The IMF dropped a bombshell over the weekend. It predicted that China’s economy would overtake America’s in 2016, a decade or so earlier than most previous predictions. Has the IMF suddenly discovered some new data? Has the impact of the financial crisis weakened America so severely that it is declining at a faster rate than most commentators predicted?
Not really. As the Financial Times and Canada’s Globe and Mail point out, this projection uses purchasing power parity (PPP), rather than the preferred GDP at market rates. The US will still be richer than China for many years yet, though the drawing level of the two countries, even in PPP terms, signals a long-term trend. Eventually, China will overtake the US to become the world’s largest economy.
So no new story then? In pure economic terms, it’s nothing major, but what has been fascinating is the reaction of American commentators over the last twenty-four hours. For some, the likelihood that China will overtake the US at some point seems to have come as a revelation. Others used it as another thing to blame on President Obama, as if no-one had been predicting this for the past decade. A few commentators informed fellow Americans that the victor of the 2012 election would be the last president to govern the world’s largest economy. For a while, eschatological angst seemed to be the order of the day, with even our own Daily Mail enthusiastically joining the gloom-fest, until more level-headed assessments began to appear later on.
Britain and other European powers are no strangers to the post-imperial malaise that accompanies a country’s relative decline. America, though, is different. Its entire history has been one of rapid growth in economic, political and military power. Unlike most other countries, America was a project, founded on a grand idea. Its raison d’être was to create a great nation on a new continent. It appealed for immigrants not to solve some temporary labour shortage but to help build a new country. New arrivals were expected to sign up for the project and that’s what most of them did. Creating the powerful nation that we see today is what America was set up to do.
The rapid expansion of America, from a strip of coastal colonies to global dominance in two centuries, has given rise to a particular view of the world. The USA became the most powerful and prosperous country in the world because its way of doing things was just better – or so the argument runs. It was victorious in three titanic military struggles and its corporations and armed forces went on to dominate the world, because the American way always wins out in the end.
Of course, the truth is slightly more complicated. Yes, liberty, the rule of law and property rights contributed to American power and prosperity, but so did the chance acquisition of the rights to a huge, largely unsettled continent, at the same time as the world’s great military powers were engaged in a decades long war thousands of miles away. The military victories could easily have gone the other way too. But for a couple of wrong decisions, autocratic state capitalism, in the form of Imperial Germany or the Nazi Third Reich, could have triumphed much sooner. But they didn’t, which means that, until now, the American narrative has remained unchallenged.
Consequently, unlike the older countries with messier histories, America has no template for being a declining power. Though it acquired an enormous empire, Britain’s national story is one of ups and downs. Our three greatest national legends, the Spanish Armada, Trafalgar and the Battle of Britain, marking roughly the beginning middle and end of our imperial story, are all about narrow escapes from threats to our country’s very existence. America has no equivalent. It’s entire history has been about growing ever more powerful and prosperous, with very few major setbacks.
Which is why its decline will be an even greater blow to its national self-image than the loss of empire was to that of the European powers. The reaction to the news from the IMF is a foretaste of things to come. Most Americans have no concept of relative national decline and they won’t like it when they see it.
But this is also the final chapter in a much longer story too. The process we now call globalisation, which began when the Spanish and Portuguese started sailing round the world and setting up empires that spanned time-zones, has been dominated by Europeans. The only global powers in the history of the world have been run by white people. The Japanese kicked their way into the club in 1905 by trouncing their nearest European neighbours but they were able to do so only by adopting European ways. For the next century, the Japanese were the only non-whites at the top table.
China is different. As Martin Jacques explains in his excellent book, ‘When China Rules The World’, the Chinese success is built not on aping the West but on their own methods, which are more in tune with their culture and history. Consequently, for the first time in three centuries, western countries will have to deal with a dominant global superpower that does not share their traditions and general view of the world.
Just as America has no template for being a declining nation, western countries have no template for understanding a world in which the dominant power is non-western. The future will be dominated not by a western democracy but by an authoritarian state-capitalist power. The people running the world will no longer look like us. We have no idea what that will be like because, in our collective memory, nothing like it has ever happened before.
Brett Arends is right in his assessment of the impact of the collapse of American hegemony. It is, indeed, the biggest story of our time. China won’t overtake the US just yet but, as he says, “the outcome is scarcely in doubt.”
The findings of the IMF report are the first signs of America’s relative decline. If yesterday’s reaction is anything to go by, when the decline really sets in it will be a huge psychological blow to Americans – and for western countries as a whole. It’s still some way off yet but the writing is on the wall for America and the long period of western dominance is drawing to a close.