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ANALYZING GLOBAL TRENDS

for Business and Society


Week 7

The Global Powers


st
of the 21 Century
Mauro F. Guilln

Mini-Lecture 7.1
The concept of global power.
Rise and fall of civilizations.
Rise and fall of global powers.

What is a Global Power?


A state recognized as having the ability to
influence affairs on a global scale, even
against the opposition of smaller powers.
Foundations of global power:
Economic strength.
Military might.
Diplomatic capabilities.
Soft resources.

Global Powers in History


The first term to be used was great power.
Coined in the post-Napoleonic period, when
Austria, Britain, France, Prussia and Russia
emerged from the Congress of Vienna
(1815) as the great powers.
Subsequently, other countries enjoyed that
status for certain periods of time: Italy,
Germany, Japan, the USSR, the US, and,
more recently, China.

Who Will Rule the 21st Century?


One single power? Who?
Multiple powers? Which?
New models for global governance?

Historical Patterns
History is not just one damn thing after another.
Ian Morris, Why the West RulesFor Now (New York:
Farrar, Straus and Giroux, 2011), p. 560.

There are patterns to history.


Patterns of rise and decline of global powers seem
to repeat themselves.
Such patterns are fascinating to study.

History
repeats itself,
first as
tragedy,
second as
farce.
Karl Marx

History
does not
repeat itself,
but it often
rhymes.
Mark Twain

The Historians
Hegel & Marx: The dialectic of history.
Oswald Spengler, The Decline of the West
(1918-23): civilizations as living organisms.
Arnold Toynbee, A Study of History (1934-61):
Cycles of challenge, response, and suicide driven
by moral & political decay.
Paul Kennedy, The Rise & Fall of the Great
Powers (1987): Imperial overstretch.
Jared Diamond, Collapse (2005): Malthusian
abuse of natural environments.
Niall Ferguson, Complexity & Collapse (2010):
It happens fast (punctuated equilibrium).

Punctuated Equilibrium
Great powers and empires are complex systems,
made up of a very large number of interacting
components that are asymmetrically organized.
Such systems can appear to operate quite stably for
some time; they seem to be in equilibrium but are, in
fact, constantly adapting. But there comes a moment
when complex systems go critical. A very small
trigger can set off a phase transition from a benign
equilibrium to a crisis. When things go wrong in a
complex system, the scale of disruption is nearly
impossible to anticipate a relatively minor shock
can cause a disproportionateand sometimes fatal
disruption.
Source: Niall Ferguson, Complexity and Collapse. Foreign Affairs (March-April 2010).

Classic Examples

Rome: 5th C.
Aztecs, Mayas and Incas: early 16th C.
Ming China: 17th C.
French monarchy: late 18th C.
The Spanish empire in the wake of the Napoleonic
invasions.
The Hapsburg, Ottoman and Romanov empires during
World War I.
The British Empire after World War II.
The Soviet Union following Afghanistan and Chernobyl.
The United States after Afghanistan, Iraq, and the global
financial crisis?

Causes of Decline and Collapse


Internal:
Fiscal crisis.
Overstretch.
Social & political fragmentation.

External:
Abuse of physical environment.
External threats.

Mini-Lecture 7.2
Lets do the numbers.

Year:
1870
1913

1000

1500

1820

1850

Population
(million)
Western Europe
Of which: UK
USA
Latin America
China
India
Japan
Africa
World total

25.1
0.8
0.7
5.6
59.6
75.0
3.0
17.0
225.8

25.6
2.0
1.3
11.4
59.0
75.0
7.5
32.3
267.3

57.3
3.9
2.0
17.5
103.0
110.0
15.4
46.6
438.4

133.0
21.2
10.0
21.6
381.0
209.0
31.0
74.2
1,041.7

166.2
27.2
23.6
31.8
412.0
235.8
32.0

187.5
31.4
40.2
40.4
358.0
253.0
34.4
90.5
1,275.7

GDP (billion)
Western Europe
Of which: UK
USA
Latin America
China
India
Japan
Africa
World total

