The Buzz

America's Shrinking Geopolitical Power

Both China and Russia have been more assertive in carving out their spheres of influence, which has led to friction with Europe, the United States, Japan and smaller countries. One example of this is China’s Belt and Road Initiative, which is set to link China with Europe and the Indian subcontinent and east Africa. If successful, China will make the Eurasian land mass its own economic sphere of influence and certainly rival the transatlantic economic world.

The second factor is that the economic policymaking environment is becoming more complicated due to politics. This comes from having to contend with a more complex set of external variables as well as internal divisions that underscore the dysfunctional aspects of political systems struggling to deal with the disruptive impact of technology and a sharper delineation of winners and losers in national economies.

The disruption of economic policymaking by politics is nowhere more evident than in the United States. After eight years of the Democratic Obama administration, the Republicans swept the White House, the House of Representatives and the Senate. The Republican agenda for economic growth and jobs should be rapidly advancing through the legislative process. Indeed, financial markets experienced the “Trump bump” from November until recently on the expectation that the new administration would be able to enact its agenda of tax reform, repeal and replacement of the Affordable Care Act, financial deregulation and fiscal stimulus helped along by a dose of badly needed infrastructure spending. That has not been the case.

While President Trump pulled the United States out of the Trans-Pacific Partnership, served notice to Canada and Mexico that the North American Free Trade Agreement would be renegotiated, and was able to appoint a Supreme Court Justice, the rest of the White House agenda stalled in Congress where the biggest problems came from within the Republican party. At the same time, the ongoing deluge of “scandals” (the Comey firing, Russia, and potential conflict of interest issues from the president and his family) has distracted White House attention from economic policymaking and caused a certain degree of infighting (a lot of over economic policies including trade).

The mix of a more complicated international political order and conflicting domestic considerations is unique to Washington. Many of the same issues face leaders in Beijing, Brussels, Paris, Berlin, London and Tokyo. The real risk is that taking one’s destiny into one’s own hands does not degenerate into a more blatant form of power politics, such as those that led to two world wars. All of this raises major questions as to how far the United States wants to withdraw from a leadership role in world affairs under President Trump. Any time a major power steps back, it leaves the door open to others. It is said that nature abhors a vacuum; the same can be said of international relations—and multipolar systems are inherently more prone to instability.

Scott B. MacDonald is chief economist for Smith’s Research and Gradings.

Image: An F/A-18E Super Hornet launches from the aircraft carrier USS Carl Vinson during an air-power demonstration in the Pacific Ocean on May 30, 2015. U.S. Department of Defense / Petty Officer 2nd Class John Philip Wagner, Jr.