The world balance of power is changing. Countries like China, India, Turkey and Brazil are heard from more frequently and on a wider range of subjects. The European Union's most ambitious global project—creating a universal treaty to reduce carbon emissions—has collapsed, and EU expansion has slowed to a crawl as Europe turns inward to deal with its debt crisis. Japan has ceded its place as the largest economy in Asia to China and appears increasingly on the defensive in the region as China's hard and soft power grow.

The international chattering class has a label for these changes: American decline. The dots look so connectable: The financial crisis, say the pundits, comprehensively demonstrated the failure of "Anglo-Saxon" capitalism. The wars in Afghanistan and Iraq have sapped American strength and, allegedly, destroyed America's ability to act in the Middle East. China-style "state capitalism" is all the rage. Throw in the assertive new powers and there you have it—the portrait of America in decline.

Actually, what's been happening is just as fateful but much more complex. The United States isn't in decline, but it is in the midst of a major rebalancing. The alliances and coalitions America built in the Cold War no longer suffice for the tasks ahead. As a result, under both the George W. Bush and Barack Obama administrations, American foreign policy has been moving toward the creation of new, sometimes difficult partnerships as it retools for the tasks ahead.

From the 1970s to the start of this decade, the world was in what future historians may call the Trilateral Era. In the early '70s, Americans responded to the defeat in Vietnam and the end of the Bretton Woods era by inviting key European allies and Japan to join in the creation of a trilateral system. Western Europe, Japan and the U.S. accounted for an overwhelming proportion of the international economy in the noncommunist world. With overlapping interests on a range of issues, the trilateral powers were able to set the global agenda on some key questions.

Currency policy, the promotion of free trade, integrating the developing world into the global financial system, assisting the transition of Warsaw Pact economies into the Western World—the trilateralists had a lot to show for their efforts.

The system worked particularly well for America. Europe and Japan shared a basic commitment to the type of world order that Americans wanted, and so a more cooperative approach to key policy questions enlisted the support of rich and powerful allies for efforts that tallied pretty closely with key long-term American goals.

It is this trilateral system—rather than American power per se—that is in decline today. Western Europe and Japan were seen as rising powers in the 1970s, and the assumption was that the trilateral partnership would become more powerful and effective as time passed. Something else happened instead.

Demographically and economically, both Japan and Europe stagnated. The free-trade regime and global investment system promoted growth in the rest of Asia more than in Japan. Europe, turning inward to absorb the former Warsaw Pact nations, made the fateful blunder of embracing the euro rather than a more aggressive program of reform in labor markets, subsidies and the like.