[In ToN.html (Table of Nations) I discuss several books related to 'Great Powers' through the ages, one of those is this one, notes on which I've transferred here]
Another book that discusses 'Great Powers' is 'Balance'. They mention many other works, including Paul Kennedy's 1987 'The Rise and Fall of the Great Powers'. They have a funny little drawing (scan?) that shows the 6 GPs they primarily deal with: RE, Ming China, Ottomans, Spain, Brits and USA (also chapters on Japan, EU and CA). As the title suggests (and the drawing reinforces), order and success result from balance (i.e. ldrs standing on a globe in the funny drawing) and that they all eventually got OUT of balance and failed along at least 1 of their 4 axes; 1 'bounded rationality' i.e. rulers lmtd by ignorance, partisan gridlock, etc., 2 'national identity' which leads to strong natl institutions (and people's trust in them), 3 'loss aversion' i.e. ldrs don't innovate since afraid to lose their gravy-train, and 4 'time preference' i.e. ldrs avoid making hard choices, e.g. hoping to stick blame on opposition (cf prisoner's dilemma). As economists, they focus on that aspect of success, which of course underwrites all the others. They also mention Mancur Olson's (1932-98) 1982 bk 'Rise and Decline of Nations' and Fukuyama's 1989 'End of History' essay. Also Daron Acemoglu and James Robinson's 2012 'Why Nations Fail' (i.e. 'extractive elites' v. 'inclusive institutions', JR has blurb on back cvr).
An 'Economist' rvw of 'Balance' (29 Jun 2013 issue) says 'Oswald Spengler started the trend in 1918. 'The Decline of the West' was the 1st notable bk to theorize about the rise and fall of empires. Spengler was followed by Arnold Toynbee [1934-61], Paul Kennedy [1987] and, most recently, Daron Acemoglu and James Robinson [2012 'Why Nations Fail']'.
Here are some other 'Balance' notes:
p12, Rome's downfall was inflation, China's technological regression (closing itself to outside world), Spain's mercantilism, USA's debt risk (i.e. 90% of GDP, currently ~70 not including internally held debt).
'Great Power decline almost always follows a [3-step] template: denying the internal nature of stagnation, centralizing power, and shortchanging the future to overspend on the present' (13, yikes).
Angus Maddison told of a 'pioneer of macromeasurement' Gregory King 1648-1712, who composed very detailed accts of the British economy, but was afraid to publish them due to their sensitive nature (22). Then Simon Kuznets developed GNP data and presented it to Congress in 1934 (w/Milton Friedman's help, 23).
They give and interesting and hopeful idea on p28 (for those fearing China will overtake us soon): 'What fascinates in these [GDP/capita aka 'productivity'] charts is how quickly some countries apprach the US level, only to settle into a steady 75-80% range relative to the US, a level at which major European economies [and Japan] have hovered for decades. This trend is remarkable, and tells us something important about how the world economy works ... the leaders can only advance slowly 'thru the thick forest of scientific ignorance' but then others can 'run across the open field of est. science and tech ... e.g. no need to rediscover the laws of economics, accting or stock options' (29). But once they catch up to a certain level (behind us, since they're not willing to be as 'free' as we are), they're in 'the thick of it' w/us (tho behind, since catching up to us would require 'a different kind of economy, based on entrepreneurship v. centrally managed [crony] capitalism. So don't worry so much about China, since they'll exhibit the same pattern and are FAR behind us in productivity (8k v. our 41k pp in 2010). They'll need to slog thru growth of scale, investment and innovation. He cites often Angus Maddison's 2006 'The World Economy' (OECD, AD 1-2000).
Economic power has 3 pillars; Smithian scale (named for Adam Smith [Joel Mokyr's typology], basic commercial expansion e.g. a new trade route, which leads to labor specialization), Solovian investment (for Robt Solow, divert income from consumption to cap-ex that enhances output) and Schumpeterian innovation (for Joseph Schumpeter, aka 'technology' or 'ideas' i.e. build a better x [via R & D], 39).
