Examining the Dimensions of the Decline of the Liberal World Order

The liberal international order is an ideological system for global governance based on a set of core liberal values. These values include free and open trade, liberal democratic governance, global human rights, collective security, and the rule of law. This order has so far been sustained by a network of international institutions such as the United Nations (UN), the International Monetary Fund (IMF), the World Bank, and the General Agreement on Tariffs and Trade (GATT), which later became the World Trade Organization (WTO). Its architects envisioned a “rule-based” and “fully open” system that would strengthen international cooperation and prevent the catastrophic conflicts of the twentieth century that twice devastated the world.^{2 and 3}

The historical roots of the liberal order date back to the 1940s, and many scholars consider the end of World War II in 1945 as its starting point. Earlier agreements, such as the Atlantic Charter of 1941, are also regarded as foundational documents of this order. The historic Bretton Woods Agreement of 1944 was a key moment for this system, as it established a monetary management framework centered on the U.S. dollar, which was convertible into gold for foreign governments. This framework, which also created the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD—the predecessor of the World Bank), aimed to prevent the competitive devaluations and trade instabilities of the 1930s, which were seen as major contributors to the Great Depression. The United States, with the support of other liberal governments, played a leading and vital role in establishing these institutions.⁵

The end of the Cold War in 1991 marked a significant transformation in the international system. With the collapse of the Soviet Union, the United States emerged as the world’s sole superpower, leading to a unipolar moment in which a global order based on liberal institutions and values took shape. This period became characterized by the expansion of liberal democracy and economic openness—a trend widely celebrated in academic and policy circles. Francis Fukuyama’s work *“The End of History and the Last Man”* is a classic example of promoting this triumphant vision. However, not all scholars agree with this timeline. For instance, John Mearsheimer offers a different perspective, arguing that the liberal order truly emerged only after the end of the Cold War.⁶

In this article, beyond a simple narrative of decline, a multilayered analysis of the current challenges facing the liberal order will be presented. This report systematically examines the feedback loops between domestic and international factors, critically evaluates the main arguments for and against the collapse of the liberal order, and explores competing perspectives on the future of the global order.

The Architecture of Order: Origins and Foundations of the Liberal International Order

The U.S.-led liberal international order was not an organic phenomenon; rather, it was an active and ideological project constructed and consolidated over decades. At its core, the liberal order was designed to establish an institutional architecture that promoted collective security, strengthened multilateralism, and encouraged free markets. Key institutions such as the United Nations, the International Monetary Fund, the World Bank, and the General Agreement on Tariffs and Trade were central to this project. As a monetary order, the Bretton Woods system represented the first fully negotiated framework intended to manage trade relations among sovereign states and was based on a system of fixed exchange rates centered on the U.S. dollar as the reserve currency.⁷

After the Cold War, the United States leveraged its economic, diplomatic, and military power to expand and, in a sense, preserve this order on a global scale. This post-1991 unipolar moment was seen by many as the peak of the liberal order, as the absence of a major ideological rival allowed liberal ideas and institutions to spread more extensively than ever before. However, the expansion of the liberal order and the emergence of the United States as a unipolar power were not without internal contradictions and limitations.⁸

The liberal order has faced significant critical analyses that question its self-proclaimed “liberal” nature. According to an analysis by Chatham House, the liberal order is more accurately described as a form of “class hegemony,” deeply infused with both explicit and implicit “racial and colonial–imperialist assumptions.”⁹ This critique is also confirmed by the institutional governance of this order. For example, in the International Monetary Fund (IMF), the United States, with only 4 percent of the world’s population, holds nearly 17 percent of the voting power, giving it a unique ability to veto key decisions. In contrast, more than 180 developing countries collectively hold less than half of the total voting power. This critique also argues that this order has never been truly “open” or “equal,” and that its institutional architecture has been primarily designed to serve corporate interests and maintain a hierarchical “grand area” of American and British influence. This hierarchical structure was solely intended to ensure the flow of raw materials to the West for reconstruction and social stability, while finished industrial goods flowed in the opposite direction. According to this think tank, this system has so far operated under a “dual set of rules”: a “zone of peace” for the Western world, and “harsh, neo-imperial, and coercive rules” applied to the rest of the world.^{10 and 11 and 12}

Image: The stark disparity in voting power of the United States in the IMF compared to other members

