Choosing to place “America First” at the expense of the global economic order and integration will wreck the US economically. US international engagement upholds the global oder that benefits the US
Carla Norloff, January 2018, International Affairs, Hegemony and Inequality: Trump and the liberal playbook, p. 63-88 Carla Norrlof holds a political science and economics degree from Lund University, Sweden and a PhD in International Relations from the Graduate Institute of International Studies. She works on great powers, particularly US hegemony, with a focus on the relationship between political and economic power. Norrlof was consulted by Swiss private banking on the international role of the dollar and the euro. Currently, she is an Associate Professor at the University of Toronto and her research examines the impact of US security provision on America’s economic standing as well as the economic consequences of US grand strategy. She collaborates on three projects, one on the profitability of US primacy, another on the interaction between hegemonic and international order and a third on the micro-foundations of China’s unipolar challenge.
Since the end of the Second World War, the United States has served as leader of the ‘free’ world, providing security guarantees and promoting open economic exchange and individual freedoms in a rules-based system. The election in late 2016 of Donald J. Trump as US president raised justifiable and widespread fear for the survival of the liberal international order (LIO). Not since the 1970s, when academics expressed alarm that US decline would result in a more disorderly international system, has the expert community been so pessimistic about the durability of the postwar order. President Trump promises to ‘make America great again’ by playing hardball with allies, overturning the LIO if necessary. On the international stage, the principle of ‘America first’ is aimed at preventing the United States from incurring losses through cooperation in the form of higher security bills, lower commercial benefits and greater monetary burdens. To ‘make America great again’, the United States must ‘win, win, win’, negotiating more aggressively with other nations, threatening to leave international agreements and alliances if necessary.1 Trump is not alone in his criticism of the LIO. Academics have worried about America’s outsized global commitments since the 1980s.2 Even before the Trump administration began complaining about freeloading allies and unfair traders, proponents of a grand strategy of restraint lamented the costs of ‘liberal hegemony’, also known as ‘deep engagement’.3 US support for the LIO in the form of liberal hegemony and deep engagement has aimed to promote the twin goals of security and prosperity by building security alliances and an economic order rooted in strong institutions and liberal values.4 In this article, I argue that the challenge confronting the United States today is not an international redistribution problem but a domestic redistribution problem, which ‘America first’ will only make worse. Internationally, ‘America first’ is premised on zero-sum logic that cannot ‘make America great again’. In fact, it will do the reverse by putting all countries last, thus shrinking the size of the available gains to create more severe distributive pressures. Domestically, ‘white America first’ promises to restore lost greatness to whites, thus aggravating economic and political inequality in the United States. I provide comprehensive evidence that the United States has benefited tremendously from the LIO (Liberal Inernational Order), and show how critics understate both those benefits and the risks of selective disengagement. I also argue, however, that the gains have been unevenly distributed within the United States. The unequal distribution of gains from international economic exchange is a recognized problem in the theoretical literature advocating a liberal economic order.5 Globalization can create an enduring division between winners and losers unless investments are made in education and health, so that new generations can compete, and unless labour market adjustment programmes facilitate workers’ transition from declining to expanding industries. Redistributive policies, including access to post-secondary education, are necessary to ensure that more Americans partake in the gains from international involvement and to shore up the domestic foundations of the LIO. In exploring how economic and political inequality within the United States has impinged on its ability to assert hegemonic leadership, I argue that an ‘us vs them’ sentiment, internationally vis-à-vis other countries, and domestically vis-à-vis non-white ethnic groups, was the primary force behind Trump’s electoral triumph. While previous presidents have more or less recommitted the United States to an internationalist foreign policy in the face of rising inequality, Trump detected festering economic and political wounds within the United States. The announcement of an intention to ‘make America great again’ resonated strongly with citizens of a Great Power who hardly felt economically privileged in relation to the rest of the world, and with white non-college-educated voters who were told they benefited from ‘white privilege’ while experiencing economic hardship and political alienation. Thus, contrary to Stiglitz, for example, who sees income inequalities in ‘white America’ as the main threat to the LIO—but does not problematize why white voters voted differently from other Americans in the same income bracket—I see political inequalities, particularly the appeal of ‘white America first’ among the white non-college-educated electorate, as a major threat to the LIO.6 The article is