FROM THE MOMENT the Berlin Wall came down, a succession of U.S. presidents used American economic, military, and cultural primacy as leverage to build a new global system incorporating both the former communist countries and the developing nations of the global South. Over the course of the next decade, America's leaders phased out the Pax Americana alliance system in Europe and East Asia -- a Temporary Cold War measure -- and replaced it with a global great-power concert.

In Europe, the U.S. administrations that came to power after the end of the Cold War transformed NATO by adding post-Soviet Russia, and worked out a common strategy with Europe and Russia to deal with the troubled Middle East region to the south. The civil war in the Muslim world provoked by radical jihadists threatened Europe, Russia, and the United States alike. So instead of responding unilaterally, Washington formed a united front with Europe and Russia against al-Qaeda and similar jihadist groups. Under the auspices of the United Nations and the new NATO, it also worked with Europe and Russia to defuse much of the anger in the Arab world and the wider Muslim world by replacing the Israeli occupation of Palestine with a temporary multinational protectorate until a Palestinian state could be established. The model pioneered in Palestine, in which American, European, and Russian NATO forces presided over a UN-sponsored transition to statehood, was then applied to end the Russian occupation of Chechnya and the Indian and Pakistani struggle over Kashmir.

Multilateral cooperation was also essential to an American-led campaign against the proliferation of weapons of mass destruction. In Iraq, UN weapons inspectors, reintroduced after a few years absence, discovered that UN policy had succeeded in preventing Saddam from acquiring weapons of mass destruction, making unnecessary an invasion of Iraq. The successful disarmament of Saddam Hussein's Iraq by UN inspectors backed up by U.S., European and Russian threats of force permitted the United States to remove its troops from Saudi Arabia and to relocate them in Europe and Russia, removing a source of propaganda for al-Qaeda. The United States joined Europe and Russia in pressuring Israel to cooperate with the nonproliferation regime of the International Atomic Energy Agency in order to reduce the motive for other states in the region to acquire their own nuclear weapons. The admission of Russia to NATO facilitated efforts to dismantle Russian nuclear warheads and to employ Russian nuclear scientists who might otherwise have sold their talents to hostile regimes.

In East Asia as in Europe, the dissolution of the Soviet Union had rendered America's Cold War alliance system obsolete. Realizing that international institutions would be stillborn in the region, Washington began promoting traditional great-power summits involving the United States, China, Japan, and Russia. Multilateral cooperation among the East Asian Powers deterred the North Korean regime, even as the United States withdrew most of its forces from South Korea and Okinawa, leaving a small number of troops as a symbol of America's security commitment. Realizing that the United States would probably be isolated in the region and the world if it pursued a policy of confrontation with China, Washington instead adopted a policy of constructive engagement. It followed a similar policy toward Asia's other rising giant, India.

By sharing the burden of policing the Middle East with Europe and Russia, and by replacing confrontation with cooperation in East Asia, the United States was able to demobilize many of its conventional armed forces, freeing up resources for long-term military modernization. The new U.S. military strategy de-emphasized conventional warfare and instead concentrated on high-tech arms and low-intensity conflict. Two previously conflicting schools of thought -- the high-tech "revolution in military affairs" and "fourth generation warfare" -- were combined in the post-Cold War American national security strategy. Even while adapting the robotics revolution to American national defense, the Pentagon downsized the regular army and focused on special forces capable of fighting alongside, not in place of, allies and proxies in low-level conflicts and peace-keeping operations. Although fewer Americans were employed in the armed forces, the expanded investment in defense R&D enabled the United States to maintain a comfortable lead in military technology and produced valuable spin-offs for civilian industry.

Following the Cold War, America's leaders undertook equally bold structural reforms of the American and world economies. The 1990s were devoted to infrastructure-led domestic growth. To share prosperity and enhance national security, Washington's economic strategy encouraged the decentralization of population and industry from the crowded coasts to the country's interior. It did so by financing the construction of a new national infrastructure that drew on advances in telecommuting practices and small-scale aviation. Washington also undertook a massive investment in hydrogen fuel cell technology in order to reduce America's economic dependence on the volatile oil-supplying countries of the Middle East.

