III.3 The end of US hegemony
The end of the Cold War has created what some observers have called a “unipolar” or “one‑superpower” world. But the United States is actually in no better position to dictate the global agenda unilaterally than it was at the beginning of the Cold War. America is more preponderant than it was ten years ago, yet, ironically, power has become more diffuse. Thus, America’s ability to employ it to shape the rest of the world has actually decreased. … America will be the greatest and most powerful nation, but a nation with peers; the primus inter pares but nonetheless a nation like others. (Henry Kissinger 1994: 809-810)
III.3.1 Symptoms of the end of an SCA
Exterior signs that mark, in general, the closing phases of systemic cycles of accumulation (confer sections II.3.1 and II.3.2) can be observed for the US SCA. This section will briefly point out some of them.
The signal crisis of the US SCA (S4 in Figure 3), was around 1968-73, with the student revolts in the West and the first oil crisis. The decreasing rate of return of capital was clearly reflected in the economic depression of the 1970s and in the abandonment of fixed exchange rates. This was followed by the financial expansion of the 1980s, with the ‘yuppie’ ‘golden age’(R4 in Figure 3) symbolised by the phenomenal (speculative) valorisation of (mostly Impressionist) paintings.
This inter-capitalist competition was matched by the inter-state competition of the 1980s “third Cold War” (LaFeber 1997: 283-326). The Reagan administration tried to maintain US hegemony by using the logic of the US Long Century – an increased arms build-up (i.e. military Keynesianism), which in the mid term led to the colossal US deficit and bankrupted its raison d’être, the USSR.
Further, the strategic commodity of the US long century was arms. This implied the existence of an enemy – the USSR, and led to an extremely stable situation in Europe, both a centre of production and consumption and a theatre of nuclear deterrence. The ‘free world’ that the USA had led had always been defined by opposition to a common communist foe. Hence, the end of the Cold War meant that the political stabilising framework of the US SCA no longer existed.
The growing inability of the USA to fulfil its hegemonic role is reflected in e.g. its failure to save its closest Russian ‘friend’, Gorbachev, or to destroy its worst ‘enemy’, Saddam Hussein (LaFeber 1997: 348-349). When it was being claimed that the USA had ‘won the Cold War’, George Bush’s attempt of implementing his ‘New World Order’ failed repeatedly (Saddam Hussein still in power; the Somalia and Liberia operations a humiliating shambles; Iraqi Curds still under threat).
Further, the US economic lead was undermined: “The US economy reigned supreme, but in such key areas as steel, automobiles, and textiles it no longer could compete in world markets” (LaFeber 283). “The US market had become saturated with consumer goods” (Rifkin 1995: 90), decreasing profits, and bringing the need for innovation. US-style vertical integration started to be abandoned in favour of more flexible forms of enterprise organisation, such as out-sourcing, lean production, or just-in-time, which emerged first in the Japanese industry (Rifkin 1995: 92-100), being later adopted in the US, and increasingly in Europe as well (Kristensen 1996: 1). That is, a crucial innovation in the economic process (the abandonment of Fordism) was not led by American agencies.
Finally, to have a situation of systemic chaos, one needs not only the old regime of accumulation to be increasingly inefficient, but also a new one to emerge, “growing in the interstices of the old one, thriving on its inefficiencies and reinforcing them, competing with the old regime and exacerbating its problems” (section II.3.1, page 14). This can be best illustrated by the relative decline of IBM, one of the US giant vertically integrated TNCs, supplanted by newcomers such as Microsoft, Apple (temporarily) or Netscape, that defied with apparent ease the barriers to the entry of competitors that giant corporations were supposed to establish (see section II.3.6).
III.3.2 Where is the terminal crisis war?
