The End of the Post-1945 World Order: Why the International System is Breaking Down

For eighty years, the international system established after the Second World War has provided the basic framework within which nations conducted their affairs. The United Nations, the Bretton Woods financial institutions, American military supremacy, international trade arrangements and, eventually, the ideology of globalisation, all formed parts of this structure. It was never a perfect system, nor was it consistently peaceful. Nevertheless, it created a degree of international stability that many people came to regard as permanent. That assumption is now collapsing.

The world of 2026 increasingly resembles an earlier historical era in which great powers competed openly for territory, resources, markets and military advantage. The language of international cooperation remains, but beneath the diplomatic formalities a different reality is emerging. Nations are rearming, trade relationships are being reorganised around national security, and international institutions are struggling to enforce the principles they were created to uphold. The comforting assumption that economic interdependence would gradually eliminate geopolitical conflict has been exposed as wishful thinking.

The German Chancellor, Friedrich Merz, acknowledged the magnitude of the transformation at the Munich Security Conference in February 2026. Speaking about the international order based upon rights and rules, he declared that this order, imperfect even at its best, no longer exists. It was a remarkable admission from the leader of a country whose postwar prosperity and security had depended so heavily upon that very system.

The Munich Security Report 2026, appropriately entitled Under Destruction, similarly described a world in which established institutions, alliances and assumptions were being challenged. The report highlighted growing uncertainty about American commitments, the ambitions of China, Russia's continuing war against Ukraine and the weakening of international economic cooperation. These are not isolated developments. They are symptoms of a fundamental transformation in the distribution of global power.

To understand what is happening, it is necessary to remember why the postwar order emerged in the first place. In 1945, much of Europe and Asia lay devastated. Germany and Japan had been defeated, the old European empires were weakened, and the United States emerged with extraordinary industrial, financial and military advantages. The Soviet Union was the principal rival, but the American economy possessed a productive capacity unmatched by any other country.

The United States used this position to construct an international system that served both its own interests and those of its allies. The Marshall Plan assisted European reconstruction. The Bretton Woods arrangements established new financial institutions. The General Agreement on Tariffs and Trade encouraged reductions in trade barriers, while NATO provided collective security against Soviet expansion. The United Nations was intended to provide a forum for diplomacy and collective action, although its effectiveness was limited from the beginning by the veto powers of the permanent Security Council members.

This system depended upon American strength. The United States provided military protection, access to markets, technological leadership and, through the dollar, the principal international reserve currency. Its allies accepted American leadership partly because the arrangement offered security and prosperity. The system was never purely altruistic. It was a bargain in which American strategic interests and allied economic interests frequently coincided.

During the Cold War, this order operated primarily within the Western bloc rather than universally. The Soviet Union maintained a competing system, while many developing countries attempted to navigate between the two. The collapse of Soviet communism in 1991 temporarily removed the principal strategic challenge to American supremacy.

What followed was the extraordinary period sometimes called the unipolar moment. The United States appeared to stand alone as the world's dominant military and economic power. Western policymakers increasingly assumed that liberal democracy, market capitalism and economic globalisation represented the final direction of political development. Francis Fukuyama's famous thesis about the end of history captured the optimism of the period, although his argument was more philosophically qualified than its popular interpretation suggested.

The underlying assumption was that expanding trade and economic integration would gradually make major wars irrational. Nations that became economically dependent upon one another would supposedly have too much to lose from armed conflict. International institutions would increasingly replace traditional power politics, while technological progress would spread prosperity and liberal values.

China's integration into the global economy was perhaps the most important test of this theory. Western governments encouraged Chinese participation in international trade, culminating in China's accession to the World Trade Organization in 2001. The expectation among many policymakers was that economic development would eventually encourage political liberalisation and closer alignment with Western institutions.

Instead, China combined participation in global capitalism with continued Communist Party rule, extensive state direction of strategic industries and growing military power. It became a central manufacturing hub while developing technological capabilities and international influence sufficient to challenge American dominance.

This was a major strategic miscalculation. Economic integration did not necessarily produce political convergence. It helped create a formidable competitor whose economic interests remained closely connected to Western markets even as its geopolitical ambitions increasingly conflicted with those of the United States.

The consequences are now visible in trade restrictions, semiconductor export controls, competition over artificial intelligence, rare-earth minerals, advanced manufacturing and the future of Taiwan. Economic policy and national security have become inseparable.

