The Economic Balance of Power in 2050
No single factor has a greater impact on the global balance of power than the economy and this will continue to hold true in the decades ahead. Europe’s rise to global dominance in the 18th and 19th centuries was a result of the economic benefits that a number of European states derived from their overseas colonial holdings and later, the Industrial Revolution that began in Britain. In the early 20th century, the United States’ economic power overtook Europe, enabling the US to emerge as the world’s dominant power.
Today, China has emerged as the only serious challenger to the US’ global leadership and its rise has been driven by the 35 years of 10% annual economic growth that China recorded between 1980 and 2015. In fact, many geopolitical and economic experts believed that China’s rise would lead to an overall rebalancing of power away from developed countries and towards the world’s leading emerging markets. However, the developments of the past few years have stunted the rise of many emerging markets and called into question the idea that the global balance of power was on the verge of a dramatic shift.
Looking ahead, one measure of power that is always considered to be a reliable measure of a state’s position in the global pecking order is the size of that state’s economy. For example, the size of the United States’ economy overtook that of Britain in the early 1870s and was larger than that of a divided China by the late 1880s. Nevertheless, the US did not transform this economic power into political and military power for a couple of decades, and did not truly emerge as the world’s dominant power until the end of the First World War.
Altogether, the United States was the world’s leading economic power (in terms of scale) for nearly a century-and-a-half, but now, China is on the verge of overtaking the US in terms of economic output. In fact, as China’s economy is forecast to grow faster than that of the US over the next few decades, once China takes the lead in terms of economic output, it is likely to hold on to that lead for a long time to come. Likewise, other faster-growing emerging markets in Asia will also see their overall economic output levels rise significantly by the middle of this century, although they will remain well behind China and the US. In contrast, Europe and Japan will continue to see their relative output levels decline due to lower growth rates. As such, at least in terms of economic power, the focus of attention in the 21st century will be on the Pacific region.
In terms of wealth, the recent convergence of economic growth rates among those previously faster-growing emerging markets and slower-growing developed economies indicates that the relative wealth levels of the world’s leading economies will remain fairly stable in the decades ahead. As higher wealth levels facilitate higher levels of spending in key areas such as research, development and defense, this suggests that the current global balance of power will not be dramatically altered by the middle of the 21st century.
However, the one major shift in terms of global wealth levels will occur, and that will be in China, where the combination of above-world-average economic growth rates and a declining population will result in per capita GDP levels in China rising significantly in the coming decades. In fact, few other emerging markets will be able to match China’s rise in terms of wealth levels and most of these will be in East Asia. In contrast, rapid population growth will mitigate the higher rates of economic growth in places such as India and Africa, leaving them much poorer than the world’s other key economies.
The implications of these long-term economic forecasts are significant for the global balance of power. They show that the United States is in a prime position to remain the world’s leading power over the next few decades, thanks to an economy that will outgrow most other developed economies. In addition, these long-term forecasts show that China’s rise will continue, even as economic growth rates slow over the next few decades. In fact, the global balance of power appears likely to be dominated by the US and China for the foreseeable future as both countries’ economic power will increase markedly.
Meanwhile, the European Union and India also have the capacity to be important power players in the decades ahead, although both will struggle to remain unified, while economic growth in the EU will be slow and India will face major environmental and demographic challenges. Another center of economic power will be found in Southeast Asia, where 800 million people will live in one of the fastest-growing economic centers in the world. Clearly, the focus of economic power in the 21st century will be the Pacific Ocean, and, if the major powers in that region can work together to avoid conflicts and to facilitate trade and investment, living standards across that vast region can improve dramatically, benefitting billions of people.