14.4
0.3
0.3
2.2
26.8
33.8
1.2
8.0
105.4

10.9
0.8
0.5
4.6
27.5
33.8
3.2
13.7
121.2

44.2
2.8
0.8
7.3
61.8
60.5
7.7
19.3
248.3

158.9
36.2
12.5
14.9
228.6
111.4
20.7
31.2
693.5

260.3
63.3
42.6

247.2
125.7
21.7

576
400
400
400
450
450
400
472
467

427
400
400
400
466
450
425
425
453

771
714
400
416
600
550
500
414
566

1,194
1,706
1,257
691
600
533
669
420
666

1,567
2,330
1,806

600
533
679

GDP per capita


Western Europe
Of which: UK
USA
Latin America
China
India
Japan
Africa
World total

1950

2008

261.0
45.6
97.6
80.8
437.1
303.7
51.7
124.7
1,792.9

305.6
50.1
152.3
165.5
546.8
359.0
83.8
227.9
2,528.0

401.4
60.9
304.2
580.2
1,324.8
1,148.0
127.3
974.5
6,694.8

366.2
110.2
98.4
27.3
189.7
134.9
25.4
45.2
1,109.7

902.1
224.6
517.4
120.8
241.4
204.2
71.7
79.5
2,733.2

1,396.3
347.8
1,455.9
415.3
245.0
222.2
161.0
202.6
5,335.9

8,698.0
1,447.0
9,485.1
4,045.9
8,908.9
3,415.2
2,904.1
1,734.9
50,973.9

1,953
3,190
2,445
676
530
533
737
500
870

3,457
4,921
5,301
1,494
552
673
1,387
637
1,524

4,569
6,939
9,561
2,510
448
619
1,921
889
2,111

21,672
23,742
31,178
6,973
6,725
2,975
22,816
1,780
7,614

Notes:
GDP and GDP per capita calculated using constant 1990 Geary-Khamis international
dollars.
Largest figure for each year noted in bold type.
Source: Angus Maddison, Historical Statistics of the World Economy: 1-2008 AD.
www.gddc.net/maddison (accessed August 20, 2011).

Largest Populations
India until ca. 1520.
China since ca. 1520.
India is projected to regain the #1
position by 2030.

Biggest Economies

1 - ca.1500: India.
ca. 1500 - ca.1888: China.
ca. 1888 - present: United States
2020? onwards: China.
The UK was never the largest economy. It
was the second largest 1820-1872. Before
1820 France was bigger, and after 1872 the
U.S. was bigger. Germany became bigger
than the UK in 1908.
Western Europe as a bloc was the largest
economy ca. 1840-1942.

Biggest Economies, 1870-2008

Note: GDP in million


1990 Geary-Khamis
international dollars.
Source:Angus
Maddison, Historical
Statistics of the
World Economy:
1-2008 AD.
www.gddc.net/
maddison (accessed
August 20, 2011).

Biggest Economies
(% world total, using purchasing power parities)

Mauro F. Guilln. Source of the data: World Development Indicators.

Richest Economies, 1870-2008

Note: GDP per capita


in million 1990
Geary-Khamis
international dollars.
Source:Angus
Maddison, Historical
Statistics of the
World Economy:
1-2008 AD.
www.gddc.net/
maddison (accessed
August 20, 2011).

Mini-Lecture 7.3
Power resources:
Hard power: territory, population, economy,
finance, military force.
Soft power: knowledge, technology, and culture.

