British and American Hegemony Compared
"British and American Hegemony Compared: Lessons for the Current Era of Decline" is an essay written by David A. Lake which responds to a contemporary application of hegemonic stability theory.
In accordance with the theory or hegemonic stability, international economic liberalization burgeoned around the globe in association with the ascendance of Great Britain as the economic world power. Along with the start of Britain's relative decline after 1870, the international system retracted its openness to trade and countries once again pursued more protectionist policies. Given the similarity of United States' hegemonic trajectory (also associated with a spread of economic liberalization) with that of Great Britain, many have predicted--and hegemonic stability theory would suggest--that a contraction of liberalization and return to national protectionism or closed regional economic blocs will follow the U.S. current decline. David Lake, however, argues that while Great Britain's and the U.S.'declines are similar a direct analogy is not appropriate; significant differences in the U.S.' rise and decline will prevent the contraction of world trade that occurred after Great Britain descended from power.
Lake first points out that because most major economic powers of the 19th Century maintained empires as a supplement to open international trade, it was easy to revert to closed trading blocs in response the decline of Britain and greater--but less monitored--competition. The present international system is less likely to break down in regional blocs because bilateral relationships, outside of empire, are A)more visible and B)more risky than they were then.
Britain's descent was met with increased competition from the United States. That competition, along with the international chaos caused by WWI, made cooperation between the economic powers difficult. As Lake notes, "the decline of American hegemony has occurred primarily through a general leveling of international economic capabilities among the Western powers" (Lake 133). Today's international economic system does not face nearly as strong a challenge to cooperation as did that of the early 20th Century.
In addition, the modern openness to trade will likely be more durable than that of the 19th and early 20th Centuries because of the U.S.' greater reliance upon international regimes. Not only do international regimes take some of the hegemon's responsibility for securing relations between countries (suggesting that even after the hegemon falls international relations will continue), institutions like the GATT also enforce reciprocity. Whereas British liberalization was founded in the unconditional most-favored-nation principle, allowing other countries to retract from free trade at will, the U.S., through the GATT, has forced countries to commit to liberalization themselves in order to receive the benefits of other countries' openness. These international relations are also largely confined to Allies, which makes them less threatening.
Finally, the United States' reliance on foreign direct investment more than portfolio investment, as well as the preponderance of multinational corporations, sustain a larger, more powerful free trade lobby in the United States and around the world.
Lake argues that unless the United States itself begins to retract from the open international economy, thereby encouraging similar behavior in other countries, the liberalized international system will likely abide, even as U.S. hegemony declines.