In late January, after weeks of waiting for a sign that the Bush administration would lead a coordinated effort to try to prevent the dollar's recent slide from turning into a full-fledged crash, the world finally seemed to get the message. “There's nobody home on economic policy in America right now,” a frustrated Morgan Stanley chief global economist Stephen Roach told an audience at the annual Davos, Switzerland, schmoozefest, where the fast-sinking dollar dominated the discussion. On any number of critical global economic issues, from Argentina's financial meltdown to deadlocked world-trade talks to the staggering dollar, George W. Bush has effectively hung a “gone fishing” sign on the White House door.

This inattention -- an abdication of the global economic stewardship the country has held with vigor and aplomb since the end of the Second World War -- has been variously attributed to the war on terrorism, Bush's fidelity to free-market principles, his disdain for multilateralism, or some combination thereof. But the inattention predates September 11, and given that Bush has been one of the most protectionist presidents of the postwar period, the free-market explanation rings equally untrue. And while Bush's unilateralist instincts have surely played a part in Washington's retreat from the global bazaar, there's likely a broader -- and more overlooked -- ideology on which he is basing his economic policies: neoconservatism.

To the neocons, globalization has always been a dangerous illusion, military might the only currency that ultimately matters. The president evidently follows this line of thinking: No president who takes geoeconomics seriously would ever have appointed Treasury secretaries as inept as Paul O'Neill and John Snow. These appointments hint at the real problem: Bush, with his constricted worldview and benighted conception of American power, just doesn't attach much importance to U.S. economic leadership.

The results of Bush's loyalty to this vision are potentially calamitous. The administration's indifference to global economics has created a void that is quietly being filled by both the European Union and, more ominously, China. If the dollar were to crash, it could lead to a deep recession in the United States and abroad. Indeed, by disavowing the link between economic integration and geopolitical stability and by woefully undervaluing the link between U.S. global economic leadership and U.S. national security, Bush and the neocons, in their quest to turn what they extol as America's unipolar moment into a unipolar era, are in the process of bringing the moment to a premature close.

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The relationship between Bush and the neocons has been consistently misunderstood and misrepresented. It has been widely portrayed as either the product of a dastardly plot (right-wing Jews hoodwink dimwitted president into invading Iraq in order to make the Middle East safer for Israel) or an accident of history (terrorists strike, and the neocons, once reviled by Bush, suddenly find themselves and their ideas welcomed in the Oval Office). In fact, neither is true. Paul Wolfowitz and Richard Perle had Bush's ear even before he became president, and Bush sounded a number of neoconservative themes as a candidate in 2000. As Ivo H. Daalder and James M. Lindsay observe in their book, America Unbound: The Bush Revolution in Foreign Policy, Bush campaigned as a hegemonist -- as someone who believes that the world is a jungle and that “America's immense power and the willingness to wield it, even over the objections of others, is the key to securing America's interests in the world.”

And this is precisely how the neocons view the world. Contrary to the oft-repeated claim that they are foreign-policy idealists (a misconception they are happy to perpetuate these days), they are, in fact, hegemonists -- foreign-policy realists of the most hard-bitten and pessimistic sort. To hegemonists, the world is in a Hobbesian state, power resides mainly in the belly of a B-52, and the only reliable way to keep the barbarians at the gate is to step outside the gate and kill them. They believe the United States should act abroad only to serve its own interests, but because danger lurks around every corner and America's interests are far-flung, self-preservation requires a relentless determination to thwart potential challengers around the globe, something they believe is best undertaken alone, unencumbered by either international institutions or formal coalitions.

The neocon urtext on the subject is an essay The Weekly Standard's William Kristol and Robert Kagan wrote for Foreign Affairs in 1996 titled “Toward a Neo-Reaganite Foreign Policy,” in which they urged Republicans to make “benevolent hegemony” the cornerstone of the GOP's international agenda. By benevolent hegemony they meant a policy of deposing rogue regimes, fomenting democratic revolutions, and otherwise using America's status as the lone superpower to reconfigure geopolitics and cement U.S. global dominance.