Nyes Indicators of Power Resources, 2012


Indicator
Basic:
Territory, thousand sq km
Population, mn
Literacy, % adult population 2009
Military:
Deployed nuclear warheads
Expenditure, $bn
Expenditure, % of world
Economic
GDP, $bn PPPs
GDP, current $bn
Per capita GDP, current $ PPPs
Internet users per 100 people
Stock of outward foreign direct
investment, $bng
Soft:
Universities ranked in top 100
Films produced (2011)
Foreign students, thousands (2010)

World

USA

China

Japan

EU

Germany

Brazil

Russia

India

148,940
7,046.4
84.1

9,827
313.9
99.0

9,597
1,350.7
95.9

378
127.6
99.0

4,325
509.0
99.5

357
81.9
99.0

8,515
198.7
90.0

17,098
143.5
99.5

3,287
1,236.7
61.0

4,400
1,742.2
100.0

2,150
682.5
39.2

0a
166.2
9.5

0
59.3
3.4

450
274.9
15.8

0
45.8
2.6

0
33.2
1.9

1,800
90.1
5.2

0a
44.8
2.6

86,057
71.918
12,213
35.6
23,593

15,685
15,685
49,965
81.0
5,191

12,471
8,358
9,233
42.3
509b

4,487
5,960
35,178
79.1
1,055

17,067
16,634
33,527
75.3
9,837g

3,349
3,400
40,901
84.0
1,547

2,366
2,253
11,909
49.8
233

3,373
2,015
23,501
53.3
413

4,793
1,842
3,876
12.6
118

100
6,573
3,573

30
819
685

3c
584d
72f

6
441
142

32
1,512e
1,215g

3
212
201

0
99
15

0
140
130

0
1,255
22

Notes: n.a.: not available. a China has 250 non-deployed warheads and India 110. b Excluding Hong Kong ($bn 1,310). c Excluding
Hong Kong (3 universities). d Excluding Hong Kong (70 films) and Macao (4). e Includes Denmark, Finland, France, Germany,
Ireland, Netherlands, Spain, Sweden, and the UK. f Excluding Hong Kong (10,300 students) and Macao (13,500). g Includes
foreign investments and foreign students within the EU, i.e. from one member country into another.
Sources: World Development Indicators, except for territory (CIA World Factbook), literacy (United Nations Development Program,
and World Development Indicators), nuclear warheads (SIPRI Yearbook 2013), stock of outward foreign direct investment (World
Investment Report 2013), universities (Top University Rankings, www.topuniversities.com), films produced (UNESCO Institute
for Statistics), and foreign students (UNESCO Institute of Statistics, Global Education Digest 2012, and Institute of International
Education).

Compiled by Mauro F. Guilln, The Lauder Institute, The Wharton School.

Territory & Population


The U.S. and China are approximately the
same in terms of territory, but:
Two-fifths of Chinas territory are affected by
ethnic strife (Tibet and the Western provinces).
The U.S. has unimpeded access to two three
oceans. China only to one.

Russia is twice as big as the U.S. or China,


but has less than half the population of the
U.S.
India will have the largest population by
2030, but only 61% is literate.

Hard Power: Economy & Finance


The U.S. and China are of approximately
the same size economically.
The U.S. continues to be the largest
financial power in terms of capital markets
and foreign investment.
Chinas financial importance is growing
very quickly.

Hard Power: Military Force


The U.S. and Russia remain the two nuclear
superpowers.
The U.S. is the only power with the ability
to project military force around the globe.
Chinas military is large but technologically
weak, and it cannot project force beyond its
territory.

Military Spending
(% GDP)

Mauro F. Guilln. Source of the data: World Development Indicators.

Military Spending
(% of world total)

Mauro F. Guilln. Source of the data: World Development Indicators.

Largest Navies
Aircraft carriers
Missile submarines
Attack submarines
Total warships
Total personnel (000)

USA
11
18
53
341
324

Russia
1
16
32
282
140

China
0
6
52
239
250

Japan
0
0
18
109
46

UK
1
4
8
100
37

http://military-navy-army-airforce.blogspot.com/2012/10/list-of-top-10-largest-navies-in-world.html

Soft Power
Knowledge and power: The U.S., Europe,
and Japan continue to dominate.
Universities.
R&D.
Patents.
Royalties.

Training the elites (foreign students): The


U.S. and Europe dominate.
Cultural production: Hollywood and
Bollywood.