Their new formula for 'Economic Power = GDP * Productivity * Growth^1/2. So e.g. USA in 2010 is 12.8T * 41.4k * 1.4% = 623 (100%), and the next 5 pwrs are EU 73% (of US), China 40%, Japan 15%, S America 7% and India 6% (48).
Keynesian theory says GNP = C(onsumption) + I(nvestment) + G(ovt) + NX(net exports = exports - imports) (57). His point was that when C and/or I are weak, boost G; popular in 60s-70s but discredited by inflationary late 70s and Reagan's (and Volcker's) non-Keynesian breaking of them.
Behavioral economics is sheding new light on how people REALLY behave (and why Keynesianism doesn't work) e.g. rent-seeking, 'public choice' theory (e.g. Mancur Olson), the 'prisoner's dilemma' (explains why both parties find it in their interest NOT to solve long-term problems), etc. (55ff). He closes that chapter w/the 4-point 'template for grt pwr imbalance' summarized above (bounded rationality, natl ID, loss aversion, not-now).
Hmmm, unlike many (including Acemoglu/Robinson) they don't say fall began at republic -> empire transition, since 'the 1C BC 'republic' before Julius Caesar had devolved into an undemocratic, corrupt and brutal society' (82), a 'republic in name only'. Furthermore, economic growth continued til Hadrian's time (height was Trajan just before). He says we should distinguish 'principate' 27 BC to AD 235 from the 'dominate' AD 285-476, w/intervening years of chaos and civil wars ('Crisis of 3C') technically part of former.
'The interesting story of Roman civ isn't the dramatic narrative of one dictator after another, but the economic logic of geographic expansion, assimilation, and growth' (85). That expansion lasted an astounding 700yrs (500 BC to AD 200), exceptional in size tho typical of what was happening in other areas too i.e. transformation of tribal human villages into larger city-states, then nation-states as kin/clan n/w's gave way gradually to impersonal rules of law and larger (economic and military) benefits from larger polities. It happened all over the world, but Rome was the most successful of all.
'Of the 100s of small errors made by REs, 3 stand out; 1 AD 122 Hadrian's Wall i.e. stop growth, turn inward, 2 c200 Septimus Severus debases $, 3 AD 285 Diocletian's effort to cmd/cntl the economy (94). All 3 involved 'short-term [modest] advantages but massive long-term costs' (94). 'To an economist, glowing tributes of Diocletian are a mystery; he established order in the RE in the way that Stalin [did so] in the USSR ... socialist interlude' (103). He says 'its maddening w/our 21C knowledge to read of these' (104) now-silly errors which ended up ruining everything!
basic jobs of govt i.e. 1 security, 2 transportation, currency and basic utilities (water, sewer, power? i.e. 'basic conditions to enable private economic prosperity'), 3 welfare (food, entertainment, health, pensions, working-age income support, other). He says 1 is a must, 2 probably, 3 no, because these 'challenge the limits of what a state can provide more efficiently than the private sector'. Relates to tight economic definition of what constitutes a 'public good' (97).
Mancur Olson saw 'rent-seeking' as 'a natural problem in democracies' (106) i.e. over time, they tend to become 'thickets of rent-seeking' (i.e. special interests). In Rome, army rent-seeking did them in.
- Next is Ming China (ch5), which after Zheng He's 7 naval ventures, began to decline as the ldrs chose to close themselves to 'destablizing' (to THEM, not to the nation) outside ideas and trade. What doomed Ming China was 'institutional fragility ... the political inst of Chinese emperorship, designed to serve the greater good, morphed into a zero-sum struggle for influence among interest groups (e.g. military, bureacrats, merchants) i.e. rent-seeking, which echoes how the Roman Praetorian Guard warped imperial rule there (124).
- Spain in next (ch6), which they says takes the prize for botched potential. 'Never did a grt pwr embody such potential to prosper or to lead the world' (126). Basically they failed to use their massive gold/silver wealth from S America to reinvest and develop their own economy. Not only was it blown on frivolities but it created a massive inflation to boot. He says GP pwr in Europe was France 100, UK 62, Spain (w/o rest of HRE) 46 and TDR 39 in 1600, but UK 100, France 81, TDR 68 and Spain 28 by 1700 (133).