In periods of systemic chaos, inter-enterprise and inter-state conflict escalates until the new regime of accumulation supersedes the old in a terminal crisis. This has invariably been a major war, involving many states, including all (or most) the great powers and lasting about thirty years (see Table II). No such war has happened in the 1990s. This section will argue that thirty year world wars are a common feature of terminal crises, but not a necessary one. Further, we will argue that the wars that did take place in the 1990s correspond to the characteristics of the new SCA.
Let us return to Chase-Dunn and Hall’s iterative model of formation and evolution of social structures proposed in section II.2.1. Within the model, scarcity (of inputs and labour) leads to environmental or social circumscription of a given region, which is eventually solved by endemic conflict and warfare that leads to the formation of more complex hierarchical structures. This corresponds roughly, in the modern world system, to systemic chaos and ulterior supersession and refoundation of the Westphalian inter-state system.
However, in the capitalist system the ‘endemic conflict’ phase can be bypassed by increasing the pace of spatial expansion and/or technological development (Chase-Dunn 1997: 112-115). While this is normally only possible during periods of expansion of production and trade, we argue that if technological progress is sufficiently fast, then scarcity of resources can be overcome even in periods of systemic chaos. That is, the period during which the CM’n-1 phase of the old SCA and the MCn phase of the new SCA coexist can become rather short, preventing full-scale world war from happening, if the technological basis of the new SCA permits its MCn phase to take off very rapidly. We shall argue in section III.4.2 that the strategic technology of the new SCA, ICT, fulfils that condition due to its own nature.
Furthermore, bypassing a new thirty years war is today essential, because “in the nuclear age nobody can have a good war” (Taylor 1996: 184). Finally, destruction of the industrial infrastructure of competitors is no longer a strategic objective, because the strategic commodity of the EwE SCA is no longer industry (Møller 1995: 54-58).
What then, is the US SCA terminal crisis war, if any? Its characteristics should be the following: it should demonstrate that the US no longer holds absolute military power, that is, that it is not able to impose its will; it should reflect the supersession of the US political framework; it should be relatively mild compared to the previous thirty year wars; and it should reflect the characteristics of the system that is to emerge out of it.
Our answer is then not one war, but many, seemingly unrelated to each other: the localised conflicts of the 1980s and 1990s. This includes the decoupling of Iran from the capitalist world system (an almost unique event since 1945), the invasion of Kuwait by Iraq in which a regional power took on the military might of the US directly (also an almost unique event), the fragmentation of nation-states such as Yugoslavia (for the first time since 1945) and ethnic conflict in the ex-USSR, and the rise of militias in the US.
On the other hand, the Kosovo war, as well as, to some extent, the war in Bosnia (which we could take as being the last war of the US SCA and the first of the new SCA), are already integrated in the political framework of the new SCA, which is to prevent conflict from arising in regions close to core countries, and if conflict nonetheless does arise, to contain it within those regions, preventing if from spreading to the core, as we shall see in section IV.6.
It should finally be noted that, while being the culmination of the endemic conflict associated with systemic chaos, terminal crises wars are also due to uncertainty about who has the most power, and hence also have as function to determine which one of the hegemony challengers will attain hegemony. As the new hegemony is non‑territorial, its establishment did not require a major world war between territorial powers.
III.3.3 Continuing but limited and less relevant US military supremacy
The US has nowadays an undisputed military technological lead. This was demonstrated in the ‘surgical’ Desert Storm operation, and again in the recent bombardments of Serbia, as well as with weapons such as stealth technology, the missiles with depleted uranium tips (capable of penetrating armour much deeper than any other similar weapon due to the high density of uranium), or the carbon powder bombs (carbon being an excellent conductor, it short-circuits electrical installations, that cease to work, although the damage is not normally permanent).
All these weapons are geared towards intervention in localised conflicts, and one of their aims is to allow close to nil casualties in the intervening force. They are extremely expensive, imposing barriers to their development by other nations, but also to their use in the massive scale of a world war. Their effectiveness depends critically on weather and geography (the desert was ideal; the Balkan winter and mountains limit their efficacy). They would therefore be of very limited utility in a world war, or in a classical major conflict in which occupation of land would be required. Further, it is doubtful that the American voters would accept large number of casualties amongst their own troops, as expected in such a war (Wallerstein 1998).
