From Empires to Emerging Powers: The Unstoppable Cycle of Global Influence
World order is changing and when money printing is out of control, new economies emerge.
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What has risen to glory must come down to ashes. The world we see today might not be the same tomorrow. The people in power and the riches they enjoy will soon be replaced with feelings of envy. The determination that has gotten them here will fade away. Internal conflicts will emerge, resentment will be the norm and finally, a new world order will be set. Winners will become losers and underdogs will challenge the status quo thereby establishing a new phase of dominance and control ultimately being challenged by people coming after them. A never ending cycle that is inevitable and history serves as a guide to better navigate these times.
In the world we live in today, America has established its image in the world as the nation ideal for being at the center of the world’s activities. This is attributed to its relative safety, economic supremacy, and housing of the world’s reserve currency. But if we look back a century or beyond, the world has not been like this. The position America holds today has been upheld by the Dutch and the British in the 17th century and the 18th century respectively.
The Rise of Empires
The plausible path for a country to succeed in its operations is the effective collaboration of its military, the government, and the capitalists. This trio is what enables the best colonial administration to expand the country’s influence. It is possible to establish trade routes, develop infrastructure and ingrain their political system only when these three bodies work in harmony. Consider the success of the Dutch Empire in the 17th century as evidence of this strategy. The Dutch government granted exclusive trading rights and charters to private companies, most notably the Dutch East India Company (VOC) and the Dutch West India Company (WIC). These companies acted as extensions of Dutch state power and received support in the form of military protection, subsidies, and monopolies. The government's backing allowed these companies to establish and maintain profitable trading posts, colonies, and military outposts. In addition, the powerful naval fleet in which the Dutch heavily invested, along with their strategic location and their tolerant attitude towards others allowed them to establish colonies and trading posts in strategic locations, including present-day Indonesia, Suriname, New York (then New Amsterdam), South Africa, and several Caribbean islands. These colonies provided valuable resources, such as spices, precious metals, sugar, and tobacco, which further fueled Dutch economic growth.
Building on the shortcomings of the Dutch empire, the British empire rose to power after the Anglo-Dutch wars in the 17th and 18th centuries. From then onwards, there was the establishment of a new colonial system by the British made possible by the forced capture by the stunning British navy and the trade dominance of the British East India Company. The British focused on expanding their colonial holdings, particularly in North America, the Caribbean, and the Indian subcontinent. They successfully displaced the Dutch from several strategic locations, including the capture of New Amsterdam (later renamed New York) in 1664. The British used their growing colonial empire to amass wealth, resources, and control over global trade networks. The British monarchy and government exhibited greater political stability and centralization compared to that of the Dutch Republic. The Dutch political system, characterized by decentralized power and factionalism, made it challenging to coordinate and implement consistent policies. In contrast, the British centralized their authority, allowing for more efficient decision-making and strategic planning.
Haven’t we seen this before?
Alas, both the British and Dutch Empires had to meet a fate in the ashes no matter the grandeur they boasted of in their prime times. The British Empire fell victim to similar circumstances that the Dutch Empire had faced and was ultimately surpassed by America. America was the underdog at the end of the 17th century when figures like George Washington established the sovereignty of the United States. The British Empire had lost control over its far-fetched colonies and the supremacy the Americans had in terms of manufacturing output was unparalleled. Emerging industrial powers, the Industrial Revolution, and the shifts of economic influence left the British in a precarious position. The Napoleonic Wars and the Crimean Wars strained British manpower and resources. The final blow came from the two World Wars that crippled the foundations on which the empire had established its reign.
The United States played a pivotal role in shaping the post-war international order and became a leader in political, economic, and military affairs. Its economic strength, technological advancements, and military capabilities propelled it to a position of global influence. The Bretton Woods Agreement in 1944 clarified the US as the hub of global finance and changed the world order with the US emerging as victorious.
We can see a pattern forming here. The dominant nation rises to its top by gaining a unique arbitrage opportunity. Productivity rises, people are dedicated, manufacturing output increases, and through competitive innovation and trade, they can establish dominance. A new world order is formed which creates a new reserve currency and peace in the region. However, the wealth gap, rise in inequality, lack of productivity in the labor force, and the opportunities for emerging nations to capitalize on lead to the deflation of a financial bubble that is inflated in the prime time. In such a situation, governments and central banks retort to money printing which is the new form of normalizing an enormous amount of debt. The price the nation has to pay is in the form of inflation which eats away the confidence in the currency like a termite.
Doesn’t this look familiar to the current state of affairs?
The next underdog
When confidence in the currency diminishes, the cycle of taking on the debt of the dominant nation disrupts. A developing nation with an advanced economy allows its cheap labor to be exploited, devalues its currency for exports to be cheaper, and rakes in dollars to save again by lending in the US. Hence the advanced economy squeezes out riches from the poor and controls its internal affairs through the strings attached to loans.