The United States also used the post-1989 moment of great-power peace to reform distorted trade and financial relationships. During the Cold War, Washington bought Japanese geopolitical support for the United States at the price of tolerating Japanese mercantilism (by contrast, America's trade and investment with Europe was more or less in balance). The result was large trade imbalances in Japan's favor. The problem was further exacerbated when the "little tigers" of East Asia -- Hong Kong, Singapore, South Korea, and Taiwan -- followed Japan's model by protecting their own markets while targeting American consumers. At the same time, American multinational corporations began to expatriate manufacturing to low-wage economies, especially to low-wage economies in East Asia. In order to finance the consumption represented by its large trade deficits, the United States borrowed from Japan and other Asian producer economies upon whose savings it had become dependent for capital.

In the 1990s, visionary American leaders moved quickly to deal with the threats of mercantilism, dependence on foreign savings, and a global "race to the bottom" in manufacturing. Following the advice of strategic trade theorists like James Fallows, a series of presidents abandoned the attempt to force Japan to become a liberal society. Instead, the United States joined with the European Union to form a giant liberal trading bloc, the Trans-Atlantic Free Trade Area (TAFTA), which negotiated specific market-share agreements with mercantilist countries like Japan, which for domestic reasons preferred to play by different rules.

TAFTA, which included the United States and Canada but not Mexico or any other low-income country, accounted for a majority of the world's wealth. The expatriation of industry to developing countries took place, not as a mad scramble in a "race to the bottom" but on the basis of negotiated market-share agreements between TAFTA and nations and regions in the global South. By preserving some market share for domestic manufacturers, the TAFTA regime encouraged industrial companies in the United States and Europe to compete with one another not by lowering wages and benefits but on the basis of efficiency. The result was the rapid automation of First World industries, which produced manufactured goods for the guaranteed market-share of high-wage First World economies.

There remained the problem of America's dependence on foreign capital. Since the Great Depression, American policymakers had been haunted by the fear of underconsumption. By the 1990s, however, it was clear that the longstanding emphasis on consumption needed to be corrected by a new emphasis on savings. A combination of compulsory and voluntary new savings vehicles spread the ownership of income-producing assets throughout American society. By the early twenty-first century, the United States became a net exporter of capital once again, and ordinary Americans profited from investing in the rapid growth of societies in the global South.

Rejecting the attempt of conservatives and neo-liberals to revive discredited Victorian-era notions of laissez-faire, successive American administrations after the Cold War recognized that a truly free global market, even if it was desirable in theory, was not possible in practice, for the reason that many developing nations wanted a share of high-tech industries, much as did all advanced nations. Abandoning the ideal of nondiscrimination among sectors as impractical for political reasons, the United States and its allies worked out new rules for world trade in which individual nations, by means of market-share agreements, domestic-content rules, and other measures, could preserve valuable industries within their borders without resorting to trade-disrupting tariffs or restrictions on investment. In its approach to global development, the United States revived an old American idea -- the infrastructure-led development promoted by Harry Truman's Point Four program and symbolized by the New Deal's Tennessee Valley Authority (TVA). The infrastructure that the major economies helped to finance in developing countries consisted, not of giant hydroelectric projects and centralized urban utilities, as in the 1940s and 1950s, but rather of small, decentralized hydrogen-fuel-cell power plants, dispersed small airport systems, and wireless communication systems like those used in the increasingly decentralized United States. By incorporating the technologies of the third industrial revolution, this new development model permitted agrarian societies to evolve directly into high-tech service economies, avoiding a stage of sweatshop factory labor and Dickensian urban agglomerations. At the same time, the marketization of non-traded services, such as housing construction, permitted investors in the global North to profit from the spread of middle-class amenities like single-family homes in the global South.

