So Now Who’s in Charge?

As Europe wrestled with monetary union last week and Japan writhed in the toils of its gathering recession, most observers missed the real story: The “American Decade” is over.

In fact, U.S. policy is coming unglued around the world. In the Middle East, Israel’s Likud government has stalled and may yet completely derail a peace process that U.S. presidents have been working on since the time of Richard M. Nixon. Cuba just won another vote at the United Nations, this time blocking the reappointment of a special rapporteur to monitor its human-rights violations. Neither the threats nor the promises of U.S. diplomats can do much about the escalating violence in Kosovo. Failure to pass “fast track” leaves the United States without a Latin America policy, even as Brazil works to consolidate its own trading zone in South America. Even the tiny Turkish Republic of Northern Cyprus has thumbed its nose at the latest U.S. attempt to mediate its long-running quarrel with its Greek neighbor.

What a change from the recent past. From 1988, when the Soviet Union began to collapse, until recently, the United States dominated the international agenda. Russia and China were too weak and too poor to do more than complain on the sidelines; Europe was too divided and Japan too unsure of itself to challenge U.S. policy.

But last week showed the world in a new and unsettling light. The introduction of a new currency in Europe and Japan’s reaction to the economic crisis in Asia are, by far, the most important things happening in the world right now.

And, for all practical purposes, the United States can’t affect either one.

Take European Monetary Union. If EMU fails, it will lead to massive economic dislocations in Europe, with major effects on U.S. stock and bond markets, and on the earnings of our companies. If EMU succeeds, the euro will rival and, to some degree, replace the dollar as the favorite reserve currency of the world’s central banks. Likely result? Long-term increases in interest rates for borrowers and entrepreneurs in America and elsewhere, and a long-term decline in economic growth around the world.

Yet, with all this at stake, Washington has no more say about EMU than Guatemala or Pakistan. Nobody cares whether the United States supports it or not; nobody wants Washington’s advice about how to set it up or about anything connected with it.

So much for expanding the North Atlantic Treaty Organization as a way to maintain U.S. authority in Europe.

It’s a similar story in Japan. For the Asian economic meltdown to end, and real recovery to take place, Japan mustrestructure. That won’t be easy: What Japan needs is a bigger revolution than Margaret Thatcher brought to Britain or Franklin D. Roosevelt brought to the United States. Japan must become an open, consuming country, running large trade deficits with its Pacific neighbors to help them grow out of recession.

Every day the news from Asia shows how critical this is for the United States. Economic--and, therefore, political--stability in places like China, Indonesia, Thailand and South Korea is a vital national interest for the United States, and Washington is doing everything it can think of to get Japan to take the necessary steps.

Unfortunately, we are virtually certain to fail. Only two Americans in history have brought that kind of change to Japan. Commodore Matthew C. Perry forced Japan to open up to the world in 1853, and Gen. Douglas MacArthur revolutionized Japan’s economy and society after 1945.

Barring more gunship diplomacy or a new military occupation, the United States today has no prospect of getting Japan to do what it wants it to do.

We don’t have any realistic threats that are scary enough to make them do what we say, and we don’t have any bribes juicy enough to persuade them.

Some old lefties might gloat at this point about Amerika in decline. But U.S. weakness is bad news for the world. EMU could slow Europe’s growth. We are right to worry that Japan’s failure to make economic reforms could have tragic consequences in Asia. In the Middle East, in the Balkans, in Cyprus, the world would be better off if U.S. efforts to mediate disputes commanded more respect and enjoyed more success. Increasingly, others can and do block our initiatives, but nobody else seems able to step forward with a positive agenda.

What happened to the American Decade? Blame politics for part of the problem. At the moment, the United States can’t seem to run itself, much less the rest of the world. Congress and the president agree that the International Monetary Fund needs to be funded and the United Nation dues need to be paid, but Congress can’t seem to write a law that the president will sign to do these things. Solid majorities in both parties and in both houses of Congress want to expand free trade with South America, but, apparently preoccupied with Monica S. Lewinsky, nobody can come up with a workable “fast track” proposal.

Still, the problem goes deeper than politics. What’s really to blame is that our key Cold War alliances, with Western Europe and Japan, no longer work well.

In the Middle East and the Balkans, much of Western Europe is frankly opposed to U.S. policy. The United States wants Turkey in the European Union as soon as possible; the EU hopes this never happens. Despite its problems with the Netanyahu government, the United States still sees Israel as the lynch pin of its regional policy. Increasingly, Europe sees Israel as more responsible than the Palestinians for instability in the region, and also blames the U.S. for encouraging Israeli extremism. Western Europe is also increasingly distancing itself from U.S. policy vis-a-vis both Iraq and Iran. If Western Europe is opposed to U.S. policy on these issues, Tokyo rarely supports U.S. initiatives that don’t offer direct short-term benefits to Japan.

These are just the side issues. The most important question in world politics today is the international economy. Here the gap between the United States and its key Cold War allies is even greater.

Unfortunately, our Cold War allies share a negative, slow-growth agenda. Neither Western Europe nor Japan wants to make troublesome, difficult reforms. Europe (Britain excepted) doesn’t want to break up its cozy welfare states and Japan doesn’t want to dismantle its centrally planned and cartel-based economy.

If that means slow global growth, Western Europe and Japan don’t care. With slow or negative population growth, Western Europe and Japan don’t need to build their economies to make room for future generations. In practice, rapid economic growth would require Europe and Japan to be more receptive to immigrants: a big taboo in both places. Finally, as creditor societies increasingly dominated by retirees, they prefer low inflation and high interest rates even if the price is slower growth around the world.

That is bad for the United States, bad for world peace and, ultimately, bad for Western Europe and Japan. If Europe and Japan don’t do their part in stimulating world growth, social and political tensions in the Third World will ultimately undermine world peace with terrible consequences for all.

Our Cold War alliances, military and economic, played a vital role for 50 years in stabilizing the world, promoting global growth and enhancing U.S. power to lead the world. Now that those alliances aren’t working very well, the United States faces fundamental questions both about its ability to lead the world and about the proper set of partners and alliances it will need in the 21st century.

Let’s hope our old allies realize what is at stake and work together with the U.S. on a positive global agenda. If they don’t, the whole fabric of the Pax Americana could unravel, and nobody has more to lose if that happens than the aging, affluent and profoundly unmartial peoples of Western Europe and Japan.