It should be emphasized that this fundamental hypocrisy is not merely theoretical; it is a direct driver of the current challenges facing the liberal order. The contradiction between the declared values of the liberal order (democracy, universal human rights) and its illiberal behaviors—such as the 2003 U.S. invasion of Iraq—has been sharply highlighted by critics. The Chinese Ministry of Foreign Affairs has specifically cited this invasion as an example of the U.S. bypassing the United Nations Security Council and violating the very norms it claims to uphold. This moral decay is not only an external issue but is also seen as a self-destructive factor for the order itself. The self-proclaimed “moral foundations” of the liberal order are undermined when its principal guarantor, the United States, acts outside the rules it imposes on others. This instability fuels nationalist and anti-hegemonic reactions both within domestic societies and among international actors, weakens the legitimacy of the liberal order, and provides a powerful argumentative link to its current crisis.^{13 and 14 and 15}

Table1: Key Institutions of the Liberal International Order

Institution Name	Year Established	Core Principles/Objectives	Role in the Liberal International Order
International Monetary Fund (IMF)	1945	Oversees exchange rates and provides reserve currency loans to countries facing balance of payments deficits to prevent competitive devaluations.	A main pillar of the Bretton Woods system, regulating the international monetary system and promoting cooperation for macroeconomic stability.
International Bank for Reconstruction and Development (IBRD)	1945	Initially established to provide loans for the reconstruction of post–World War II Europe. Now part of the World Bank Group.	A key Bretton Woods institution for global financial stability, whose mission has expanded to development and poverty reduction.
United Nations (UN)	1945	Maintains international peace and security, develops friendly relations among nations, and promotes social progress and human rights.	A central institutional and normative pillar providing a platform for multilateral cooperation and the promotion of universal values.
General Agreement on Tariffs and Trade (GATT)	1948	Promotes international trade by reducing or eliminating trade barriers such as tariffs and quotas. Replaced by the World Trade Organization (WTO) in 1995.	A key driver of global economic openness, creating a framework for rule-based trade and economic integration.

Crisis from Within: Internal Challenges and Signs of Weakness

The decline of the United States and the liberal international order is not merely the result of external geopolitical changes; it is fundamentally a product of the self-destructive characteristics of the order itself. The economic component of the liberal order, often referred to since the 1980s as “hyper-globalization,” has generated significant economic inequality within countries, a trend that has been far more pronounced in the United States than in other developed nations. This “super-inequality” is not merely the outcome of global economic forces but stems from specific institutional arrangements within the United States that have failed to effectively redistribute wealth. This concentration of wealth has been reinforced by a political system in which the interests of the wealthy are far better represented in the legislative process than those of the poor or working classes.^{17 and 16 and 18}

This socio-economic discontent—particularly among the “left-behind” white working and middle classes—has generated strong reactions of resentment and opposition. These groups, facing stagnant or declining wages and the loss of economic opportunities, have grown increasingly disillusioned with governing policies. This widespread discontent was a major driving force behind the “America First” movement and the election of Donald Trump in 2016. The United States is now “turning away” from the very system it created. The core problem lies in the economic mechanisms of the liberal order—specifically, unrestrained free markets and unconditional trade liberalization—which have created the conditions for its own internal delegitimization. This structural fragility represents a critical, self-referential problem that extends beyond external threats.^{19 and 20 and 21}

The effects of this internal divide have also spilled over into U.S. foreign policy, which has become increasingly polarized in recent decades. Partisan disagreements now frequently impact Congress’s ability to act on major foreign policy issues, such as providing aid to other countries or implementing trade agreements. This polarization has led to significant and abrupt political swings from one presidential administration to another on key issues, including climate change and international cooperation. The U.S. withdrawal from the Paris Agreement and the World Health Organization serves as a clear example of this chaotic and disordered environment. Such unpredictability and internal inconsistency have eroded the trust of foreign leaders and public opinion, making the United States appear as an “unreliable actor.”^{22 and 23 and 24}

The decline of the United States is also evident in several key economic indicators:

Sharp decline in industrial output: The United States’ share of global industrial production in 2024 was 17.3 percent, significantly lower than China’s 27.7 percent. Additionally, the value added by industrial production in the U.S. economy in 2024 was 9.98 percent of GDP, the lowest level since 1997 and below the global average of 12.37 percent.^{25 and 26}
Trade deficit: The United States faces significant trade imbalances with its key partners. In 2024–2025, the U.S. trade deficit with China was $295.4 billion, with the European Union $235.6 billion, and with Mexico $171.9 billion.²⁷
Decline in research and development management: China’s investments in research and development grew nearly twice as fast as those of the United States from 2019 to 2023, and by 2023, China’s total R&D expenditure was estimated at $1.8 trillion, more than double the U.S. total investment of $823 billion.²⁸

