The Imperious Economy (review)

BOOK REVIEWS 239 The Imperious Economy. By David Calleo. Cambridge, Mass.: Harvard University Press, 1982. 265 pp. $17.50. Reviewed by Andrew M. Moravcsik. Liberals and conservatives alike have claimed this book as their own. Perhaps they are both mistaken. David Calleo's provocative new book, The Imperious Economy, is certainly strikingly political, yet remains politically independent. Calleo approaches the problems of the world economy with the long-term vision of the historian. He begins by emphasizing an oft-neglected point: The postwar Pax Americana was purposefully designed to promote unprecedented economic growth, notjust in the United States, but throughout the world. Thus, the relative economic decline of the United States in an increasingly pluralistic world might be seen as a natural outcome, indeed an indirect success of American hegemonic policies. For Calleo the key question is: How has America adjusted to this inexorable, but perhaps ultimately salutory, shift of power? The thesis of Calleo's book is elegantly concise: No nation can afford to expend more material resources than it has at its command. The United States has attempted to do so, overextending itself in an effort to secure its international position while increasing its domestic prosperity. The direct consequence has been inflation. However , rather than adjusting to the realistic constraints implied by constantly rising prices, the United States has manipulated the world economy in an ad hoc fashion to force others to bear the costs of its own ambition. In his analysis ofAmerican economic policy, Calleo incorporates three important critiques: the "monetarist" critique of governmental full-employment fiscal and monetary policies; the "anti-imperialist" critique of American overextension abroad; and the "European" critique of the inadequate institutional limits to American privileges in the world economy. Calleo chronicles the way in which the United States, since the Kennedy administration , has financed an active world role and domestic full-employment policies through a combination of budget deficits and lax monetary policies. Within the context of a liberal international economic system, the consequences were unavoidable : chronic inflation and a permanent balance-of-payments deficit. While similar policies in other nations were checked automatically by the need to maintain a balance -of-payments equilibrium, the United States exploited the unique position of the dollar as the international reserve currency, as well as American geopolitical strength, to transfer the burden of profligate spending onto others. The "imperious" American economy, exempted from the need to defend its currency, exported its domestic inflation to the rest of the world. The resulting global inflation, Calleo argues, has been the central weakness of the postwar world economy, undermining international trade, discouraging investment, rendering rational state planning almost impossible, engendering social conflict, and, most important, progressively destabilizing the international monetary system. Nixon's New Economic Policy, which Calleo views as a revolution in the postwar international economic system, explicitly recognized the exploitative "neo-mercantilist " character of American policy. Nixon wielded American power aggressively to impel foreign acquiescence to a set of policies once called "begger-thy-neighbor devaluation" and "unfair protectionism." American primacy over Western Europe, 240 SAIS REVIEW influence in the Middle East, and détente with the U.S.S.R. defused international opposition. Hence, a superpower that had almost singlehandedly created the Bretton Woods system thirty years previously was compelled to destroy it in 1971. These exploitative American international policies compensated for domestic problems more serious than those of other nations. Indeed, according to Calleo, the divergence in American policy between ambitious ends and limited means transcends economics. While all democracies have difficulties curbing excessive political demands that fuel inflation, the United States suffers from a special "comparative disadvantage" in this regard. As Calleo notes, ultrapluralistic politics, strident individualism , a tradition of government nonintervention, and the decline of traditional social structures have compounded the difficulties of controlling American inflation. Calleo concludes the book with a sketchy discussion of possible solutions in which he pleads for a stronger, more efficient state, inspired by reasonable and more limited national goals. While Calleo's general analysis is cogent, his prescriptions seem frustratingly vague. Rather than offering a definitive solution—a reduction of American NATO responsibilities, for example—as he did in a recent article in Foreign Affairs, Calleo...