More noteworthy than what Kristol and Kagan said, however, was what they didn't say: Not once in their essay did they use the word “globalization,” and they devoted just three sentences to America's economic preeminence before moving on to what they considered the real issues. Given the year in which the article was published, these were peculiar omissions: The United States was in the midst of an unprecedented economic boom, and globalization was the word on almost everyone's lips. The Cold War was over, and Francis Fukuyama, now of Johns Hopkins' School of Advanced International Studies, had famously declared history to be at an end and democratic capitalism to be triumphant. Self-interested nation-states were channeling their ambitions and aggressions into economic competition, economic interconnectedness was rendering war obsolete, and it was generally believed that freedom was best served by the free market. “Peace through strength” was being replaced by “peace through prosperity.”

The neocons didn't buy it. To them, this was all delusion, and Bill Clinton's treatment of economic power as the new geopolitical coin was leaving the United States dangerously exposed. They pointed out that in the late 19th century, the world had been similarly gripped by globaphoria and a belief that international trade would inexorably lead to world peace. “As World War I showed,” Kagan gravely intoned in The New Republic in 1997, “the allegedly unbreakable bonds of economic interest snapped in an instant when the armies of powerful nations moved.” He and his fellow neocons were convinced that the new globaphoria would also end in tears.

Their response was a sort of smug silence, a confidence that globalization was a trend that would soon pass. In a symposium on American foreign policy published in Commentary in 2000 and featuring a roster of neocon luminaries -- Kagan, Charles Krauthammer, Norman Podhoretz, Jeane Kirkpatrick, Michael Ledeen -- only Fukuyama addressed the issue of globalization at any length. In Present Dangers: Crisis and Opportunity in American Foreign and Defense Policy, a 400-page book co-edited by Kagan and Kristol and published that same year, the word “globalization” garnered a half-dozen entries while economic issues were virtually ignored.

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True to his neocon convictions, Bush during his first term relegated economics to an afterthought (save for the tax cuts) and globalization to a nonphenomenon. While surrounding himself with foreign-policy heavyweights -- Wolfowitz, Dick Cheney, Colin Powell, Donald Rumsfeld, Condoleezza Rice -- he hired the hapless O'Neill, later replaced him with the barely sentient Snow, and effectively neutered the Treasury Department and the White House economics staff. An attitude reflected in personnel decisions was also reflected in policy prescriptions. In 2002 the administration had published The National Security Strategy of the United States; in a 35-page document offering a meticulously detailed explication of Bush's worldview (it was here that the policy of preemptive war was enshrined), the word “globalization” didn't appear once.

The administration had signaled its disengagement from the international economic arena almost from its first day in office. Through all of 2001, Argentina's economy teetered on the brink of collapse, and with the government set to default on $132 billion in external debts, there was obvious concern about a possible global financial meltdown. Faced with a similar risk when the Mexican peso collapsed in 1994 and Russia devalued the ruble and defaulted on its loans in 1998, the Clinton administration had sprung into action to limit the damage to the world economy. The Bush administration, by contrast, was indifferent to the Argentine crisis, indifferent to the possible repercussions, and not ashamed to advertise its indifference. “They have been off and on in trouble for 70 years or more,” O'Neill told The Economist in July 2001. “Nobody forced them to be what they are.”

At the time, it was generally assumed that the administration's inaction was motivated by a combination of ideology and antipathy -- by its opposition to rescuing Argentina and its creditors from the consequences of their own follies, and by a determination to do the opposite of whatever Clinton had done. Four years on, however, it is hard not to conclude that Bush shrugged for another reason: He didn't consider such leadership vital to the national interest. That's a conclusion that can reasonably be drawn because Bush has now shrugged in the face of another potential economic crisis that hits a little closer to home: the falling U.S. dollar.