The United Nations Conference on Trade and Development reported in October 2026 that trade between China and the United States had fallen by more than 20 per cent since 2024. Yet global trade itself continues to expand, demonstrating that the process is not simply the end of international commerce. Rather, trade is being redirected through new relationships and strategic arrangements. Globalisation is changing from a system organised primarily around economic efficiency into one increasingly shaped by political rivalry.

Russia's invasion of Ukraine represents another decisive challenge to the postwar international system. The prohibition against aggressive war and territorial conquest was supposed to be a foundational principle of the international order. Russia's invasion demonstrated that a major military power could still attempt to alter borders by force, despite the economic sanctions, diplomatic condemnation and military assistance provided by Western governments.

The war also exposed Europe's longstanding dependence upon American military power and, before the invasion, significant European dependence upon Russian energy. European governments are now attempting to rebuild military capabilities neglected during decades when major interstate warfare seemed increasingly remote.

The assumption that European security could be maintained indefinitely through American protection and economic engagement with potential adversaries has become difficult to sustain. The United States itself has undergone an important transformation. Donald Trump's political movement did not create all the underlying tensions, but it brought them into the open. The argument that America has carried a disproportionate share of the costs of maintaining international security has resonated with voters increasingly sceptical of foreign military commitments and trade arrangements perceived as damaging domestic industry.

Trump's approach places greater emphasis upon national advantage, tariffs, bilateral bargaining and demands that allies assume more responsibility for their own defence. Supporters regard this as a necessary correction to decades of strategic overextension. Critics see it as an abandonment of the institutions and alliances that enabled American leadership.

Both perspectives identify something important. The postwar order required a dominant power willing to bear substantial costs to maintain it. If the American electorate becomes unwilling to continue that arrangement on the old terms, the system must change, regardless of what European or Asian allies might prefer.

The difficulty is that no other country can readily replace the United States as the principal guarantor of the existing order. China possesses immense economic and military capabilities, but its political system and strategic objectives are not universally attractive, to put it mildly. Russia remains a formidable nuclear power but lacks the economic capacity to construct a comparable global system. The European Union is economically significant but politically divided and militarily dependent upon arrangements that are themselves changing.

The result is not the orderly replacement of one dominant power by another. It is an increasingly fragmented world in which several major powers compete, while smaller countries attempt to preserve their independence by balancing relationships among them.

The World Economic Forum's Global Risks Report 2026 found that 68 per cent of surveyed respondents expected a multipolar or fragmented international order over the following decade. Only 6 per cent anticipated a revival of the previous unipolar, rules-based system. These figures are measures of expert expectations, not proof of an inevitable future, but they reveal the extent to which confidence in the old arrangements has deteriorated.

There is also a profound economic dimension to the crisis. The postwar international system eventually developed into an extraordinarily complex structure of global supply chains, financial markets and industrial specialisation. Countries became dependent upon distant suppliers for energy, medicines, fertilisers, semiconductors, industrial components and food inputs.

This arrangement produced considerable efficiencies. It also created vulnerabilities that were often ignored during periods of stability.

The COVID pandemic demonstrated how quickly international supply chains could be disrupted. The war in Ukraine exposed the importance of energy, grain and fertiliser supplies. Conflict in the Middle East has repeatedly threatened shipping routes and energy markets. Strategic competition between China and the United States has revealed how control over critical minerals and advanced technologies can become a geopolitical weapon.

The United Nations' World Economic Situation and Prospects 2026 specifically identifies geopolitical fragmentation as a growing threat to trade, finance and supply chains. The report notes that disruptions affecting major maritime routes can rapidly increase transport costs, commodity prices and inflationary pressures.

The lesson is that economic efficiency and national resilience are not identical. A country may enjoy inexpensive imported goods while gradually losing the industrial capacity needed to sustain itself during a major international crisis.

For Australia, this issue is particularly serious. The country possesses enormous natural resources, agricultural capacity and strategic advantages, yet remains dependent upon imported manufactured goods, sophisticated machinery, pharmaceuticals and important industrial inputs. Its prosperity is closely connected to trade with China, while its security arrangements remain deeply connected to the United States.

A serious deterioration in relations between those two powers would therefore place Australia in an exceptionally difficult position. Economic and military interests that have coexisted for decades could become increasingly difficult to reconcile.

The problem extends beyond economics and military strategy. The postwar order also rested upon a degree of confidence within Western societies themselves. Governments assumed that their populations broadly accepted the legitimacy of national institutions, democratic government and the cultural traditions from which those institutions emerged. That confidence has weakened.

