Saturday, May 3, 2014

On the US world-role and the economic rise of China

This is based on comments I made here.

The World Bank reports that, on a purchasing power parity (PPP) basis, China's economy is set to become bigger than the US's while India has overtaken Japan.  China has declined the honour of being soon the world's largest economy.

The economic rise of China to becoming (at some stage) the world's biggest economy is the return of the normal pattern of world history. At least since the First Emperor (r.210-220BC), whenever China was unified, it was the world's largest single economy (with the possible exception of the Roman Empire at its height). 

Indeed, China was historically more economically "dominant" than it has any prospect of becoming in likely futures. According to the Maddison estimates, in 1820, over a third of the world’s population was in the Qing Empire, producing about a third of world GDP. This is the sort of economic “dominance” that is never likely to come China’s way again.

Economics and hegemony
Talk of the Chinese economy overtaking the size of the US economy inevitably encourages comment and speculation on the international role of the US (and of China). According to the Maddison estimates, the US economy became larger than the UK economy in 1872. The US economy did not become bigger than the Chinese economy until the late 1880s. The British economy did not become bigger than the Chinese economy until about 1910, by which time the US economy was more than twice as large as the British economy.

The US did not automatically replace Britain as the manager of the international state order simply because its economy became bigger. The Pax Britannica did not immediately become the Pax Americana. Partly, this was because adding in the British Empire shifts the economic balance. Mainly, however, because the US made little or no effort to become global hegemon or state-system manager. The US Navy, for example, remained considerably smaller than the Royal Navy until the Dynasts's War (1914-1919) and the Washington Naval Treaty (1922). 

Note that decades earlier, the UK had been easily able to beat the Qing Empire in the Anglo-Chinese War (1839-1842), the first of the Opium Wars. This despite the British economy at the time being about a fifth of the size of the Chinese economy and the population of China being about 16 times that of the UK. The difference was not Britain being able to draw on its Indian possessions, but that the British state had much higher capacity to mobilise resources. The British central government had over four times the revenue (pdf) of the Qing central government, with much greater capacity to borrow. Fighting an opponent with better military technology and organisation as well as much greater revenue: of course it was going to end badly for the Qing Empire. 

It is not merely economic or demographic size that counts. What matters is ability and willingness to project power. 

International role of the US
The biggest failing of US policy was remaking the world monetary order by creating the US Federal Reserve (by concentrating the US gold reserves, suddenly the new US central bank had about 27% [pdf] of all world gold reserves: 45% by 1923) and remaking the world state order by its intervention in the Dynasts' War and the Treaty of Versailles and then stepping back from the responsibility that came with its actions and power. The result was 1929-1945: the Great Depression, the rise of Nazism and the Dictators's War (1939-1945).

The period since 1945, when the US has taken much more of the responsibility that comes with its relative power, has been much better. Both for the world state order (i.e. general peace) and for the world monetary and economic order. On simple utilitarian grounds, an active US is to be preferred.

Not that it is a prospect any time soon, but a regime which gave us the Beijing Massacre, the Great Firewall of China, has had border wars with its neighbours, ruling a state-culture whose history was of conceiving other states as either tributaries or enemies and whose name for itself translates as “centre of the universe” [literally it means "central country" but culturally it is more like "centre of the universe"] is not a preferable prospect as global (or even regional) hegemon.  As, indeed, almost all the other states in its region agree.

[Cross-posted at Skepticlawyer.]

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