Nuclear technology linked to missile technology has also became more widespread recently. India has 30 to 60 nuclear bombs equivalent to the Hiroshima one, and missiles with a 2500 km range. Pakistan has about 10 nuclear bombs and missiles with a 2300 km range. North Korea developed a missile with a 6000 km range, and is developing a new generation with 8000 km range, capable of reaching the west coast of the USA (Público 18 June 1999).
One should also note that many threats are not directly military, for instance, paramilitary militia terrorism. Cheaper weapons of mass destruction are also increasingly available, such as chemical and biological agents that are relatively easy to procure or fabricate at moderate prices. These weapons can be held by non-statal actors, even by very small groups, as the Tokyo tube attacks with Sarin gas demonstrated.
That is, the USA now has a reduced capacity to fight major conflicts, including Vietnam-like ones, it faces increased nuclear threats, and it is rather unable to prevent the diffusion of cheap weapons of mass destruction. Its technological superiority is best used in containment of localised, medium or small scale conflicts, which admittedly is the type of conflict that must be met to prevent war from spreading into core regions. However, even in this case containment is only one of the relevant aspects, the other being prevention of conflicts through economical, social, and political means, in which the USA is just one actor amongst several others such as the EU or large regional actors (e.g. China, Indonesia, India, etc.) (see section IV.6).
Summarising, the USA do not have the military capacity to impose their will to large regional powers; it does not have the military and political capacity to impose its will to smaller powers without the acquiescence of the neighbouring major regional powers; and it is not able to control the proliferation of weapons of mass destruction that are potential major threats to its own integrity. It is still, however, the single most powerful state in the world, but that has become less relevant than during the Cold War.
III.3.4 Shared economic prominence as relative decline
The number of US, European and Japanese (including Southeast Asia) transnational corporations (TNCs) in the largest top 50 group (based on original data published by the Fortune magazine, and collected by Bergesen and Fernandez – Bergesen 1999) from 1956 to 1989 is shown in Figure 4. It illustrates well the decline of American dominance in world production. While up to about 1970 the USA had between three and four times more TNCs in the top 50 than all other countries combined, since 1973 it has about the same number as Europe, and less than Europe and Japan put together. This decline was strongest between 1967 and 1973 (which is the period that we took to mark the US SCA’s signal crisis – see section II.3.6 and Table II), after which the number of top 50 US TNCs stabilised until the mid 1980s, since when it has been undergoing a steady if slow decline. The European share is constant since 1973, and the US decline has been at the cost of a steadily increasing Japanese number of top 50 TNCs, which by 1989 was however still about only half that of either European or US TNCs.
Su investigated the nature of trade relations between the US, German (which we can take to represent Europe, since it is the dominant European economy), and Japanese blocs in 1938, 1960, and 1990 (Su 1999). He found that the three blocs overlapped significantly in 1960, with each of them trading extensively with all continents. This was very different from the situations in both 1938 and 1990, that, Su dixit, resemble each other: the three trade blocs were in both dates largely separated from each other, with a degree of overlap of 5%, as opposed to 42% in 1960 (Su 1999: 128). While in 1938 this reflected inter-state competition and preparation for war, we argue that the situation in 1990 is significantly different, because most of the inter-block economic connection is no longer done by trade, but by foreign direct investment (FDI) that substitutes for trade (Dunning 1993: 134, Dent 1997: 261-301). That is, the current small degree of trade overlap reflects a deeper integration between blocs, and in fact, a large share of inter‑block trade is in fact intra-enterprise, that is, between regional delegations of the same TNC. The relevance for US hegemony is that, first, US companies become simply one more player in a network of inter-regional FDI, and second and perhaps more importantly, TNCs (American, European and Japanese) tendencially loose their specific national character.