- Ottomans next (ch7), which they title 'Rule of Slaves' (i.e. Janissaries). Tho ancient Egypt managed to be 'the 1st great human empire' (145, hmmm), lasting 3kyrs by 'committing to stasis, not progress', 'If we were to write a chapter on it to affirm our thesis, it would be just a few pages, and we could summarize thusly; agricultural monarchy based on rich lands and seasonally flooding Nile, no strategic peers, complete and purposeful institutional stagnation, hold for 3kyrs til superior pwr emerges, Hail Caesar!' The Ottomans lasted >600yrs from 1299-1923. Like Rome, an aggressive, conquering tribe (Turkic ldr Osman b1258). They fed on waning Byzantium while battling encroaching Mongols. By Suleiman's time 1520-66 (their zenith) their territory rivalled ancient Rome's. True, its economy was based on spoils of war i.e. 'extractive' (Acemoglu/Robinson's term). But as the West experienced tremendous innovation e.g. Renaissance, Reformation, Industrial Revolution, the Ottomans stagnated. Why? They were once tolerant and willing to learn from all conquered peoples, but after Suleiman d1566 and Shia Islam rose in Persia under the Safavids (149) that began to change. 'Orthodoxy and conservatism became more important, w/a heuristic of cultural superiority'. After the sultan's 'sipahi' (knights, cavalrymen), the 2nd institution were the slave-boy Janissaries, a kind of 'praetorian guard' loyal ONLY to the sultan. The best of these could graduate to 'askeri' or 1st-class citizens, equiv to China's Confucian mandarins and court eunuchs (the bureaucratic elites). They numbered 20k in the 16C. They often made the top office of 'grand vizier' (152, PM). But as in China, they turned into political 'masters' i.e. 'fighting a zero-sum game of pwr politics v. serving the greater good. This imbalance is regulatory, the well-known problem of rent-seeking' (152) like in Rome. By the 18C they were running things (w/puppet sultans) and numbered >100k. They were militarily outdated but crushed all efforts at reform, even after Napoleon's 1798 invasion of Egypt showed them what was coming. Widespread tax farming (and its inevitable corruptions) also helped kill them. Tho they made many reforms in the 19C it was by then too late, they were too far behind the West.
- Japan (ch8), they discuss the Japanese strategy game 'Go'. Opening move 'fuseki' was rapid modernization from 1860-1905, even beating European pwr Russia in 1905 (shocking many, 1st non-European pwr to adopt 'liberal' inst. and beat a W pwr). Pioneered Asian pattern of 'state-managed, export-driven capitalism' (later used by 'Asian tigers'). Then came Japan's 'brutal and successful colonization of the Pacific region' til its defeat in 1945. W/numerous 'tesuji' or creative plays along the way, it converged to (~80% of) W productivity standards by 1990. But since then i.e. 'Lost Decades' its been stagnant. In 'Go' terms, Japan has lost 'sente' (active lead, initiative) and has been forced into 'gote' (passive reaction), since it now relies on US (esp. tech) innovation. Their institutional model has reached its limits, so now they must 'empty the Go board and invent a new fuseki' i.e. dump 'state-managed' and 'export-driven' and adopt more individualistic, innovative, creative destruction entrepreneurialism. He discusses the 1970s movie 'Shogun', the real-life Tokugawa shogunate 1600-1867 w/brilliant general Hidyyoshi 1537-98 beating other warlords and unifying the country. Tho there was much progress, not all were happy. The samurai class was ~7% of pop. and were rural/ag based, threatened by the new urban commercial culture. They represented 'status protected by violence shrouded in ritual', a common theme we've also seen in Roman, Ottoman and nearly all premodern empires. But tho the samurai resisted, many other Japanese could see that they had to change or be dominated by the W pwrs (like e.g. China, India, Indonesia increasingly were). In 1827 a poor fisherman named Manjiro was shipwrecked and stranded on a Pacific island, surviving for 6mos til found by a passing American ship. He was adopted by the captain, brot to America for 10yrs and educated, etc (renamed 'John Manjiro'). He returned to Japan in 1851, the ONLY person in Japan who could speak English! That was useful when Commodore Perry's 'Black Ships' arrived there in 1853 demanding open trade. JM managed to convince Japan to cooperate v. conflict. The ruling shogun was called 'taikun' (title, i.e. ldr), leading to one of the new English words of Japanese origin 'tycoon'! Russians and Brits soon followed. But a reaction was forming that later toppled the shogunate, installing a 14yo boy as the 'meiji' as emperor (i.e. 