imperial occupation, is not a long-term remedy for the ills of a miscreant world. America desperately needs to deepen and regularize its relationships with like-minded countries to gear itself up for 21st-century challenges.

The Problem of China

The greatest long-term foreign policy problem facing both the United States and the European Union is what to do with China two decades from now. During that time, China's economic growth will likely outstrip that of both powers, though India will also emerge as a major industrial competitor. It is too early to do anything at the moment. China is still an authoritarian nation though its economy is moving in a liberal direction and it may yet undergo political change. Democratic or not, Beijing's economic growth will likely foreshadow a hegemonic shift in the leadership of the international system just as did the emergence of imperial Germany in 1871-1914.

The question is whether China will follow Bismarckian policies and forego expansionist aims. Bismarck tied Germany up into a series of pacts, limiting its future options and foregoing all but the tidbits of empire. He did not question French or British imperial primacy overseas. Nor did he build a German navy to offset British naval primacy, although by the end of the 19th century, Germany's growth surpassed that of Britain. Had Bismarck's successors continued these self-limiting policies, there would have been no challenge to England, no rebuff to France, and World War I might have been avoided. As late as 1907, Sir Eyre Crowe of the British Foreign Office was willing to accept German growth that did not involve territorial expansion in the center of Europe. The rise of the United States is another example of growth that did not overturn the status quo or threaten established powers. Even though Washington emerged from the First World War with the world's second-largest navy, Great Britain did not long view the United States as a primary opponent. As a democratic country distant from Britain, the United States did not threaten British purposes in Europe or initially in the empire. China, of course, is not democratic, but neither was Germany when it laid down its self-limiting regime. Then or now, no country has declared war on another simply because of the latter's growth rate. Thus, the key to the future is not Chinese growth but what Beijing does with it. The upshot is that power transitions have taken place without war in the past, and they can do so again.

The balance of power may make this transition easier. If the new leader of the system confronts a series of like-minded balancers, the difference in power between the top two states may not be all-important even though no new mergers take place. Short of mergers, a counterbalancing coalition may link India and Japan with the United States. China's growth will affect those nations as directly as it will America. Thus, Chinese primacy may not translate into the power to expand regionally or internationally.

The need to formally balance China's relative strength may not arise, however. An American merger with Europe would create an unbreakable combination that provides similar size and scale as corporate mergers do today. If China becomes the Wal-Mart of world politics, the United States and Europe can do better than Sears and K-Mart. Their union would overshadow Chinese growth and size, and it would accommodate other rising nations as well. For the United States to find a merger partner to offset China, America must deepen its ties to Europe. As former Federal Reserve Chairman Paul Volcker recommended, a first step might be to establish bands of allowable currency fluctuation among the dollar, the euro and the yen. This would help to institutionalize relationships already established in the Plaza and Louvre accords of the 1980s. If the Doha Round of WTO negotiations does not reach early agreement, there could be a new transatlantic free trade relationship (TAFTA), laying the foundations for a U.S.-European merger. Such a step would acknowledge that episodic bilateralism is insufficient to deal with the problem of China. Only a growing combination of the United States and Europe would be sufficient to offset the dynamic power of China over the long term. By themselves, neither the American nor the European growth rate will match China's. Corporations would know what to do in such circumstances, but states are only now becoming aware of the need for combination.

China will not remain immobile as Europe and the United States begin to merge their foreign policy fortunes. Beijing will turn to neighboring states for support, perhaps negotiating a special trade bloc with Japan, Korea and Southeast Asian states. Beijing might seek to fashion a new currency link among the renminbi, the yen and the won to prevent the dollar's slide from exporting inflation into Far Eastern economies. As China sells more to its own consumers and less to the outside world, a fixed relationship to the U.S. dollar will in any event be less important. At some point China will raise the value of the renminbi to take the economic pressure off its trade relationship with the United States and Europe.