Israel
Finland
Sweden
Japan
Korea, Rep.
Switzerland
Denmark
United States
Germany
Austria
Singapore
Iceland
Australia
WORLD
France
Belgium
Canada
United Kingdom
Netherlands
Slovenia

R&D (% GDP)
4.7 Norway
3.7 Luxembourg
3.7 Portugal
3.4 China
3.4 Czech Republic
3.0 Ireland
2.9 Spain
2.8 Estonia
2.7 Italy
2.7 Tunisia
2.7 Brazil
2.6 Russian Federation
2.3 Hungary
2.1 South Africa
2.1 Croatia
2.0 Ukraine
1.8 India
1.8 Lithuania
1.8 Iran, Islamic Rep.
1.7 Belarus

1.6 Hong Kong SAR, China


1.6 Turkey
1.5 Uruguay
1.5 Latvia
1.5 Poland
1.5 Morocco
1.4 Romania
1.3 Malta
1.2 Gabon
1.1 Moldova
1.1 Argentina
1.0 Cuba
1.0 Slovak Republic
0.9 Bulgaria
0.9 Cyprus
0.8 Jordan
0.8 Costa Rica
0.8 Mexico
0.8 Chile
0.7 Serbia

0.7
0.7
0.7
0.6
0.6
0.6
0.6
0.6
0.5
0.5
0.5
0.5
0.5
0.5
0.4
0.4
0.4
0.4
0.4
0.4

Granted U.S. Patents 1995-2010


USA
1286236 Hungary
Japan
514683 Argentina
Germany
152198 Luxembourg
South Korea
74913 Czech Republic
France
55385 Poland
United Kingdom
53791 Greece
Canada
51856 Liechtenstein
Italy
23650 Saudi Arabia
Sweden
18904 Philippines
Switzerland
18675 Thailand
Netherlands
18193 Turkey
Israel
15551 Portugal
Australia
14439 Iceland
Finland
11791 Bulgaria
Belgium
9697 Slovenia
China
9008 Ukraine
Austria
7885 Chile
Denmark
6507 Romania
India
5399 Venezuela
Spain
4057 Croatia
Norway
3651 Slovakia
Singapore
3465 Kuwait
Russia
2835 Monaco
Hong Kong
2561 Colombia
Ireland
2190 Egypt
New Zealand
1828 Indonesia
South Africa
1695 Bahamas
Brazil
1497 Estonia
Mexico
1094 United Arab Emirates
Malaysia
1001 Belarus

816 Costa Rica


41 Tunisia
8 Chad
1
672 Lithuania
40 Azerbaijan
7 Cte d'Ivoire
1
498 Kenya
36 Barbados
7 Democratic People's Republic o1f Ko
459 Cuba
35 Viet Nam
7 Ethiopia
1
353 Lebanon
22 Cameroon
6 Gabon
1
336 Uruguay
22 Jordan
6 Iraq
1
248 Cyprus
21 Nigeria
6 Kyrgyzstan
1
201 Ecuador
21 El Salvador
5 Myanmar
1
192 Georgia
21 Fiji
5 Namibia
1
192 Iran
21 Qatar
5 Netherlands Antilles
1
192 Latvia
20 Republic of Moldova (the) 5 Nicaragua
1
179 Peru
20 Syrian Arab Republic
5 Palau
1
167 Malta
19 Seychelles
3 Saint Kitts and Nevis
1
151 Sri Lanka
18 Algeria
2 United Republic of Tanzania 1
148 Pakistan
16 Bangladesh
2 Vanuatu
1
139 Bermuda
15 Bolivia (Plurinational State 2of)
130 Jamaica
15 Bosnia and Herzegovina 2
111 Serbia
15 Ghana
2
104 Morocco
13 Honduras
2
102 Trinidad and Tobago 13 Paraguay
2
76 Kazakhstan
12 Samoa
2
71 Panama
12 T F Y R of Macedonia
2
68 Armenia
10 Uzbekistan
2
60 Dominican Republic 10 Angola
1
54 Serbia and Montenegro 10
(formerly
Antigua Yaugoslavia)
nd Barbuda
1
45 Zimbabwe
10 Bahrain
1
42 Guatemala
9 Belize
1
42 Andorra
8 Benin
1
42 Macao (SAR), China
8 Brunei Darussalam
1
41 Oman
8 Burkina Faso
1

