This is a guest post by the ‘Data Artist’, an author who hails from the fintech world and is a believer in beautiful rather than big data.
Back in 1991, it was a glorious time to be a leader of a Western nation.
The collective West, which broadly included Western Europe, the US, Canada, Japan, South Korea and Australasia, had seemingly triumphed over the Soviet bloc after decades of Cold War.
It was not just a political victory over the oppressive Communist political system. It was an economic coup. In 1991 the West accounted for around three quarters of global GDP. The Russian Federation and the other countries later to be grouped together as the BRICS (i.e. Brazil, Russia, India, China and South Africa), on the other hand, accounted for a measly 5 percent of global nominal GDP.
Even Britain had almost three times the economy of the People’s Republic of China.
For the years of the Cold War, the Soviet bloc’s determination to match the West militarily and in terms of global influence had, however, blunted the West’s ability to make the most of that economic advantage. From 1991 onwards that was no longer the case. Many dictatorships and socialist economic systems around the world collapsed soon after.
Not of all of these were former clients of the Soviet bloc. Some had maintained power by playing off the superpowers against each other. Others were “friends” of the West who had maintained power with the support of Western powers simply by not being communists.
Change in Share of Global GDP Between 1991 and 1997
Not only did the West inherit an unrestrained economic ability to throw its weight around (often for the best of intentions), its leaders had genuinely come to believe they had triumphed over communism because almost everything about the West was inherently superior. Democracy was superior to any other political system and markets were superior to central planning, they had come to believe.
Follow the Western path, it was noted, and the world would continue getting richer, freer, and more liberal. Countries that did not want to play according to the Western rule book, such as Iran, Cuba and North Korea would soon find themselves friendless, only able to hang around with other losers in the game of geopolitics, who could not offer a great deal of support.
In the early 90s, China, meanwhile, had been eager to woo Western investment and to access Western markets on their terms. It had also started liberalising itself socially and economically. Western leaders visiting China felt empowered enough to make a habit of lecturing Chinese leaders about human rights and such the like. And even at the point of the handover of Hong Kong, in 1997, the UK economy in nominal terms was still coming in at 50 percent more than China’s. For the time being China remained committed to “one country two systems” for Hong Kong, assuring the former British territory would theoretically continue to have freedom of press, rule of law and a proportion of their legislature elected in free and fair elections.
Figure 1 – China vs UK Relative Economic Power in 1997
For over two decades, things continued more or less as before in Hong Kong. But by 2020 the world had truly become a different place economically. China’s economy was now over five times larger than the UK’s. Meanwhile, following a series of demonstrations against the Hong Kong government, China decided to introduce its contentious National Security Law and clamp down on civil liberties. The Sino-British joint declaration that had given Hong Kong “one country two systems” the backing of an international treaty was suddenly dead. It seemed China did not have to worry about what economically insignificant Britain thought about Hong Kong anymore.
Figure 2 – China vs UK Relative Economic Power 2020
So where does that leave us now?
According to the popular narrative, the West now accounts for just 50 percent of global GDP in nominal terms meaning we are heading into a multi-polar world. The up-and-coming BRICS nations, and their friends, meanwhile, are in that context understandably showing greater disregard for what the West thinks. Dictators and tyrants everywhere can once again breathe easier knowing their nations can continue to trade with economic powers that are not concerned about imposing their ethics. And on the face of it, America is supposedly in danger of being overshadowed by China.
But all is not what it seems. Take a closer look at the figures and you will see that it’s not necessarily American might that is waning:
In 1991, America’s economy made up over a quarter of the global GDP. In 2022 it still made up over a quarter of GDP.
That means the relative decline of the West, if it is happening anywhere, is happening in the “Rest of the West”. That’s in the European Union, Japan and UK, all of which are suffering with stagnating productivity and crushing demographic problems.
And while India is showing significant growth, the economic power of the BRICS still remains largely concentrated in the “C” of China, which today makes up some three-quarters of overall GDP for the original BRICS.
So, for all the noise made about the decline of the US and its many problems, it seems more than likely that the land of the brave will continue to be a major power for many years to come. The question that needs entertaining at this point really is what does the new economic order mean for the Rest of West? As ever, the editor of this publication insists on looking to Ancient Rome for all the answers. So we shall indulge.
By the 5th Century AD the Roman Empire had been politically split into two halves. Though both were beset by various plagues and waves of what today would be called “undocumented migrants” the outcomes in the two regions were very different.
The Eastern half of the empire soon took over as the economic powerhouse (later to be named the Byzantine Empire). The Western empire, on the contrary, became ever poorer while still having to maintain an equally large and ever less effective bureaucracy and army. (Not to mention the demanding populous of Rome)
In that context, small surprise, the East let the Western Empire collapse mostly unaided. The Byzantine Empire on the other hand continued on for hundreds of years more. Based on that precedent, perhaps the lesson for the leaders of the “Rest of the West” is not to be so concerned with the problems of the United States but how to solve their own economic and demographic problems before the Americans, like the Byzantines, think they are not worth the trouble?
Perhaps Donald Trump, so hated by leaders in the Western World is not the freak they believe he is but just a symptom of a historical/economic process that has been going on for almost 30 years?
Notes:
- All data cited above is sourced from the World Bank and is based on nominal GDP.
- The definition of the “The West” includes, the United States, Canada, UK, Japan, South Korea, Australia, New Zealand, all members (and subsequent members) of the European Union, all other western European nations and overseas dependencies of the nations listed.
One Response
I think its more closely analogous to the decline of the hellenistic world in the years prior to its conquest by Rome, essentially by the same means, that being endless internal warfare over centuries that eventually broke the Greeks/Europeans. As Europe grows week and the Islamic and Asian civilizations stronger, the US will be forced to take a more involved role on the old continent over time. The last century more or less follows this pattern, WW1 was primarily fought between europeans with america only providing financial support until the very last months of the war, ww2 saw much more american involvement with millions of soldiers and half of the continent being liberated by the us. Now with war in ukraine you see states like finland and sweden clambering to join nato and put themselves under american protection while american armaments and funding are the only things keeping russia from advancing right up into the balkans and the rest of central europe. Over time the need for american protection will only grow stronger as europe depopulates and grows less relevant to the global economy. Its a similar state of affairs to the relationship between Rome and the greek states of the aetolian league, where rome was called on to defend the city states against the macedonians, and over a series of wars slowly subsumed all greek territory into the empire, macedon is a stand in for russia, the greek city states are western europe and the aetolian league is nato. Under this analogy you could see a resurgant europe become the last remaining part of the united states in a few centuries byzantine style, as the continental states finally fall to invasion from the south.