The result of the post-Cold War reforms in the United States and the world was not a Golden Age. Military rivalries among the great powers, including China and India, continued to exist, along with extensive cooperation in areas of shared interest. Both global security and world trade were governed more by mutual disarmament treaties than by a single set of agreed-upon rules. The civil war in the Muslim world, spilling over its borders now and then, was a disruptive force for decades. Large-scale immigration from the Middle East, South Asia, and Africa, not only to North America and Europe but also in time to Eurasia and South America, created a backlash in the form of xenophobic ethno-nationalist movements. The ideological struggles between capitalism and communism that turned on control of the means of production were replaced by a new ideological struggle over the regulation of biotechnology that revolved around the question of control of the means of reproduction of humans as well as other organisms. These tensions notwithstanding, the system that enlightened American leaders shaped in the years following the Cold War averted great-power conflict for generations, while triggering a sustained growth in global wealth and middle-class living standards without precedent in history.

UNFORTUNATELY, THIS IS FICTION. The story told above is one of an alternate history. Actual history took a different course following the end of the Cold War -- and both America and the world are worse off than they might have been.

Consider the fundamental decision confronting American policy-makers following the fall of the Berlin Wall -- whether to construct a new global system, or to try to preserve the old Cold War system with slight modifications. Both George Herbert Walker Bush and Bill Clinton chose the latter option. The first Bush, cautious to a fault, initially opposed the reunification of Germany and the secession of the non-Russian nationalities from the Soviet empire, and then insisted that any united Germany must be in NATO. Clinton, instead of incorporating Russia into the Atlantic alliance the way that West Germany had been incorporated in the 1950s, pushed NATO to Russia's borders and pursued an American grab for influence over Central Asian oil resources at Russia's expense. In East Asia, the Clinton administration arbitrarily froze the number of troops at Cold War levels, even though America's Asian troop deployments were not an appropriate response to any threat, including the threat of North Korea to South Korea and its neighbors.

The strategy of the first Bush administration and the Clinton administration can be described as Cold War Plus -- the expansion of America's Cold War alliance system into the power vacuum left by the collapse of the Soviet Union. Both administrations had an internationalist veneer, but it was largely a camouflage for American unilateralism. This was especially true of the Clinton administration, as illustrated by the contrast between the Gulf War and the Kosovo War. When the Clinton administration realized that it would not obtain the support of the UN Security Council for an American-led war against Serbia, Clinton circumvented the United Nations and worked through NATO instead.

At least the elder Bush and Clinton sought to portray themselves as liberal internationalists in the post-1945 bipartisan tradition. George W. Bush, under the influence of neo-conservative ideology, broke with the post-1945 tradition of American liberal internationalism. The neo-conservatives of the Bush administration, based in the civilian leadership of the Pentagon, envisioned a "unipolar world" in which the United States, with "coalitions of the willing," would reserve the right to wage "preventive war" and to "end regimes" that were potential and not imminent threats. Influenced by this radical vision, George W. Bush embarked on a spree of treaty cancellation, went to war in Iraq without UN authorization over the objections of every other great power except Britain, thus crippling NATO by pitting its new Eastern European members against American allies like Germany and France.

In the aftermath of the al-Qaeda attacks on the United States on 9/11, the Bush administration was right to go to war in Afghanistan to topple the Taliban regime, which had permitted Osama bin Laden to use Afghan territory as headquarters for his terrorist army. Unfortunately, however, the United States sought to minimize the role of NATO members in the Afghan war, while expecting its NATO allies to undertake much of the difficult work of peace-keeping and reconstruction in its aftermath.

Following the Afghan war, the Bush administration used the struggle against Osama bin Laden's terrorists as an excuse for two policies that had nothing to do with al-Qaeda: a massive expansion of America's conventional military and the invasion of Iraq, both of which had been planned by neo-conservative policy experts in opposition during the Clinton years. In addition to encouraging the notion that Saddam Hussein somehow was linked to al-Qaeda's attacks on the World Trade Center and the Pentagon, the Bush administration justified the war in Iraq on the grounds that Saddam Hussein was on the verge of obtaining weapons of mass destruction which were likely to fall into the hands of al-Qaeda or other anti-American terrorist groups. But Saddam's secular Baathist regime was not allied with al-Qaeda's Muslim extremists, and apparently Saddam had no weapons of mass destruction -- as the UN weapons inspectors would have soon discovered had their work not been abruptly aborted by the American invasion.