All in all, while US TNCs are still prominent, they share this prominence with European and Japanese ones, which is a relative decline from their position of uncontested dominance in the MC phase of the US SCA, and as we stressed in section II.4.8, loss of hegemony is more a question of relative than absolute decline.
III.3.5 The rise of Southeast Asia?
Giovanni Arrighi (Arrighi 1994: 332-356, 1996, 1997a) and others claim that a hegemonic shift from the West, as currently represented by the USA, back to (Southeast) Asia, is now taking place. The main thrust of his argument is that incorporation of East Asia into the Western-dominated modern inter-state system is an event too recent (confer section II.3.8) to have destroyed the region’s specificities:
Three peculiarities stand out above all others: the “quasi-state” nature of the economically most successful states of the region; the importance of informal business networks in connecting the economies of these quasi-states to one another and to the rest of the region; and the extreme imbalance of the distribution of military, financial and demographic resources among the states operating in the region. (Giovanni Arrighi 1996: 6)
This political organisation is matched by a cross-border horizontal organisation of economic enterprise relying on informal networks (including Japan, China, the Asian Four Dragons, and the Mini Dragons), rather than US-style vertical integration (see section II.3.6). Arrighi argues that this political, economic and social system allows East Asia to meet the challenges associated with the disempowerment of the nation-state due to “transnationalism, … regionalism, … and tribalism” (Arrighi 1996: 5).
While it was initially due to weakness vis a vis the USA, this system became an advantage with the coming of the US SCA signal crisis, in what Arrighi considers to be a rather typical rise of a previously subordinated region. Thus, “Japan continued to depend on the United States for military protection; but the United States came to depend ever more critically on Japanese finance and industry” (Arrighi 1996: 10), which was free from the burden of military commitments and spending, and Southeast Asia came to be the most dynamic area of economic expansion during the 1980s.
However, these “peculiarities” do not seem to be peculiar to Southeast Asia at all, and are also applicable to e.g. Europe. Many of the most successful European economic areas are no longer states, but regions, that can be considered to be quasi-states as well (see section IV.3). These regions can span more than one country, with connections established by networks of local politicians and business people. These networks can lead to greater economic links across one (multinational) region than between different parts of the same country (Harvie 1994: 53-74). Finally, a similar imbalance of military, financial and demographic resources amongst European states also exists, for instance between Andorra, Germany, and Russia, but also between e.g. Brandenburg and Lower Saxony (financially) or between Finland and the Republic of Ireland (militarily).
Further, while the recent financial crisis (starting in 1997 and continuing into 1998) shook the economy of the whole Southeast Asian region, both the US and the EU area remained practically untouched and immune to the crisis. It is highly doubtful that a region that has so recently been the target of IMF aid packages is about to take the role of hegemon. It is also important to note that US capital has not been flowing to Japan (quite the contrary), which leaves the condition of ceaseless accumulation of capital unfulfilled. Capital has been flowing to China since the late 1980s, but about 80% of that capital comes from overseas Chinese (not from the USA), and is invested mainly in labour-intensive low-value added production (Arrighi 1996: 11).
Arrighi’s assertion that the “Overseas Chinese capitalist diaspora” is emerging as the leading agency of capital accumulation in East Asia (and hence in the world as East Asia is becoming hegemonic according to Arrighi), and is strikingly similar to the sixteenth century Genoese (Arrighi 1996) is ludicrous: The Genoese controlled the capital flows due to the American silver trade, those due to the transoceanic spice trade, as well as the North Italian capital (which included the Papacy), that is, all the contemporary major systemic sources of capital in the West, while the Chinese do not currently control any sizeable fraction of the daily massive movements of capital.
