From Insurance to Extraction: Rethinking Posen’s Defence of the Post-War U.S.-Led Order
Picture from the British Online Archives
I recently came across an article by Adam Posen in Foreign Affairs titled “The New Economic Geography: Who Profits in a Post-American World?” Posen, who leads the Peterson Institute for International Economics, speaks from the vantage point of a Washington institution long associated with free trade orthodoxy and globalisation. Foreign Affairs itself, as the flagship of the Council on Foreign Relations, represents establishment internationalism: centrist, neoliberal in economics, and liberal-internationalist in foreign policy. Its editorial line consistently defends the post-1945 U.S.-led order, NATO, the IMF, dollar stability, and multilateral institutions, and tends to resist Trump’s “America First” challenge.
In his essay, Posen frames the United States as the world’s benevolent insurer, underwriting global peace and prosperity in exchange for premiums: demand for dollars, investment in U.S. assets, and adherence to American rules. Trump, in his telling, transformed this arrangement into gangster-style extortion, raising premiums arbitrarily and leaving allies exposed. It is a clever narrative. However, it romanticises the past. The U.S. system was never a cost-free benevolence. It was always a blend of stability and extraction, propped up by rising debt, enforced through institutions like the IMF, and sustained at the expense of global equality.
The U.S.-led order certainly delivered gains. Trade expanded, violence declined, and incomes rose. Nevertheless, the insurance metaphor conceals who paid. Washington enjoyed the privilege of seigniorage, borrowing cheaply because it issued the world’s reserve currency. It could finance its deficits while exporting monetary shocks to others. The Latin American debt crisis of the 1980s and the Asian financial crisis of 1997 were not random events but symptoms of dependence on U.S. liquidity. IMF bailouts, marketed as rescue packages, often reinforced dependency through austerity and capital account conditionalities that cut social spending while protecting creditors. Stability existed, but selectively. It flowed to Washington and Wall Street, while many in Africa, Asia, and Latin America endured precarity. Even within the U.S., cheap borrowing and financialisation enriched asset holders while wages stagnated. Stock buybacks soared as household debt and medical bankruptcies grew. The empire of debt was also an empire of inequality, between nations, and within them.
By the end of 2024, U.S. federal debt exceeded 120 per cent of GDP. Meanwhile, annual interest costs surpassed defence spending in FY2024 (October 2023–September 2024), reaching $949 billion compared to $816 billion for defence as per the Congressional Budget Office (CBO). Unlike in the postwar era, today’s debt does not accompany industrial renewal. No state can credibly underwrite global stability while borrowing at this scale. For decades, the U.S. demanded fiscal restraint from others through the IMF while exempting itself. That asymmetry is now ending. Trump did not cause the arithmetic; he exposed it. Asking allies to contribute more reflected necessity, not extortion. The perception of cost-free insurance was never sustainable. Multipolarity is not the collapse of order; it is the extension of market discipline to the one country that long claimed exemption from it.
Posen points to Japan’s concessions under Trump—15 per cent tariffs on autos and steel, and GDP-linked funds—as evidence of betrayal. In reality, Tokyo is adapting. It now pays higher costs to buy time, deepen ties with the EU, and further embed itself in the Regional Comprehensive Economic Partnership (RCEP), a trade agreement among 15 Asia-Pacific nations. Canada is hedging through Europe, while South Korea and Mexico rebalance supply chains. Pew surveys register declining favorability toward the U.S.—20 points in Canada, 32 in Mexico—but such figures measure shock more than permanent estrangement. When the subsidy ends, allies adjust, because they must.
Posen also warns of shrinking dollar liquidity. He is right that Treasuries once provided unrivalled safety. However, the shift underway is not a collapse; it is diversification. Central bank gold reserves climbed to 36,000 tons in 2024, with China and Russia leading the accumulation. The EU has begun issuing joint defence bonds, with euro-denominated issuance now accounting for roughly 20 per cent of the market. RCEP, encompassing 30 per cent of global GDP, and AfCFTA, if paired with the proposed African Monetary Fund, are developing new corridors of trade and finance outside the dollar. ASEAN has expanded local-currency swaps with China and invested in industrial linkages. Rising U.S. borrowing costs reflect risk repriced more honestly. The real distortion was concentrating the world’s savings in a single debt-heavy sovereign.
Critics cast multipolarity as inefficient because self-insurance requires higher reserves and raises borrowing costs. That is true in the short run. However, these costs are not fatal; regional pooling and institutional reform mitigate them. AfCFTA strengthens Africa’s internal trade. ASEAN and China cooperate on currency swaps and infrastructure. The EU spreads risks through joint financing. Even the IMF could evolve: BRICS’ 2024 proposal to dilute U.S. veto power signals how governance might adjust to reflect multipolar realities. Multipolarity is not chaos; it is the reassertion of sovereignty. It disciplines Washington, reduces systemic fragility, and gives regions space to set terms closer to their own development priorities.
Posen portrays Trump as chaotic and self-serving, citing tariff shocks, personal transactions, and even the bombing of Iran in 2025 as proof of volatility. Some of this critique is fair. Trump’s methods are erratic. Nevertheless, disruption can still serve a structural function. The U.S. could not continue underwriting global insurance while drowning in debt. By forcing allies to see the true cost of dependence, Trump hastened recalibration that elites in Washington might have delayed until breakdown. Even if his style resembled gangsterism, the substance was unavoidable: a debt-driven order that entrenched inequality and denied sovereignty could not last.
Posen is right that the U.S.-led system delivered stability, but he underemphasises its extractive costs and ignores its fiscal unsustainability. He is right that fragmentation carries risks, but he overlooks how diversification can enhance resilience and fairness. The cracks Trump exposed were not only fiscal, they were moral. A system that imposed austerity on the Global South while enriching U.S. (and global) elites, that denied sovereignty while demanding obedience, could not endure. The post-American world will be more complex, less liquid, and costlier in the short term. However, complexity brings freedom. Nations can combine open trade with strategic protectionism to safeguard critical interests, balancing market access with sovereign resilience. The outcome is fairer growth, shared governance, and a global economy no longer captive to one nation’s debt. That is not the collapse of order, it is its renewal.
Dean N Onyambu is the Founder and Chief Editor of Canary Compass.
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