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THE FUTURE OF WORLD POWER: AN ANALYSIS OF LONG CYCLE THEORY

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Authors IVIE, HARRISON MCKINNEY

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Download date 23/09/2021 15:05:38

Link to Item http://hdl.handle.net/10150/614137 Ivie 1

THE FUTURE OF WORLD POWER:

AN ANALYSIS OF LONG CYCLE THEORY

By

HARRISON MCKINNEY IVIE

A Thesis Submitted to the Honors College

In Partial Fulfillment of the Bachelors Degree With Honors in

Political Science

THE UNIVERSITY OF ARIZONA

MAY 2016

Approved by:

______

Dr. Tom Volgy Department of Political Science

Ivie 2

Abstract:

In 1498, the Portuguese created an interconnected international system by establishing a maritime trade route between and India. The maritime trade route brought unprecedented economic power to the Portuguese, established as the first world power, and served as the origin for long-cycle theory. Between 1498 and present day there have been four complete world power cycles and the world is currently in the fifth. The world has systematically transitioned from world power cycle to world power cycle every one hundred to one hundred and twenty years. The has been in its world power cycle for the over seventy years since the conclusion of World War II. Using historical, quantitative, and theoretical analysis I have analyzed the United States’ current position, and the positions of and Russia as potential challengers to the world power of the United States. The results are that neither China or Russia are currently in position to over-take the United States as the world power of the international system. Ivie 3

Introduction

The International System

The term ‘international system’ is both a noun and an adjective. The international system as a noun refers to all the international actors of the world, and as an adjective it is descriptive of the interconnectedness of all international actors. This paper will utilize long cycle theory to anchor historical observations and hypotheses about the ebb and flow of concentration of power within the international system.

When we use the term ‘international system’ we are also making the assumption that the interconnectedness of the world causes the world to operate as a single system rather than as a world made up of regions and states that are isolated from one another. This paper will discuss the origins and history of the interconnected world and why some states have become more powerful than others. This paper will then dissect the present state of the international system, and why the United States will remain as the world power into the foreseeable future.

Defining Power

The power of individual states will be determined militarily, specifically regarding naval strength; economically, with an emphasis on the ability to control as well as domestic demographics; politically, regarding alliances and coalitions, as well as the sufficiency of domestic political institutions; technologically and level of innovation, specifically by determining if a state has made innovative break-throughs that alter the world; institutionally, regarding whether or not a state has been able to create domestic and international institutions that it derives power from. Throughout history, the militaristic, economic, technological, Ivie 4 political, institutional, and innovative status of a states have been major determinants of the capacity to be powerful states.

Notwithstanding it is important to know where to start when assessing who the world’s most powerful states are. Just as the DNA of any given human plays a large role in determining who that human will become regarding their mental or physical capabilities, each state has its own “DNA” that helps us determine its potential capabilities. Among other things, the DNA of each state includes its geographic location and features, the demographics of its population, and the proximity and power of its neighboring states.

Long Cycle Theory

Before the year 1498, there was no discernable international system and that is because there had never been a true maritime power. The ability to transfer goods, people, and ideas by sea significantly reduces the amount of time required for communication and transportation, and significantly increases the amount that can be transported. This same idea is present today with the fact that it costs $0.17 per container-mile to ship goods by sea versus $2.40 per container- mile to ship goods by tractor trailer across land (Zeihan). Long cycle theory is based on the ability of states to project power with maritime force rather than use of land-based because the only way to project power around the entire globe requires having a navy and trade network that is capable to do so.

In addition to focusing on the maritime power of states, long cycle theory also suggests that there is a single state that is the “world power” of the international system that is responsible for providing order and stability to the international system. More specifically, a world power Ivie 5 supplies leadership and the tools for meeting global problems, and it organizes and coordinates the relationships between the political and other subsystems at the global level (Modelski).

Since the first world power cycle began in 1498, the international system has gone through dramatic shifts every 100-120 years, which has always coincided with global war, and has resulted in the beginning of a power cycle. This defines the first facet of long cycle theory: recurring cycles. Further, every world power cycle passes through four chronological phases that last 25-30 years each beginning with phase one: global war. At the conclusion of global war, a single powerful state emerges as the most capable to provide order and stability to the international system thus becoming the new world power. At the conclusion of the global war phase, the international system enters phase two of the world power cycle: world power.

During the world power phase, the international system is relatively stable and absent of any major global wars. During this period there are no viable challengers to the world power and this allows the world power to project its power with relative ease. Next, the world enters into phase three: delegitimation.

During phase three, rising powers within the international system, which are not faced with maintaining the order of the international system, are able to allocate a greater percentage of their resources to developing their domestic , , and technology. As the rising powers within the system grow stronger, the demand for international order supplied by the world power wanes and as the strength of the world power and rising powers converge, the cycle eventually enter phase four: deconcentration.

During the deconcentration phase the rising powers reach a power parity with the world power. Eventually, one, or multiple, rising powers will emerge as a challenger to the world Ivie 6 power, and this results in global war. It is important to note though that no challenger to the world power has ever become the world power of the next cycle. After the global war concludes the international system returns to phase one of its new world power cycle. While the average length of a world power cycle has been roughly 104 years, each cycle has been equal or greater in the length than the previous cycle, and this leads us to the second facet of long cycle theory: continuous evolution of the international system.

The evolutionary tendencies of the international system mean that no two cycles will be exactly alike. The evolution of technology, the evolution of how wars are fought, and the evolution of how power is projected have the ability to alter how the international system functions. Long cycles can be explained by two main forces: entropic decline that is inherent in every order, and the erosion of monopoly power (Modelski).

The relationship between the international system and long cycles can be summed up in two points: the recurrence of long cycles every 100-120 years, and the occurrence of irreversible evolution of the international system.

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History of World Powers

Portugal

In 1498, Portugal created the first international maritime trade system. In the late 15th century there were two European states with the capacity to become the world’s first maritime powers: Habsburg and Portugal, and the discovery of the New World opened up myriad opportunities for trade, and accumulation of wealth for both states. In 1494, instead of warring over the newly discovered hemisphere, Spain and Portugal signed the , which effectively cut the map of the world in half by way of a north-south meridian that ran halfway between the Cabo Verde Islands and the island of . The treaty granted the

Spanish access to everything west of the meridian, and Portugal everything east of the meridian.

While Spain was intent on using its power to colonize the New World and expropriate copious amounts of natural resources, Portugal was more intrigued by cutting the massive costs of obtaining goods in the spice trade from China and India. Less than a decade prior to the Treaty of Tordesillas, Portuguese explorers had discovered a way to potentially undercut the Ottoman monopoly on trade with India: open-sea maritime trade routes. This was thanks to Portuguese explorer, Bartolomeu Dias who, in 1488, was the first European explorer to sail from continental

Europe to the Cape of Good Hope in and then into the Indian Ocean. Three years after the treaty was signed, in 1497, Portugal sent a merchant convoy led by explorer Vasco da

Gama around the Cape of Good Hope in attempt to become the first European state to sail all the way to India. The voyage was a success, and in 1498 da Gama reached Calicut, India, which was a main center of commerce for the Indian Ocean region at the time (Modelski). In 1499, da

Gama returned to Portugal and sold the spices he had acquired for massive profits, and Ivie 8 permanently altered how the world engaged in international trade. But it is important to consider why, of all the states in Europe, Portugal was the state that decided to take the risk to sail from

Lisbon to Calicut, a 22,000 mile round trip journey on the high seas? The answer has to do the

“DNA” of the Portuguese state.

The reason Portugal took the risk to reach India by sea was economic in nature but rather than out of greed it was a result of Portugal’s geographic location and features, and Portugal’s desire for self-preservation; King Manuel I of Portugal was a realist. During the Middle Ages the

Iberian Peninsula was rife with conflict as Muslim invaders from the North African region launched continuous attacks from the south. The constant conflict divided the region into small protectorates that were run by various warlords who, subsequently, took advantage of the introduction of gunpowder to Europe during the late 14th century to innovate and create more efficient weaponry. The fact that the Iberian Peninsula is surrounded by the and the Atlantic Ocean meant that the people of the Iberian Peninsula were naturally sea-going people, more so than their contemporaries in Western and Central Europe. The Iberian people became not only proficient sailors but also excellent cannon manufacturers, which gave both of the Iberian states the capacity to become the first maritime power.

Not only did the constant conflict divide the people of the Iberian Peninsula, it also resulted in Iberian society being the poorest in all of Europe in the century leading up Portugal’s rise. Not only were the Portuguese relatively poor, they were also located on the very western end of the spice trade that came from China and India. The Ottomans, who functioned as the middle-men in the spice trade between Asia and Europe, were able to charge the Europeans extraordinarily high prices but the cost of spices for the Spanish and Portuguese was even higher than it was for the states in Western and Central Europe. Europe’s second longest river, the Ivie 9

Danube, stretches from its estuary in the Black Sea all the way through Eastern and Central

Europe and into what is today the western border of . Due to the fact that there are no major rivers connecting the Iberian Peninsula to Western Europe, and that the Pyrenees

Mountains function as a major geographic barrier between the Iberian Peninsula and continental

Europe, the cost of transporting spices overland from Germany to the Iberian Peninsula involved much greater costs and a greater number of middle-men. Portugal’s possession of highly skilled sailors who had robust weaponry to defend themselves against belligerents, and the fact that

Portugal’s poor financial standing made the absolute cost of the spice trade even more relatively expensive pushed the to find a way to cut costs. Despite the extraordinarily length between and Calicut, the Portuguese spice trade cut the cost of spices in Portugal by 90% and enriched the state—Portugal was now in control of international trade (Zeihan).

The ability of the Portuguese to undercut the market prices set by the Ottomans was severely disrupting to the revenues the Ottoman’s generated from the spice trade, and it soon resulted in conflict but the Portuguese navy possessed ships that were better built, better equipped, and had more experienced naval infantry—Portugal had the maritime power to protect its control of international trade. The fact that Portugal didn’t emerge from global war meant that it immediately started in phase two of its world power cycle but it was a fleeting cycle though due to the increasing expenditures of the royal family. Additionally, as noted before, it was difficult to transport goods between Portugal and Continental Europe and so the Portuguese became the new middle-men of the spice trade by sending its excess spices to the burgeoning commercial market in , as early as the first decade of the (Global war,

Public debts…) As early as the Portugal was required to take on increasing amounts of Ivie 10 debt to finance its expeditions, and consequently Portugal was deeply in debt by 1543 (Rasler

Thompson Global War…). As the financial spiral continued post-1540, Portugal entered the third phase of its world power cycle. Portugal’s financial woes continued unabated into the mid-16th century, and by 1560 Portugal declared and with the initiation of the Eighty Years

War in 1568 the Portuguese entered the fourth and final phase of its world power cycle.

Despite the fact that Portugal served as the impetus for the modern international system, and profoundly altering the interconnectedness of the world, Portugal served primarily as a global economic power and was never able to significantly project its power militarily. Although it is argued that was the truly global power of the time as it had colonized much of Central and South America, and flooded the market with goods and gold from the New World,

Spain did not alter the structure of the international system in the way that Portugal was able to.

This was due, largely to the fact that the Treaty of Tordesillas forbade Spain from disrupting the established major markets in the Middle East and Asia (History of World pwr cycles). Albeit

Portugal was not the same kind of world power that the was or that the United

States still is regarding military strength, technological innovation, political alliance networks, or international institutions it was the first state to connect the world trans-regionally through maritime trade and served as the impetus for the international system. Portugal’s increasingly unstable financial situation, and the fact that its Spanish neighbors were a dissatisfied rising power are what ultimately led to Portugal’s demise as a world power.

The “DNA” of the Portuguese state can explain both the rise and fall of Portugal during the first world power cycle. The fact that the Iberian Peninsula is surrounded by water allowed the Portuguese to become great sailors; their belligerent neighbors to the south led to the Iberian people being great weapons manufacturers; the lack of riverine network in the Iberian Peninsula, Ivie 11 the geographic barrier presented by the Pyrenees Mountains, and fact that the Portuguese were on the very western end of the spice trade exponential increased the cost of acquiring spices.

These factors led to Portugal’s rise. The fact that Portugal is a very small country in terms of area and had a small population meant it could not defend itself very well from its powerful neighbor,

Spain. Portugal’s power was economic and was derived strictly from its control of international trade, once that was gone so too was Portuguese world power.

The Dutch

In 1580, Spain emerged as the challenger to the operating world power, Portugal, when

King Philip II of Spain annexed Portugal into the Kingdom of Spain. Spain’s attempt at becoming a world power was thwarted by its own overly ambitious expansionary policies—as has been common with challengers to the world power. Similar to result of World War II, the

Napoleonic Wars, and the Wars of Louis XIV when the challenger to the operating world power was unable to win a war while fighting on multiple fronts, Spain was fighting wars with and England while at the same time attempting to extinguish revolts in its Habsburg colonies. The Eighty Years’ War began in 1568 with the revolt of the colonies and became more complex for the Spanish when the English joined the war in 1585 at the defense of the . By 1588, Spain had reconquered its colonies in the Southern

Low Countries, which today consist of and , but this was also the year when the great was defeated during an attempted invasion of England by sea.

The defeat of the Spanish Armada was deflating for the Spanish, and the financial toll of replacing and rebuilding its naval forces severely damaged its chances of winning the war and by the early 1590s, the Dutch Republic had reconquered what would today be the current borders of Ivie 12 the Netherlands. In 1609, a temporary truce between the Dutch Republic and the Spanish- controlled southern provinces of the Netherlands would come to be known as the Twelve Years’

Truce, and would mark the beginning of the second world power cycle with the Dutch as the new world power.