But what happens when it stops accepting payments in the form of the dollar? What happens when confidence in the dollar erodes? Well, a new economy emerges having the support of many other developing nations. The best contender suiting these circumstances is none other than the Peoples' Republic of China.
Most companies incline towards China when considering their manufacturing base. This is because China has provided the world with a cheap labor force and has been able to efficiently extract raw materials and present them in refined form at the cost of ecological conservation. Companies care about profits so China has proven to be the most plausible hub for manufacturing. China is the 50s and 60s America which has been known for its efficient manufacturing then. China has sprung up to be a prominent player in innovative technologies and its economy has been burgeoning operating at about twice the manufacturing output of the USA at $4.98 Trln.
China has recently sent shockwaves by restricting the exports of Germanium and Gallium, two natural elements necessary in the semiconductor industry, an industry China has a fortified ground in because of its supposed control over Taiwan. China accounted for 70% of world mine production of rare earths in 2022 and it is home to at least 85% of the world's capacity to process rare earth ores into material manufacturers can use, according to research firm Adamas Intelligence in 2019. Exports have decreased in recent times as a retaliation against the US which is curbing China’s access to technological progress. This is but a diminutive effort in the face of its own declining manufacturing base.
China, on the other hand, is strengthening its financial markets to better position itself for the changing world order. This can be seen in the recent gold-backed currency announced for the BRICS nation bloc. This is a step focused to alleviate these developing economies from the control of US hegemony and preserve value in their savings which the US has proven not to do with rampant inflation and reckless monetary policies. Is it possible to overthrow the dollar? Maybe but what is important to consider here is that the world has segregated enough to realize the demise of power concentration in a single bloc and a shift is inevitable. Read more
where our friend describes it eloquently:Russia vs. Ukraine… and the winner is China
China has maintained a stance of neutrality in the war which is a source of contention for most advanced economies. No taking sides, no aggression, and no political interference. However, China identifies Russia as a strategic partner as most of the energy requirement and agriculture output is through it. It is a major producer nation and Europe also depends on it for its energy needs. Hence, it is in the best interest of China not to interfere blatantly but to silently support Russia, allowing a weakened Russia after the war to benefit China the most and to utilize its strategic location for accessing various parts of the world. The BRICS alliance further aids in coalition with other developing nations so that greater control can be harnessed.
America, on the other hand, has realized the upper hand China has gained. Keeping aside the domestic problems it is facing, the government has realized the importance of national security by securing its international influence. China has increased its military expenditure primarily because of the greater influence it is seeking. America, on the other hand, must face the reality that a war retreated is far worst than a lost war as it signals the adversary that the nation is crippled from the core, enough to fall after the price hefty war. Hence, it is strengthening its military endeavors overseas.
First is its collaboration with Japan. As Japanese islands, specifically Okinawa, is close to Taiwan, the US deems it necessary to increase its military presence by deploying its bases there. In addition, weapons having Taiwan in the range are beneficial to establish control over the region. Japan has a decade-long alliance with Washington and this deployment is a corollary of both of their collective interests.
Next is the Philippines. China has been hostile to the Philippines on many occasions and is often bashing around the islands and maintaining control over the region. Most notable is the show of power in the waters surrounding the islands to restrict them and expel them from fishing grounds. America then automatically becomes an ally. Both of them have a common enemy and thus establishing a military base there is also in the interests of America to curb Chinese influence in the region.
This is all part of an elaborate strategy to limit China in the South and East China Seas. The line joining the Japanese islands from above and the Philippine islands from below seem to form a strengthened line to restrict China from accessing trade routes.
Facing reality
What goes up must come down, the end is inevitable. This can be attributed to the change of circumstances and the generational shift we observe after the shift. The end can only be avoided if awareness of the problem at a large scale is identified and rectified. Smaller steps in the right direction lead to astronomical changes. However, the reality cannot be ignored that the country overtaking now has a much stronger foundation and has built on the progress of the falling nations.
Monitoring vital signs in the economy is necessary. the next war will not be open guns and artillery. Technology plays a crucial role here. Deep fakes, machine learning models, drones, and artificial intelligence are the norms of tomorrow, and harnessing them is necessary. The deep fake of Zelensky calling off Ukraine troops was detected as fake, the next might not!
While historical patterns can offer insights into the dynamics of power and influence, it's important to note that predicting the future is highly uncertain and complex. The rise and fall of empires can be influenced by a multitude of factors, including economic, political, social, and technological changes. The global landscape is constantly evolving, and unforeseen events and shifts in power dynamics can significantly alter the course of history.