structured as follows. First I present the criticism of the LIO embodied in the ‘America first’ agenda as expressed on the campaign trail and in Trump’s inaugural promises. Second, I draw on International Relations (IR) theory to better understand both criticisms of the LIO and the rise of Trumpism. Third, I propose an alternative reading of the challenges the LIO confronts in both its international and it domestic foundations, as well as the relationship between the two. The final section offers concluding thoughts. What’s wrong with the LIO? Trump’s campaign and inaugural promises President Trump’s campaign and inaugural speech promised an ambitious redistributive programme, vowing to rebalance global wealth and power. Like populists in other advanced countries, Trump argues for a fundamental revision of the international order, proposing a recasting of the prevailing principles to foster a global system tailored to US interests. The leitmotiv for this new order is ‘America first’. The term has historical origins in an isolationist movement protesting America’s involvement in the Second World War. President Trump’s version of ‘America first’ was clarified in the policies he first proposed during the 2016 campaign and then reiterated in his January 2017 inaugural speech and at the Conservative Political Action Conference (CPAC) the following month.7 This programme targets three theatres of the LIO: security, trade and money. I will discuss each in turn, demonstrating the connection between Trump’s proposed policies and the logic of free-riding allies and unfair burden-sharing. The security plank In a bid to open up a new era, the Trump administration has sought to reorientate US grand strategy by advocating policies which repudiate the LIO. On the campaign trail, Trump insisted that America’s allies in NATO and similar alliances pay their ‘fair share’ of the world’s national security expenses. In a New York Times interview, he stated that if allies failed to adequately share in the defence burden he would tell them: ‘Congratulations, you will be defending yourself.’8 Trump’s stance on US security provision is not new. Asked by Larry King in an interview 30 years ago: ‘We are kind of the world’s keeper, are we not?’, Trump responded: I don’t believe we should be. I think Japan should certainly make a contribution … one of the reasons they’re so successful is they don’t have to worry about defense. Because why should they worry about defense when the United States will do it for nothing. I mean it’s crazy.9 Trump’s position on this point has in fact remained remarkably consistent since the late 1980s. In his inaugural address, he said the United States has ‘subsidized the armies of other countries while allowing for the very sad depletion of our military. We’ve defended other nations’ borders while refusing to defend our own.’10 And in his February address to Congress, he said: ‘We expect our partners—whether in NATO, the Middle East, or in the Pacific—to take a direct and meaningful role in both strategic and military operations, and pay their fair share of the cost.’11 Even Secretary of Defense General James Mattis, who generally favours alliances, said: ‘America will meet its responsibilities, but if your nations do not want to see America moderate its commitment to this alliance, each of your capitals needs to show support for our common defence.’12 And after German Chancellor Angela Merkel’s visit to the White House, Trump tweeted: ‘I had a GREAT meeting … Nevertheless, Germany owes … vast sums of money to NATO & the United States must be paid more for the powerful, and very expensive, defense it provides to Germany!’13 After a meeting with NATO’s Secretary-General, Jens Stoltenberg, Trump partially retreated from his previous comments about NATO being ‘obsolete’, citing the organization’s commitment to fight terrorism and the Secretary-General’s efforts to increase allied burden-sharing as reasons for this shift.14 By either abandoning or neglecting commitments, or seeking to put pressure on allies to deliver better deals, the Trump administration hopes to staunch what the President sees as a security-driven financial haemorrhage that has transferred wealth from the United States to other countries. But US security alliances are not a drain on the public purse or some optional add-on to the liberal order; they are its very foundation. Never before in postwar history has a US president voiced such a fundamental break with the organizing principle of US security provision, replacing the understanding of the United States as ‘leader of the free world’ with appeals to the white man’s burden to ‘unite the civilized world’.15 The trade plank Concerns about other countries gaining disproportionately from international cooperation are not confined to security relations but extend to economic relations. President Trump has opposed the multilateral economic bargains of the postwar era, and has been an especially fierce opponent of the international trade order. For many decades, we’ve enriched foreign industry at the expense of American industry … The wealth of our middle class has been ripped from their homes and then redistributed across the entire world … We must protect our borders from the ravages of other countries making our products, stealing our companies and destroying our jobs. Protection will lead to great prosperity and strength.16 In reality it is automation, not trade, that accounts for the overwhelming proportion of US job losses in the manufacturing sector.17 That said, automation has not diminished US employment more than trade has in all bilateral relationships. US job losses as a result of imports from China between 1999 and 2013 are estimated by economists at between 2 million and 2.4 