Across much of the Western world, political polarisation, distrust of established institutions, disputes over immigration, declining religious participation and conflicts over national identity have produced increasingly fragmented societies. Many younger people face high housing costs, uncertain employment prospects and difficulty forming independent households. Political movements of both the Left and Right have challenged aspects of the liberal consensus that dominated the decades following the Cold War.

These developments cannot be explained by a single cause, and criticism of Western institutions is not itself evidence of civilisational decline. Democratic societies require the freedom to question their own assumptions. Nevertheless, an international order becomes harder to sustain when the societies responsible for maintaining it no longer agree upon its purposes or legitimacy.

There is an important historical irony here. Western political leaders spent decades promoting the virtues of international integration, global citizenship and the gradual weakening of national economic boundaries. Yet the contemporary crisis is encouraging a return to national sovereignty, border control, industrial self-sufficiency and strategic competition. The very concepts that were sometimes dismissed as outdated are becoming central to government policy once again.

The World Trade Organization faces comparable difficulties. Its dispute-settlement system has been weakened since the paralysis of its Appellate Body in 2019, while governments increasingly employ tariffs, subsidies, export controls and investment restrictions for strategic purposes.

The WTO's World Trade Report 2026 acknowledges that the multilateral trading system has reached a critical juncture. It argues that the system requires adaptation to changing economic power, government intervention and geopolitical tensions. The institution is not announcing the end of international trade, but it is recognising that rules developed for an earlier era are under considerable strain.

The breakdown of the postwar order does not mean that every international institution will disappear or that all cooperation will cease. It means that the assumptions underlying those institutions are increasingly contested.

The deeper problem is that international rules ultimately depend upon political power and mutual restraint. Treaties, courts and organisations cannot independently compel the world's strongest states to obey decisions they regard as contrary to fundamental national interests. When the distribution of power changes, the institutions reflecting the previous distribution of power become vulnerable.

This is a familiar pattern in history. The European order established after the Napoleonic Wars gradually weakened as nationalism, industrialisation and shifting military capabilities altered the balance among the great powers. The international arrangements created after the First World War proved unable to contain the ambitions of revisionist states during the 1930s.

The contemporary world possesses nuclear weapons, global communications and levels of economic interdependence unimaginable to earlier generations. Nevertheless, the underlying problem remains recognisable: an established international order is being challenged by states and political movements dissatisfied with its distribution of power and benefits. The greatest danger is that the transition to a new system will occur through uncontrolled confrontation rather than negotiated adjustment.

A conflict over Taiwan, a wider European war, a major Middle Eastern escalation or a severe disruption to international energy and financial systems could accelerate existing fragmentation. Cyberattacks against critical infrastructure, attacks upon satellites and the military application of artificial intelligence introduce additional possibilities for escalation.

Nuclear deterrence makes direct great-power war extraordinarily dangerous, but it does not eliminate miscalculation. Indeed, the existence of nuclear weapons may encourage some states to pursue aggressive actions below the threshold at which they expect an opponent to respond with overwhelming force.

The world could therefore experience prolonged instability without a single catastrophic global war. Regional conflicts, economic coercion, technological competition, sanctions and intermittent supply disruptions might become persistent features of international life.

For ordinary citizens, the consequences could include higher prices, less reliable access to imported goods, increased taxation to finance military expenditure and greater pressure upon governments to prioritise national security over other objectives.

There is also the possibility of a more fundamental reorganisation of the international economy. Countries may increasingly seek domestic production of essential goods, diversify energy supplies, rebuild strategic industries and maintain larger reserves of critical materials. Such policies may sacrifice some economic efficiency in exchange for resilience.

This would represent a partial reversal of the assumptions that dominated the era of hyper-globalisation. It would not necessarily mean complete economic isolation. Rather, nations might become more selective about the dependencies they are willing to accept.

From an Australian perspective, the implications are clear. A country that wishes to remain secure in an increasingly unstable world cannot rely indefinitely upon distant supply chains and assumptions of uninterrupted international cooperation. Energy security, food production, industrial capability, infrastructure protection and credible defence arrangements must become central concerns.

There is also a case for strengthening local communities and institutions. National resilience is not simply a matter of military equipment or government expenditure. It depends upon practical skills, functioning infrastructure, social trust and the capacity of communities to respond when centralised systems fail.

The decline of American predominance does not automatically promise a more peaceful or just world. Multipolar systems can provide opportunities for greater national independence, but they can also generate dangerous competition among rival powers. The essential question is whether the transition can be managed without the kind of catastrophic warfare that historically accompanied major changes in the international balance of power.

https://www.bundesregierung.de/breg-en/service/speech-munich-security-conference-2407298