First, the U.S. is not in decline. Americans and others have been predicting decline regularly over the years: after the Soviets launched Sputnik in 1957; again when Nixon closed the gold window in 1971; and when the American rust-belt economy seemed to be overtaken by Japanese manufacturers in the 1980s.
Predicting the decline of the U.S. has been something of a cottage industry over the past 5 or 6 decades. One of the foundational IPE texts took it as a given in the mid-1980s. The end of the Cold War stopped all of that talk temporarily, but it is difficult to keep those dogs at bay. Talk of the end of American influence has been popping up all over the place since the financial crisis. Nye explains why they are wrong:
But when one looks at the underlying strength of the American economy, it is not surprising that the World Economic Forum ranks the U.S. second (just behind Switzerland) among the most competitive, while China ranks some 30 places below.
Second, the fact that China holds so many dollars is not a true source of power, because the interdependence in the economic relationship is symmetrical.
True, if China dumped its dollars on world markets, it could bring the American economy to its knees, but in doing so it would bring itself to its ankles.
China would not only lose the value of its dollar reserves, but would suffer major unemployment. When interdependence is balanced, it does not constitute a source of power.
Even more fundamentally, I don't know if it's possible for a country with an extremely export-biased economy to provide global leadership. How would that work? The simple fact that China has felt it had to stockpile so many dollar reserves is evidence of American, not Chinese, strength: China is largely dependent on the U.S. for its growth. China's internal market will be a source of strength one day, but it will remain a weakness until they can employ all of their citizens in productive work and enact public policies (like a social safety net) that make massive domestic savings less necessary.
Emmanuel takes issue with Nye, noting that the U.S. has looming demographic problems. This is true, but the U.S. is not unique in this regard. Europe, Japan, and even China are all similarly on the wrong side of the demographic curve. Which is why productivity and competitiveness are so important. Here, the U.S. are still ahead of any other large country.
The recent crisis demonstrated that the world is not ready for the end of U.S. leadership. The saying used to be that if the U.S. sneezes the world catches a cold. Well, in the last few years the U.S. caught a nasty bug, but the rest of the world caught pneumonia. If only one lesson can be learned from the present downturn, it is this: the end of U.S. influence is not at hand.