Updated 28 June 2013
A superpower is a state with a dominant position in the international affairs which has the ability to influence events and its own interests and project power on a worldwide scale to protect those interests. A superpower is traditionally to be one step higher than a great power. Until the breakup of the Soviet Union there were two superpowers. At present there is only one – the USA. (Adapted from Wikipedia)
The question therefore is whether both China and India will be more powerful than any other nation apart from the US in 25 years. Our educated guess is that China probably will be at or nearly at the level of the US, but India will only be a ‘great’ power by then, alongside Japan, Germany and perhaps Russia. Our prediction is that the EU will have sorted itself out as a viable entity, but not yet a ‘power’ of any significance.
The reason for our prediction about China is that it is already well on its way to becoming a superpower: in terms of economics – there is already talked of a G2, military development and through its seemingly ubiquitous deals with most nations across all continents. Each deal may seem innocuous and ‘natural’ – for resources, for technology know-how, to build infrastructure or factories; and more recently to provide financial backing to debt-ridden Euro states. But taken together, they are both a projection of power, in the sense of “we can do it and you need us more than we need you” as well as in sowing the seeds for future returns. We know that nations, like people, can be forgetful. But a memory can nevertheless be refreshed, and a happy memory can often stand one in good stead. In gambling, the term is “calling in or cashing in the chips in” when needed.
The reason for our prediction about India becoming a great power but not a superpower by 2036 is that India is lagging behind in all three areas: the economy (more later), the military, and in international deals. Yes, Indian firms are making deals. But because they are done individually without a national strategy, they make business sense to the Indian firm and, hopefully, to its partner, but often does not further the interests of India as a nation. For each Indian deal, there must be a dozen equivalent Chinese deals. Also, some deals are ‘unique’ in that once done, there is little opportunity for a second-comer to get a look in. So, if China has helped a land-locked African nation to build a backbone road or rail network, all a second party (be it a commercial or a national entity) can do is to flesh it out, with reduced publicity and reward.
As China is slowly flexing its muscle, America is gradually relaxing: it consciously decided to take a back seat in the Libyan situation, purposely letting NATO take a lead – unheard of even five years ago. That is one of the unintended consequences of wars in Iraq and Afghanistan; and – indirectly, of the US-led banking crisis. Obama has also decided to reduce the US military presence in Europe by 25% in 2015. However, towards the end of 2011, beginning of 2012, when announcing cuts in defence spenig, Obama made clear, the Pacific will be a centre of focus, hinting ever so clearly that it will not tolerate Chinese domination that worries several of its neighbour who have mutually incompatible claims to the sea around them, deemed to contain untold oil and gas reserves.
In a surprise move, China staged a successful test flight of a military spacecraft to rival the US’s secret X-37B. The announcement came just before the US Defence Secretary Robert Gate’s visit to China in January 2011 to mark the final step towards resumption of military relationships with China since a rift over us arms sales to Taiwan. Call it timing!
In the civilian aerospace field, China is about to complete its satellite set to provide GPS so that it is not dependent on the US or European systems.
In Why the West Rules – for now, Ian Morris convincingly argues that just as Britain could not stop America’s rise, neither can America stop China’s ascendancy. Apparently, behind Dalian’s IKEA superstore was the first Chinese aircraft carrier being prepared. Initially, the second-hand Soviet craft was supposedly going to be turned into a casino. But more recently, China admitted to its true role.
Note: since the writing of this page, the aircraft carrier Liaoning has been commissioned and on the high seas.
See also: What kind of superpower could China be?
Having a G2 is no bad thing. We would not have had the recent fiascos like Iraq and Afghanistan with essentially a G1 and – possibly – avoided the excesses of the credit crisis (though some analysts blame the Chinese ‘cheap’ products and propensity for absorbing US debt for making money so cheap it led to greedy bankers overextending themselves, but that is another story). This is especially so, as unlike the previous G2 of protagonists, the USA and the USSR, we will have two highly interdependent G2, albeit one is the banker and supplier and the other the debtor and customer. As someone said, if you owe the bank a $100, it is your problem. But if you owe the bank $1 trillion, it becomes the banker’s problem!
China is keenly mindful of its dependency on the US dollar. In recent years it has done two things to mitigate against this risk. Firstly, from 90%, it is estimated that only 60% of the $1 trillion surplus is denominated in US dollars. When President Hu in June 2011 declared China will continue to support the Euro despite the Greek debt crisis, he was only stating what was and is happening. The second action is that China’s various sovereign funds are buying into foreign companies, either by outright takeover or by JVs. Initially, these were in energy or raw materials, but increasingly, the funds are playing where there is money to be made, regardless of sector.