million.18 Thus, President Trump has correctly identified Chinese imports as a source of declining US employment. But imposing punitive tariffs on China is not the appropriate policy response. For one thing, US exports to China, though significantly smaller than US imports from China, still contribute to US job growth. Second, unless measures taken by the US administration are consistent with WTO rules, imposing tariffs on China could spark retaliation and a mutually harmful ‘tariff war’ with lasting economic damage. Third, any effort to reduce trade with China must weigh the benefit of protecting American workers (around 2 million laid off so far) against the cost of denying American citizens (around 300 million) savings from cheaper Chinese imports. If the aim is to alleviate the plight of low-earning Americans, who spend a higher proportion of their income on imports than their wealthier compatriots, and who therefore are the largest beneficiaries of trade, these different considerations must be balanced very carefully.19 Tr Trump has already made good on his promise to upend trade agreements. He has withdrawn the United States from the twelve-nation Trans-Pacific Partnership (TPP);20 and, striking at the very fabric of the free trade system, he has threatened to renegotiate NAFTA and possibly to withdraw from the regional agreement altogether. He has also proposed to impose 45 per cent tariffs on Mexico and China—in violation of WTO rules—and the Office of the United States Trade Representative (USTR) has sought to depart from WTO dispute settlement procedures.21 The Trump administration has also raised the spectre of replacing multilateral and regional trade agreements with bilateral agreements. We’re going to make trade deals, but we’re going to do one-on-one … and if they misbehave, we terminate the deal. And then they’ll come back and we’ll make a better deal. None of these big quagmire deals that are a disaster.22 Prioritizing bilateralism contradicts the prevailing wisdom in trade. Economists generally regard multilateralism as preferable to regionalism and bilateralism.23 That is because preferential trade agreements (PTAs) create an unruly system with overlapping, often contradictory, agreements in a ‘spaghetti bowl’ mess.24 Though PTAs need not reduce global welfare, they risk damaging it both directly and indirectly by undermining support for multilateral trade institutions.25 Even economists sympathetic to PTAs ask how they can be streamlined with a multilateral approach rather than suggesting they should replace international agreements.26 Bilateral deals are also politically less efficient to negotiate than regional or multilateral deals, since they cover fewer countries and issues, and have to be ratified one by one in Congress. The USTR has started to put Trump’s protectionist inclinations into concrete form via an ‘America first trade policy’.27 According to the USTR’s 2017 report, it is time for a new trade policy that defends American sovereignty, enforces US trade laws, uses American leverage to open markets abroad, and negotiates new trade agreements that are fairer and more effective both for the United States and for the world trading system.28 According to the USTR, ‘section 301 can be a powerful lever to encourage foreign countries to adopt more market-friendly policies’.29 Allegations of unfair trading practices tend to surface as US trade deficits deepen. These types of complaint also figured prominently in the 1980s when the United States was grappling with serial trade deficits. The US President has far-reaching executive authority to retaliate against ‘unjustifiable, unreasonable, or discriminatory’ foreign trade practices outside the GATT/WTO framework through a set of legal instruments.30 Section 301 of the 1974 Trade Act allows American firms to petition the USTR in order to remove trade barriers in foreign markets. Special 301 extends the provisions of section 301 to intellectual property rights.31 Super 301 identifies a hit-list of priority countries for section 301 actions. However, using these measures without prior permission from the dispute settlement body violates WTO law. In the event of serious injury to the United States through trade, the President has a variety of options, such as imposing tariffs under section 201. In defending its ‘America first trade policy’, the USTR argues that President George W. Bush used safeguard action under section 201 to curtail the increase in steel imports in 2002, and that such action ‘can be a vital tool for industries needing temporary relief from imports to become more competitive’.32 However, in response to President Bush’s use of section 201, the WTO authorized the EU to retaliate and the US withdrew the tariff. Both section 201 and section 301 have been unpopular internationally. One of the main purposes of the 1995 WTO ‘Understanding on rules and procedures governing the settlement of disputes’ was to reform dispute settlement procedures so as to reduce section 301 litigation. Making panel rulings binding aimed to replace US unilateral enforcement with WTO enforcement. Prioritizing ‘fair trade’ litigation through US trade statutes, even though the WTO now has strong enforcement powers, suggests that the ‘America first trade policy’ is more about rigging the playing field than levelling it. And if the President authorizes section 201 tariffs without sufficient evidence of serious domestic injury (as President Bush did), the United States risks setting off mutually destructive tariff wars. The money plank President Trump’s extremely controversial positions on the international monetary order have gone largely unnoticed. While his complaints about unfair trade advantages arising from currency manipulation have been