The year 1609 also marked the beginning of the “Dutch Golden Age.” The Dutch

Golden Age, which was a period of time that spanned the majority of the when

Dutch trade, naval capabilities, financial institutions and overseas colonies were most prominent, also coincided with the Dutch world power cycle but the Dutch rise to power was already a century in the making by the turn of the 17th century. Just as Portugal’s “DNA” served as incentives for innovation, the same is true for the Dutch Republic. During much of the Medieval period in Europe the Dutch Republic was relatively poor compared to its counterpart in the southern Netherlands provinces of Flanders and Brabant, which is where the city of Antwerp is located. Until the latter half of the 16th century the of the Dutch Republic was based on agriculture and fishing while Antwerp in Brabant was a commercial center of Western Europe that had long-standing, close business relations with the Portuguese spice trade. When the uprisings of the southern Netherlands provinces erupted in 1568 many of the craftsmen, artisans, and merchants who took part in the burgeoning commercial economy of Antwerp fled to the northern provinces and added to the already growing urban populations (EH). Just as Portugal was a relatively small country, the Dutch Republic was even smaller and despite the fact that the majority of the Dutch economy was generated from agriculture, the domestic production of grains could not keep up with the demand of its flourishing population, and so the Dutch had to import. By the mid-16th century the Dutch were sending ships to the Baltics for grain, and to

Western France for salt using their own ships for the transportation of goods so as to cut out the Ivie 13 middle-men of the trade—just as the Portuguese had done half a century earlier. This benefitted the Dutch in multiple ways: by cutting out the middle-men in their trade they were able reallocate funds towards their industries, which resulted in the creation of faster, more efficient ships; the increase in trade, and growth of their shipbuilding industries greatly improved the Dutch economy and led to the creation of major financial institutions in

Amsterdam; the Dutch became even more proficient at sailing and expanded their capacity for oversea trade.

The fact that the Dutch Republic was a small country with an agricultural sector built to support a small population, and was strategically located on the shores of the North Sea in close proximity to all the major European powers put the Dutch in an auspicious position to become an economic and maritime trade center for Europe. The Dutch also had something that gave them a great advantage over Portugal, Spain, and France regarding trade in continental Europe: The

Rhine River. The Rhine empties into the North Sea through Rotterdam and so not only did the

Dutch have easy access to trade with the French, English, and Iberian Peninsula, they also could trade goods deep into the heart of Europe. The Rhine runs through, or borders what is today

France, Germany, , Liechtenstein, and and it also runs within a hundred miles of the Danube River, Europe’s second largest, which runs all the way to the Black Sea. By the late second half of the 16th century the Dutch were in position to greatly expand their overseas trade and compete with the Spanish and the Portuguese.

In addition to expanding oversea trade during the 1580s and 1590s to include South

America and West Africa (Penelope), the Dutch succeeded in overthrowing Spanish rule in

Antwerp in 1585, and by the mid-1590s the war had reached a stalemate. The continuous fighting was severely damaging Spain’s finances, and was exponentiated by the fact that Dutch Ivie 14 oversea trade was growing. In 1602, Dutch trade in Asia grew by leaps and bounds when the

Dutch East India Company (VOC) was established and was granted monopoly rights on trade in

Asia. The VOC eventually became the world’s first multinational corporation when it opened up factories in Java, Sumatra, India, and the Malay Peninsula during the first decade of the 17th century (Penelope). The VOC was not just a multinational corporation, it served as a wing of the

Dutch government and possessed the ability to pursue treaties, wage war, and mint their own coins. The VOC’s superior naval capabilities meant that the Portuguese merchants in Asia were held at the behest of the VOC’s . The expansion of the VOC’s trade in Asia came at a significant expense to the revenues generated by the Portuguese trade in Asia and by the first decade of the 17th century the Spanish were exhausted financially and talks of a cease-fire began in 1607 and were reached in 1609.

The Twelve Years Truce was not just a temporary defeat of the Spanish. Along with a cease-fire, the truce meant that the Dutch Republic was now an officially recognized state and that all trade embargos that had previously been levied on the Dutch were to be removed. This allowed the Dutch economy to grow at an even faster rate, and greatly expand its growing international trade network in the East Indies, Mediterranean, and the Americas. The Dutch firmly established themselves as the world power during the - time period with the creation of an oversea colonial network that was larger than that of the Spanish or Portuguese, the creation of financial institutions and corporate finance methods, and control of international trade. The financial institutions of the Dutch Republic included the establishment of a deposit and exchange bank in 1609 and the establishment of a lending bank in Amsterdam in 1614, which greatly helped to foster economic growth (EH). As the concept of bills of exchange became popular in the Dutch Republic the ability of the Dutch, as well as merchant traders and Ivie 15 bankers throughout Europe, to take on debt and grow their economy grew exponentially. The emergence and growth of Amsterdam’s banks marked a major shift in the Dutch economy from one based on capital accumulation through trade—like that of the economy of Portugal when it emerged as a maritime power during the early 16th century—to an economy based on merchant capitalism. By the mid-17th century Dutch merchants and bankers had begun to use the

Amsterdam to trade commodity futures, shares of joint stock companies, and engaged in currency and insurance exchanges; the Dutch economy had given rise to a form of corporate finance—the Dutch economic innovations gave rise to a new form of finance, which was able to exponentiate economic growth (EH). The banking and financial sectors of the Dutch economy would be one of the most important innovations created by the Dutch during their world power cycle. In 1640, when the VOC completed the siege of Malacca and pushed out the

Portuguese, the Dutch firmly established the dominance of their oversea trade and colonial network. The mid-17th century was the height of Dutch maritime, commercial, and financial power and was a time period marked by economic and societal innovation, and prosperity never before seen in Europe, or the world. With the conclusion of the Thirty Years’ War in 1648 the

Dutch entered in the the second phase of their world power cycle.

Although Portuguese and Dutch power was similar in that it was based on maritime power and control of international trade, the Dutch were able to compound that success with further economic innovations. Where the Portuguese crown had been in control of the spice trade, the success of the Dutch economy was based on the creation of a capitalist society with successful maritime-based merchants at its heart. By the second half of the 17th century, the merchant fleets responsible for the copious amount of wealth generated by Dutch oversea trade were larger than that of England, France, Spain, and Portugal combined—the Dutch were in Ivie 16 control of international trade (History). The economic riches produced by the Dutch merchants combined with the relatively small population of the Netherlands allowed the Dutch to produce a significant middle-class population (History). At this point, the labor productivity of the Dutch was significantly higher than any other country of Europe, and this is reflected by the fact that wages in the Netherlands were nearly 20% higher than England (History). The mid-17th century was also marked by a rise in the capabilities of the future world power, England. As is common with most rising powers, by the mid-17th century the English were growing discontent with the discrepancy in wealth generated by international trade between themselves and the Dutch.

Between 1649 and 1651 the English Commonwealth doubled the size of its fleet and felt they were in position to challenge the Dutch fleet.

The first three of the four Anglo-Dutch Wars occurred between 1652 and 1674, and although this did not perilously weaken the Dutch, the relative decline of the Dutch was evident as was the fact that the Dutch had entered the third phase of its world power cycle. The First

Anglo-Dutch War (1652-1654) began when the English attempted to protect its trade with North

America by passing the Navigations Act, which stated all goods imported into Britain must be carried by British vessels. It was clear by the conclusion of the war that although the Dutch were superior when it came to number of merchant vessels, the British possessed an extremely capable navy; the Dutch began to expand their navy.

The Second Anglo-Dutch War (1665-1667) began when the British believed they were in position to seize the Dutch trading and shipping networks. The Dutch, who had been expanding their navy for a decade, embarrassed the British and made it known that they were the dominant naval power of the day—the Dutch had the naval capacity to protect their international trade network. The conclusions of the Second Anglo-Dutch War though directly preceded the War of Ivie 17

Devolution (1667-1668) that was launched by another rising and belligerent power in the region,

France. The War of Devolution was launched by King Louis XIV of France following the death of King Phillip IV of Spain in 1665. With the death of King Phillip IV, King Louis XIV felt that he was entitled to the territory and consequently took action. King Louis

XIV had intended to conquer all of the Spanish Netherlands territory but the war resulted only in his conquering of Flanders and unsurprisingly, this disappointment for the French led directly to the Third Anglo-Dutch War (1672-1674), also known as the Franco-Dutch War.

In 1670, the English and the French signed the Treaty of Dover, which was a military alliance aimed at defeating the Dutch Republic. The Dutch, whose navy was still the superior of

Europe, was able to defeat the the English and French handily and in 1674 the Second Treaty of

Westminster was signed by the warring parties and the Third Anglo-Dutch War concluded. More importantly though was the fact that in 1677, King Charles II of England arranged a marriage between his niece, Mary, and Prince William III of Orange, which meant that Prince William III of Orange was now fourth in line as an heir to the English, as well as the Dutch throne. The marriage between William and Mary also formed a dominant political coalition between the two states that ended up being a deciding factor during the Wars of Louis XIV. It was at this point though that the Dutch entered phase three of their world power cycle.

The death of King Charles II of England in 1685 meant that his brother, James II was the new king of England. By this time the French had built the strongest military in all of Europe and wariness of that growing military power was reflected in the creation of the League of Augsburg in 1686, which was a coalition of European states that all aimed to limit the growing power of

King Louis XIV of France. King James’ II rise to power and the growth of France’s military were both factors that led to the Glorious Revolution in 1688. King James II was a catholic in a Ivie 18 country that had a strong anti-Catholic history and when his first son was born in 1688, the wife of William III, Mary, a protestant—as was William III—dropped from second in line to the throne to third, and William dropped from third to fourth. In addition, King James II was much friendlier towards the French than the Dutch were comfortable with because an English-French alliance would be the end of the Dutch Republic. In November of 1688, after garnering promises of political and financial support in England, William III launched an invasion of England and overthrew King James II in what is known as the Glorious Revolution. William III was now

King William III of England, as well as Stadtholder William III of Orange. King William III of

England soon joined the League of Augsburg, now known as the Grand Alliance, and this marked the beginning of the Nine Years’ War (1688-1697) as King Louis XIV of France interpreted the Dutch invasion of England as a declaration of war. Taken out of context the successful Dutch Invasion of England could be seen as an exclamation point on Dutch power but it was actually the opposite as King William III focused heavily on building an already prominent English navy while using Dutch funds to do so.

At the beginning of the Nine Years’ War the French had the superior naval and military forces but throughout the course of the war the English and Dutch navies grew at a much faster rate and the ability of King William III to maintain the Grand Alliance was a major factor in being able to deny the French—superior political coalitions prevented a French victory.

Additionally, although the Dutch benefitted militarily from its alliance with England it was also saddled with being responsible for much of the funding for the war, which drained it financially.

The Treaty of Ryswick in 1697 ended the Nine Years’ War but peace never really lasted as the

Spanish War of Succession (1701-1713) erupted four years later. Ivie 19

By the beginning of peace talks in 1712 it was clear that Britain was in position to become the next world power. The French, who had essentially been fighting a war on multiple fronts since 1688, was exhausted financially and possessed a massive amount of debt.

Additionally, with the death of Louis XIV three years later in 1715, and a military that had weathered over two decades of constant fighting France was no longer the prominent military that it was during the Nine Years’ War. The Dutch could no longer compete with the size and strength of the British navy and after functioning as the main financier for the British for almost two decades of war, the Dutch were also carrying a large debt burden. In addition to carrying the heavy debt burden, over the course of the Nine Years’ War and subsequent War of Spanish

Succession much of Amsterdam’s prominent banking and finance community moved to London.

Similarities between the Portuguese and Dutch World Power Cycles

The world power cycles of the Portuguese and the Dutch were similar in their rise, fall, and the fate of their challengers, as is presumed to occur through the long cycle theory framework. Both countries are small in terms of area and population—similar state DNA. Both countries exist on the coast of major bodies of water with direct access to the open-sea, which allowed their peoples to become proficient sailors—similar geostrategic locations, and maritime proficiency. Both countries faced economic pressures that forced them to engage in efficient oversea trade, which led to control of international trade—similar control of international trade.

Both states made economic innovations that altered the international system: trans-regional maritime trade for the Portuguese, while the Dutch were able to expand the Portuguese oversea trade network and combine it with their own innovative banking and financial sectors. Both countries existed mainly as economic powers, and although the Dutch were able to hold their Ivie 20 own against belligerent European powers during the mid-17th century, they were never strong enough to project stability across Europe and for most of the 17th century, Europe was engaged in multi-state war.

The Dutch and Portuguese power differed in the sense that the innovations of the Dutch allowed them to derive power from the creation of economic institutions, and additionally, the

Dutch were able to preserve their power throughout the turbulent 17th century with better utilization of multi-state coalitions.

Before the Dutch rose to power the Portuguese and the Dutch had a close economic relationship due to the fact that much of the Portuguese spice trade was directed through

Antwerp. In the quarter century leading up to English world power the Dutch and the English also had a close economic and political relationship as the Dutch contributed significantly to financing of English war effort during the late 17th century. In addition to Dutch financing, much of Amsterdam’s banking and financial sector relocated to London during this time as well.

Regarding the challengers to the Portuguese and the Dutch, both the Spanish and the

French were defeated while attempting to fight wars on multiple fronts for decades at a time with insufficient alliance networks, which resulted in financial ruin and the inability to continue fighting effectively.

Regarding the demise of the Portuguese and the Dutch as world powers, both were brought to their knees by a massive burden of debt, financial ruin, and the inability to protect themselves from neighboring countries that were also belligerent rising powers. When the

English rose to power at the conclusion of the War of Spanish Succession they already had a navy that was more capable than what the Dutch or Portuguese had ever possessed, the English had a larger country in terms of area as well as population, the location of the English was far Ivie 21 more geostrategically advantageous as the English Channel separate it from continental Europe, and the English were in the beginning stages of the greatest technological revolution in history: the Industrial Revolution. Just as the Dutch made innovations that helped redefine the meaning and projection of power, so too did the British. Nevertheless, many aspects of the first British world power cycle remained the same such as naval power, economic power, control of international trade, geographic features, and innovations that helped to reshape the world.

Britain I

The Treaty of Utrecht in 1713 marked the end of the Wars of Louis XIV, and the beginning of the first British world power cycle. Although the British world power cycle began in 1713, the lead-up to Britain as a world power began almost two centuries prior. The British were faced with an energy crisis during the mid-16th century as the consumption of lumber in

Great Britain had far surpassed the ability to regrow forests. This resulted in an increasing price of lumber, and created the fear that the English crown would not have sufficient lumber to build ships. This inconvenience served as the incentive for the British to find an alternative source of energy, and the new energy source happened to be one that the British had plenty of: .

