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The World Economy After the Cold War

Courtesy Reuters

Three global transformations are well under way as we enter the 1990s. First, the reforms in the Soviet Union and Eastern Europe, if successful, will end the Cold War and most East-West confrontation, and will allow substantial reductions in military arsenals. Second, the salience of security issues will decline sharply; economics will move much closer to the top of the global agenda. The international position of individual countries will derive increasingly from their economic prowess rather than their military capability. The relative power of the United States-and, even more, of the Soviet Union-will fall; Europe's-and, even more, Japan's-will rise. Third, the world economy will complete its evolution from the American-dominated regime of the first postwar generation to a state of U.S.-European-Japanese "tripolarity." An economically united Europe will be the world's largest market and largest trader. Japan is already the world's largest creditor and the leader in many key technologies. Its GNP will exceed three-quarters of America's by the year 2000 at the growth and exchange rates that now seem likely.

International relations will look very different by 2000 as a result of these transformations. The hierarchy of nations will shift considerably. The Big Three of economics will supplant the Big Two of nuclear competition as the powers that will shape much of the 21st century.

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The United States is the only superpower in both military and economic terms. It alone will remain in the top rank as the nature of world affairs changes. Indeed America may soon be the only military superpower. Such status, however, will be of decreased utility as global military tensions are substantially reduced and international competition becomes largely economic.

Moreover the United States is in relative economic decline, caught in a scissors movement between increasing dependence on external economic forces and a shrinking capacity to influence those forces. The share of international trade in the American economy has tripled over the last four decades, and is about as great as in the economies of Japan or

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