Doug Henwood files from the Upper East Side:
Doug Henwood Talks » Blog Archive » missing hegemon at the CFR: I was at one of those Council on Foreign Relations public events this morning - Larry Summers and Paul Volcker on a successor to the Bretton Woods system, moderated by James Grant.
1) Summers pronounced himself a “chastened prophet” for saying that the U.S. current account deficit was unsustainable since it has gone on for so long. Volcker agreed. Summers added that it’s interesting that there were more people worried about the U.S. stock market when the Nasdaq was at 2500 than there were at 3500, and quoted his “good friend” Rudi Dornbusch as saying things always go on longer than you expect, and then when they go bad, it all happens much more quickly than you’d expect.
2) From the questions, the CFR audience was seriously concerned about the c/a deficit and the weakening of U.S. power in the world. They’re all very polite, but it sounded like they don’t think Bush has been good for the imperium. One questioner noted that today’s world looks like one without a hegemon, and when that’s happened in the past, bad things ensued (e.g., Depression and world war). He noted that since both Summers and Volcker occupied seats of power when the U.S. was an unchallenged hegemon, how different do they think things would be now were there some sort of financial crisis, esp one featuring the U.S.
Both Summers and Volcker looked stunned into silence for a while, and then Summers said that that was a “powerful” observation couched as a question. And Volcker expressed concern that managing a crisis would be much more difficult now with the U.S. “politically weakened” and the target of so much “antagonism” around the world. He worried that Europe and the Asia might go off on their own. Someone else asked who out there might “lend a hand” if the U.S. hit a wall. Another long pause, and then Volcker doubted anyone would raise his hand as volunteer, which prompted nervous chuckles.
The view that the Great Depression happened because Britain was no longer strong enough to manage the international monetary system and the United States had not--as it ought to have--stepped into the role was the view of my old teacher Charlie Kindleberger. I tend to place more weight on ideology: even had Britain possessed much greater economic strength in the late 1920s and early 1930s, I don't think they would have used it constructively. On the security side, Britain and France ought to have deterred Nazi Germany from launching its invasion of Poland. Their error was in not understanding that Hitler was crazy early enough, and not having taken steps to remove him from power earlier in the 1930s. And World War I... I still don't understand the origins of World War I.
So I don't agree with the premise of the question. But the question is, as Summers said, a powerful observation. Hegemonic stability theory might be true. Certainly Charlie Kindleberger thought that it was.