During the late 16th and early 17th century the mining of coal grew at a faster rate than the rate of increase in domestic consumption so the British began to export their excess coal. The British, who were naturally sea-going people as they lived on an island, were more than capable of devising an extensive oversea trade network, which is what they intended to do. Just as the

Portuguese and Dutch innovated their shipbuilding industry in order to build more efficient merchant ships, the British also created more efficient merchant vessels. During the late 16th century, in order to expedite their entrance into the oversea trade market, the English crown hired Ivie 22 to disrupt Spanish and Dutch trade with the Americas. By 1591, the British sent merchant ships around the Cape of Good Hope in South Africa to the Indian Ocean region and in

1600 the English East India Company (EIC) received its royal charter for trade in the Indian

Ocean in order to grab share of the Portuguese spice trade network. Over the course of the next forty years the English established colonies in the and increased its trade with North

America and in 1651 they passed the Navigation Acts so as to protect its flourishing trade network from Dutch merchants. Consequently, the Navigation Acts led to the three Anglo-Dutch

Wars, the War of Devolution, the Nine Years’ war, and finally the War of Spanish Succession.

Despite on-going war during the second half of the 17the century, the English managed to charter the Hudson Bay Company (HBC) in 1670, which greatly expanded its fur trade in North

America, and the Royal African Company in 1672, which was responsible for the extremely profitable Atlantic Slave Trade. While the English were greatly expanding their presence on the international stage, they were also separating themselves domestically. In 1689, a year after the

Glorious Revolution, the British established one of the most important political institutions in history: The Bill of Rights. The Bill of Rights not only limited the power of the , it also gave greater power to and established political and legal rights for all British citizens.

The constitutional guarantee that property of English citizens would not be expropriated by the

Crown, or that taxes would be levied excessively or inequitably was unprecedented and is still maintained today in every . A guarantee that the English citizens would not have property unlawfully seized by the government was also a warmly welcomed reassurance to all potential foreign investors. Not only did the Glorious Revolution result in the creation of the most important political institution in history, when William of Orange crossed the English

Channel he also brought with him the concept of financial institutions, specifically the idea of a Ivie 23 —The Bank of England was established in 1694, and served to promote financial stability. While it is undeniable that the extraordinary economic growth exhibited by Britain in the late-18th and until the end of the 19th century was due in large part to technological innovation, and control of international trade, the importance of political and economic institutions that served to facilitate the necessary political and legal environment for that extraordinary innovation and growth should not be understated, as it often is. Beginning in the

1680s and extending deep into the 18th century, innovation in Britain spread like wildfire.

Throughout the 17th century, technological innovations using coal for energy in the production of goods significantly increased. As the use of coal in the production of goods increased, innovative tendencies increased due to the fact that goods that had previously been produced by using open-wood fires as energy were susceptible to being damaged by coal fumes.

The 1680s proved to be a turning point as new production methods using coal for fuel allowed for the smelting of nonferrous metals including lead, copper, and tin ores (Nature). Britain took another giant leap forward when Abraham Darby created his coke smelting process in 1709, which made possible the smelting of iron using coal as fuel. By the signing of the Treaty of

Utrecht in 1713, the British were a prominent naval power that had an extensive and growing oversea trade and colonial network, they had a flourishing population, and were in the midst of the industrious revolution—soon to be the industrial revolution.

The early to mid-18th century in Britain was marked by technological innovation:

Abraham Darby’s coke smelting process in 1709, which served as the impetus for the British iron industry; Thomas Newcomen’s atmospheric engine in 1712, which was the first mechanical pump to utilize steam, and increased the efficiency of coal mining; James Watt’s steam engine of

1763, which replaced Newcomen’s engine as a more efficient ; James Hargreaves’ Ivie 24

Spinning Jenny of 1764, which increased the efficiency of weaving textiles; Richard Arkwright’s water frame of 1769, which also increased the efficiency of the textile industry (Crafts). The economy and rate of production grew steadily during the 18th century until the year 1760 when industrial production began to expand significantly. This was the early years of the Industrial

Revolution (Crafts).

In addition to an increase in domestic industrial innovation, the 18th century was also marked by constant maritime battles between the British, French, and Spanish. The constant fighting helped the British naval officers hone their naval tactics and strategy while at the same time it allowed the British to expand their oversea trade and colonial network. Increasing international trade during the latter half of the 18th century facilitated the gradual shift of the

British economy from agriculture-based to industrial-based and by 1775, the British had become importers of agricultural products but this was offset by massive exports of cotton textiles(Crafts). In 1776, Britain’s American colonies declared independence, which consequently created a domino effect that led to the French Revolution and the Napoleonic

Wars. The year 1776 was also when Britain entered phase three of its first world power cycle.

The Declaration of Independence in 1776, and subsequent victory of the American rebels proved that enlightenment values could be successfully adopted, and that revolution was possible. Two leaders of the American independence movement, Benjamin Franklin and Thomas

Jefferson, both frequently visited France and consorted with French intellectuals, which consequently helped inspire the French Revolution in 1789. The 1770s and 1780s in France saw grain shortages, high taxes on the middle class, minimal taxes on the nobility and clergy, and a bankrupt crown that still found a way to live extravagantly. After the particularly harsh winter of

1788-89, the summer of 1789 marked the end of the first British world power cycle, and the Ivie 25 beginning of the French Revolution with the Tennis Court Oaths in June, the storming of the

Bastille in July, and the Declaration of the Right of Man and Citizen, which was based on the

American Declaration of Independence, in August—who’s main author, Thomas Jefferson, drew inspired from the 1689 English Bill of Rights.

The French Revolution last from 1789 to 1799, and by its conclusion, Napoleon

Bonaparte had risen to the highest ranks of the military, and with a coup d’etat in 1804 he declared himself emperor. During the Revolutionary Wars of 1790s, multiple other states in

Europe including the British, Austria, Prussia, the Dutch, and Spain formed a coalition force against the French in order to prevent revolutionary fervor from spreading into their states.

Notwithstanding, by 1797, the first coalition fell apart and Britain was the only state remaining that had not made some sort of peace treaty with the French.

In 1798, a second coalition was formed, which included the British, Austria, Russia,

Portugal, and the but was defeated in 1801, again leaving Britain as the only coalition force standing strong. In 1803, a third coalition of European forces hoping to contain and defeat the French was formed, which included Russia, the British, the ,

Naples, and . By 1806, the coalition forces were again defeated but the Battle of

Trafalgar in 1805 proved the continuing dominance of the British navy, and still, today serves as a microcosmic example of why continental, land-locked powers cannot be world powers.

As the French continued to dominate land battles across Europe, Napoleon was in the midst of planning an invasion of England and by 1805, Napoleon had built and set aside an army of 200,000 for that purpose. Before Napoleon launched his invasion though he wanted to secure a trans-English Channel supply line from the Royal Navy and so he intended to clear the English

Channel of Royal Navy vessels. Napoleon ordered a rendezvous of French and Spanish fleets so Ivie 26 as to create a flotilla of sufficient size to defeat the Royal Navy. Although Napoleon was a brilliant tactician when it came to land battles, he was less familiar with naval strategy as were the novice French naval officers that had replaced the high-ranking naval officers who had been purged during the French Revolution. This was not the case for the British, and it showed on 21

October of 1805, when a Spanish and French fleet, which had yet to attain the size desired by

Napoleon, ran into a fleet of 27 British ships off the coast of Trafalgar, Spain. The British decimated Napoleon’s fleet, and of the 33 French and Spanish ships, the British sunk 19 without losing any one of their own (Battle of). Although the Napoleonic Wars raged for another decade, and Napoleon continued to conquer continental Europe, Napoleon knew he would not defeat the

British until he could defeat their navy.

By the War of Sixth Coalition, which began in 1812, the end was near for Napoleon. In

June of 1812, Napoleon launched an invasion across the Northern European Plain into Russia, with a massive army estimated at somewhere between 450,000 and 650,000 troops (Greenspan).

Napoleon had the man power necessary to defeat the Russians but the sheer length of the French supply line was impossible to overcome. On September 14 of 1812, Napoleon and his army conquered Moscow but the Russians had burned almost everything in the path of the French army leading to Moscow, and had emptied the city of almost all food and supplies (Greenspan).

On October 19, faced with starvation, Napoleon and the French began their retreat to France but by the time Napoleon and his army returned to France in November the French army was no more than 40,000 men (Montana.edu).

Between 1812 and 1814 the French suffered continuous losses until Napoleon and the members of the sixth European coalition signed the Treaty of in May of 1814, which established peace between the French and the coalition members, and exiled Napoleon. Ivie 27

Napoleon returned from exile in March of 1815, and launched one final military campaign, the

Battle of Waterloo. French defeat at Waterloo permanently ended the Napoleonic Wars, restored the French monarchy, and resulted in the exile of Napoleon to the island of Saint Helena until his death in 1821.

The defeat of Napoleon and the French Empire was inevitable. All challengers to the operating world power have attempted to fight on multiple fronts, without a substantial alliance network, and with too great a focus on being a dominant continental force. Although all challengers to the operating world power prior to Napoleon were defeated due to financial ruin from extended military campaigns, Napoleon’s attempted invasion of Russia so crippled the

French military that the economy did not have time to collapse before the French were defeated militarily. Due to the fact that the British were still in control of international maritime trade, were separated from continental Europe by the English Channel, and had the most dominant navy in the world that was unchallenged by the French, all the English had to do was wait for

French to collapse economically or militarily. France never reached a power parity with Britain, who was still the dominant naval, economic, and institutional force while also maintaining control of international trade, and so Britain’s world power never faced deconcentration, and this allowed Britain to reemerge as the world power for a second time in 1815. By the end of the

Napoleonic wars, ideas of free market economics and free trade, spread most famously by Adam

Smith in his book The Wealth of Nations (1776), and which were preserved by the 1689 Bill of

Rights, had become pervasive throughout Britain. The ability of the British to maintain the foundation of international trade, colonialism, industrialization, and naval capacity it had created during the first cycle, while adding new innovations to its economic, military, technological, and Ivie 28 political power put the British in position for extraordinary economic growth, and unprecedented global power.

Britain II

The second British world power cycle began in 1815, and although previous world powers had been dominant naval powers, they had never been powerful enough to project peace and stability around the world as Britain did during the 19th century. In addition to being the first global military superpower, the economic growth of Britain exponentially increased during the

19th century as the British were able to take advantage of the legal and economic stability its institutions provided and utilize its superior industrial base. Between the years 1800 and 1840 the rate of industrialization in Britain increased exponentially during what economist Kenneth

Pomeranz has called the ‘great divergence.’ The great divergence was a time period that spanned the 19th century and was characterized by Britain striding ahead of the rest of the world in technological innovation, industrial production, and efficient political and economic institutions.

At the start of the Industrial Revolution in Britain in 1760, 37.5% of the population’s income came from agriculture while only 20% came from industry but by 1840 those numbers had changed to 24.9% and 31.5%, respectively (Crafts). This can be partly explained by the fact that urbanization of Britain was increasing dramatically and between 1760 and 1801 the population of London grew from 740,000 to over 1 million, and by 1815 the population had jumped to 1.4 million (Clive). By 1820, urbanization had also started to increase in the emerging manufacturing centers in Leeds and Manchester (Crafts). The 1820s were also important in that it was the first decade when investment in manufacturing was greater than investment in agriculture (Crafts). As early as the 1830s and through the middle part of the 19th century, in Ivie 29 addition to having a major textile production industry, Britain was the major supplier of iron and steel to the world market due to the low-cost of British raw materials, and the superior technology and production methods (Allen). The creation of the Bessemer Process in 1856 allowed for an even more efficient production method for steel, and reasserted British dominance in the iron and steel industry.

Although the industrial production of Britain was increasing substantially during the first half of the 19th century, the regime of international free trade combined with innovations in transportation and communication methods between the late-1830s and early-1840s was what allowed British power to span the globe. The year 1837 was extremely important in British history as the first commercially available telegraph, as well as the first transatlantic steamship came into service. The following year, in 1838, the first major railway between London and

Bristol made its first journey. By 1843, the world’s first iron-hulled, screw-propeller-driven, transatlantic steamship came into service, and in 1846 Britain officially began their regime of international free trade with the revocation of the Corn Laws. By the 1860s free trade was ubiquitous but the United Kingdom was able to benefit far more than the rest of Europe as its industrial production per capita was 9-11 times greater than the average European state and

Britain is estimated to have been about half a century ahead of the average European state in terms of economic growth (Bairoch). Additionally, international trade was a much larger part of the British economy and so reducing tariffs provided a greater advantage for the British. In addition to profiting from trade, the British were also the leading foreign investor of the time

(Bairoch) with much of their foreign investments allocated to North America, specifically the railway and telegraph industries of the United States. While British foreign investment absolutely facilitated the growth of the telegraph and railroad industry in the United States, it Ivie 30 also benefitted the British in two ways: first, by increasing transportation and communication efficiency—combined with the British steamship—it drastically reduced the cost of grains for the British, and second, the United States was growing rapidly and so foreign investment also facilitated fantastic returns for British investors. Consequently, this drastic reduction in the cost of grains is what hurt the development of states in continental Europe even more so than the flood of industrial products coming from the United Kingdom. Between the late-1830s and the mid-1870s the United Kingdom was an unchallenged industrial, colonial, naval, and international trading power. Beginning around 1870, though the United States and Germany began to make relative gains against the United Kingdom regarding industrial output, trade, and military strength, and this is also when Britain entered into phase three of its world power cycle.

By 1870, the United States, the United Kingdom, and Germany were responsible for just over two thirds of the world’s industrial output (Chandler). By 1872, the United States had the largest economy in the world, surpassing the British economy (Carter), and by the mid-1870s the

United States had begun to catch up to the British in measure of GDP per capita. Additionally, in

1871 Otto Von Bismarck unified the German states into a single entity, and in 1879 he ended

German participation in international free trade, which ultimately would be recognized as the beginning of the end of the European system of free trade. By 1887, Germany had erected ad valorem tariff barriers for imported wheat to 33%, 47% for rye, and by 1887 France also had established ad valorem tariffs on wheat to 22% (O’Rourke, K). Britain maintained its free trade policy but it did so to its own peril as land rents in Britain fell by over 50% between 1870 and

1913 (O’Rourke, K). While the United States and Germany erected protectionist policies that allowed their industries to develop, British industries began to increasingly feel the pressure imposed by foreign . Additionally, the failure of the British to adopt newer, more Ivie 31 efficient technologies such as the -Martin Open-Hearth Furnace in steel production hurt the ability of their industrial sector to keep up with the growing industrial production of the

Germans and the United States. Between 1870 and 1914, industrial productivity increased much faster in Germany and the United States than it did in Britain (Allen) and after the depression of the 1890s the United States emerged as the world’s leading industrial nation (Chandler). By

1913, the United States was producing 36% of the world’s industrial output compared to

Germany or the United Kingdom, which were producing 16% and 14%, respectively (Chandler).