Over the last three years, the dollar has declined by around 35 percent against the euro and 25 percent against the yen, driven by low U.S. household savings, the ballooning U.S. trade and budget deficits, and mounting concern that foreign investors are growing wary of financing America's profligacy. At this point, the dollar's main prop is the continued willingness of Asian central banks, principally Japan's, to buy billions worth of U.S. Treasuries (more than $200 billion last year) in order to keep their own currencies artificially low and their exports robust. (Pause to savor the irony: An administration determined never to surrender an inch of American sovereignty has now, through its fiscal recklessness, created a situation in which several Asian central banks control the fate of the dollar and, to a large extent, the U.S. economy.)

The fear is that at some point, one or more of the banks will start paring back its Treasury purchases, other foreign investors will get spooked, and there will be a stampede out of the dollar. Former Federal Reserve Chairman Paul Volcker recently rated the chances of a dollar crisis sometime in the next five years at 75 percent. Were this to happen, the consequences could be cataclysmic: U.S. interest rates would spike sharply, stocks would tank, housing prices would fall, and a deep global recession would almost surely follow. As Harvard economist Ken Rogoff, a former International Monetary Fund chief economist who believes the dollar is poised for another 20-percent to 40-percent drop, recently said, “The world is set to jump off the top of a waterfall without knowing how deep the water is below.”

It is for this reason that the international financial community has been calling for a coordinated effort to manage, if necessary, the pace of the dollar's decline in order to avoid what French Finance Minister Herve Gaymard called “a global economic catastrophe.” But the Bush administration has refused to even consider the idea, insisting that it believes in “open, competitive currency markets,” as Treasury Secretary Snow put it during a visit to London in November. (That Snow has kept his job may itself be a source of downward pressure on the dollar: As one London-based analyst told The Guardian, “I would sell the currency of any country of which he was the finance minister.”)

The truth, of course, is that the administration welcomes the dollar's fall: A weaker dollar would make U.S. exports more competitive and, in theory anyway, help reduce the trade deficit. But it is one thing to want the dollar to depreciate; it is quite another to court financial and economic disaster by refusing to take precautionary measures that might prevent a run on your currency. This is one lesson from the Reagan era that the Bush White House appears to have forgotten or ignored. In 1985, the central banks of the G5 (Italy, France, Great Britain, Spain, Germany), acting chiefly at the behest of the Reagan administration, intervened in the currency markets to stem the dollar's steep rise, and two years later they joined forces again to put a floor under the dollar after it had dropped by some 30 percent. But Ronald Reagan clearly had a different conception of American leadership than George W. Bush.

This time around, we face the prospect of a crashing dollar and a resulting global recession. What's more, a dollar crash would very likely end the greenback's 60-year status as the world's sole reserve currency. True, the dollar has been slowly losing ground for two decades, but its decline has rapidly accelerated during the Bush years, and, of course, the dollar now faces a formidable challenger in the euro. As historian Niall Furguson has pointed out, when the British pound began to lose its status as the world's preferred currency between the two World Wars, the change hastened the unwinding of the British Empire.

The lesson appears lost on the Bush administration, which evidently sees no inherent tension between its ambitious foreign policy and the record deficits it has run up. And it is a lesson that also appears lost on the neocons. America's finances, The Economist recently observed, “now look more like those of a banana republic than an economic superpower.” And yet neither Kristol nor Kagan nor any other prominent neocon has voiced alarm over the spiraling current account and budget deficits. Indeed, as they lay the groundwork for possible future action against Syria and Iran, they are indifferent to the issues of long-term solvency, ignoring the historical truth that it is difficult to sustain an empire that is broke.

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The only area in which the administration can reasonably claim to have shown any sustained interest is trade policy, and even here it has squandered American authority and influence. The imposition of steel tariffs during Bush's first term, coupled with the 80-percent increase in farm subsidies, completely undermined U.S. credibility on trade issues. Moreover, under Bush, the United States has ceased to be the driving force behind efforts to liberalize world trade; instead, the administration has put most of its energy into pursuing bilateral trade agreements that are primarily intended as sops to various domestic constituencies.

