SYDNEY — The euphoria and promise of Barack Obama’s election triumph will soon be tempered by the stark prospect of U.S. weakness and decline. The new president has a mountain of work ahead of him if he is to restore the tarnished U.S. brand and repair the financial mess that is likely to be his predecessor’s most enduring legacy.

President George W. Bush’s stewardship of the U.S. economy has been a disaster. On his watch, Bush has turned a 2000 Clinton surplus of $128 billion into a $1 trillion-plus deficit, private debt has skyrocketed, the nation’s infrastructure has deteriorated alarmingly and the defense budget is under serious strain.

These economic realities present Obama with two major challenges as he contemplates his domestic and foreign policy agenda. First, is the Herculean task of repairing a dysfunctional financial system and dealing with the consequences of what may be the worst recession since the 1930s.

Already burdened by unrealistically high expectations, Obama will have little financial wriggle room to implement his planned domestic reforms which, as a consequence, are likely to be less transformational than either he, or his supporters, would like.

The external environment is equally unpromising for the new president. U.S. strategic predominance has been underpinned by the entrepreneurship and productivity of the American people. But the wide gap that once separated the U.S. economy from all others is narrowing. It has been living beyond its means on other nations’ credit for far too long.

Now its economic power is being challenged not only by the rise of China and India, but also a resurgent Russia, the wealthy oil states of the Middle East and a more confident, assertive Europe.

None of these states, or agglomeration of states, is yet a peer competitor. But collectively they are diluting and challenging U.S. suzerainty in ways that would have been unimaginable barely a decade ago, when the United States basked in the sun of its “unipolar moment” as the world’s only super power. That moment has long since passed into history.

A sign of the times is the number of governments and corporations beating a path to the doors of cashed up Chinese and Mideast sovereign wealth funds, the global realignment of the financial system away from its previous dependence on Wall Street, and strident calls for reform of the international institutions largely crafted and dominated by the U.S. since 1945.

Then there are the non-state actors, who owe allegiance to no state and march to the beat of their own discordant drum. Most are no friend of America and many actively seek its downfall. Al-Qaida is the most prominent, but there are numerous, like-minded organizations around the world intent on sapping U.S. strength and resolve.

Does this mean that Pax Americana is about to go the way of all previous hegemonies? Not for the moment, and maybe not even in our lifetime, if Obama can marshal the traditional sources of U.S. strength.

The $13 trillion U.S. economy remains the world’s largest by a considerable margin. Washington far outspends all other nations on defense, as well as research and development.

Demographically, the U.S. is rejuvenating itself through large-scale immigration and healthy fertility rates that over time will stimulate the economy, deepen the tax base, broaden the nation’s skill set and provide a continuing source of recruits for the military.

However, in order to realize this potential, Obama must ensure that Americans practice what they preach and lead by example. This means a return to thrift, reducing the mountain of private and public debt and restoring America’s strength and moral authority abroad.

The latter may prove especially difficult because of the multiplicity and complexity of the foreign policy challenges confronting the U.S.

Stabilizing the deteriorating and linked conflicts in Pakistan and Afghanistan will require more subtle diplomacy than has been evident in the recent past, a coherent and overarching political and military strategy, and the judicious, intelligent use of military force when required.

The U.S. must once again learn to share power with other states and to accept that the center of economic and financial gravity has shifted inexorably from the cozy club of Group of Seven allies to the larger and more diverse group of G20 developed and developing economies, which are far less amenable to U.S. influence.

This will require a difficult but necessary attitudinal shift in Washington that many Americans will oppose. If Obama is successful in rewriting the script to give the U.S. a leading but not dominant role in the much promised but now emerging new world order, then he will have demonstrated conclusively that the U.S. remains the world’s indispensable power.

Alan Dupont is the foundation Michael Hintze Chair of International Security and the director of the Center for International Security Studies, University of Sydney. © 2008 OpinionAsia

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