Beyond political and economic divides, some analyses point to a deeper, more philosophical problem. There is a growing sense of “spiritual decline” and a loss of self-confidence in this order and in the United States. Critics argue that the moral foundations of the liberal order are eroding due to “excessive individualism” at its core, which they believe has hollowed out society. This crisis of trust has triggered a strong domestic backlash, with populism, protectionism, and nativism regaining prominence, and an increasing number of people expressing opposition to the liberal order.^{30 and 29}

Table 2: Internal and External Challenges of the Liberal International Order

Category	Specific Challenge	Key Mechanisms
Domestic	Severe domestic political polarization	Partisan disagreements have led to political fluctuations between administrations and a lack of focus, eroding trust at domestic levels and making the U.S. an unreliable actor.
	Socio-economic discontent	Hyper-globalization has increased inequality and stagnant wages, provoking strong domestic reactions against the status quo.
	Moral decline	U.S. hypocrisy and double standards between adherence to liberal values and non-liberal behavior (based solely on interests) have undermined its legitimacy and produced a “moral decline” globally.
	Declining economic indicators	Reduced share of global production, large trade deficits, and slowing R&D investment have weakened the economic foundations of U.S. power.
External	Rise of China	China’s economic and military growth enables it to promote a rival, state-centered view of the international order—one without U.S. hegemonic pressures and unilateralism.
	Global discontent	Developing countries in the Global South and emerging powers do not accept the current liberal order structure and seek to reclaim lost rights.
	De-dollarization and rival institutions	Governments are gradually moving away from the dollar, creating alternative financial institutions, and attempting to challenge U.S. financial dominance.

External Challenge: Foreign Challenges to the Liberal International Order

The internal fragility of the liberal order is further intensified by significant external pressures. The rise of China is arguably the most complex and immediate of these challenges, fundamentally altering the international strategic environment to the detriment of the United States. Beijing’s economic and military growth since joining the World Trade Organization has not only challenged U.S. material power but also provided a credible ideological alternative to the liberal order. China is actively seeking to reduce U.S. influence and promote a rival “Westphalian view of order” centered on states, sovereignty, and non-intervention.^{31 and 32}

The competition between China and the United States is not a simple rivalry between major powers; rather, it is a fundamental ideological struggle over the future of global governance. According to World Bank data, in 2022, China was the world’s leading exporter with a 14.58% share, while the United States ranked second with an 8.31% share. This trade imbalance in bilateral relations is significant, as noted, with the U.S. trade deficit with China reaching $295.4 billion in 2024–2025.^{34 and 33}

In terms of military power, SIPRI data for 2024 shows that China’s military expenditures, estimated at $314 billion, make it the second-largest military spender in the world, although it still lags far behind the U.S. figure of $997 billion. These two countries, along with Russia, Germany, and India, accounted for 60% of total global military spending in 2024.³⁵

Similarly, Russia under the leadership of Vladimir Putin poses a direct and aggressive challenge to the norms of the liberal order. Russia is widely seen as a “revived power” strategically seeking to counter the existing order through the use of its influence and military strength. Russia’s military expenditures in 2024 also rose by 38% to approximately $149 billion, equivalent to 7.1% of its GDP.³⁶

Beyond these great-power rivalries, widespread global discontent challenges the hierarchical structure of the liberal order. Many developing countries in the Global South view the liberal order as hypocritical and believe that this system has been engineered against them. This is corroborated by data on voting power in institutions such as the International Monetary Fund, where the United States holds nearly 17% of the votes and can veto key decisions, while more than 180 developing countries collectively hold less than half of the total voting power. A growing trend of “de-dollarization,” in which countries like Russia, India, Iran, and Saudi Arabia are seeking alternative currencies and joint payment systems, reflects a significant shift in global economic and geopolitical dynamics. The share of the U.S. dollar in global official reserves has declined from a peak of 72% in 2001 to 58% in 2024, and foreign reserve managers now prefer to diversify their currency portfolios. Additionally, the share of U.S. Treasury securities held by foreign investors has decreased from nearly 50% in 2014 to 32% in the first quarter of 2025.³⁷

The Importance of the Palestine Issue in the Global Order

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