Peter J. Taylor advances four reasons why Japan will not be the new hegemon (Taylor 1996: 184-185). First, size, as Japan would represent a reversal from US-continental to UK-island size, and despite the rise of the regional Southeast Asian system, Japan does not dominate China. Second, it is not possible for all core states to emulate Japanese export-led economic practices, on the contrary, the pressure today is for Japan to conform to other economies by increasing domestic consumption. Third, Japan does not present a ‘universal’ idea of the future to form “one world under hegemonic guidance” (Taylor 1996: 185). Finally, “a state trajectory to world dominance is no longer possible given the nature of the contemporary world-economy. … The world is becoming far too complex for any one country to impose its leadership in the manner of past hegemons” (Taylor 1996: 185).
Arrighi correctly states that the East Asian business networks occupy places but are not defined by the places they occupy, but the point is that exactly the same is true for American and European capitalists. We claim that the crucial point is that, while the Southeast Asian region did pioneer the current innovations in the economic process (the abandonment of Fordism for flexible specialisation) that will define the new SCA, the very basis of that innovation, ICT, allowed it to spread extremely quickly to other agencies of accumulation of capital. The net effect is that no single nationally-bound group of capitalists enjoys a decisive advantage. This will be the subject of the next section.
 Which meant that the US could no longer regulate the supply of world money (Arrighi 1994: 300).
 This inability to exercise leadership is felt in other areas as well, not only militarily. For instance, while Kennedy successfully forced West Germany and Italy to give up plans to build an oil pipeline from Russia, Reagan’s attempts to prevent Germany from building a natural gas pipeline from Siberia failed: “Reagan no longer could dictate policy to Western Europe” (LaFeber 1997: 305).
 Which however followed quickly, to the point that a 1999 book on horizontal organisation of enterprises written by a leading American management consultant does not mention Japan even once (Ostroff 1999).
 Supplanted, in fact, by the combination of the many thousands of IT companies that popped up in the last 10 to 15 years, from small ‘garage’ ones to giants such as Microsoft.
 Which in the original model is taken to be due to population pressure, but we can assume that it can also be due to the law of decreasing return of capital.
 Not its disintegration as e.g. WW II led to the disintegration of the UK-led system, since that would require a full-scale world war.
 That Iraq did not win is irrelevant; it also did not loose, or at least Saddam Hussein is still in power. The simple fact that Iraq dared to challenge the hegemon is a good indication that it was only an ex-hegemon.
 Meaning that the USA, Germany, and Japan dominate their regional trade areas, while keeping largely away from each other in terms of trade. For the EU, it means that most of its trade is internal.
 Like e.g. America was to Britain during the long nineteenth century
 The expression ‘quasi-states’ designates states that have been granted juridical statehood but lack the capabilities traditionally associated with statehood. Mutatis mutandis, it can also designate regions that do have some of those capabilities, often regulated by juridical status (such as German Länder), but also informally.
 Finland rearmed in the late eighties and in the nineties (for instance, with the purchase of sixty four F18 Hornet fighter jets, the most potent aircraft in the Baltic region), to the extent that, considering the 1990 Conventional Forces in Europe treaty on limitation of weapons, not even Russia currently poses a (conventional) military threat to it (Dörfer 1997: 24,42,84).
 Recovery of some of the Asian economies is beginning. After 18 months of recession, Japan grew 1.9% in the first quarter of 1999 (The Economist: 26 June 1999, page 79). However, both the USA and the EU grew continually during those same 18 months.
 Arrighi has recently qualified his assertion that an East Asian state is preparing to become hegemonic (Arrighi 1997b, 1999d), by considering that, firstly, the East Asian region will need a plurality of states, including China, Japan, and the USA, working together to bring into existence an East Asian-based new world order. Secondly, he admits that the East Asian system is not replicable elsewhere, and that other core regions will have to follow their own geo-historical heritage.
 This pun on the effect of network forms of organisation (as well as on the internet) was taken from Doyle, Ferguson and Morris, who are partners at Andersen Consulting and responsible for programmes related to ICT (Doyle 1998).