The result of the second Bush administration's policies was a catastrophic diversion of American resources. The two wars in Afghanistan and Iraq stretched the American military to the limits of its manpower and required the expenditure of hundreds of billions of dollars which might have gone to other purposes -- including other military expenditures more closely tied to America's actual national security needs. Two of Bush's core constituencies -- Protestant fundamentalist "Christian Zionists" in the Bible Belt South and the minority of Jewish-Americans who supported the right-wing Likud government in Israel -- applauded the deepening involvement of the United States in the Holy Land. The truth was, however, that the only genuine strategic interests the United States had in the region were shared with Europe and Russia. An American-European-Russian condominium over the weak and turbulent Middle East made sense in terms of American national interest. An Israel-American condominium, disguised by the addition of small numbers of British, Spanish, Italian, and Polish troops, did not.

The guerrilla war against the American occupiers of Iraq soured the American public on foreign military intervention and tended to discredit the neo-conservatives. It also raised the question of the utility of a regular army designed to wage World War II-style campaigns, in an era in which asymmetric warfare was becoming the norm. In East Asia, the neo-conservatives at first treated China as the next Soviet Union, a superpower that could provide a rationale for massive increases in U.S. defense spending. However, China refused to play its assigned role of villain and sought economic prosperity by inviting multinationals from the United States and other First World countries to take advantage of its huge pool of inexpensive labor. The world's largest surviving communist country was a greater economic threat to the workers of the world than it was a military threat to the capitalists.

In the area of the world economy, American strategy following the end of the Cold War was equally misguided. The 1990s were the years, not only of the stock-market bubble, but also of a "bubble" in economic theory. Anachronistic nineteenth-century notions of a magically self-regulating global market, that had been buried during the Great Depression and the post-1945 Golden Age of managed, regulated welfare capitalism, were revived in the 1970s by conservatives and attained intellectual hegemony in policymaking circles by the 1990s. The "Washington Consensus" held that global free trade would not only benefit all industrialized nations but would lead to the development of poor countries as well. The Clinton administration supported regional free-trade agreements like NAFTA and presided over the formation of the World Trade Organization (WTO).

In practice, the neo-liberal Washington Consensus did not promote actual global free trade -- that would have required an open-borders policy toward immigrant labor. Instead, the United States pushed for the global liberalization of investment rules, while leaving intact the existence of multiple states with more or less immobile populations with different levels of wages and benefits and rights. The predictable consequence of this combination of mobile capital with immobile labor was a global "race to the bottom" as multinationals transferred first production and then services to low-wage economies. Freedom of investment also meant freedom of dis-investment -- as Asian countries discovered, when panic among Western investors led to a pull-out of "hot capital" and to the worst economic crisis in the region since the Great Depression.

The Asian economic crisis was followed by new crises, as low-wage countries that had earlier profited from the expatriation of manufacturing, like Mexico, lost jobs to other low-wage countries like China. The expatriation of industry, in some form, was inevitable, and often desirable. But in the world of the alternate history that began this essay, the globalization of production took place on a negotiated basis, as a united Euro-American liberal world worked out agreements with low-wage nations in the global South. In the real world expatriation took place in an environment more like that of the California Gold Rush -- to the detriment of the industrial and industrializing nations alike.

The contrast between policies promoted by the Washington Consensus and those the United States could have pursued if it had been true to its internationalist traditions could not have been more extreme. In the history of what might have been, American policymakers after 1989 revived the view of mid-century Americans like Franklin Roosevelt and British thinkers like John Maynard Keynes. Roosevelt, Keynes, and the other architects of the post-1945 Bretton Woods financial order believed that capitalism must be made safe for democracy. Currency fluctuations and depressions, by wrecking stable middle classes, fed the kind of political extremism that led to the rise of ideologies like fascism and communism. The mid-century reformers of the world economy, having regulated national economies by policies such as America's New Deal, believed that the regulation of the global market was necessary both to preserve the middle class in industrial nations and to promote a middle class where it historically had not existed, in agrarian, former colonial countries.