Balance of Royalties & Fees


(millions USD)
Country
United States
Japan
France
United Kingdom
Sweden
Germany
Israel
Chile
Spain
South Africa
India
Brazil
Italy
Russia
South Korea
China
Singapore

Receipts
105,583.0
26,680.3
10,407.2
14,284.9
5,168.4
14,384.5
849.4
64.1
877.5
59.2
128.7
397.2
3,623.0
625.1
3,145.8
830.5
1,866.6

Payments
33,450.0
18,768.6
5,558.6
9,676.3
1,382.6
13,050.5
859.5
496.5
2,648.8
1,941.2
2,437.5
2,850.2
7,011.1
5,066.3
8,964.6
13,039.5
15,857.3

Balance
72,133.0
7,911.7
4,848.6
4,608.6
3,785.8
1,334.0
-10.1
-432.4
-1,771.4
-1,882.0
-2,308.8
-2,453.0
-3,388.1
-4,441.2
-5,818.8
-12,209.1
-13,990.7

Mini-Lecture 7.4
China as a global power?
Chinas strengths.
Chinas limitations.

Chinas Economic Muscle

Largest population (until ca. 2030).


Second-largest economy.
Leading trading power.
Largest current account surplus.
Largest foreign reserves.
Increasingly important source of foreign
direct investment.

Chinas Limitations

Growth of cities.
Population ageing.
Gender imbalance.
Environmental
degradation.
Loss of cost
competitiveness.
Fragile banking
system.
Transition to
consumer economy.

Currency
convertibility.
Rampant corruption.
Income inequality.
Political legitimacy.
Internal ethnic strife.
Internal territorial
issues.
Conflicts with
neighboring countries.
Open ocean access.

U.S. vs. China


The U.S. is still head and shoulders above
China in terms of financial, military, and
cultural power and influence.
However, the U.S. is not hegemonic.
No topic of global significance can be
discussed without the U.S. and China sitting
at the table:
Global trade.
Global financial architecture.
Climate change.
Exception: localized conflicts (U.S. vs. Russia).

Pax Sinica?
Key Books about Chinas Rise

Martin Jacques, When China Rules the


World (2009).
Arvind Subramanian, Eclipse: Living
in the Shadow of Chinas Economic
Dominance (2011).
And: Arvind Panagariya, India: The
Emerging Giant (2011).

Remember Japan?
Vogel, Japan as Number One (1979).
Ouchi, Theory Z (1981).
Imai, Kaizen: The Key to Japans
Competitive Success (1986).
Crichton, Rising Sun (1992) [a novel].

The Skeptics
Joseph Nye, Soft Power (2004) and The Future of
Power (2011): U.S. still on top, but cannot
accomplish everything by itself.
Jared Diamond, Collapse: How Societies Choose
to Fail or Succeed (2005): China faces numerous
challenges.
Aaron Friedberg, A Contest for Supremacy (2011):
U.S. can benefit from Chinas rise.
John Ikenberry, The Future of the Liberal World
Order. Foreign Affairs ( May-June 2011): China
does not want to undermine the global liberal
economic order, but to become more influential
within it.

Chinese Views on Chinas Global Ascendancy


Chinas rise will be peaceful and focused on
development and cooperation:
Justin Yifu Lin, Demystifying the Chinese Economy
(2011).
Hu Angang, China in 2020: A New Type of
Superpower (2011).
Wang Jisi, Chinas Search for a Grand Strategy.
Foreign Affairs (March-April 2011).
Zhu Feng, Chinas Rise will be Peaceful (2008).

More militant scholars who think China must


assert itself:
Shen Dingli, Sino-American Relations: Mutual
Accommodation. International Studies (2009).