registered, he also has strong views on the dollar’s global role. As regards currency rigging, the President is right in that both China and Japan have formerly intervened in currency markets to reduce the dollar price of their currencies.33 But at present, Chinese authorities are struggling to prevent depreciation of the renminbi as a result of capital outflows caused by instability in Chinese financial markets. Recently, Trump changed his mind about China, saying: ‘They’re not currency manipulators.’34 Moreover, currency manipulation does not necessarily translate into commercial competitiveness.35 Japan’s efforts to increase competitiveness via currency manipulation in the twenty-first century were largely unsuccessful. Today, the Japanese government claims its interventions are designed not to improve the country’s trade balance but to combat deflation. However, the most contentious monetary policy advocated by the President has largely failed to register on the radar screen. His proposed return to the gold standard would be a truly astonishing break with US monetary policy. On the Richter scale for the world economy, it would be equivalent to the 1971 ‘Nixon shock’ when the United States unilaterally suspended convertibility of dollars into gold, destroying the Bretton Woods fixed exchange rate system. ‘Bringing back the gold standard would be very hard to do, but boy, would it be wonderful. We’d have a standard on which to base our money.’36 His economic advisers, most notably Dr Judith Sheldon, have advocated a return to the Bretton Woods system of fixed exchange rates with dollars convertible into gold.37 The President’s speech to the CPAC in late February 2017 suggested unfamiliarity with the dollar’s global status, let alone its perks. The President said the dollar was not the global currency and apparently thought that was a good thing. Global cooperation—dealing with other countries, getting along with other countries—is good. It’s very important. But there is no such thing as a global anthem, a global currency, or a global flag. This is the United States of America that I’m representing. I’m not representing the globe. I’m representing your country.38 Despite the voluminous literature on the topic, the President is seemingly unaware both that the dollar is the global currency and that significant benefits are associated with being the issuer of the world’s primary monetary vehicle.39 What’s wrong with the LIO? Making sense of Trumpism It remains an open question whether the Trump administration will follow through on the political platform on which the 2016 presidential election was fought. Trump’s choice of the ‘America first’ slogan to describe his set of policies created expectations of a non-interventionist security policy combined with economic nationalism. But in key areas, Trump’s security policy to date is consistent with President Obama’s more restrained foreign policy approach. Like Obama, Trump has so far stayed clear of full-scale interventions, favouring air power, especially the use of drones and special forces. Like Obama, he opposes the ‘Washington playbook’—the knee-jerk reaction to adopt militarized responses to international problems—and perhaps for the same reasons as Obama: ‘Where America is directly threatened, the playbook works. But the playbook can also be a trap that can lead to bad decisions.’40 From the viewpoint of November 2017, it is fair to say that a truly isolationist policy has not yet emerged. But it is easy to underestimate the geopolitical significance of the shifting political currents in the United States and Europe to which Trump’s evolving grand strategy is a response.41 Across the three areas surveyed in the preceding section, Trump sees serious disadvantages with America’s position at the top of the LIO. For him, the United States’ current role in the international system entails larger constraints than opportunities: the country is asked to take on special responsibilities for which it is not adequately compensated, leaving itself vulnerable to exploitation. In his view, the United States should prioritize self-regarding objectives rather than other-regarding objectives, giving precedence to protecting its citizens from outside threats and raising American standards of living. Trump and IR theory Two bodies of IR theory speak to Trump’s proposed grand strategy. The first is the ‘exploited benevolent hegemon’ version of hegemonic stability theory (HST). According to this, the United States provides public goods from which everyone benefits but no one can be excluded, resulting in systemic free-riding, leaving the United States to shoulder disproportionate costs while others reap only benefits.42 The United States effectively agrees to this unequal bargain because of its overwhelming interest in seeing the goods provided.43 Over the long term, this dynamic weakens the hegemon politically and economically, helping other countries to rise and leading to its own relative decline. The second relevant theoretical approach is grounded in Waltzian realism. According to this approach, states should pursue their national interest defined narrowly, responding to threats that affect them directly. The doctrine of restraint, also called selective engagement, sees the maintenance of long-term hegemony as exceedingly costly and futile, breeding resentment and requiring rivals to be defeated and outcompeted in a continuous effort to thwart attempts at balancing. Balancing occurs when states seek to reduce the military power of exceptionally dominant states. The tendency for states to balance power is a hard systemic law, which no state can escape, and which guarantees that a unipolar distribution of power will eventually become bipolar or multipolar. Academic