Ideas are one of our most important exports, and two fundamentally American ideas have dominated global thinking since the early 1980s, when Ronald Reagan was elected president. The first was a certain vision of capitalism—one that argued low taxes, light regulation and a pared-back government would be the engine for economic growth. Reaganism reversed a century-long trend toward ever-larger government. Deregulation became the order of the day not just in the United States but around the world.
The second big idea was America as a promoter of liberal democracy around the world, which was seen as the best path to a more prosperous and open international order. America's power and influence rested not just on our tanks and dollars, but on the fact that most people found the American form of self-government attractive and wanted to reshape their societies along the same lines—what political scientist Joseph Nye has labeled our "soft power."
It's hard to fathom just how badly these signature features of the American brand have been discredited. Between 2002 and 2007, while the world was enjoying an unprecedented period of growth, it was easy to ignore those European socialists and Latin American populists who denounced the U.S. economic model as "cowboy capitalism." But now the engine of that growth, the American economy, has gone off the rails and threatens to drag the rest of the world down with it. Worse, the culprit is the American model itself: under the mantra of less government, Washington failed to adequately regulate the financial sector and allowed it to do tremendous harm to the rest of the society.