'Meiji Restoration' hmmm, movie name? 'The Little Emperor?'). But while billed as a 'return to tradition' it was actually a 'young samurai' adoption of W institutions (of centralized rule). Feudalism was abolished in 1869. Their ldrs traveled far and wide learning W ways. They were so successful they were copied by Singapore, Hong Kong, Malaysia, Thailand, Taiwan, S Korea, even (later) China (others Philippines, Australia, Indonesia, Vietnam, Laos, Bangladesh, India, Mongolia, cf map p167 'Diffusion of Japanese Growth Model in Asia'). This contrasted w/Mao's disastrous 'Great Leap Forward' of 1957-61 (15-40M starved, >500k executed for resistance, then the even worse Cultural Revolution of the 1960s, killing 10s of millions!). Lester Thurow tried to portray them as having discovered a better 'more communitarian' model than the US (Anglo-Saxon model), thus sparking the near-panic 'Japan Inc' craze of the 1980s. Japan was badly hurt by the 1973 oil crisis and hit its peak productivity of 94% of US in 1991. Then its asset bubble burst (fueled by super-high savings rate there). They've tried Keynesian stimulus (which led to massive debt) but they need more internal openness and (esp. internal) competition, and MUCH less rent-seeking by farmers, small retailers, etc. Also rent-seeking by a triokia of big cos, banks and bureacracy i.e. economic imbalance rooted in political stagnation. Once again, the Go board is stagnant (pieces are never removed til end of game) and must be 'swept clean' and a new game started. They did catch-up really well, but now they need to play as a fully developed advanced economy i.e. w/'inst. that emphasize entrepreneurshp and innovation, w/a heavy tolerance for individual failure, and capital mkts open to small start-ups' (like USA).
- Britain (ch9) Tho 'Dickensian' London was bad by today's standards, it was better than most places of the era (and indeed of all earlier eras) i.e. we suffer 'hindsight bias'. Tho Britain experienced a sudden relative decline after WWI/II, it never had an absolute one. Paul Kennedy attributes most empire failures to 'imperial overstretch' but GH/TK are skeptical. 'The initial plan for this bk included no ch on Britain, because [its story] ... lacks what every murder mystery needs - a dead body' (172). But you can't discuss GP decline w/o mentioning Britain! They think its MAIN failing was treating colonists as mere subjects v. citizens i.e. it was UNDERSTRETCHED in terms of human resources. Indeed, they think it could still be a superpower today if it had been 'more expansively British and less imperial' (179). In 1909 it had 1/4 of the world's landmass and 1/4 of world pop.! They quote U Chi IL economist Deirdre McCloskey as noting the importance (and originality) of 'the [British] cultural embrace of the merchant class as something heroic v. ignoble' (180). But after WWII it stopped being extraordinary. Why? That's the puzzle (182). 'Brit intelectuals understood in the 1870s that other nations were catching up, and they were befuddled about how to stay in the lead. The vaunted free-trade consensus began to crumble, as just one example ... in 1900 Britain's [and other nations'] ldrs shared a belief in the importance of 'natl economic pwr' but lacked agreement on exactly what that meant or how to measure it' (182, hmmm, this is when the American 'progressives' were rising, apparently thinking THIS was how to get ahead, WRONG!). If only they'd had our ideas regarding economic growth i.e. scale, innovation, investment w/emphasis on human capital and how to develop it (GDP, productivity, growth rate; and same for 1776 i.e. if only they'd known). In the late 19C there were battles over free trade v. protectionism, but Britain's economy was 'falling into patterns of special-interest rent-seeking' (189, cites Mancur Olson's classic theory, who used 19C Britain as 'exhibit A'). Rather than compete w/other powers, they chose to harden the status quo i.e. 'institutional sclerosis'. Tho Thatcher pushed back in the 1980s, British GDPpp (productivity) hardly budged, remaining at 80% of US (he cites the NHS as 'expensive, famously inefficient, hard to reform'). So on they muddle, but what they need is to 'rediscover their ID as an institutional pioneer'.
