Scheherazade S. Rehman is a professor of international finance/business and international affairs at The George Washington University. You can visit her homepage here and follow her on Twitter @Prof_Rehman.
This is the fifth blog in the series on the world's potential next superpowers; we have covered the European Union, Russia, and Turkey so far. The ensuing blogs will be about India, Brazil, and China. But today, in deference to Veterans Day, I would like to first hold a moment of silence for all those who bravely fell in the line of duty throughout time and across borders for defending freedom, justice, and the weak. Second, I would like to revisit the nature of superpowers and the costs of wars today—it would seem apt.
An often forgotten fact amongst economists is that significant and lasting shifts in a county's wealth, i.e. becoming a rich nation, tends to transpire over very long periods of time and is cyclical. Past patterns in premodern civilizations reveal that it took more than 200 years for a country to become wealthy then—now it is taking less time. On average it is about five generations—approximately 100-150 years. Clearly there are many exceptions to this rule. There are plentiful countries that simply never became seriously wealthy—pick any in Sub-Sahara Africa. There are a handful of countries that acquired wealth very quickly due to the discovery of natural resources such as oil. And then we have the rare exceptions, such as Japan, which through the careful crafting and innovation of its comparative advantage, rose to economic supremacy in just decades.
Nonetheless, give these vast time spans for acquiring wealth for the average country it would seem entirely reasonable to argue that no government in the world is really controlling its country's growth or wealth plan. The time-frame is simply too long. An excellent place to look at these wealth cycles is Ray Dalio's "Why Countries Succeed and Fail Economically." His work spans back to the 1500s as he tries to observe the patterns of wealth in the rise and decline of nations. According to this study countries typically go through five cycles/stages of growth:
China is in Stage 2 and there is much debate about whether the United States is in Stage 4 (somewhere between Stage 3 and 5 depending on whom you believe). Perhaps both new governments of China and the United States should remember that in the end—large debt and excessive leveraging coupled with wars speeds up the march to Stage 5.
Corrected 11/12/2012: An earlier version of this blog post failed to properly denote quotations regarding the five stages of country growth.