In short, Washington has taken its hand off the wheel of the global economy, and as a result, America's aura of indispensability is eroding. “There is a palpable concern in foreign-policy circles that the U.S. position in the global economy is at a low point, and it is a tragedy,” says Morgan Stanley's Stephen Roach. On a visit to India in December, a congressional delegation comprising mainly Republican congressional staffers was surprised to hear from a number of business and government officials that India is increasingly focusing on its budding economic rivalry with China and is less inclined to pay attention to Washington these days.

By its very nature, globalization tends to disperse power; it spreads wealth, and with wealth comes power. But there can be no doubt that America's global preeminence is now being challenged in a way that wouldn't have been possible but for Bush's myopic foreign policy. The idea that Europe might vie for global influence with the United States was once laughable. Not anymore: The EU has been using its much-disparaged “soft power” -- namely, trade links and economic aid -- to stitch together alliances throughout Asia, Latin America, and the Middle East.

But, of all the unintended consequences of Bush's foreign policy, it is the growing stature and assertiveness of China that is surely the most ironic and troubling. Through the 1990s, the rise of China was a neocon obsession. They were convinced that Beijing was intent on challenging American hegemony, that confrontation was inevitable, and that the Clinton administration, which had made trade the centerpiece of its China policy, was, to borrow Lenin's dictum, selling the rope by which the United States would eventually be hanged. In numerous screeds in The Weekly Standard and other publications, Kristol and Kagan all but accused the Clinton White House and the U.S. business community of treason, and they argued that containment, not engagement, was the necessary response to China's growing economic and military prowess.

Four years into the Bush presidency, what the neocons most dreaded -- an emboldened China undercutting American influence around the world -- is coming to pass, and it is being helped along considerably by Bush's neoconservative foreign policy. “The Chinese didn't imagine they would be in this position,” says Fukuyama. “I think they are quite surprised at the way we've abdicated the field to them.”

China has enjoyed its greatest gains in East Asia, where it has long sought to eclipse the United States as the dominant player and where the United States has largely gone awol since 9-11. In addition to signing a raft of bilateral trade agreements, Beijing is now in the process of creating, in conjunction with the Association of Southeast Asian Nations, what will be the world's largest free-trade zone when it takes effect in 2010. At the same time, China has been cultivating a wider web of influence, particularly in Latin America, where the Bush policy has been one of abject neglect. On a visit last November to Argentina, Chile, and Brazil (now China's second-largest trading partner), Chinese President Hu Jintao announced $30 billion in new investment earmarked for Latin America, and Chinese corporate leaders accompanying him signed some 400 deals.

In Present Dangers, Kristol and Kagan dismissed the 1990s as a “squandered decade,” a view echoed by Bush in his recent inaugural address in which he cuttingly referred to the '90s as “years of repose, years of sabbatical.” But those were only years of repose and sabbatical if you believe that globalization is a myth and that America's position in the world is purely a function of its military prowess. Clinton had no doubt about globalization's authenticity. He also had a more complex and subtle view of American power and a different conception of what was required to bolster America's position in the post–Cold War world, and it turns out he was right. Was the United States in a stronger position four years ago to influence events around the world than it is now? It is a question that hardly needs to be asked.

The Clintonites never claimed that geoeconomics had displaced geopolitics. But they recognized that with the collapse of the Soviet Union and the advent of globalization, America's economic strength could be a critical tool in keeping the peace while extending U.S. dominance. As Robert Wright wrote in January in The New York Times, Bill Clinton saw “the tight link between economic and political liberty in the information age, the essentially redeeming effect of globalization.” Because George W. Bush and the neocons see nothing redeeming about globalization and believe military might is all that ultimately matters, this link has been lost on them, and America's unipolar moment is being lost as a result.

Michael Steinberger is a Prospect senior correspondent.