The world is neither unipolar, multipolar, nor chaotic—it is all three at the same time. Thus, a smart grand strategy must be able to handle very different distributions of power in different domains and understand the trade-offs among them. The concept of “smart power ” is essentially the intelligent integration and networking of diplomacy, defense, development, and other tools of so-called “hard and soft” power.

“The concept of ‘smart power’—the intelligent integration and networking of diplomacy, defense, development, and other tools of so-called ‘hard and soft’ power—is at the very heart of President Obama and Secretary Clinton’s policy vision.”Footnote 1 Because the term has been adopted by the Obama administration, some analysts think it refers only to the United States, and critics complain that it is merely a slogan like “tough love” that sugarcoats nasty stuff. But, even though the term “smart power” lends itself to slogans (no one wants to be “dumb,” though counterproductive strategies fit that description), smart power can also be used for analysis and is by no means limited to the United States.

Small states are often adept at smart power strategies. Singapore has invested enough in its military resources to make itself appear indigestible in the eyes of neighbors it wishes to deter, but it has combined this approach with active sponsorship of diplomatic activities in the Association of Southeast Asian Nations, as well as efforts to have its universities serve as the hubs of networks of nongovernmental activities in the region. Switzerland long used the combination of mandatory military service and mountainous geography as resources for deterrence, while making itself attractive to others through banking, commercial, and cultural networks. Qatar, a small peninsula off the coast of Saudi Arabia, allowed its territory to be used as the headquarters for the American military in the invasion of Iraq, while at the same time sponsoring Al Jazeera, the most popular television station in the region, which was highly critical of American actions. Norway joined NATO for defense but developed forward-leaning policies on overseas development assistance and peace mediation to increase its soft power above what would otherwise be the case.

Historically, rising states have used smart power strategies to good avail. In the nineteenth century, Otto von Bismarck’s Prussia employed an aggressive military strategy to defeat Denmark, Austria, and France in three wars that led to the unification of Germany, but once Bismarck had accomplished that goal by 1870, he adapted German diplomacy to create alliances with neighbors and make Berlin the hub of European diplomacy and conflict resolution. One of the Kaiser’s great mistakes two decades later was to fire Bismarck, fail to renew his “reinsurance treaty” diplomacy with Russia, and challenge Britain for naval supremacy on the high seas. After the Meiji Restoration, Japan built the military strength that enabled it to defeat Russia in 1905, but it also followed a conciliatory diplomatic policy toward Britain and the United States and spent considerable resources to make itself attractive overseas.Footnote 2 After the failure of its Greater East Asia Co-Prosperity imperial scheme of the 1930s (which had a soft power component of anti-European propaganda) and defeat in World War II, Japan turned to a strategy that minimized military power and relied on an American alliance. Its single-minded focus on economic growth was successful on that dimension, but it developed only modest military and soft power.

China under Mao built its military strength (including nuclear weapons) and used the soft power of Maoist revolutionary doctrine and Third World solidarity to cultivate allies abroad, but after the exhaustion of the Maoist strategy in the 1970s, Chinese leaders turned to market mechanisms to foster economic development. Deng warned his compatriots to eschew external adventures that might jeopardize this internal development. In 2007, President Hu proclaimed the importance of investing in China’s soft power. From the point of view of a country that was making enormous strides in economic and military power, this was a smart strategy. By accompanying the rise of its hard power with efforts to make itself more attractive, China aimed to reduce the fear and tendencies to balance Chinese power that might otherwise grow among its neighbors.

In 2009, China was justly proud of its success in managing to emerge from the world recession with a high rate of economic growth. Many Chinese concluded that this represented a shift in the world balance of power and that the United States was in decline. One dated the year 2000 as the peak of American power. “People are now looking down on the West, from leadership circles, to academia, to everyday folks,” said Professor Kang Xiaoguong of Renmin University.Footnote 3 But, such narratives can lead to conflict. Overconfidence in power assessment (combined with insecurity in domestic affairs) led to more assertive Chinese foreign policy behavior in the latter part of 2009. Some observers wondered if China was beginning to deviate from the smart strategy of a rising power and violating the wisdom of Deng, who advised that China should proceed cautiously and “skillfully keep a low profile.”Footnote 4

Dominant states also have incentives to combine hard and soft power resources. Empires are easier to rule when they rest on the soft power of attraction as well as the hard power of coercion. Rome allowed conquered elites to aspire to Roman citizenship, and France coopted African leaders such as Leopold Senghor into French political and cultural life. Victorian Britain used expositions and culture to attract elites from the empire, and as we saw earlier, it was able to rule a vast empire in large part with locals and very few British troops. Of course, this became progressively more difficult as rising nationalism changed the context and eroded the soft power of the British Empire. The development of the British Commonwealth of Nations was an effort to maintain a residual of that soft power in the new postcolonial context.

