The Political Economy of American Hegemony

Abstract

America's unipolar moment is over. It … ended with the collapse of Lehman Brothers on September 15, 2008. Robert J. Art The Obama administration inherited a mess when it entered office in January 2009. The country remained on a war footing, with more than 160,000 troops in Iraq and 38,000 more stationed in Afghanistan (Belasco 2009). The financial system remained weak, with memories of the collapse of 2008 strong. The national economy had contracted at the annual rate of 8.3 percent in the last quarter of 2008 and continued to shrink at an annual rate of 5.4 percent in the first quarter of 2009. As economic activity collapsed, the budget deficit swelled to almost 10 percent of gross domestic product (GDP). Consequently, much of the administration's energy and attention have been directed at cleaning up this mess, at financial reform and retrenchment – reducing America's overseas commitments. Regulatory reform was enacted in 2010 via the Dodd–Frank Wall Street Reform and Consumer Protection Act. Among other things, the Dodd–Frank Act consolidated existing regulatory agencies and created the Financial Stability Oversight Council and Office of Financial Research. In addition, the Act established new regulations as well as a new resolution regime with responsibility to step in to liquidate insolvent institutions not covered by the FDIC. Global retrenchment has progressed more slowly. The administration withdrew all U.S. forces from Iraq, and began withdrawing troops from Afghanistan in 2012. Moreover, adherence to the “don't do stupid sh*t” principle has led the Obama administration to resist pressure to accept new and potentially costly obligations, such as its non-intervention in the Syrian civil conflict. It is not unreasonable to suggest that the Obama presidency has been characterized by financial system reform and global retrenchment. Obama is not the first to be forced to repair the damage imparted by the administration that preceded him. Indeed, retrenchment and reform have been the typical final stage of the political economic of imbalance.