advocates of selective engagement approve of Trump’s call for a more restrained foreign policy while distancing themselves from his other ideas.44 They believe America’s postwar grand strategy spills too much blood and treasure and carries high opportunity costs,45 and that the United States should instead pursue a strategy of offshore balancing, refocusing policies around a narrow definition of the national interest limited to preserving regional hegemony in the western hemisphere and preventing the rise of regional hegemons.46 They consider US security interests to be at stake in three areas—Europe, east Asia and the Persian Gulf—with only east Asia requiring significant onshore engagement.47 Broadly agreeing with Trump, they say allies have to learn how to fend for themselves, and that the US should introduce uncertainty about forthcoming military support.48 In order to improve the plight of fellow Americans, the United States should reorientate public policy around domestic goals, giving up some international goals. For proponents of these arguments, America’s international commitments clash with its domestic commitments. Three flawed assumptions Three features of the LIO emerge as problematic from these two perspectives. First, other countries free-ride on US political and economic leadership. Second, there are fundamental trade-offs between America’s military and economic capability: US security commitments are responsible for US economic decline. Third, there are fundamental trade-offs between America’s international and domestic posture. On the basis of this analysis, to promote America’s national interest, the grand strategy supporting the LIO should be replaced with strategic restraint; the US should stop bearing a disproportionate share of the costs associated with solving global problems and let others take care of themselves, restricting US involvement to protecting vital security interests, defending the homeland and preventing the emergence of a regional hegemon. However, the three assumptions underlying this analysis, and criticisms of the LIO, mischaracterize America’s liberal dilemma. The first questionable assumption is that international cooperation resembles a public goods problem whereby the US, as the largest state, bears disproportionate costs while free-riding allies reap disproportionate benefits. Second, the negative repercussions of US security commitments for US economic strength are rarely balanced against the full benefits of US security commitments to the United States itself. Third, the assumption that there is an international–domestic trade-off and that whatever resources have been ‘squandered’ on international engagement can readily be diverted to the pursuit of productive, welfare-enhancing, domestic goals grossly understates both US benefits from the LIO and the risks attached to dismantling ‘selected’ parts of the LIO.49 When international cooperation is cast as a public goods dilemma, it is easy to come to the conclusion that the hegemon is in a disadvantageous position. But the public goods analogy does not adequately capture the essence of international cooperation, because few issues are characterized by the properties that define public goods—non-rivalry and non-exclusion.50 Rather, the hegemon provides a mix of public and private goods, or imperfect public goods.51 Despite these recognized flaws, and much scholarship to the contrary, the public goods version of HST remains influential. Rejecting the ‘exploited hegemon’ version of HST, several scholars point to the ways in which the hegemon is positionally primed to benefit disproportionately from underwriting the LIO.52 They argue that public goods provision offers more opportunities than constraints, and, while they recognize that free-riding is a possible threat to the hegemon’s long-term rule,53 they emphasize the ways in which the hegemon can use its dominance to internalize positive externalities and externalize negative externalities.54 As long as the hegemon is not providing pure public goods, the distribution of gains will not necessarily favour other states. And as long as the distribution of gains does not favour other states, providing an open economy does not necessarily compromise the hegemon’s security interests or its position of dominance.55 The founders of HST, Robert Gilpin and Stephen Krasner, believed that hegemonic orders were particularly robust during the hegemon’s ascendancy, and therefore worried greatly about the future of US hegemony and the LIO as the US underwent relative decline in the 1970s and 1980s. Contemporary scholars, on the other hand, emphasize the cyclical property of postwar hegemony, seeing the United States as capable of reversing phases of decline by using different levers of power to avoid absolute decline.56 They see different forms of power interacting favourably for the hegemon, with financial dominance reinforcing commercial dominance, commercial dominance facilitating financial dominance, and security dominance boosting both commercial and financial dominance.57 Since the 1980s, IR scholars have tended to view the United States as militarily strong yet economically weak, a development hastened with the rise of China and other emerging economies in the third millennium.58 But even today, after many rounds of decline (and ascent), the United States has no peer competitor either militarily or economically. Commercially robust but financially vulnerable, China ranks as the world’s third largest military power after Russia and the United States. While Russia’s military continues to be the US military’s principal rival, it is not as potent as it was under the Soviet Union. And while Russia’s economy is not as debilitated as it was under the Soviet Union, it