- Europa (ch10); Some rvwrs objected to their thesis by citing Nazism. While its true that 'the Nazi economy of the late 1930s WAS one of the most advanced in the world, its also true that little of the progress was thanks to Nazi institutions i.e. the heights of Nazi tech. achievements wree based on excellent German universities, developed long before the 1930s, and even they fell into decline when overt racism drove 'the best and brightest' away (not just Jews but non-Jews of conscience). Most economists would say Nazism is 'hostile to growth' (193) i.e. state v. individual and 'little appreciation for the entrepreneur'. We can't know how they would've done in peace had they won, but the late 30s fits a now-familiar model of 'statist takeover' i.e. looks good at first due 'a one-time extraction of wealth from formerly indep private companies. But like any sudden wealth tax, this action diminishes the incentives of the private sector to CREATE wealth going forward' (193 i.e. eventually they 'run out of other peoples' money' Thatcher). Hmmm, they refer to Joe McCarthy's 'despicable hearings' (195, exploited America's paranoia re relative decline [but there WERE commies here])!? We're all cold warriors now, but for many years the Soviet system looked like it was working. For decades Paul Samuelson's famous economics textbk included projections showing the USSR overtaking us in GDP, w/later editions blaming 'bad weather' or 'an unfortunate past', staying positive right up to 1989!? Tho statism offers timeless appeal, its built on SLAVERY, which is 'never efficient, let alone moral' (196). Thankfully Ike understood this. The next challenge to the US was the European 'mixed economy', also an 'appealing fiction' since European GDPpp rates have consistently lagged ours (tho he shows 3 'tiers'; the Nordics at ~90% of US, the 'core' at ~80% and the S at ~60%). E Europe is rising but varied in their approaches. They say 'the assumption of a common interest rate was a fundamental error that led to the EU's present crisis' (202). Just as US states like CA and IL have weaker balance sheets and thus higher risk ratings, so should weaker EU countries. Just as in the US, only certain aspects should be centralized, w/others left to experimental competition (he cites 1 trade, 2 money, 3 labor, 4 regs, 5 banking and 6 fiscal, saying only 1-4 are centralized in the US [and maybe not all of THOSE should be]). They conclude w/a warning that the US is looking more like Europe w/its 'increasingly generous welfare state' and 'unsustainable debts' ... 'Europe is in more danger of failing than America, but both should know better' (211).
- CA Dreaming (ch11); much of CA has perfect climate i.e. 'Csa' or 'Mediterranean' on the Koeppen scale i.e. coastal breezes, dry dummers, warm winters. SF was a sleepy village of 200 in the early 1840s, but added 35k in 2yrs as non-natives in CA grew from 14k in 1848 to 250k in 1852! 1rst movie studio on Sunset Blvd in 1911, and 1923 the famous 'Hollywood' sign erected. Then came Silicon Valley (HP est. 1939, INTC 1968, AAPL late 1970s). Today 1 in 9 House seats are from CA (53/435)! CA was reliably GOP from Lincoln's day til 1992, and its been swinging leftward ever since (and running it into the ground). Amazingly, CA would rank #10 as world GP by GDP. By their 3-way scale it ranks 4th (! at 24% of US in 2010) behind US, EU (73%) and China (40%). But its concentration of 'innovation capacity' (e.g. Hollywood and Silicon Valley) 'has also blinded many to the weakness of the state's fiscal situation' (219), which has been crumbling for decades. While now 10th in GDP, just a few yrs ago it was 5th! Its the old 'rent seekers' problem again e.g. CA Tchr's Union K-12 education uses 40% of state general fund! Bottom line, CA (and the US) HAVE to cut spending while maintaining economic growth (i.e. DON'T raise taxes). Also chgs to political inst. are needed e.g. to reward long-term v. short-term and economic growth v. partisanship.
