The Diminished Giant Syndrome

The perception, far exceeding the reality, of American decline is having subtly harmful consequences for U.S. international economic policy. The curse of declinism, manifest from the mid-1980s but contained by the Bush administration, was indulged to excess by Bill Clinton's campaign. Its political success in ending Republican presidential reign adds a lethal edge to the prospect that U.S. leadership will be sacrificed to the myopic and self-indulgent pursuit of "what's in it for us" economic policies in the world arena.

The American mood parallels Great Britain's at the end of the nineteenth century. Germany and the United States had emerged on the world economic scene as major players, threatening the end of the British Century. Today it is Japan that has emerged, threatening to open a Pacific Century. As was Great Britain at that time, America has been struck by a "diminished giant syndrome"--reinforced by the slippage in the growth of its living standards in the 1980s. This affliction has caused a loss of confidence in America's inherited postwar trade policies.

When the syndrome hit Great Britain unilateral free trade had been received doctrine, with Germany and the United States seen, correctly, as embracing tariffs to protect nascent industries. The ensuing debate was about renouncing British unilateralism, which had been practiced with a passion for nearly half a century. In the United States a parallel view has grown--with presumably immense influence in the Clinton administration--that America too has disarmed itself unilaterally in trade while others compete "unfairly" and that the time has come to shift from being patsies who turn the other cheek to becoming aggressive traders.

The British reality of asymmetrical trade barriers, which survived that nineteenth-century debate, is matched today only by America's perception of the same. This perception is grossly disproportionate to the reality, but it is driving Washington toward trade policies that could well endanger the postwar trading system that it has so assiduously nurtured for more than forty years. It rests on a measure of self-serving exaggeration and distortion of facts, all a result of the panic and petulance that attend the diminished giant syndrome. Two examples should illustrate.