Henry Kissinger
The question ultimately comes down to what
the United States and China can realistically
ask of each other. An explicit American
project to organize Asia on the basis of
containing China [] is unlikely to succeed
in part because China is an indispensable
trading partner for most of its neighbors. By
the same token, a Chinese attempt to exclude
America from Asian economic and security
affairs will similarly meet serious resistance
from almost all other Asian states.
Source: Henry Kissinger, On China (New York: Penguin Press, 2011), p. 526.

Mini-Lecture 7.5
Global Governance: The basic problem.
Options.

Capital Investments 1914

Mauro F. Guillen. Source of the data: W. Woodruff, Impact of Western Man (1966).

Capital Investments 1967

Capital Investments 2012

Mauro F. Guillen. Source of the data: World Investment Report; World Investment Directory.

Global Governance
United Nations:
Climate change.
Peacekeeping.
Human rights, refugees, etc.

International Monetary Fund:


Financial matters.

World Bank:
Poverty reduction.

World Health Organization.


G6, G7, etc

G6 and G7
Largest market economies: US, Japan,
Germany, UK, France, Italy, Canada.
First met in 1975 as a G6 (without Canada,
which joined a year later).
A total of 22 summits.
In 1985 the G5 (US, Japan, Germany, UK
and France) reached the famous Plaza
Accord, which brought down the value of
the U.S. dollar in an orderly way.

G8
Since 1998.
US, Japan, Germany, UK, France, Canada,
Italy.
Russia
A total of 16 summits, with additional
countries and multilateral organizations
occasionally invited.

G20
Started in 1999.
US, Japan, Germany, UK, France, Italy,
Canada, Russia.
Europe: EU.
Africa: South Africa.
Asia/Pacific: China, India, South Korea,
Indonesia, Australia.
LatAm: Argentina, Brazil, Mexico.
Middle East: Saudi Arabia, Turkey.
8 head-of-state summits since 2008.

Is the G20 effective?


The G20 is a nice forum that helps keep
channels of communication open.
It is too small in that it does not represent all
of the different emerging regions of the
world.
But it is too large from the point of view of
decision making.
Whats the optimal size of a group?
Ultimately, 4-5 powers will make the big
decisions.

My View

A multi-polar world.
G-zero world (Roubini & Bremmer).
No single power can impose its will.
The problem of American power in the
twenty-first century, then, is not one of
decline but what to do in light of the
realization that even the largest country
cannot achieve outcomes it wants without
the help of others.
Joseph Nye, The Future of American Power: Dominance and Decline in
Perspective. Foreign Affairs (November-December 2010), p. 12.

Mini-Lecture 7.6
Global tensions.

Socio-Demographic Realm
DRIVERS:
Population ageing.
Shifting demographic
centers of gravity.
Growth of cities.
Income inequality.

IMPLICATIONS:
Fiscal crisis.
Political unrest.
Geopolitical balance
of power.
Race for natural
resources: energy,
water, and food.

Economic Realm
DRIVERS:
Growth of emerging
economies.
Global trade &
financial imbalances.

IMPLICATIONS:
Competition for
natural resources.
Geopolitical frictions.
Skills gap.
Income inequality.

Geopolitical Realm
DRIVERS:
Shift in geo-economic
balance of power.
Failed states.
New forms of violent
conflict.

IMPLICATIONS:
Governance problems
(G-zero world).

Political Realm
DRIVERS:
Crisis of the state:
fiscal and legitimacy.
Disillusionment with
democracy.
Proliferation of
anocracies.

IMPLICATIONS:
Diminished state
capacity to act.
Social unrest.
Political protests.

Mini-Lecture 7.7
What kind of world should we expect.

Basic Postulates
Complexity:
Multi-polar world.
Unanticipated interactions.

Tight coupling:
Within countries and across the global system.
Little room for error.

Uncertainty:
The new normal.
Potential for systemic disruption.

Whats needed?
New programs, new products?

New business models?

New decision models?

New mindset?

Week 7 Test
I hope you have enjoyed learning about the
challenges facing the world in terms of
sustainability.
Now, please take again the Global Literacy
Test.