The first mover advantage that the British experienced for almost 150 years during and following the Industrial Revolution is what ended up being the reason for British decline. The sunk cost fallacy affected most of Britain’s iron and steel firms as their ironmasters proved reluctant to pay the cost of switching to newer technologies, and while they did save on the fixed costs that they would otherwise have had to pay, the savings came at the expense of greater efficiency.

Although the British were losing their power in terms of industrial production, they still maintained power over world trade and the international financial system as the Pound Sterling continued to be used as the international currency, which is what helped to offset increasing trade deficits that arose due to the fact that by 1913, Britain, the once dominant producer and exporter of iron and steel, had become a major importer (Allen). Britain’s inability to assert itself as a world power militarily and economically became evident during the First World War. Perhaps even more telling of the First World War is the fact that the United States intervened on behalf of

Britain and France, proving that it was more than just a regional power.

At the beginning of World War I in 1914 the British still maintained the most prominent naval fleet in the world. World War I is a turning point in military history as all states that were involved possessed modern weaponry, and it is the first time the world has seen the use of air Ivie 32 forces, and chemical weapons. By the end of World War I, in 1918, the world had witnessed unprecedented destruction and carnage as there were over 9 million casualties on the battlefield and an additional 5 million civilian deaths while leaving over 21 million more wounded (World

War I). London also witnessed and felt the horrors of war for the first time since 1688 as the

Germans launched dozens of Zeppelin bombing campaigns targeting British civilians, which killed less than 700 citizens but achieved its goal of terrorizing and breaking the morale of

British citizens. The results of World War I set the stage for the Bolshevik Revolution in Russia, the Great Depression, the rise of Nazi Germany, World War II, and the rise of American world power.

At the conclusion of World War I, the United States, who fought the entire war on foreign soil, became the economic and industrial power of the world as Europe was faced with rebuilding its infrastructure, and populations. The end of World War I marked the end of the

Ottoman, German, and Austro-Hungarian Empires, as well as the end of the liberal economic order of Europe as democracy gave way to fascism and free market economies gave way to severe protectionist policies. In addition, Germany was faced with paying war reparations that it could not afford, and almost all the allied countries in Europe took a chunk of German territory for their own. Both of these factors helped facilitate the rise of nationalism and xenophobia in a

German state that already had a strong history of nationalism. Conversely, the United States experienced an economic boom during the immediate post-war period during what is known as the Roaring Twenties. The United States became a creditor nation to states in Europe that needed capital to rebuild their countries, additionally, the United States was able to cover the net loss in industrial production of Britain and Germany. The deconcentration of British world power became even more evident during the 1920s when an increase in protectionist policies Ivie 33 around the world hampered world trade and led to the Great Depression and subsequent rise of

Nazi Germany.

The dynamics of World War II regarding the world power-challenger relationship and the resulting outcome was exactly what history would have told us it would be. Germany was a rising, continental-based power in the European community, and was extremely upset over the treatment it had received at the conclusion of the First World War. Not only was Germany a rising power, it had been the most productive industrial, and chemical manufacturing economy in

Europe for almost a quarter of a century. Although Germany has direct access to the sea, it is considered a continental-based country due to the fact that its entire geography exists within the

Northern European Plain. This means that Germany essentially has no geographic barriers that prevent neighboring countries from invading; Germany’s geography leaves its national security vulnerable. Just as Russia, whose western quarter exists in the Northern European Plain, is extremely sensitive to an ever-encroaching NATO (hence the absurd number of tanks), so too was Germany extremely sensitive to the encroachment by the allied countries after World War I.

Germany not only lacks geographical features, it was also located right between France and the

Soviet Union, which were two historically strong countries, and this created the same type of realist-based paranoia that we see in Russia, today. Although the German economy had begun to recover during the late-1920s, the subsequent Great Depression reversed those gains and resulted in high unemployment and poverty levels (The Next Decade). Given the economic woes, and international humiliation experienced by the German people, the rise and popularity of a fascist leader like Hitler, who spewed nationalism and xenophobia is not surprising because these two things united the German core against the “other” and created a sense of strength and security that they so longed for. What separated Germany from prior challengers is that before Germany Ivie 34 began its attempted usurpation of continental Europe it created an alliance network with ,

Japan, and the Soviet Union. Additionally, before the outbreak of the war in 1939, Hitler initiated Plan Z, which was a plan to significantly increase the strength of the German Navy in an attempt to defeat Britain’s Royal Navy. The outcome of the war might have been significantly different if Germany took the time to grow a slightly larger alliance network and navy but time is of the essence when a leader chooses to use visceral nationalism and xenophobia as a rallying point for war. In 1938, Germany annexed Austria and later would coerce Britain, France, and

Czechoslovakia into ceding the Sudetenland to Germany as well. In early-1939, Germany invaded the remaining territory of Czechoslovakia, and coerced into ceding territory as well. In the spring of 1939, Britain and France extended their guarantee of protection to but would lend only half-hearted support when Germany and the Soviet Union invaded Poland during the fall of 1939. The reluctance, and inability of the British to assert themselves militarily against the Germans established that they were no longer capable of existing as the world power.

Notwithstanding, the British still possessed a military formidable enough not to be defeated. The

Battle of Britain in 1940 provided a fresh reminder of the significant advantage the geographic separation that the English Channel afforded to the British, and it also served as a major strategic turning-point in military history. The Germans understood, just as Napoleon understood almost

150 years prior, that they would not emerge victorious until the United Kingdom was defeat outright or through agreement. The Germans had formulated a plan referred to as Operation Sea

Lion, which was to be an amphibious-air assault and invasion of Britain. The chronology of

Operation Sea Lion was to play out in similar fashion to Napoleon’s attempted invasion of

Britain with the exception that the Germans had to incapacitate the Royal Air Force (RAF) before they could sweep the English Channel of mines, and engage the Royal Navy in the North Ivie 35

Sea and the Mediterranean to limit the Royal Navy’s response in the English Channel. The Battle of Britain was a turning-point for the British in World War II just as the was a turning-point for the British in the Napoleonic Wars, as the Germans were sufficiently repelled by the RAF. The defeat of the Germans in the Battle of Britain forced Hitler to abort Operation

Sea Lion, and served as the first major Nazi defeat in World War II. In addition to being a turning-point in World War II, the Battle of Britain was a major turning-point in military history due to the fact that this was the first major battle fought primarily in the air. British victory came at a cost though, as over 20,000 Brits were killed during the German air campaigns. The war soon reached the point where the Germans—as has been the fate of every challenger to the world power—was fighting the war on multiple fronts against the French, British, Americans, and

Russians. Additionally, just as Napoleon had done 130 years prior, the Nazis suffered horrible losses during the Battle of Stalingrad in 1943, and they were never able to recover. By the end of the war, the casualties and destruction in Europe, Japan, and China were like nothing the world had ever seen. World War I paled in comparison to the estimated 21 million soldiers, and 27 million civilians lost during World War II (Estimated). Additionally, nearly 36 million of the total 48 million deaths were people of European nations; Europe was destroyed. The destruction of Europe during World War II confirmed the end of Britain’s second world power cycle and ushered in the United States as the new world power, and for the first time in history the world power was located outside of Europe.

Ivie 36

The United States

As has been the case for all prior world powers, the United States was at least a century in the making by the time is assumed its role as world power in 1945. Actually, though the beginning of the world power for the United begins with its geography and geographic features.

In 1803, the United States purchased the Territory from France, and little to the knowledge of France or the United States it contained more miles of navigable river than the rest of the world combined (Marshall) and also contained, what is today, the largest contiguous area of fertile farmland in the world (Zeihan). As it would develop, no U.S. agricultural region is more than 150 miles from the nearest navigable waterway, which means that the necessary funds to create artificial infrastructure for the transportation of agricultural products around the country is of a limited nature (Zeihan). By 1848, the United States had purchased, annexed, or conquered through war the entirety of what the continental United States is today, sin the Gadsden Purchase of 1853, and the implications were enormous. Where the French and the Germans were unable to invade Britain in consecutive centuries thanks in large part to the geographic barrier provided by the English Channel, the United States now had the Atlantic Ocean to its east and the Pacific

Ocean to its west as buffer zones. To the south of the United States is mainly desert, and there are only two population centers of any real significance within 500 miles of the U.S.-Mexican border, which means there is no real staging area for an attempted invasion (Zeihan). Today,

Mexico does not pose any strategic threat to the United States, and is one of the United States’ largest trading partners. Additionally, Canada is one of the United States’ closest allies and trading partners and provides as a massive buffer zone from any attempted invasion from the north. From the 1840s onward, the United States’ geographic location and features has and continuous to serve as one of its greatest assets and defense mechanisms. Ivie 37

The economy of the United States also blossomed throughout the 17th century. Just as the

Portuguese and the Dutch, and subsequently the Dutch and the British shared close economic and/ or political connections, so too did the United States and the British. The relationship between the United States and the British is the closest of the three aforementioned due to the fact that the United States was originally composed of a completely British population and was a

British colony for nearly 200 years. Additionally, the American Declaration of Independence, and the Constitution of the United States were heavily influenced by British political scholar,

John Locke, as well as by the English Bill of Rights. Initially though, the British benefitted far more than the Americans in this relationship. The Atlantic Slave Trade, which brought Africans to the Americas, enriched the British while also helping to transform the United States’ southern states into an agricultural powerhouse that ended up becoming one of the world’s largest producer of cotton and tobacco. Beginning in the early-19th century, not only did the United

States possess unlimited amounts of fertile land in proportion to the population that it had, it also had copious amounts of cheap labor in the form of African slaves. This in turn benefitted the

British because much of the cotton produced in the United States was exported back to Britain, fueling Britain’s dominant textile industry during the Industrial Revolution. The British not only delivered African slaves to the United States, beginning in the mid-19th century foreign investment in the United States’ railroad and telegraph industries by British investors started to increase and helped facilitate development. Combined with British innovations in steam power, the introduction of the rail drastically reduced transportation costs, again facilitating Britain. By

1820, the United States’ economy only accounted for 1.8% of the world’s GDP (Jacques) but its land, labor, and the combination of foreign and domestic capital set it on the path to develop into the next world power during the following century. During the early-19th century U.S. slave- Ivie 38 grown cotton accounted for over half of U.S. exports, and by 1840 the United States was responsible for 60% of the world’s cotton production, and 70% of the cotton consumed by

Britain’s textile industry (Gilderlehrman). Although the economic growth of the United States slowed temporarily during the American Civil War (1861-1865), the war time actually help facilitate the development of the United States’ bond market because prior to the civil war most businesses and firms were local or regional but issuance of war bonds helped develop the bond market at the national level (Geisst).

Although economic growth in the United States during the 1870s was relatively stagnant due to the Panic of 1873, by 1870 the U.S. economy accounted for 8.8% of the world’s GDP compared to the U.K., which accounted for 9.0% (Jacques). The depression of the 1870s was actually more damaging to the economy of Britain, which would never fully recover as the U.S. economy continued to expand. By the 1890s the United States was the world’s largest: industrial producer, economy, market, and producer of wheat and corn, not to mention that the development of a blue-water navy was already underway by this point (Zeihan). The United

States’ consumer base and human capital store were also greatly expanding during this time period because between 1880 and 1920 over 20 million immigrants arrived at the doorstep of

America (U.S. Immigration). The significant increase of trade, and maritime power in the United

States during the late-19th century was facilitated in 1903 by the United States’ leasing of exclusive rights to the use of the Panama Canal. By the first decade of the 20th century the United

States’ navy was a force to be reckoned with, at least in the eyes of the U.S. as in 1904 President

Theodore Roosevelt presented the world with his Corollary to the Monroe Doctrine, which claimed the Western Hemisphere as belonging to the United States, as well as promising to intervene militarily if any European power should attempt to extend its influence into America’s Ivie 39

“backyard.” Roosevelt followed-up on his Corollary in 1907 when he sent sixteen U.S. battleships on a voyage around the world, essentially parading the U.S.’s arrival as a global military power (Marshall). Those sixteen U.S. battleships visited the ports of over twenty different countries during their maritime version of a debutant ball.

At the beginning of World War I in 1914, the United States’ economy accounted for

18.9% of the world’s GDP, dwarfing the exiting world power, Britain who by 1914 was only responsible for 8.2% of the world’s GDP (Jacques). The back-to-back world wars absolutely decimated Europe but because the United States’ domestic market was, and continues to be so large, even as the world’s leading industrial, and agricultural producer the United States’ international trade has only accounted for roughly 15% of its GDP (Zeihan), which means it is less vulnerable to decreased demand abroad. At the conclusion of World War II, the United

States was far and away the world’s most dominant military, economic, and soon-to-be the world’s leading institutional and political power. Not only did the United States have the most powerful navy in the world after the war, it essentially had the only navy in the world as the navies of every former European power was destroyed. The same can be said for the land-based militaries of all the European powers that fought in World War II, aside from the Soviet Union.

Albeit the Soviet’s lack of naval capacity limited their land-based military’s ability to project power to the distance it could travel across land (Zeihan). The United States had the most powerful military relative to the international system in the history of the world. In addition, the

U.S. was now responsible for more than 60% of the world’s aggregate manufacturing output

(Branson) and by 1950 the U.S. economy was responsible for 27.3% of the world’s GDP, which was a greater percentage than the cumulative GDP of Western Europe (Jacques). The economic and militaristic power of the United States was clear. Ivie 40

The United States had actually started reshaping the world, or at least it was continuing to shape the Western Hemisphere, in 1940 in what is known as the Destroyers-for-Bases

Agreement with Britain when the United States agreed to give 50 U.S. naval destroyers to the

Royal Navy in exchange for a 99-year rent-free lease of British air and naval bases in: The

Bahamas, Jamaica, St. Lucia, Trinidad, Antigua, and British Guiana (Fact File). Not only was this advantageous for the United States regarding its acquisition of almost all of Britain’s naval bases in the Atlantic, by providing the British with more ships it was essentially fueling the fire that was World War II in Europe, guaranteeing that the British and the Germans, the greatest power rivals to the United States, would continue fighting each other into submission, which is what happened.