Late in 2010, the IMF initiated a set or sweeping reforms. One of these is to recognise China’s economic strength and consequently China will leapfrog Germany, France and Britain to be IMF’s third most powerful member after the US and Japan. India will also be granted more authority.
More important than anything else is how the IMF is viewing national debt. until recently largely ignored, this is coming to the fore with S&P threatening to downgrade the US rating because of not only its deficit and national debt, but because of the lack of any sign that politicians in Washington seem to have any desire to curb the deficit and to plan to reduce the debt. Until recently, nations in surplus were under scrutiny. There is now increasing recognition that it takes two hands to clap and deficit nations are beginning to be called to reform. It is increasingly clear the current state of deficit/surplus cannot go on for much longer.
Then in August 2011, the unthinkable happened, the US credit rating was downgraded from triple A despite the debt ceiling being raised above the current astronomical £14.3 trillion by $2.5 trillion!
News on 6 August 2011 offers a big indicator of the shifting economic power balance between China and the US. Xinhua, the Chinese state news agency, said this in a statement: “China, the largest creditor of the world’s sole superpower, has every right now to demand the United States to address its structural debt problems and ensure the safety of China’s dollar assets. To cure its addiction to debts, the United States has to re-establish the common sense principle that one should live within its means. It should also stop its old practice of letting its domestic electoral politics take the global economy hostage and rely on the deep pockets of major surplus countries to make up for its perennial deficits.”
See also: China number two on Fortune 500 list
Finally, the dollar is waning slowly as the world’s reserve currency and the currency of exchange. The Chinese Yuan is slowly gaining ground as the currency of exchange amongst its top trading partners outside of the US and Europe. But to become an alternative to the dollar, it must first become an international fully convertible currency allowed to float freely. China has called for a review of a new stable reserve currency. In all probability this will be based on a ‘basket of currencies’, such as the US dollar, the Euro, the RMB and perhaps some other currencies.
As historians sometimes remind us, Rome did not fall in a day or even a year but over centuries to at least when Romulus Augustus, the last Emperor of the Western Roman Empire, was deposed by Odoacer, a Germanic chieftain. By then it had lasted a millennium. The British Empire from the founding of the East India Company to the end of WWII only lasted a third of a millennium. So will the US ascendancy last under a century, from the end of WWII to 2036? And will they in 2036 remember August 2011 as the beginning of the end of American supremacy?
There is also a small but growing view that America is in decline. But the current American leaders are in denial and see any sings of decline as temporary and a matter of either wrong policy or policy gone wrong.
- Time to start thinking, America iand the spectre of decline
- 10 Ways America Is Losing Its Superpower Status to China (dailyfinance.com)
- Brazil, China to Sign $30 Billion Currency Swap Agreement Soon
A contrary view
According to Robert Kagan, a senior fellow at Brookings Institute, although all empires rise and decline, the timing is not always predictable. In his book The World America Made he asserts that there are several reasons America will not lose its number 1 slot for many decades to come. His reasons are as follows:
- Although China, India and others are expanding their GDP, they are not doing so at the expense of America’s GDP. American GDP stands at c25% of global GDP over four decades and the proportion hasn’t changed much in the last few years.
- If GDP was the main determining factor for being or becoming a superpower, then how did India and China fall down to ‘puny’ Europeans in the 18th and 19th centuries?
- GDP is one thing, but per capital GDP is another altogether. And no one denies that China dn India are on a par with so-called developing countries in that respect.
- American defence spending is larger than the rest of the great powers put together and yet it is not as high a percentage of GDP as was experienced during the Cold War or the two World Wars.
- Furthermore, American military experience is deeper and more varied than for any other country. It has a very experienced top echelon as well.
- In addition, American naval and air forces have no equal. The former is particularly significant in the Pacific.
- Finally,America has allies around the Pacific, some very close such as Taiwan, Japan and South Korea, together with Australia, Philippines and others; China has a very tense relationship with most of her neighbours, either on ideological grounds such as Taiwan or due to disputed maritime boundaries.
Kagan concludes by asserting that the timing is not in the hands of others but Americans themselves. If they lose faith in themselves then the end will hasten. But if they believe then the American downfall may take centuries rather than decades.
Finally, unless China is able to re-balance its economy along the lines proposed by Prof Linda Yueh (see section on need to re-balance economy) within the next five to ten years, then all will be lost.