By contrast, the actual policies promoted by the United States during the heyday of the Washington Consensus following the Cold War promoted the interest of small elites in both the North and the South, often at the expense of working-class and middle-class citizens in both. Some countries with strong and enlightened governments, like Singapore, were able to use their status as low-wage producers to move up the economic food chain. More often, the foreign investment that flowed into encapsulated export-processing zones in low-wage countries did not necessarily "trickle down" to the primitive economy around it; all too often, the money, monopolized by local partners of multinationals, went to secret offshore accounts.

Ordinary Americans sometimes did benefit from cheap consumer goods made in low-wage countries like China and Mexico. At the same time, however, the expatriation of manufacturing forced many well-paid, unionized manufacturing workers into the poorly-paid, non-unionized service sector. Only a small minority of Americans accounted for most stock ownership, and they reaped the lion's share of the gains from the global economic strategies of the multinational companies they co-owned. Even the rich suffered from the instability of a global trading and financial system in which a devaluation here or a political change there could lead to a rush of capital from one low-wage economy to another, leaving shuttered factories, empty government treasuries, and impoverished populations behind.

The failure of American foreign policy in the past decade and a half has been, at its core, a failure of ideas. The administrations of George Herbert Walker Bush and Bill Clinton lacked the imagination to envision a new international order other than an incremental extension of the Pax Americana system of the Cold War and a return to laissez-faire economics. George W. Bush suffered from no lack of vision -- but his vision, of unilateral American world domination, based on brute force and contempt for international law and diplomacy, was profoundly misconceived.

The new American internationalism that I have outlined would have been easier to promote in the decade following the end of the Cold War than in the changed circumstances of the second half of the first decade of the twenty-first century. The U.S. government is constrained today by escalating budget and trade deficits. The damage to America's prestige in the world and to American alliances that has been done by the belligerent unilateralism of the second Bush administration will take years to repair.

But it is never too late to start doing the right thing. Whether under a Democratic president or a second Bush administration, the United States should repudiate both incrementalism and unilateralism. Belatedly, the United States should accept the challenge of collaborating with the other nations of the world to create a genuine international order that is not merely American hegemony in disguise. Inevitably, the American share of global power and wealth will decline. When it does, it will be in America's interest to have a peaceful and liberal global order in whose preservation and perpetuation every major power, not merely the United States, has a stake.

In the realm of security, the goal of the United States should be to phase out America's Cold War alliances and to replace them with a system of regional and global concerts, in which former Cold War rivals like Russia and China play the role of partners in the peaceful resolution of international crises. The management of a multilateral world will require a style of American diplomacy different in kind than that exercised by Washington either during or after the Cold War. The institutions of U.S. foreign policy-making may need to be reformed, to provide for long-term continuity and to insulate the executive branch to a greater degree from the disruptive influence of domestic special interests and ethnic lobbies.

In the realm of political economy, the supply-side approach to global development associated with the moribund neoliberal Washington Consensus needs to be replaced by a new development strategy based on demand-led growth in the global South, fuelled by the invested savings of the aging populations of the global North. Sustainable global growth may require a "new Bretton Woods," a new multilateral financial architecture that provides long-term stability in exchange rates.

Americans in the bipartisan internationalist tradition of Roosevelt and Willkie and of Truman and Eisenhower can only remain true to their tradition by having the courage to innovate. Twice in the past, after World War I and after World War II, new great-power conflicts prevented American plans for a liberal world from being implemented, except in a partial form and on a small scale. The end of the Cold War, by contrast, brought a period of great-power peace that would have made such a project more feasible. Tragically, when this unprecedented opportunity arose after 1989 America's leaders, for lack of a strategy, were unable to take advantage of it. It is not too late for the United States to promote a new internationalism. But as time passes, America's leverage will dwindle -- and with it may diminish the chance for the United States to help create a global system favorable to American interests and values alike.