A state’s “grand strategy” is its leaders’ theory and story about how to provide for its security, welfare, and identity (“life, liberty, and the pursuit of happiness” in Jefferson’s terms), and that strategy has to be adjusted for changes in context. Too rigid an approach to strategy can be counterproductive. Strategy is not some mystical possession at the top of government. It can be applied at all levels.Footnote 5 A country must have a general game plan, but it also must remain flexible in the face of events. In the words of one historian, a sound grand strategy is “an equation of ends and means so sturdy that it triumphs despite serial setbacks at the level of strategy, operations, and campaigns.”Footnote 6 Some American analysts of the post-Cold War world look for narratives that can be reduced to bumper stickers, such as “containment” served in the past. They forget that the same slogan covered policies that sometimes conflicted with each other.Footnote 7 For some, containment justified the Vietnam War ; for George Kennan, author of the strategy, it did not. More important than simple formulas or clever slogans is the contextual intelligence that leads to accurate assessment of trends in power and thinking ahead about smart policy responses.Footnote 8

As we have seen, academics, pundits, and presidents have often been mistaken in their assessment of America’s position in the world. For example, two decades ago the conventional wisdom was that the United States was in decline, suffering from imperial overstretch. A decade later, with the end of the Cold War, the new conventional wisdom was that the world was a unipolar American hegemony. Some observers concluded that the United States was so powerful that it could decide what it thought was right and others would have no choice but to follow. Charles Krauthammer celebrated this view as “the new unilateralism,” and this narrative of dominance heavily influenced the Bush administration even before the shock of the attacks on September 11, 2001, produced a new “Bush Doctrine” of preventive war and coercive democratization.Footnote 9 But, the new unilateralism was based on a profound misunderstanding of the nature of power in world politics and the context under which the possession of preponderant resources will produce preferred outcomes.

What are the main features of the current world environment, and how are they changing?Footnote 10 I have likened the context of politics today to a three-dimensional chess game in which interstate military power is highly concentrated in the United States; interstate economic power is distributed in a multipolar manner among the United States, the EU, Japan, and the BRICs, and power over transnational issues such as climate change, crime, terror, and pandemics is highly diffused. Assessing the distribution of resources among actors varies with each domain. The world is neither unipolar, multipolar, nor chaotic—it is all three at the same time. Thus, a smart grand strategy must be able to handle very different distributions of power in different domains and understand the trade-offs among them. It makes no more sense to see the world through a purely realist lens that focuses only on the top chessboard or a liberal institutional lens that looks primarily at the other boards. Contextual intelligence today requires a new synthesis of “liberal realism” that looks at all three boards at the same time. After all, in a three-level game, a player who focuses on only one board is bound to lose in the long run.

That will require an understanding of how to exercise power with as well as power over other states. On issues arising on the top board of interstate military relations, an understanding of ways to form alliances and balance power will remain crucial. But, the best order of military battle will do little good in solving many of the problems on the bottom chessboard of non-state actors and transnational threats, such as pandemics or climate change, even though these issues can present threats to the security of millions of people on the order of magnitude of military threats that traditionally drive national strategies. Such issues will require cooperation, institutions, and pursuit of public goods from which all can benefit and none can be excluded.

Theorists of hegemony have looked at issues of transition and the prospects of conflict, but they have also examined the beneficial effects of hegemony on the provision of public goods. This led to a theory of hegemonic stability. Public goods from which all can benefit are underproduced because the incentives to invest in their production are reduced by the inability to prevent others from enjoying the benefits without paying for their production. If everyone has an incentive to “free-ride,” no one has an incentive to invest. The exception may be situations where one state is so much larger than the others that it will notice the benefits of its investment in public goods even if smaller states free-ride. In this “case for Goliath,”Footnote 11 hegemonic states are necessary for global governance and must take the lead in production of global public goods because smaller states lack the incentives or capacity to do so.

When the largest states do not step up to the task, the results can be disastrous for the international system. For example, when the United States replaced Britain as the world’s leading financial and trading state after World War I, it did not live up to these obligations, and that failure contributed to the onset and severity of the Great Depression. Some analysts worry about a repeat of that experience.Footnote 12 As China approaches the United States in its share of the distribution of economic resources, will it assume the role of responsible stakeholder (to use the phrase developed by the Bush administration), or will it continue to free-ride as the United States did in the interwar period?