If Beijing seeks a merger with Far Eastern nations, it will find that partner countries do not wish to form a permanent connection with an authoritarian and therefore unpredictable regime. What could happen if a future China undergoes massive political change? On June 4, 1989, the democracy movement failed at Tiananmen Square, but the protesters represented an elite in waiting. Educated youth espousing democracy have until now been the perpetual bridesmaids in Chinese politics, but that doesn't mean that their generation is not planning to exert political influence as the Communist Party wanes or loses legitimacy. Moreover, the Chinese movement for democracy is able to sustain itself in the more independent incubator of Hong Kong. China's present hesitant elite may not realize that without democratization, Beijing cannot form structural--which is to say, constitutional--ties with others. Mergers are impossible. In this sense the most powerful weapon in the hands of China's elite is not economic growth or military preparedness, but political transformation. A democratic China would be a far more potent factor in international politics than the conflicted and cautious regime of the moment. Such a China would also likely be constrained by its democratic character from attacking other democracies.

A New Partnership?

A particular synergy would animate a merger between the United States and Europe. They have similar democratic political systems, but complementary, not identical economies. The United States is a buying power, a powerhouse of consumption. Europe is a selling power, a powerhouse of savings and investment. U.S. development over the long term will depend upon heavy European investment. Europe's ability to sell abroad, meanwhile, will depend upon investment and production overseas, particularly in the United States. Both powers depend upon investments in high technology, information technology and biotechnology, and the development of a Euro-American common market will stimulate these. Without markets in the United States, Europe will slow down. Without European capital, the United States will decelerate. They are fitted, hand-in-glove, for each other. In addition, the United States provides a more decisive form of foreign policy leadership when new crises emerge. The EU excels in long-term strategies, the United States in prompt rejoinders to immediate threats, and at least at this time, the United States possesses the logistics and lift capabilities needed to intervene in crisis regions when necessary. Again, the combination of the United States and Europe is stronger than either taken separately.

This does not mean that the United States or Europe can simply count on a merger combination to solve problems for them. Domestic economic progress and democracy are the two factors that attract emulation by other nations and therefore provide merger momentum. America and Europe must maintain economic momentum and democratic stability. Nor will such mergers create "superstates" designed to overawe China through military prowess or expansion. Merged combinations--confederations--operate slowly because they have to achieve consensus among existing as well as potential members. Slow, deliberative and consultative policies should not create an insuperable barrier to a common position on China, because Beijing also views international matters from a long-term, even glacial perspective. Mergers may be slow and long term, but the spread of democratic institutions and values will help forge among partners a common point of view toward the outside world. Brussels, Washington and Beijing already look at problems of terrorism and rogue states from a similar standpoint. Under such circumstances, the very definition of "power" may begin to undergo change. The greatest power is not military; it is social. It involves, as George Kennan noted, the replication and extension of one's free society through international adoption of its usages. Merged societies create institutions and values that others can employ themselves. This is the true meaning of "soft power" as depicted by Joseph Nye. Thus, while it is true that mergers may involve ponderous decision-making, they also evoke emulation by other nations.

In addition, mergers may attract others, possibly even the Russian Federation. While Vladimir Putin focuses on raw-materials links with Beijing, with Moscow providing much needed oil and minerals to China, a much closer U.S.-European association would raise questions about Russia's long-term strategic response. An America domesticated by Europe would be much more attractive to Russia than the U.S. "lone wolf" of Bush's first term. Russia will never be able to sell anything but raw materials to China. But a Russia more closely linked to Europe and more attuned to Western legal systems would offer an inviting prospect for industrial investment from both Europe and the United States. Given its educated population, Russia's software competence could become a useful accompaniment to Western industry.

The United States will always need a powerful military establishment. There are certain tasks that, as President Bush saw in his 2002 strategy statement, require pre-emption to succeed. But in dealing with other major powers, pre-emption is neither feasible nor justified. Even in occupying third world nations, a largely unilateral invasion should not be the strategy of choice. After early apparent success, the dilemma of the victor's inheritance continues to confront both America and a successor Iraqi regime. In the face of domestic opposition, continued occupation is a very costly project. Much more effective over the long term is successful and additive merger with other nations which creates emulation by nearby countries. History has not been written on such subjects, but it is worth asking whether the European Union's prospective admission of Turkey may not have greater long-term effect on international politics than the U.S. invasion of Iraq. But most important, mergers are the only practical antidote to China's growth strategy. The United States can neither attack nor occupy China. Nor can the United States or Europe grow quickly enough to offset Chinese economic gains between now and 2030. Like that of industrial corporations, the appropriate recourse of the two Western power blocs is successful merger with each other.

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