In 1941, with what can be considered as a preamble to the United States’ entrance to

World War II and accession to the role of world power, the leaders of the United States and the

United Kingdom created what is known as the Atlantic Charter. The Atlantic Charter established post-war goals for the for the allied nations, which included: no territorial aggrandizement; no territorial changes made against the wishes of the people, self-determination; of self- government to those deprived of it; reduction of trade restrictions; global cooperation to secure better economic and social conditions for all; freedom from fear and want; freedom of the seas; and abandonment of the use of force, as well as disarmament of aggressor nations. Due to the fact that the Charter was authored by leaders of the United States and United Kingdom, it also established the United States as a world leader and and international institutional power.

As the war was nearing its end, leaders of 44 allied nations met in Bretton Woods, New

Hampshire in July of 1944 to discuss the future of the international system. During the three- week Bretton Woods Conference, the future of the international monetary system was drawn up Ivie 41 with the U.S. dollar at its heart—the first, and arguably strongest official institutional power of the United States. The Bretton Woods conference also resulted in the creation of two still- functioning institutions: The International Monetary Fund (IMF) and the International Bank for

Reconstruction and development (IBRD), which is now part of the (WB). The premise of the Bretton Woods System was that through a system of fixed exchange rates and international monetary institutions the international monetary system would experience relative stability that would foster an increase in trade across borders and help to reduce poverty. Each country was to fix their currency to a gold standard but due to the fact that the U.S. dollar was fixed to the price of gold the U.S. dollar became the popular international reserve currency of the world. Additionally, because U.S. dollars were fixed at a value of $35 per ounce of gold, all U.S. dollars held by foreign central banks were able to be exchanged for gold by the U.S. Treasury.

One of the major developments during the creation of the Bretton Woods system though was influenced by the Atlantic Charter of 1941, which was the free-flow of international maritime commerce and it would be enforced by the only substantial navy left in the world, the United

States navy. An official agreement on the free-flow of maritime trade was made in 1947 when 23 nations signed the General Agreement on Tariffs and Trade (GATT), which aimed to reduce all discriminatory tariffs and quotas and help facilitate international trade.

Following the creation of the Bretton Woods System, in July of 1944, another major international institution was created in October of 1944 at the Dumbarton Oaks Conference in

Washington D.C., the United Nations. The United Nations, which was established during deliberations between the United States, the United Kingdom, the Soviet Union, and China, is an international organization meant to promote international cooperation—the fist official major political institution that the United States was a leader of. Ivie 42

Beginning in 1945, the United States occupied Japan and supplanted its former government with a new constitution that was written by the United States, the Japanese military was dismantled and turned into nothing more than a security force, and the United States built a major military base on the island of Okinawa. In addition to the U.S. military base on Okinawa, the U.S. also built a military base on the South Pacific island of . Consequently, before the year 1950 the United States had major military instillations in Japan, the , Guam,

Hawaii, and on the western coast of the Continental United States; the Pacific Ocean belonged to the U.S. navy. In 1948, the United States built a military base in West Germany, and the following year in 1949 the North Atlantic Treaty Organization (NATO) was formed when twelve states signed the agreement: Belgium, Canada, , France, , Italy, Luxembourg,

Netherlands, Portugal, the U.K., and the U.S. NATO was formed to prevent any international conflict like World War II from ever happening again, as well as to contain the power and growth of the Soviet Union. In addition to projecting its military power through the establishment of foreign military bases, the United States launched Operation Paperclip in 1945, which resulted in the recruitment of over 1,600 of the top Nazi scientists to come and work for the United States military while receiving immunity from the actions of the Nazis, in order to help develop weaponry and advance US military technology (Lower). By the year 1950, although the United States was the clear world power in terms of its military and naval capacity, its economy, its institutional strength, and its superior geographic location and features, the Cold

War with the Soviet Union had entered full-swing.

Ivie 43

The Cold War

The Cold War simmered through the 1940s and 1950s until a 1957 technological innovation by the Soviet Union struck fear into the hearts of U.S. citizens: Sputnik. In 1957, the

Soviet Union launched the first man-made satellite, Sputnik, into the Earth’s orbit. Albeit

Sputnik was just a soccer-ball-sized piece of metal that beeped, in the eyes of the Americans, this meant the Soviets were vastly ahead of the United States technologically—a horrifying thought.

The feat may have been less horrifying if the Soviets had not yet successfully tested a domestically produced nuclear bomb, but they had done just that in August of 1949. Not only had the Soviets attained nuclear technology, they had successfully attached a nuclear warhead to a torpedo and detonated a hydrogen bomb in 1955, and launched the first successful test of a medium-range, nuclear-tipped ballistic missile in 1956. Even though the United States was still far superior to the Soviet Union regarding its over economy and economic influence, electronic and industries (Zeihan), and institutional and coalition strength, the United States’ fear of a growing Soviet threat was genuine. The threat of nuclear war reached its peak during the 1962 Cuban Missile Crisis but was successfully avoided and never again would reach such a high level.

Unlike challengers to the world of the past, the Soviet Union was an amalgamation of multiple states, and in 1955 it created the Warsaw Pact, a military coalition meant to rival

NATO. The Soviet Union was essentially an extension of its strongest individual state, Russia, and included the individual of , , Lithuania, Belarus, Ukraine, Moldova,

Georgia, Azerbaijan, , Kazakhstan, Uzbekistan, Turkmenistan, Tajikistan, and

Kyrgyzstan. The Soviet Union was massive, accounted for 17% of the world’s land mass, and was nearly the size of the entire North American continent (The Former). In addition to the Ivie 44 individual republics of the Soviet Union, the Warsaw Pact included Bulgaria, Albania, Romania,

Poland, , East Germany, and Czechoslovakia. Just as NATO was in-part created to help contain the Soviet Union, the Warsaw Pact was created with the intention of limiting the encroachment of NATO into Central and Eastern Europe. The Warsaw Pact countries became satellite states of the Soviet Union due to the Soviet military’s occupation and influence over their domestic . The height of Soviet power relative to the United States came during the

1950s and 1960s when Soviet military and space technology rivaled that of the United States.

During the succeeding decades, the United States would begin to separate itself as a global power as the Soviet economy stagnated and slowly collapsed.

Beginning in the late-1970s, the Soviet economy began to stagnate as the rest of the world began to grow at a faster rate. Although the Soviet Union maintained parity with the

United States in terms of pig iron, steel, cement, and oil production, the Soviets lacked the sophistication of the United States in emerging industries such as electronics and specialty chemicals (Smitha). Due to the fact that Soviet leaders were making all decisions regarding domestic production in the Soviet economy, not to mention the fact that Soviet state-controlled firms faced no domestic or foreign competition, the Soviet economy was completely devoid of the innovation and efficiency seen in the American economy. Additionally, so much of the revenue generated by the Soviet state was allocated towards social welfare, the military budget, and inefficient production of goods there were limited funds left to be allocated to commercial technological innovations.

In 1985, Mikhail Gorbachev became the party leader and initiated Perestroika in order to reinvigorate the stagnant Soviet economy. The goal of Perestroika was to establish limited market reforms in the Soviet the economy with the belief that socialism could be made as Ivie 45 efficient as a free market economy but it did not work as Gorbachev had planned. Throughout the second half of the 1980s, Perestroika resulted in extended economic decline and high (Smitha). In 1987, Gorbachev granted independent Soviet firms control over production decisions and in 1988 Gorbachev entirely removed the Soviet communist party from control over the economy (Smitha). By 1989, labor strikes had begun and movements for independence in many Eastern European countries were on the rise, and in 1990, and for the first time since the creation of the Soviet Union, each republic within the Soviet Union was granted autonomy to hold independent elections. The independent elections within the Soviet republics resulted in the central Soviet government losing political control in Estonia, Latvia, Lithuania, Moldova,

Georgia, and Armenia. In 1991, a newly elected and first-ever president of Russia, Boris Yeltsin, officially banned the Communist Party in Russia and seized all of its property. By the end of the year all former republics of the Soviet Union had followed suit, and the Soviet Union was no longer a legal political entity; the Cold War was over.

Just as the United States emerged from World War I and II unharmed domestically, and with the dominant economy and military, the United States emerged from the Cold War as the clear world power. Throughout the 1990s, while the Russian economy suffered from high inflation and unemployment, corruption, low growth, and negative population growth, the economy of the United States flourished. The U.S. economy finally began to reap the benefits of the massive population expansion that happened between 1946 and 1964 when the U.S. population grew by over 76 million during the Baby Boomers Generation (History.com).

Consumption in the United States reached a new peak between the years 1983 and 2007, while immigration increased significantly beginning in 1991 (Dent). Although the U.S. economy flourished throughout the 1990s, it experienced the dot-com bubble crash in 2000, terrorist Ivie 46 attacks in September of 2000, which would serve as the impetus for wars in Afghanistan and

Iraq, the world-wide of 2008, an increasingly volatile Middle East beginning with the Arab Spring of 2011, and the reemergence of Russia and China. Nevertheless, in 2016 the

United States still maintains its militaristic, economic, innovative, political, and institutional edge over all other states in the international system, and so the question remains: what is the future of U.S. power in the international system? We will now analyze current U.S. power and the prospects for India, China, and Russia emerging as the next world power during the 21st century.

Ivie 47

The United States in the 21st Century

In the second decade of the 21st century the United States is still the clear world power militarily, economically, technologically, in terms of innovation, demographically, and geographically. The belief that the United States’ power is in decline, a belief held not only by many foreigners, but also by many citizens of the United States, is not a new phenomenon and has been commonly and erroneously believed since the Early-Cold War period.

The United States emerged from the World Wars as the far-and-away world power but by the mid-1950s and throughout the 1960s and 70s, the United States believed that the Soviet

Union was their equal, and perhaps had already passed them in terms of military power and technology. Although in hindsight, the 1950s and 1960s in the United States are seen as decades of positive and progressive growth, they were turbulent times as American society was going through its Civil Rights Movement at the same time it was involved with the Vietnam War. The

Vietnam War was a two-decade long conflict that resulted in American defeat and withdrawal, and also cost the United States billions of dollars, which posed a problem for the Bretton Woods

U.S. Dollars to gold system of convertibility. The enormous amount of Dollars printed in order to fund the lengthy Vietnam War resulted in the amount of U.S. dollars in global circulation to be far greater than the value of gold in the U.S. Treasury. The deficit was recognized by foreign leaders, and so, under the belief that the United States would not follow through with converting their U.S. Dollars to gold, they began to frantically exchange their reserves of US dollars for US gold causing the United States’ gold reserves to plummet (Coppes). In August of 1971 US

President, Richard Nixon, officially ended the the convertibility of U.S. dollars to gold. Between the rise of the Soviet Union in the 1950s, the Cuban Missile Crisis in 1962, the Civil Rights

Movement of the 1950s and 1960s, and the Vietnam War, which lasted from the mid-1950s until Ivie 48 the mid-1970s, the United States was unable to fully appreciate the great power they were due to constant conflict domestically and externally. The 1970s was another decade of constant worry that the power of the United States was collapsing.

Two years after the abrupt end of the Bretton Woods system, in October of 1973, the

Yom Kippur War started when Egypt and Syria engaged Israel. In response to the hostilities of

Egypt and Syria, the United States provided Israel with supplies and weapons. During the Cold

War, Israel was a very strategic ally of the United States due to the fact that it was one of the few countries in the Middle East that was a democracy in contrast to many Middle Eastern states that had fallen into the Soviet sphere of influence. Israel is also strategically located on the banks of the Mediterranean Sea and serves as a bisector between the Middle East and North Africa in addition to having a close proximity to the Suez Canal. Israel is still a strategic ally of the United

States today but is not nearly as essential as it was during the Cold War. During the Yom Kippur

War, the members of OPEC, who are not allies of Israel, were upset that the United States was supporting the only non-Muslim country in the region, and so they placed an oil embargo on the

United States and many of its Western allies. Oil prices shot up from close to $3 per barrel when the embargo started in October of 1973 to $12 per barrel in March of 1974. Although the embargo ended in early 1974, the United States was extremely uncomfortable with the fact that its entire carbon-based economy could come to a screeching halt at the behest of OPEC leadership. The Oil Embargo of 1973 further influenced those who believed American power was waning.

As a result of the collapse of the Bretton Woods system, the quadrupling of the price of oil, as well as a 34% increase in the real cost of energy between 1973-1974 (research) the US stock market, and even more significantly the stock market in London collapsed. Between Ivie 49

January of 1973 and December of 1974 the Dow Jones Industrial Average dropped 45% (Dow) which led to a during the first half of the 1970s. The U.S. economy was suffering from high inflation, and rising unemployment—stagflation—and U.S. leaders needed to do something to restore faith in foreign investors that the U.S. economy and U.S. dollar were robust. In the summer of 1974, President Richard Nixon and Secretary of State Henry Kissinger proposed a plan, which was authored by Secretary of the Treasury, William E. Simon, to Saudi officials. The plan was called the US-Saudi Arabian Joint Commission for Economic Cooperation (JECOR) and its purpose was to promote programs of industrialization, trade, manpower training, agriculture, science and technology, and the development of infrastructure within .