continues to be frail. Japan and Germany, two of America’s principal allies, are economically strong, but militarily weak. As figures 1 and 2 reveal, the United States has sustained its economic lead throughout the postwar era, boasting the world’s first economy with an unrivalled capacity for economic output, an impressive commercial record and an unsurpassed financial position. US economic performance is grossly underrated. First, as shown in figure 1, which displays US GDP, trade and company size, US GDP is still roughly a quarter of global GDP (just below the dotted 25 per cent line). Declinists take the considerable fall in America’s postwar share of global GDP as a sign of weakness. But it is unrealistic to think that the United States would continue to command a third of global GDP as it did immediately after the Second World War—particularly since much of the observed decline was the result of deliberate efforts by the United States to bolster its allies in western Europe and east Asia through the Marshall Plan and other initiatives.59 What is rather remarkable is that, even with the rise of non-allies such as China, America’s share of world GDP has stabilized around a quarter and continues to be nearly twice as large as China’s share. Second, as also shown in figure 1, US commercial capability aggregated into its combined share of world exports and imports—trade—is slightly higher than China’s. But exports and imports are not the best way to measure commercial prowess, because the contemporary web of production globalizes manufacturing. Owing to global supply chains, imported final goods include intermediate inputs and technology produced and developed in the United States that do not show up as exports but nonetheless provide American jobs and income. And when exporting final goods, US firms depend on low trade barriers to import low-cost intermediate inputs. The United States’ ability to spread production worldwide has been accompanied by long-term rising trends in numbers of foreign affiliates, value added and net income, generating significant profits for the United States.60 As shown in figure 1, the aggregate value of US companies far exceeds that of any other country. Figure 1: Great Power production and commercial capability, 2016 View largeDownload slide Great Power production and commercial capability, 2016 Great Power production and commercial capability, 2016 Figure 2: Great Power financial and military capability, 2016 View largeDownload slide Great Power financial and military capability, 2016 Great Power financial and military capability, 2016 Third, few assessments compare the relative financial capabilities of Great Powers. Studies often favour narrow definitions of financial power over broader assessments. Some focus on the relative size of US financial markets, some on financial networks, some on reserve currency issuance, but few provide an aggregate picture.61 These incomplete portrayals lead to gross underestimation of US financial power.62 As shown in figure 2, US financial markets account for slightly more than a quarter of the global total, and US reserve currency provision far surpasses that of any other state or states, and that of the eurozone. Fourth, as also demonstrated in figure 2, the United States is the world’s most formidable military power, its capabilities far exceeding those of any other nation. Taking into account front-line capabilities on the ground, on the sea and in the air, as well as the capacity for reconnaissance, strategic transport and communication to project power, the United States has no rival.63 The United States’ multidimensional power base clearly puts it in a class above rival powers. Yet its privileged position in the international system is even greater than what these snapshot barometers indicate, because significant synergies exist between the various dimensions.64 US security dominance supports US commercial and monetary dominance, and its commercial and monetary dominance are mutually supportive. First, by providing security guarantees, stabilizing hot-spots and securing sea lanes, the United States ensures that international trade and finance can occur without disruption. This is of great value to the United States itself because, as the world’s single largest economy, it has a high stake in guaranteeing stable economic relations. Second, propping up the financial realm, America’s vast security network provides incentives for allies to continue supporting the dollar’s role as the number one global currency.65 Third, the dollar’s global role gives the United States the capacity to borrow at exceptionally low rates, providing it with extraordinary macroeconomic flexibility to ease balance of payments adjustments, particularly trade adjustments.66 Fourth, America’s commercial position bolsters the dollar’s global role by facilitating trade adjustment as governments, particularly in emerging markets, continue to finance US deficits by holding dollar assets in the hope of gaining continued access to US markets.67 ‘America first’ promises to touch all of these areas, overhauling longstanding US policies in the security, commercial and monetary spheres. But its real menace lies in its potential for sparking drastic changes by overturning policies in just one sphere. If the United States ceases to defend allies, and reduces its commitment to secure the international environment, cross-border trade and investment will operate in a more uncertain setting. While it is impossible to predict which policy is most likely to unleash an unfavourable chain of events, a hypothetical example can be used to illustrate the presumptive cascade. If we assume the United States follows through with significant commercial retreat, then we should expect