For nearly two decades—from the fall of the Soviet Union until the global financial collapse in 2008—the Western market-based economy thrived, fostering hope for a democratic world with a globalized economy. Now, according to Gideon Rachman, the chief foreign affairs commentator for the Financial Times, America's power is giving way to other forces, and Westerners find themselves insecure about what lies ahead. In his new book, Zero-Sum FutureZero-Sum Future: American Power in an Age of Anxiety, Rachman chronicles the rise and recent fall of the American-based, free-market mentality. With the growth of China and other non-Western states, confidence in American political and economic principles is diminishing, he says. Rachman recently spoke with U.S. News about how overconfidence became a trap for the West and why Americans should still believe in U.S. principles despite their flaws. Excerpts:
You say that before the financial crisis, the West thought it existed in a win-win world, powered by globalization and the spread of democratic, free-market ideas. Where did the West lose its way?
You have simultaneously a sense that the United States is relatively weaker and China is relatively stronger, and also a sense that some of the ideas that we had had about how the world works were looking a bit shakier. A deterioration in U.S.-Chinese relations, which have become more adversarial, is at the core of this shift from a win-win to a more zero-sum world.
Was America too optimistic?
I sometimes use an analogy [comparing] political ideas with the stock market. If ideas or a stock has a good run, people pile into them. It's an almost inevitable process. After 1989 and the victory of the Cold War and so on, there was a tremendous surge in confidence in Western liberal ideas, whether on democracy or economics, [or] the kind of Reaganite idea that freedom works. That was overconfident—which is not to say that one wants to swing entirely in the opposite direction.
Where did the free-market system go wrong?
Obviously, with the financial crisis, there was a period, sort of epitomized by Alan Greenspan, where there was a belief that markets were self-regulating, essentially, and that—as [Margaret] Thatcher put it—you can never buck the market, and most of the markets have an inherent wisdom that is greater than that of the people who are trying to regulate them. Whereas we now know that actually that was rather dangerous. At the time, there was a sense that if this was happening, it was happening for a reason. It was a sort of wisdom of crowds thing. We're now trying to find a new medium, a new way of taking the best bits of market-driven economics without overshooting to a kind of deregulated free fall, which led to financial collapse.
In President Obama's recent State of the Union address, he emphasized increasing our competitiveness with China. Is this the right approach?
The ultimate way of getting out of this zero-sum world is to rediscover the strengths of Western, and particularly American, society. The strongest kind of hope for liberal values is a strong America. When Americans feel less confident, it means that they feel more threatened by the rise of a country like China, they look weaker to potential adversaries, and also, the kind of values that America has traditionally stood for—liberal economics, liberal politics—lose prestige in the world. In that sense, [Obama's] right. If America can use this new age of anxiety as a sort of challenge to itself . . . then that's the most important thing that can happen.
You take a line from the now viral British World War II poster, recommending that the West "keep calm and carry on." Why?
While being self-critical about mistakes we've made about democracy promotion, about free markets, etc., you don't want to go completely the other way and say that everything we believed before is wrong. I use that phrase as an analogy with the 1930s, when there was a big loss of faith in the ability of democracies to cope. We've been through even worse phases in the past, and in the end, for all its flaws, the liberal democratic way of doing things proved better than the alternatives.