In exchange, Saudi Arabia was to conduct international transactions for its oil in US dollars and then reinvest the billions of US oil dollars (petrodollars) it received into the US economy

(Lippman). JECOR was good news for the United States for two reasons: 1.) Every modern economy needs oil to function, and Saudi Arabia was the most powerful oil producing country in the world’s more powerful oil cartel, OPEC, and therefore it was necessary for every state that purchased oil from OPEC to possess US dollars. JECOR helped the US dollar remain as the world reserve currency. 2.) JECOR reduced the consequence of oil shocks to the U.S. economy because if the cost of oil increased suddenly, Saudi Arabia’s investment into the United States’ economy increases as well. Additionally, the agreement itself inherently reduced the chance of

OPEC oil shocks due to the fact that a healthy US economy was beneficial to both states. Due to the complexity of the JECOR agreement, it was not fully implemented until 1978 (The U.S.), and the combination of much tighter monetary policy that was implemented by new Chairman of the Federal Reserve, Paul Volcker, and the Iranian Revolution of 1979, the United States faced another recession during the early-1980s. Ivie 50

The late-1970s and the early-1980s were an important point in contemporary history though because this was the beginning stages of significant economic growth for the United

States, its economic relationship with Saudi Arabia, and the emergence of the United States as the uncontested world power; the beginning of the collapse of the Soviet Union; the time period when China’s Central Committee decided that market forces must play a larger role in its economy rather than government planning (China). Although the 1980s was when the United

States began to establish itself as the uncontested world power, the historically popular belief that the United States was declining grew in ubiquity once again because as fear of the Soviet

Union decreased, the fear of the growing economic power, Japan, increased. By the end of the

Cold War in 1991, the United States was far-and-away the world leading power, Russia was and would continue to be a collapsed state for the rest of the decade, China was still very much developing country, and Japan was in the beginning stages of a financial crisis that lasted throughout the 1990s, a decade now referred to as “the lost decade.” Albeit the 1990s was a “lost decade” for both Japan and Russia, the 1990s was a decade of economic growth and development for China, India, and the United States. While Japan’s and Russia’s GDP per capita decreased by 12.28% and 49.16%, respectively (Indicators), between 1991 and 2000, China’s,

India’s, and the United States’ GDP per capita increased by 187.96%, 46.26%, and 49.35%, respectively. During the first decade of the 21st century, China’s manufacturing and export-based economy flourished after it joined the (WTO) in 2001. Russia’s energy-based economy also improved during the first decade of the 21st century as oil price increased significantly throughout the middle of the decade. India also went through major economic reform during the early 1990s and has averaged 7% economic growth per year over the course of the last two decades but India still lags behind Russia and China in terms of GDP Ivie 51 per capita and many other indicators of development. As of the second decade of the 21st century,

Japan’s economy still has yet to fully recover and its demographics have only gotten worse. As of 2015, Japan has the second oldest population in the world with a median age of 46.5 (Country

Comparison), only the age of Monaco’s population is higher. Additionally, beginning in 2010,

China’s

Figure 1. GDP per Capita

60000

50000

40000

30000

Current USD 20000

10000

0 1981 1985 1990 1995 2000 2005 2010 2014

China United States Russia India

Source: World Bank

annual economic growth rate, which had been in double digits for decades, began to slow and has slowed every year since. Russia, which was beginning to see the beginning stages of economic stagnation during its recovery from the 2008 financial crisis, has faced far more serious economic trouble since the significant drop in oil prices at the end of 2014. Although

India has maintained its high rate of annual economic growth into the 2010s, it is still far behind Ivie 52

China, Russia, and the United States. In order to establish where China, and Russia stand relative to the United States, and what their chances of becoming the next world power are we have to analyze each state in terms of military, economy, technology and innovation, demography, and geography.

Russia

Geography and Military

Russia is extremely vast and is more easily understood when its territory is split into different regions. Russia’s territory is broken into five main regions: Siberia, Central Asia, The

Caucasus, the Northern European Plain, and the Baltics. To begin we will start with the largest region of Russia: Siberia. The harsh climate and topography of Siberia means that foreign invasion from the east is implausible. Mongolia does not have an expansionist military agenda, nor do they have the capacity annex Russia territory, anyways. Mongolia also had a very strong relationship with Russia during the Soviet-era, and although Mongolia has grown much closer to

China since the break-up of the Soviet Union, the Russians have started rebuilding positive economic relations, including the recent write-off of 97% of Mongolian outstanding debt to

Russia (Panda) in addition to discussions of a potential gas pipeline running between Russia and

China through Mongolia. There is only one country in the Eurasian-Asian region that has or will soon have the capacity to challenge Russian military power and that country is China. The economic and militaristic power of the Chinese has been growing for the past two decades, and they currently have the largest military in the world by measure of personnel (Indicators).

Nevertheless, even if China decided to invade Russia, its supply lines would be thousands of Ivie 53 miles long and the world has repeatedly learned by witnessing attempted invasions of Russia from the west that there is an inverse relationship between supply line length and rate of success for invading militaries. For sake of comparison, the distance between Berlin and Moscow is just over 1,100 miles across the flat Northern European Plain. The distance between Beijing and

Moscow is just under 4,600 miles, and an attempted invasion would involve crossing mountainous Eurasia, traversing the barren Siberian tundra and taiga, and then crossing the Urals in order to access Russian power centers. Additionally, Russia is part of the military alliance called the Collective Security Treaty Organization (CSTO), which includes the Eurasian countries Kazakhstan, Kyrgyzstan, and Tajikistan. Currently, though a Chinese invasion of

Russia is unrealistic especially due to growing economic relations between the two states, and the domestic concerns of both states. Siberia is not only useful for its capacity as a buffer zone because Siberia is where the majority of Russia’s oil and gas fields are.

Even though the vast majority of Russian territory is to the east of the Ural Mountains in

Siberia, the vast majority of the Russian population lives to the west of the Urals in European

Russia and therefore the geography of European Russia is much more relevant to Russia’s prospects of becoming a world power. There are three imporant geographic regions of focus west of the Urals: The Baltics, the Northern European Plain and Eastern Europe, and the Caucasus.

The Baltic region is important to Russia due to the proximity of St. Petersburg and

Moscow to the Baltic States, and the Baltic Sea. The importance of the region increased significantly in 2004 when NATO expanded to include all three Baltic States: Estonia, Latvia, and Lithuania. This meant that NATO forces had moved to within seventy miles of St.

Petersburg where NATO forces had been over one thousand miles away during the Soviet-era Ivie 54

(The Next 100). Additionally, St. Petersburg is an important city because it houses one of only three major Russian naval bases.

The Northern European Plain, which spans from the Ural Mountains south to the

Caspian Sea and Caucasus Mountains and then east all the way to the Carpathian Mountains and then northeast through Germany and into the and Northern France, is the primary geographic region of focus for the Russians, and has been for centuries. Aside from Russia’s limited access to warm-water oceans, the Northern European Plain is the main reason Russia will never become a world power. The emphasis placed on its land-based military as a result of its geographic vulnerability is exemplified by the fact that Russia’s military has the most tanks of any country in the world with 15,500. Russia has 70% more tanks in its military than the country with the second most number of tanks, China, which has only a little over 9,000 tanks. Russia’s air force is prominent but it can only operate in proximity of Russia’s air bases due to the fact that Russia’s navy has only a single air craft carrier. In comparison, the United States has 19 vessels that could be considered air craft carriers and 10 official carriers (Aircraft). Luckily for the Russians, the Eastern European country that it has the best relations with is the one it most desperately needs good relations with, Belarus (Friedman), which provides as a buffer zone between Moscow and the NATO states in Central and Western Europe. Although talk of Ukraine joining the and NATO has been thrown around for years, and even though there are many Ukrainians who support the proposal, the proximity of Russia’s military and intelligence agencies combined with the fact that Ukraine receives much of its natural gas from

Russia will make it hard for any such proposal to pass. Russian relations with Ukraine will remain volatile into the foreseeable future as Ukraine remains divided east to west regarding support for Russia. Belarus, on the other hand, has a much greater and more unanimous affinity Ivie 55 for Russia and Russian culture. Belarus is also a member of CSTO, which includes Russia,

Armenia, Kazakhstan, Kyrgyzstan, and Tajikistan. The security of the Northern European Plain region of Russia comes down to the prevention of NATO expansion towards Russia’s European borders, and the dedication of significant resources to its land-based military and air force. In the foreseeable future, Russia will be concerned with maintaining influence in Eastern Ukraine, and preventing Ukraine’s joining of NATO or the EU. The relations between Belarus and Russia will remain very close, potentially resulting in a supranational union similar to the EU.

The Caucasus region is a unique and troublesome region for the Russians. It is unique in that the only Russian part about it is the fact that the territory belongs to the state of Russia. The

Caucasus region is inhabited by Georgians, Chechens, Turkic people, and the people of

Dagestan, and the region is rift with rebel groups and independence movements. What makes it even more complicated is the fact that Georgia is an ally of the United States. Consequently, if

Russia allows independence movements in the Caucasus region to succeed, the Russian border could potentially be pushed north of the Caucasus Mountains, which would give the Georgians, and subsequently the U.S. and the West the strategic position on Russia’s southern border. Two specific regions on the Caucasus border region that have strong support for independence movements are and Abkhazia. Additionally, Russia and Armenia are close allies and members of the CSTO, which complicated Russian relations with Azerbaijan especially due to the recent rekindling of the conflict in the Nagorno-Karabakh disputed region between

Armenia and Azerbaijan.

What separates the geographies and subsequent militaries of Russia and the United States is the fact that not only does the United States have the strongest military in the entire Western

Hemisphere, which allows its navy to station around globe without putting the national security Ivie 56 of the U.S. at risk, the United States has huge warm-water coastlines. The benign nature of neighbors to the U.S. and its huge warm-water coasts have allowed the United States to develop an extremely sophisticated navy that has the ability to patrol international waters around the world. The fact that Russia must deal with so many potential conflict zones at home and along its borders means that even if Russia had the financial luxury to build a powerful navy, its navy could not patrol the seas far from home, as the U.S. Navy does. Russia’s geography leaves it vulnerable to the west and south, which requires that a significant portion of its military resources are dedicated to protecting its borders rather than projecting power internationally.

The United States realizes that the closer NATO expands towards Russia, the more resources Russia must dedicate to its land-based military, and this reduces Russia’s ability to challenge the global power of the United States. For this reason, the United States will continue to support any pro-Western forces in the region, and continue its political rhetoric regarding the aggressive and rogue state of Russia. From the Russian perspective, the expansion of NATO represents a credible threat to Russian national security, which is why the recent military action

Russia has taken in Ukraine, Crimea, and Georgia are actually defensive in nature.

Crimea is strategically important to the national security of Russia due to the fact that foreign access to the Black Sea is the same as foreign access to Russia’s south. Since 2004, when

Romania and Bulgaria joined NATO, every bordering country of the Black Sea, besides Russia and Ukraine, is part of NATO, and for this reason the Russian annexation of Crimea was not aggressive territorial acquisition, but was a strategic defensive move. Additionally, due to

Russia’s deteriorating relations with Ukraine, Russia needed to secure the Black Sea naval base in Sevastopol that it leases from Ukraine because its lease expires in 2017. The same is true of Ivie 57

Russian involvement in Eastern Ukraine because Western support of pro-Western Ukrainians is threatening to Russian national security.

The number one priority of Russian leaders will remain maintaining the national security of Russia, and this means allocating a far greater amount of military resources to its land-based military along its western boarder than to its navy. The fact that Russia focuses on its land-based military combined with the fact that Russia lacks strategic access to the seas almost entirely eliminates its chances of challenging the global power of the United States by themselves.

Energy and Economy

Russia’s energy industry is closely tied to its overall economy and is a big reason Russia will not be a world power in the foreseeable future. All world powers, past and present, have had significant control of international maritime trade but this is not the case for the Russians. In

2013, more than two-thirds of all Russian exports were either oil or natural gas (Russia is), and of that two-thirds, 98% of Russian exported oil went to Europe or Asia, and 100% of Russian exported natural gas went to Europe. What this means is that almost 70% of Russian exports went through a pipeline and was not effected at all by Russia’s maritime capabilities. Russian energy exports also directly affect the Russian economy as the revenue generated from oil and gas exports account for more than half of Russia’s federal budget (Russia is). Russia’s reliance on energy exports, especially exports to Europe serve as another vulnerability.

Russia is the world’s second largest natural gas producer and supplies 30% of Europe’s natural gas consumption (Russian Gas), which gives Russia leverage in relation to the EU. This leverage is compounded by the fact that the most powerful country in the EU, Germany, is

Russia’s largest European importer. It is no surprise then that when sanctions against Russia due Ivie 58 to the crisis in Ukraine were being discussed, German Economy Minister, Sigmar Gabriel, opposed the sanctions in favor of maintaining Germany’s economic and trade relations with

Russia (Kirschbaum). As the future of the EU and grows increasingly uncertain,

Russia will want to maintain its economic relationship with Germany in order to maintain the leverage it has in Western Europe. Russia should want to keep its relationship with Germany under wraps though, because growing ties between Russia and Germany will inevitably cause

Poland, which is already a NATO State, to look to the United States for protection due to

Poland’s poor history with both the Germans and Russians. As is expected though, the United

States has recently stepped-up its attempts at reducing Russian influence in Europe, which may be in reaction to Germany’s reluctance to sanction Russia in 2014. In 2016, and for the first time in decades, the United States is exporting oil and gas, and the first delivery to a foreign country the United States made was to the Baltic state, Lithuania, which had previously been 100% reliant on Russia for its supply of natural gas (U.S.). Russian energy exports to Europe are of strategic importance to Russia but as the United States enters the European energy market as a supplier, and Western European countries increasingly turn to renewable forms of energy

(McHugh) the Russians will have to fight to maintain their influence. Russia’s ability to access the European market is of vital importance because the Russian energy sector is very closely tied to Russia’s economy and trade.