monetary consequences. With the United States ceasing to account for a significant portion of international trade, official and private investors will increasingly hold alternative currencies for reserves and payment. If the diversification out of dollars is substantial, the dollar could gradually lose its centrality in the monetary order, complicating the adjustment of US trade imbalances. Balance of payments difficulties could very well ricochet back in the monetary sphere, with a crisis of confidence over trade imbalances triggering a run on the dollar. With the dollar under pressure, its international role for governments and private actors could come into question. If the dollar is no longer widely used for reserves and payments, US financial markets will lose importance relative to other financial markets. A diminished role for US financial markets implies lower demand for US assets, raising US borrowing costs. And the loss of US borrowing privileges will have security ramifications, since financing US military power will become more expensive.68 With these developments, America’s slippage in the ranks of Great Powers will be assured…Summary and conclusion Trump did not create angst about America’s dominant position in the world, or about white America’s dominant position vis-à-vis other ethnic groups, but he tapped into these two currents more unabashedly than any other presidential candidate in postwar history. This article deconstructs ‘America first’ into two components, an international component and a domestic component, which share common symptoms (lost greatness) and common remedies (redistribution) In the first two sections of this article, I discussed the international component, and how ‘America first’ threatens to undermine the LIO. I showed how ‘America first’ reflects concerns about American decline and American overextension in three areas: the security, trade and monetary spheres. A common theme in this narrative is how the United States is being exploited by other countries, and how disengaging from the LIO presents a better path forward. In the security area, the world should no longer count on the US to act as global policeman or to tolerate unfair burden-sharing within security alliances. In trade, the US will no longer stand by as other countries free-ride on America’s openness. In the monetary realm, the dollar’s global role is not as good as gold. While Trump’s views on the LIO are quite idiosyncratic, and have yet to be fully implemented, declinists and proponents of retrenchment share certain aspects of this outlook. In opposition to this perspective, I have provided broad-based metrics demonstrating that the United States remains by a long way the leading state in the world today, and argued that it would be a lot worse off under alternatives to the LIO than it has been in the postwar era and is today. A counterfactual setting, where the United States does not provide international security, would be a more uncertain and more economically fragile one, with more limited commerce and investment. A United States of America in which the commercial and financial playing field, including the dollar’s role, no longer spans the globe, but is domestically confined, will reduce US prosperity and geopolitical reach. Yet there is a growing sense, correctly identified by President Trump, that America’s global engagement is not benefiting all Americans. In discussing the domestic component of ‘America first’ in the third section of the article, I argue that America’s real challenge, in shoring up support for the LIO, is not to redistribute gains internationally (from other countries to the United States) but to redistribute them domestically. Safety nets and economic relocation programmes have a vital role to play in the effort to manage how globalization affects the domestic distribution of income. But such measures are unlikely to be sufficient, given that US income inequality has been rising since the late 1960s and the US electorate has repeatedly backed presidents who have recommitted America to the LIO. To better understand what role income distribution played in the 2016 election, I analyse real income levels and real income growth, both nationally and regionally. I find that income concerns on their own were not the primary driver of support for Trump. The most powerful predictor of the Trump vote was a combination of education and race, with white non-college-educated voters favouring Trump by very pronounced margins. Racial divisions were also significant on a regional basis. Drawing on additional survey data, I infer that the vote was not only racially patterned but reflected racism among white non-college-educated voters and a desire for a ‘white America first’. The relationship between education and race was first noted over seven decades ago by the Swedish Nobel laureate Gunnar Myrdal, in a study commissioned by the Carnegie Foundation.99 His appeal for an ‘educational offensive against racial intolerance’ to foster an ‘American creed’ based on liberty, equality and justice remains relevant today.100 Post-secondary education encourages liberal attitudes, at least up to a point. On the basis of the evidence presented in this article, I conclude that higher education is a vital element in strengthening the domestic foundations of the LIO. More resources should be allocated to expanding higher education, and considerable effort dedicated to creating more inclusive environments at colleges and universities. The main lessons from this article are straightforward. ‘America first’ internationally and ‘white America first’ domestically will cause America to fall in the ranks of Great Powers and in the ranks of liberal guardians. ‘America first’ will make America second rate.