Weekly Geopolitical Report – A Smaller World (November 3, 2014)
by Bill O’Grady
Being the global superpower is a great burden. There are military, political, economic and financial obligations that are costly to maintain. At the same time, history shows that when there is no dominant hegemon the world tends to suffer from instability and chaos. Although the superpower may wish to abandon the encumbrance, the consequence of an unstable world isn’t an attractive alternative.
Since the fall of the Berlin Wall in 1989, the U.S. has been the sole superpower. The costs of that position have become increasingly apparent to Americans, leading to political factions calling for a retreat from the role. So far, the political elites remain committed to the hegemonic role, but it is unclear if it can be maintained.
One possible solution to the superpower problem would be to “shrink the world.” In other words, some nations may opt out of the international system the U.S. crafted since WWII, which includes open trade, free markets and democracy. As we saw during the Cold War, the communist bloc created a “smaller world” where economies were closed, markets were managed and authoritarianism was the primary governmental structure. Although the creation of a new bloc in opposition to the U.S. may appear to be a retreat from America’s hegemonic role, it may actually make the burden more manageable.
This week’s report will review the burdens of superpower role. We will examine growing opposition to U.S. hegemony and discuss the impact of “shrinking the world” by allowing the creation of a competing superpower. As always, we will conclude with market ramifications.
 The best analysis of the key role of the superpower is from Kindleberger, Charles, P., The World in Depression, 1929-39, University of California Press, Los Angeles, 1973.