The negative consequences of the emphasis Russia places on natural resources exportation pertain to the positive correlation between energy prices, and the growth rate of the

Russian economy. Although over the years Russia has built an impressive reserve fund at its treasury from budget surpluses and revenue generated from the exportation of oil and natural gas, its fund has been significantly depleted since the price of oil dropped in late-2014. In 2013, Ivie 59 the reserve fund was an impressive $509 billion (Indicators) but by July of 2014 that number had fallen to $358 billion (Russia’s Currency) In anticipation of a budget deficit and economic contraction in 2016, economist, Sergei Guriev, suggests that Russia’s reserve fund could run out by the end of 2016 or 2017 (Russia’s Currency) Russia’s economy has been so severely hampered by the past 18 months of low oil prices that the leaders of Russia are seriously considering cutting defense budget by 10% this year (Economic Downslide). Meanwhile

Russia’s Finance Ministry has recently announced that if the price of oil stays at $40 per barrel, the greatest amount of growth Russia’s economy could hope for is 1-1.5%. Any greater amount of growth is directly tied to higher oil prices (Russia’s Currency). Russia’s economy is no where near diversified or sufficiently integrated with world maritime trade to be a candidate to surpass the global centrality of United States, and this is due in large part to the same geographic reasons for its limited naval capacity. Russia is, for the most part, a land-locked country and its neighbors in Central Asia and the Caucasus region are poor countries that would be insufficient consumer market-bases for high-tech Russian exports, anyways. Russia’s best bet, economically, is to integrate as much as possible with Western Europe while building its relations with China, and its huge consumer market, because it will never be the center of international maritime trade that the Portuguese, Dutch, British, and the U.S. is due to Russia’s poor geographic DNA.

Current Russian President, Vladimir Putin, came to power in the year 2000 and it had been Putin’s plan all along to achieve by using revenue generated from exporting natural resources (Aron). According to Putin, Russia will need to achieve between 4-

6% annual economic growth through the first half of the twenty-first century in order to catch-up to other developed nations (Aron), which Russia was able to do until the 2008 economic crisis.

In 2016, as half of Russia’s federal budget is still generated from the revenues generated by Ivie 60 energy exports, the decrease in oil prices is seriously hampering the Russian economy but

Russia’s economy will soon have to deal with the problem posed by poor demographics and capital flight.

Demography

Although Russia’s reliance on the exportation of natural resources is the reason for the most recent downturn in its economy, the low birthrate and high mortality rate of Russia, especially during the twenty years between 1991 and 2011, will hamper its economy moving forward. After the break-up of the Soviet Union in 1991, Russia had negative or zero population growth every year until 2011. Between 2011 and 2014, for the first time in twenty years Russia registered minimal population growth (Indicators) but it will not be enough to avoid the inevitable economic burden that will be placed on the newest generation. For twenty years, almost the length of an entire generation, Russia had constant negative or zero population growth, and still, today, Russian mortality rate is 11th in the world while its birth rate is 165th in world, a bad combination for a country that desperately needs population growth to help spur its economy (Indicators). Low population growth rates are especially devastating to countries that embrace generous pension systems, like Russia because as the population of retirees grows relative to the number of working Russians the tax burden on the young, working Russians who represent the engine of consumption must grow, or pensions must be reduced. In 2005, when

President Vladimir Putin proposed cutting social security for 40 million Russians he was greeted with week-long protests across the country, which forced him to reconsider his proposed cuts

(Bigg). As a percentage of Russian GDP, the amount spent on pensions increased from 5%-6% between 2001-2008 to 8%-9% between 2010 to 2014 (Pfeifer). Currently, spending on pensions accounts for 9% of the Russian GDP but by 2030 this number is expected to grow to 12% of Ivie 61

GDP, and by 2050 the number is expected to grow to 16% (Eich). In order to maintain the relative cost of the pension program at 9% of GDP replacement rates must be cut to 28% from

40% by 2030 and then cut again to 20% by 2050 (Eich). It is hard to levy all blame for Russia’s hesitation to drastically alter its social welfare on its leaders though because prolonged protests and social unrest generally end the careers of politicians fairly quickly. Unless the pension system of Russia is restructured, the demographic situation of Russia will be a damper on its economy for decades ahead as projections for the Russian population in 2050 between 90 million at the low end and 128 at the high end (Friedman). In addition to Russia’s shrinking population, the poor economic environment, Russia’s insufficient enforcement of private property laws, and endemic corruption are pushing away Russia’s entrepreneurial class as well as potential foreign investors.

Russia in the 21st Century

Russia lacks the geography, economy, navy, and institutions necessary to be a candidate for the next world power. Russia’s economy, and military are both intrinsically tied to its geography, which puts it at a disadvantage now and forever. Russia is a massive but mostly land- locked country, which hampers its ability to engage in meaningful international maritime trade and also its ability to have a prominent navy. Additionally hampering Russia’s ability to have a prominent navy is the fact that European Russia exists completely in the Northern European

Plain, which leaves its western frontier vulnerable to foreign invasions, which have occurred every century since the . Russia must dedicate significant military resources to its land- based military in the west, and as NATO and the United States continue their expansion towards

Russia, Russia must continue to dedicate more resources to its land-based military. Aside from Ivie 62 the fact that Russia’s geography limits its international maritime trade, Russia’s economy is heavily reliant on energy exports, which leaves it vulnerable to volatile international energy prices. As seen in Figure 2, the recent decrease in oil prices and subsequent contraction of

Russia’s economy has resulted in significant capital flight as foreign investors seek more profitable economies. Russia’s insufficient democratic institutions and rampant corruption both hamper its economy even further. An example of the still-existing corruption in Russia is the

2016 arrest of billionaire air-port owner, Dmitry Kamenshchik, which many in Russia’s business community suggest is another example of Russian authorities seizing the assets of a prominent member of the business community due to discretionary private property laws (Aleksashenko).

The negative or zero growth of Russia’s population between 1991 and 2011 (Indicators) will prove to be another thorn in the side of Russia’s economy in the years to come as Russia’s pension and social security systems will inevitably falter, and consumption will decrease. Russia has a powerful land-based military and even though its purpose is mainly defending Russia’s borders, it will continue to be a Eurasian military power but Russia’s geography, and its current and future economic struggles guarantee that Russia will not be the next world power in the foreseeable future.

Ivie 63

Figure 2. Foreign Direct Investment in-flows

80 70 60 50 40 30 Russia 20 10 Billions of Current U.S.$ 0

Source: World Bank

China

Geography

The continental geography of China provides it with security, while the states that exist along China’s coast are what will be the greatest geostrategic obstacle for China to overcome.

China is often referred to as a civilization rather than a nation-state and that is because although the borders have changed over time, the concept of China has existed for thousands of years. The eastern half of China, where the vast majority of the population lives has, been in Chinese possession since the middle of the Han Dynasty in the year 2 A.D. (Historical), and the current territory of China has only marginally changed since the beginning of the Qing Dynasty in 1644.

To China’s east and southeast is the Yellow Sea, East China Sea, and South China Sea, which gives China great access to the Pacific Ocean, albeit it shares those seas with a handful of other states, and China has never been a maritime power. Although China borders a number of countries to its south, southwest, west, northwest, and north, China’s geography effectively isolates it from any direct conflict with those states. China’s border region with Vietnam, Laos, Ivie 64 and eastern Myanmar is mostly jungle, and from from northeastern Myanmar all the way to

China’s border with Kazakhstan is mountainous. The Himalayas separate China from Bhutan,

India’s Arunachal Pradesh, Nepal, northern India. From there the Karakoram Mountains separate

China from the Kashmir territory and Pakistan. The Hindu Kush, Kunlun, and Tien Shan

Mountains separate China from the Central Asian countries while the Tien Shan and Altay Shan

Mountains partially separate China and Kazakhstan. The Altay Shan Mountains separate China and western Mongolia until the Altay Shan Mountains meet the Gobi Desert, which provides as a buffer zone along the the rest of the Mongolia-China border until it meets the Greater Khingan

Range, which separates Manchuria from eastern Mongolia and Russia’s Far East.

Aside from the Mongol invasions of the 13th century (perhaps the Gobi Desert is not that great of a buffer zone) the only time China has had a major land battle with a bordering state (not including the Korean War), was the Sino-Indian War of 1962, which was fought at altitude in the

Kunlun Mountains in the Aksai Chin region, and resulted in more casualties due to the freezing weather conditions than from enemy fire. Although China and India continue to dispute the territory in Aksai Chin, which is part of the greater Kashmir and Jammu region that is disputed by India and Pakistan, as well as the Arunachal Pradesh region in Northeastern India, the terrain between the two states is not conducive to large-scale warfare.

China’s Tibet region has always been disputed and Tibet continues movements for independence but China wants to maintain possession of Tibet for the same reason Russia wants to hold on to the Caucasus Mountain region: Tibet provides as a geographic barrier between

China and India but if India extended its territory to include the Tibetan Plateau, not only is it strategic high-ground, it also provides as an area to launch attacks from. Ivie 65

China’s Xinjiang territory is similar in that it is sparsely populated and the majority of the population that does occupy the territory are Uighur Muslims the align much closer with the populations of the Central Asian countries. The Uighurs and any rebel or independence movements are severely repressed by the Han in the Xinjiang region because the region is strategically important to the Chinese. Xinjiang contains 22% of China’s oil reserves and 40% of its coal reserves and is of prominent geostrategic importance for the recently announced “One

Belt, One Road” project that will connect China and Central Asia economically, militarily, and politically in an attempt to expand China’s influence in the region (Clover). As China attempts to exert its influence in the Central Asian region it will be interesting to watch how the dynamic between Russia and China develops over the course of the next ten to twenty years.

The vast majority of China’s population lives in the eastern third of the country. Due to the fact that for the past twenty-five years China’s economy has been based on manufacturing and exporting, and China’s urban population has increased by 400 million in that same time period, a significant portion of China’s population, as well as China’s wealth, is located in

China’s coastal regions. Most of China’s large cities that aren’t located in close proximity to the coast are located along major rivers that lead directly to the sea. One of China’s biggest problems is that not only is there extreme income inequality within the population there is also serious income and wealth inequality between regions.

China is geographically in a better position than is Russia as it pertains to its economy and military. China’s long, warm-water coastlines have allowed the Chinese to easily access international maritime trade, and although China has historically always been more oriented towards the Asian continent and has never had a strong navy, its long, warm-water coast lines give China the opportunity that Russia will never have: the ability to develop a strong, blue- Ivie 66 water navy. Aside from having to dedicate military resources to suppressing rebel and independence movements in Tibet and Xinjiang, China’s continental border is relatively safe from invasion, and China’s growing economic relationship with Central Asia will help to reduce that risk.

Economy

The of China began in 1978 when China opened its doors to the international market. In 1978, international trade, the household responsibility system in agriculture, which allowed farmers to sell excess crops on the open market, and town-village enterprises (TVEs) were all established in China. Also, in 1978 the Yuan was adopted as China’s foreign trade currency and the Renmenbi as the domestic currency (China). In 1979, China officially welcomed foreign investment on a limited basis, and by the spring of 1980, China was a member of the World Bank and the International Monetary Fund. The year 1986 marked the establishment of the General Principles of Civil Law, which provided the basic legal principles for the operation of a market economy. In 1990, China’s level of political extraction began to increase relative to the United States and has continued increasing ever since. By 2001, after joining the World Trade Organization (WTO), China had established itself as a major developing economy. Between 2001 and 2011 China’s Middle-Class increased from 3% of its population to

18% (Kochar). In 2014, in terms of GDP based on (PPP) valuation,

China surpassed the United States in size, which means that for the first time since 1872 the

United States was not the world’s largest economy (Carter). Not only has China just surpassed the United States’ GDP, China is still maintaining a GDP annual growth rate of near 7% (IMF) so to suggest that the Chinese economy has been growing over the course of the last two and a Ivie 67 half decades is very much an understatement. According to the IMF, and seen in Figure 3,

China’s economy has increased from accounting for just over 4% of the world’s GDP in 1990, to over 17% in 2015 with projections reaching over 19% in 2020 (IMF).

Figure 3. Share of World GDP (%)

30

25

20

15

Percentage 10

5

0 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

China United States Russia

India Linear (China) Linear (United States)

Linear (India)

Source: IMF

Although the past two and a half decades of Chinese economic growth have been robust, the size of a country’s GDP does not tell the whole story nor does it automatically translate into economic, militaristic, technological, or innovative power. In terms of true market valuation, the

GDP of the United States is still 70% larger than the at over $17 trillion compared to China’s $10 trillion. Even though the economic growth of China has been outstanding, it has largely been based on manufacturing due to China’s advantage in labor costs.

While China has significantly increased its exports of high-tech products this misrepresents

China’s economy because China isn’t actually creating these products. Usually, foreign Ivie 68 companies ship the parts for high-tech goods to China to take advantage of their cheap labor, and then China assembles the products and ships them back out again (Brooks). When it comes to technological production the United States still far ahead of China in terms of the sale of its intellectual property and the gap between the two countries is growing rapidly, as seen in Figure

4. An additional way to see how the international market establishes the profitability

Figure 4. Charges for the Use of Intellectual Property, Receipts

140

120

100

80

60

40

Billions of Current USD 20

0 1981 1985 1990 1995 2000 2005 2010 2014

United States China Russia India

Source: World Bank

of the economies of different countries is by looking at how many foreigners are applying for patents in the country. The reason that a foreigner would apply for a patent in a country other than their own is because that individual has determined the profitability of that foreign economy is greater due to institutions that better protect private property, higher rates of economic growth, or better market conditions for their product. As we can see in Figure 5, the United States still maintains a great advantage in annual patent applications by foreigners. Regarding innovations made domestically in physics, chemistry, and physiology and medicine, since 1990, scientists in Ivie 69 the United States have garnered 114 Nobel Prizes, while scientists in China have garnered only two (Brooks). The United States is also ahead of China in terms of scientists and

Figure 5. Annual Patent Applications by non-Residents

300

250

200

150

100

50

0

Patent Applications (in thousands) 1980 1985 1990 1995 2000 2005 2010 2013

China United States Russia India

Source: World Bank

researchers per capita, percentage of GDP spent on research and development, and annual scientific and technical journal articles published (Indicators). The United States also ranks 5th in the world in the Global Innovation Index while China ranks 29th (Lanvin). China’s growth and development over the past twenty-five years is undeniable but that does not mean China’s growth and development will continue in linear fashion into the future.