Fortunately, hegemonic preponderance is not the only way to produce global public goods. Robert Keohane argues that it is possible to design international institutions to solve problems of coordination and free riding in the period “after hegemony.”Footnote 13 Moreover, as other theorists have pointed out, hegemonic stability theory is an oversimplification because pure public goods are rare, and large governments can often exclude some countries from some of the benefits they provide.Footnote 14 Some broad goods, such as security or trade agreements, can be turned into “club goods” that benefit many but from which some can be excluded.

Global government is unlikely in the twenty-first century, but degrees of global governance already exist. The world has hundreds of treaties, institutions, and regimes for governing areas of interstate behavior ranging from telecommunications, civil aviation, ocean dumping, trade, and even the proliferation of nuclear weapons. But, such institutions are rarely self-sufficient. They still benefit from the leadership of great powers. And it remains to be seen whether the largest countries in the twenty-first century will live up to this role. As the power of China and India increases, how will their behavior in this dimension change? Some, such as liberal scholar John Ikenberry, argue that the current set of global institutions are sufficiently open and adaptable that China will find it in its own interests to be coopted into them.Footnote 15 Others believe that China will wish to impose its own mark and create its own international institutional system as its power increases. Ironically, for those who foresee a tripolar world at mid-century composed of the United States, China, and India, all three of these large powers are among the most protective of their sovereignty and the most reluctant to accept a post-Westphalian world.

Even if the EU retains a leading role in world politics and pushes for more institutional innovation, it is unlikely that, barring a disaster such as World War II, the world will see “a constitutional moment” such as it experienced with the creation of the UN system of institutions after 1945. Today, as a universal institution the United Nations plays a crucial role in legitimization, crisis diplomacy, peacekeeping, and humanitarian missions, but its very size has proven to be a disadvantage for many other functions. For example, as the 2009 UN Framework Conference on Climate Change (UNFCCC) at Copenhagen demonstrated, meetings of nearly two hundred states are often unwieldy and subject to bloc politics and tactical moves by players that are largely extraneous because they otherwise lack resources to solve functional problems.

One of the dilemmas of multilateral diplomacy is how to get everyone into the act and still get action. The answer is likely to lie in what Europeans have dubbed “variable geometry.” There will be many multilateralisms that will vary with the distribution of power resources in different issues. For instance, on monetary affairs the Bretton Woods conference created the International Monetary Fund in 1944, and it has since expanded to include 186 nations, but the preeminence of the dollar was the crucial feature of monetary cooperation until the 1970s. After the weakening of the dollar and President Nixon’s ending of its convertibility into gold, France convened a small group of five countries in 1975 to meet in the library of the Chateau of Rambouillet to discuss monetary affairs.Footnote 16 It soon grew to the Group of Seven and later broadened in scope and membership to the Group of Eight (which included Russia and a vast bureaucratic and press attendance). Subsequently, the Group of Eight began the practice of inviting five guests from the BRICs and other countries. In the financial crisis of 2008, this framework evolved into a new Group of 20, with a more inclusive membership.

At the same time, the Group of Seven continued to meet at the ministerial level on a narrower monetary agenda; new institutions such as the Financial Stability Board were created, and bilateral discussions between the United States and China continued to play an important role. As one experienced diplomat puts it, “If you’re trying to negotiate an exchange rate deal with 20 countries or a bailout of Mexico, as in the early Clinton days, with 20 countries, that’s not easy. If you get above 10, it just makes it too darn hard to get things done.”Footnote 17 After all, with 3 players, there are 3 pairs of relationships; with 10 players, there are 45; with 100 players, there are nearly 5000. Or to take issues of climate change, the UNFCCC will continue to play a role, but more intensive negotiations are likely to occur in smaller forums where fewer than a dozen countries account for 80% of greenhouse gas emissions.Footnote 18

Much of the work of global governance will rely on formal and informal networks. Network organizations (such as the G-20) are used for agenda setting and consensus-building, policy coordination, knowledge exchange, and norm-setting.Footnote 19 Centrality in networks can be a source of power, but “the power that flows from this type of connectivity is not the power to impose outcomes. Networks are not directed and controlled as much as they are managed and orchestrated. Multiple players are integrated into a whole that is greater than the sum of its parts”Footnote 20—in other words, the network provides power to achieve preferred outcomes with other players rather than over them. We saw that power in networks can come from both strong ties and weak ties. Strong ties, such as alliances, “multiply a nation’s power through everything from basing rights, intelligence sharing, weapons system collaborations and purchases, and shared military deployments to support in multilateral institutions, mutual trade benefits and mutual security guarantees.” And weak ties, such as global multilateral institutions, “for all of their manifest deficiencies … still matter, and a nation cannot be a great power without at least having a significant voice as the UN, the IMF, and the World Bank.”Footnote 21 In this dimension, predictions of an Asian century remain premature; the United States will remain more central in a dense global web of governance than other countries.