- US Beyond the Consequence Horizon [i.e. pols don't care, but we do] (ch12). They ask if the US will be able to avoid the 'Great Power curse i.e. centralization, weakening individual liberty, strengthening of rent-seeking groups (e.g. special interests, and govt itself) that hinder creative destruction (239). They discuss the 'prisoner's dilemma' and apply it to Congress (GOP wants to cut spending but is least punished by keeping it high, the Dems want to raise taxes but is least punished by keeping them low, 260). Jonathan Rauch is a student of Mancur Olson (cf his 1999 'Govt's End' bk). Tho things look bad, they say 'in what we hope is a surprise, it can be turned around; there's good reason to believe the US can avoid the GP curse' (240). Their answer is to reverse the 1974 'campaign finance reform' (which was in practice a disaster, they say, i.e. by granting a 'duopoly' to the 2 major party committees [to cntl campaign $], and HAS been partly reversed by the famouse 2010 Citizens United case). Tho it aimed to reduced polarization, it made it MUCH worse (and more permanent). Now they think/hope that coalitions will be more flexible and fast-forming, allowing progress. 'Polarization locked in the worst quadrant' (267) of the prisoner's dilemma, so unleashing competitive political speech should help unlock it. They expect a 3rd, and maybe even more political parties e.g. 1860s abolitionists, 1900s progressives, etc. and even more important; truly indep legislators. We NEED more outside challengers and 'policy entrepreneurs'.
- Amending America (ch13) 'Our American polity descends from the wisdom of Moses, thru the ancient Greek democracies, thru the Roman laws, thru the kingdoms of Europe and the particular French and British intellectual rebellions against them. But most of all [its] rooted in Greek rationality' (269, hmmm). Their 7 lessons from Grt Pwr history:
We need to prioritize outcomes like more jobs, faster growth, less poverty, NOT inputs (like taxes and spending). But they do favor lower taxes and spending v. higher, WITH balanced budgets over the longer term. They recommend 3 strategies; reform the tax code, expand the scale of our economy (free trade agreements) and arrest the decline of busniess formation and job creation. Tho many have doubted democracy (Plato, Aristotle, ...), they say the problem is not participation, but incentives (i.e. prisoner's dilemma). So they propose a 28th Amendment (the 1st 27 avg about 1 per 8yrs, tho the last was in 1992). So far they've all gone via the 1st path specified in 143-word Article V (2/3 of both House and Senate, then 3/4 of state legislatures) but a 2nd path is also open (petition of 34/50 states for a convention, then 38/50 approve resulting amendment). Their proposal:
1 annual limit on spending of median infl-adj rev of prev 7yrs, NOT incl. current yr
2 count accrued liabilities, and be neutral, NOT ideological (trust voters to favor lower spending v. higher taxes)
3 use escalating supermajorities e.g. 3/5 both houses 1rst year for higher spend, 4/6 2nd yr, 5/7 3rd yr, and so on (for whatever reason e.g. war, recession, natural catastrophe, etc., trust their judgement)
4 glide path to balance, avoid sharp (recessionary) chgs e.g. narrow gap by 1/7 per year for 7yrs
They're not declinists, since that smacks of inevitability and failure, neither of which describe the US or its economy. But there are storm clouds, political stagnation, erosion in mighty inst e.g. constitutional rights, properly regulated mkts, entrepreneurship, to name a few. Tipping points are real and its unwise for the US to test how far we can push the limits of partisanship and budget imbalance before falling. We should return to const. principles of federalism, lmted central govt, uncond. free speech/assmbly. 2nd we need honest accting of all future obligations and a hard limit on spending, forcing Congress to make tough choices v. deferring those.
Here's a file that extends their idea to all the nations covered by 'Economist' mag's annual GDP survey.