China’s economic development model, and rapid urbanization will result in domestic conflict if China does not successfully reform its economy or does not continue growing at its current rate. China’s economy faces four main problems in the coming decade: One, China’s economy is still largely based on the manufacture and export of goods but as China develops it is losing its advantage in labor costs to countries like Pakistan and the Philippines (The Next Ivie 70

Decade). Two, many of the developed countries around the world are aging, which means consumption and demand for manufactured goods from China will decrease, which could lead to mass unemployment if China’s domestic consumer market does not sufficiently develop within the next decade (Dent). Three, as a result of the first two problems the third problem is that between 1990 and 2014 China’s urban population grew by over 400 million, and the goal of the

Chinese government is to increase the urban population by an additional 200 million by 2025

(Dent). Within the next decade, if China does not reform its economic development model,

China could have millions and millions of unemployed citizens in its cities, which will result in mass protests and domestic conflict, or citizens migrating back to the rural areas. Four, China’s

One-Child-Policy, which was in effect between 1978 and 2015, caused the the age of China’s population to increase rapidly. At a time when the OECD countries are aging and decreasing their consumption, China needs to grow its domestic consumer economy to replace the decreased consumption in the developed world but soon the Chinese population between ages of 20-40 will be levied with supporting China’s massive retiree population. What the world is witnessing today in the Japanese economy that has been stagnant for over two decades as a result of its extraordinarily old population, we could witness in China within the next decade. The only problem is that when the Japanese economy began to stagnate in the early 1990s it already had a developed economy, and one that had a GDP per capita larger than the United States

(Indicators).In 2015, China’s GDP per capita is only $13,000, compared to $56,000 in the United

States (IMF), and China also has an extremely high rate of inequality, which means the average

Chinese citizen can not handle paying significantly more in taxes, and the super-rich, as is common, will absolutely balk at the idea of a significant increase in taxes. China will need to address these four problems within the next decade. Ivie 71

Figure 6.

Source: CIA World Fact Book

Recent Chinese economic growth may not be accurate. According to Dr. Larry Lang from the Chinese University of , GDP growth in China has been wildly overstated when considering electricity use in newly built homes and apartment complexes. Instead of growth hovering around 8% it is more likely that growth has been around 4% (Dent). When comparing electricity use statistics, nearly 24% of new homes, condos, and apartments built in

China’s major metropolitan areas are empty (Dent). China has reported that retail sales in the country grew by nearly 10% in 2015, but it is difficult to understand how that is possible when Ivie 72 its domestic production was down and imports were down (Babones). In addition to China’s housing bubble, China’s economy could be facing a private and public debt bubble. China’s debt has grown from 164% of its GDP in 2008 to over 247% at the end of 2015, which means China’s private and public debts combine to be over $26 trillion, and is growing at a rate faster than the rate in the United States during the lead-up to the 2008 financial crisis (Curran). China’s borrowing actually accelerated between 2013 and 2015, and in the first three months of 2016,

China extended $1 trillion in new (Curran). As long as china can continue its unprecedented economic growth, most of its potential economic and financial problems will sort themselves out but if China’s growth continues to slow, as it has been for the past 6 years, the

Chinese economy will face serious problems within ten years.

Nevertheless, the fact that China’s economy is growing and has been growing for the last twenty-five years is evident, even if the numbers coming out of China today are overstated.

China’s growth between 1990 and 2015 was easy growth due to the copious amount of cheap labor, the largest population in the world, and the extent of underdevelopment in the last quarter of the 20th century. Over the course of the last twenty-five years China’s economic growth did not depend on efficiency or human capital because China was so underdeveloped when it opened its doors to the international market in 1978 that the CCP could throw money anywhere or at anything and cities grew rapidly. As seen in Figure 7, the Chinese economy reached a major milestone in its development in 2013 as the services sector of its economy surpassed its industry and agricultural sectors (Indicators). Albeit the development of China’s economy still has a long way to go considering that its services sector still represents less than 50% of its GDP while the average for OECD countries is close to 70% (Indicators). If China’s economy can navigate the next 10-15 years without a serious economic or financial collapse, can maintain a high annual Ivie 73 growth rate, can make the smooth transition from away from a dependence on cheap labor and can begin to produce their own technologies, then Chinese economic power will be a very serious threat to that of the United States.

Figure 7. Chinese GDP by Sector

60

50

40

30

20 Percentage of GDP 10

0 1980 1985 1990 1997 2000 2005 2010 2012 2013 2014

Services Agriculture Industry Linear (Services) Linear (Industry)

Source: World Bank

Military

China’s military is large and still developing and its first goal is become a regional power before it even thinks about challenging the United States globally. By number of military personnel China has the largest military in the world (Indicators), by measure of annual military expenditures they are second in the world (Military), by number of tanks they are second in the world (Tanks), perhaps the most threatening representation of China’s military rise relative to the

United States is the fact that within the next few years China will have more submarines than the

United States (Kaplan). China has historically been a continental power with its focus towards Ivie 74

Asia rather than to the Pacific but over the course of the past decade China has begun to build its navy, which threatens the U.S. Military’s preeminence. According to a March 2016

Congressional Research Service report, Department of Defense officials are beginning to express concern that the U.S. Military is losing its technological and qualitative edge over other countries, specifically due to improving Chinese naval capabilities (O’Rourke). At the same time, observers have noted that weaknesses still exist regarding the ability of China’s navy to engage in joint operations with other parts of its military, anti-submarine warfare, a dependence on foreign suppliers for ship parts, and also long-range targeting (O’Rourke). China may not be able to independently construct its ships, or mass-produce high-performance aircraft engines

(Brooks) but China’s military and its navy are developing, and will continue to develop into something threatening. At the current rate of acquisitions and decommissionings by the late-

2020s, the Chinese navy will have more warships in the Western pacific than the U.S. Pacific

Fleet (Kaplan), but it is important to keep in mind that just having a large number of ships doesn’t directly translate into being able to project naval power. It is extremely complicated to be able to efficiently and effectively deploy a carrier battle group, and the necessary experience is something that can take decades to acquire. China’s navy is not the only arm of its military that it has been modernizing because between 2000 and 2015 China increased the number of its modern, fourth generation air-crafts from fifty to five hundred while simultaneously shrinking its air force from three thousand to two thousand air craft (Kaplan).

In addition to the modernization of Chinese air crafts, China has one of the most actively developing ballistic missile programs in the world (Kaplan), and in recent years China has been placing a greater emphasis on developing advanced anti-ship ballistic missiles, and anti-ship cruise missiles (O’Rourke). Most recently, in April of 2016 China completed its seventh Ivie 75 successful test of a hypersonic ballistic missile capable of carrying a nuclear warhead (China

Successfully). This technology is significant because a missile with the capacity to travel at speeds close to 7,000 mph could bypass the U.S. missile-defense system. In addition to China’s hypersonic ballistic missiles, in 2007 China was able to use a missile to shoot down a non- functioning weather satellite. In May of 2013, China launched a non-explosive missile into space on a ballistic trajectory with a peak at 18,641 miles, and in July of 2014 China launched a missile into space in an attempt to mimic its 2007 launch (Shalal). China has also begun to reform its military and in late-2015 300,000 troops were cut from the People’s Liberation Army in order to increase the CCP’s control over the PLA as well as in attempt to reduce corruption at the highest levels (Xi’s). Where China’s military power is seriously lacking is in terms of alliances.

Compared to the United State’s dozens of alliances in multi-state treaties, and bi-lateral military alliances, China essentially has no real alliances. China is close with Bangladesh, growing closer to Pakistan, has a working economic relationship with Russia, is friendly with

Indonesia, and has an uncomfortable relationship with North Korea but the only official alliance or treaty that China is a part of is the Shanghai Cooperation Organization, which is more economic in nature anyways. This is a problem for China because that means the United States has more official military alliances in Southeast Asia, than China does. The United States has official military alliances with Taiwan, Japan, the Philippines, and , not to mention the fact that the U.S. has military bases in Japan, Guam, South Korea, and has recently been granted greater access to the use of the Philippines’ naval base. With so many foreign navies in the region it is no wonder that China has started to exert its influence, which it has done so by claiming the Spratly Islands, which is actually just a coral reef chain, and building artificial islands on top of them in order to build runways for its air force, which it is no longer attempting Ivie 76 to deny (Lyengar). Aside from serving as a way to publicly announce its intentions at becoming the regional power, the Spratly Islands are strategically located in proximity to the Straight of

Malacca, which is narrow waterway where 75% of China’s imported oil passes through each day

(Clover). China hopes to solve this problem with its “One Belt, One Road” project that will connect China to the Pakistani port city of Gwadar and therefore bypassing the Straight of

Malacca all together.

China in the 21st Century

China is a growing power. In the past twenty-five years, economically, China has grown from a country that was mainly rural, and very poor, to a country that is responsible for 17% of the world’s GDP, and has the second largest economy in the world. China now must make the jump from being a manufacturing and export-based economy that utilizes its labor-cost advantages, to one that manufactures its own technology and has wages equivalent to OECD countries. Between 2000 and 2015 China’s middle class increased from 3% of its population to

18% of its population, which is astounding but it still means that China has hundreds of millions of poor and impoverished citizens. If China can continue to build its middle-class, can avoid the looming financial and economic crisis, can avoid domestic conflict and civil unrest, and can begin to develop its own technology, China will sufficiently rival the United States economically in the 2030s. Militarily, China will soon be a force to be reckoned with. The modernization and growth of China’s navy and its ballistic missile program along with development of artificial island air bases will usher in China as the established regional power within ten years. China understands and respects the power of the U.S. Navy and so inside of tens years the Chinese will not directly confront the U.S. or its allies in the region but its provocations, and defiance will Ivie 77 continue and most likely increase as they attempt to exert themselves while also protecting their interests. Over the course of the next ten years the main focus of the Chinese should be to stabilize their economy and demographic situation, and if they can achieve this without slipping into something similar to the Japanese stagnant, zero-growth economy of the 1990s and 2000s,

China will assert itself much more aggressively in the region. Until China can stabilize its economy and domestic situation, there is no guaranteed, linear rise of China to be the next superpower.

Ivie 78

The Future of U.S. World Power

As it stands, the United States is still the clear world power. In terms of innovation, in terms of desirability of foreigners, and in sheer size, the United States still possess the most dominant economy in the world. In terms of military power by measure of technological sophistication, and ability to project power around the world the United States is dominant. The combination of the United States’ geography and its benign neighbors is a unique situation in this world and it allows the United States’ navy and military to station themselves around the world without fear of putting the U.S. national security at risk. The United States has over 60 foreign military bases in addition to the dozens of official military alliances and coalitions it has with other states. The United States also has major institutional power around the world with major leadership roles in the UN, WTO, World Bank, IMF. Additionally, the U.S. Dollar still serves as the reserve currency of the world and the United States is the only country with the naval capacity and regional stability to be able to protect the international maritime shipping lanes. People often forget that it is thanks to the U.S. Navy and the U.S. promotion of free trade in the post-WWII years that allowed countries like China to take advantage of its cheap labor and export its products all around the world. Potential challengers to the United States have come and they have passed but the United States derives too much power from its strategic geographic location, its vast arable lands, its benign neighbors, its powerful self-propelling domestic economy, its international institutional strength, its overwhelming military, and growing economies like China need the United States and its navy, which protects the international shipping lanes, too much. Until a country is strong enough to attack and defeat the United States at home, and replace the U.S. Navy as protectors of the international shipping lanes, the only thing that can defeat the United States is the United States. As long as the leaders of the United Ivie 79

States keep orientated towards the long-term and can keep sound fiscal policies, the United

States will never be removed from power. That being said, all great powers eventually fall.

The Future of Long-Cycle Theory

The first U.S. world power cycle has resulted in some evolutions as well as some consistency with the cycles of past world powers. The primary evolution is the fact that for the first time in the history of long-cycles the world power was not located in Continental Europe or

Great Britain. The geographic separation between the United States and any potential challenger has benefitted the United States immeasurably. Rather than having potential challengers right next door, the United States has thousands of miles of ocean on either side of it. This is significant because throughout time almost every foreign invasion of Great Britain has failed due to the obstacle presented by the English Channel. The Spanish attempted invasion of England in

1588 resulted in the defeat of the great Spanish Armada, Napoleon’s attempted invasion of the

U.K. in 1805 resulted in an embarrassment during the Battle of Trafalgar, and Hitler’s attempted invasion of the U.K. was reconsidered after the German air force was defeated during the 1940

Battle of Britain. If the English Channel gave the British a strategic advantage that prevented invasion, the Atlantic and the Pacific gives the United States an unsurmountable advantage in the prevention of foreign invasion. But as time goes on technology evolves that helps to reduce the importance of geographic barriers such as oceans or mountains; the Spanish Armada didn’t have the hypersonic ballistic missiles being developed by the Chinese nor did the British have to worry about the German’s shooting down their reconnaissance or communication satellites.

Although technology and warfare have evolved over the course of time what has remained constant is that when the economy of the world power fails, the world power falls and is replaced Ivie 80 with a new world power. In addition, every world power has had control of international maritime trade, and has had a navy capable of protecting its maritime interests, and has made some sort of major innovation that has given them the edge over all other countries in the international system. Understanding the prevalent trends that have occurred through long-cycle theory makes it easier to assess the future of U.S. power and how China and Russia fit in to that future.

Historically, China has been a continental-based power. China has never historically concerned itself with building the strongest navy but rather has focused on building a strong land-based military, and per the Silk Road, has also emphasized trade across the land. Today,

China is emerging as a strong economic power but China’s economic power is not derived from innovations nor is it derived from being able to control international maritime trade. Actually,

China’s economic emergence isn’t organically Chinese at all but rather is a derivative of U.S. power. The U.S. navy protects all the international maritime trade lanes, and the U.S. is the destination for many of the goods China produces with its cheap labor. China currently has one of the most active ballistic missile development programs in the world, and has also put a great emphasis on developing submarine technologies—both of which are offensive in nature. China is surrounded by countries that are allies of the United States and that help to establish the world power of the United States. Considering China’s continental location, is economic development sin the creation of innovative technologies, its increasing offensive military capabilities, and the proximity of countries in China’s “backyard” China is predisposed to becoming the challenger at the end of the U.S. world power cycle. As we have learned from all previous world power cycles, the challenger to the world power never becomes the next world power. No other country in the world has the geographic, economic, or militaristic strategic advantages possessed by the Ivie 81

United States, which is why challengers have come, and challengers have passed. The only thing that will end the United State’s reign as world power is the United States and so if a challenger rises against the United States before the economy of the United States has collapsed relative to another powerful country, or absolutely, then it is very likely that the United States will enter into a second world power cycle as the British did in 1815.

Ivie 82

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