The nature of world politics has changed more rapidly in the past four years than anyone expected. From the fall of the Berlin Wall up to the financial crisis of 2008, the United States had enjoyed aunprecedented period of hegemony. A decade ago, the US defence budget by itself was larger than the combined defence budgets of all other countries in the world combined, and the US felt free to launch a ‘war of choice’ in Iraq.

While the US remains the dominant military power, its weakened financial condition today means that it is much less willing to use it.

The Obama administration’s reluctance to take leading roles in the crises in Libya, Syria, and now Mali are evidence of a shift to a much more passive role. And with the ongoing euro crisis, it is not clear than the European powers are going to fill in this void anytime soon.

What is world politics in this G-O world going to look like? The issue is most acute for Japan and other countries that have been close US allies, that will face critical choices as American power retreats.

After the end of the Second World War, the United States constructed an international system in which it unilaterally provided a number of key international public goods. This system began with its network of alliances in Europe and Asia, built to contain the Soviet Union. By paying for the lion’s share of military security in both regions, it allowed its allies to focus on economic growth, something particularly true for Japan, which was able to keep military spending under one percent of GDP throughout this period. But the US provided other public goods as well. These included the open system of world trade that started with the General Agreement on Tariffs and Trade and evolved into the World Trade Organization, as well as a host of regional and bilateral trade liberalization measures.

It is clear that no other power is going to step in to fill this role of structuring world politics on a grand scale. It does not necessarily imply, however, that the world will turn into a chaotic free-for-all.

What occurs after the retreat of US hegemony will depend critically on the behaviour of American partners and their willingness to invest in new multilateral structures. The dominant role of the US in years past relieved American allies of the need to invest in their own capabilities or to take the lead in solving regional problems. They now need to step up to the plate.

This has already been starting to happen in Europe and the Middle East. The Obama administration’s unwillingness to get sucked into new engagements after the Arab Spring has led Britain and France to take on the primary burden of military power projection in Libya, with the US playing a background role providing logistics and intelligence support.

This same scenario looks like it is unfolding today in Mali, where the French have intervened to stop the Islamist advance into the south of the country.

The critical test of a new security structure will be in Asia, however. China’s rise as a superpower is the most complex challenge faced by the international system today, comparable to the rise of a unified Germany after 1871. That earlier challenge was mishandled and ultimately led to the First World War. If we are to avoid this situation occurring in contemporary Asia, we have to give careful thought to new mechanisms for dealing with Chinese power in the future.

China’s new assertiveness with regard to its territorial claims both in the South China Sea and against the Senkakus/Diaoyus reflects its growing power. Prior to 2008, China downplayed these issues and indeed bent over backwards to seem non-threatening to its neighbours. But with its continuing economic growth and the apparent weakness of the world’s other major powers, its ambitions and claims have expanded in the manner of many other great powers before it.

No one in Asia has any interest in letting these territorial disputes get out of hand or to escalate into military conflict. All of them are theoretically solvable in a multilateral framework including China, since the underlying interests are more symbolic than real. But to get to the right negotiating framework requires a great deal of diplomacy that has not so far materialized, and is threatened by growing nationalism on all sides.

China understands very well that its rise threatens the interests of many of its neighbours, and its recent diplomacy has been aimed at preventing them from acting collectively to contest its territorial claims. Thus it has told the states of ASEAN that they cannot discuss territorial issues multilaterally among themselves, but only on a bilateral basis with China where Beijing can dominate. The United States has been trying to urge ASEAN to adopt a common position, which was both justified and necessary, and has provoked Chinese anger in turn.

But despite efforts by Vietnam, the Philippines, and other ASEAN states to present a common front, Beijing so far has been able to undermine their solidarity. The most recent ASEAN summit in Phnom Penh failed to reach agreement due to Cambodia’s opposition, which acted on China’s behalf.

The situation in Northeast Asia is even worse. There should be a broad strategic commonality of purpose between Japan and South Korea in dealing with China over the long run, since both are democracies, allies of the United States, and similarly vulnerable to Chinese pressure. Yet

Japan has found itself largely isolated in the region as a result of the persistence of the historical issues between itself and its neighbours. There is plenty of blame to go around on all sides for this fact, but a more skilful diplomacy would have put the historical questions to one side in the interests of long-term strategic cooperation.

The Obama administration has acted very appropriately in pivoting towards Asia, in reassuring its regional allies, and in defending the right of countries potentially threatened by China to talk among themselves about common solutions. But one of the consequences of its financial situation is increasing constraints on its ability to fulfil its commitments. While the US will be reallocating some existing military forces to Asia, the long-term trajectory of the US defence budget is trending downwards. The regional military balance has already shifted toward China more than many American allies would like to admit.

Moreover, while the basic American commitment to Tokyo under the US-Japan Security Agreement remains sound, the willingness of the Obama administration to risk military conflict with China over some uninhabited islands in the middle of the Pacific is not at all clear.

The appropriate response to these changing circumstances should not be greater unilateralism on the part of Japan, Korea, or any of the states of ASEAN. In particular, the new Abe administration risks alienating the very friends it will need, including the US, if it insists on defending a certain nationalist narrative of the 20th century. Individually China’s neighbours are too weak to face this rising power on their own. A new kind of multilateral structure is required, not to isolate and contain China, but rather to build bargaining leverage so that the territorial issues can be settled peacefully with China’s cooperation. In the end, everyone is going to have to deal with the reality of growing Chinese power, and find ways of accommodating it even as they defend their core interests.

The American-led international system that emerged after World War II involved the outsourcing of German and Japanese sovereignty to other powers. In Germany’s case, it went to two multilateral organizations, the European Union and NATO, in which Germany remains firmly embedded.

In Japan’s case, sovereignty was outsourced to the US alone under the Security Treaty. The persistence of the historical issues has prevented the emergence of a broader multilateral framework to act as a backstop to American power; yet this is exactly what is needed today. There is an opportunity to fill in the G-zero world with new structures not invented in Washington, but that will take leadership and foresight from Japan and Asia more broadly.

Fukuyama is author of the book End of History