Rise and Fall of the Great Powers

Here are some excerpts from the 1987 book
The Rise and Fall of the Great Powers (Amazon, Wikipedia) by Paul Kennedy.
Most of the emphasis has been added.

Part II
Strategy and Economics
In the Industrial Era

[From this part I include only the following tables.]

Tables 6 and 18 (merged). Relative Share of World Manufacturing Output, 1750‒1938 (percent)
1750 1800 1830 1860 1880 1900 1913 1928 1938

(Europe as a whole) 23.2 28.1 34.2 53.2 61.3 62.0
United Kingdom 1.9 4.3 9.5 19.9 22.9 18.5 13.6 9.9 10.7
Habsburg Empire 2.9 3.2 3.2 4.2 4.4 4.7
France 4.0 4.2 5.2 7.9 7.8 6.8 6.1 6.0 4.4
German States/Germany 2.9 3.5 3.5 4.9 8.5 13.2 14.8 11.6 12.7
Italian States/Italy 2.4 2.5 2.3 2.5 2.5 2.5 2.4 2.7 2.8
Russia 5.0 5.6 5.6 7.0 7.6 8.8 8.2 5.3 9.0

United States 0.1 0.8 2.4 7.2 14.7 23.6 32.0 39.3 31.4
Japan 3.8 3.5 2.8 2.6 2.4 2.4

Third World 73.0 67.7 60.5 36.6 20.9 11.0
China 32.8 33.3 29.8 19.7 12.5 6.2
India/Pakistan 24.5 19.7 17.6 8.6 2.8 1.7

In endnote 4.11 Kennedy gives the source for Table 6 (1750‒1900) as
page 296 of an article by Paul Bairoch:
“International Industrialization Levels from 1750 to 1980,”
Journal of European Economic History 11 (1982).
In endnote 5.24 he gives the source of Table 18 (1880‒1938) as pages 296 and 304 of ibid.

Note the increase in United Kingdom output from 1830 to 1860
is more than a doubling,
with a corresponding rapid decrease in the figures for India and the Third World.
It seems hard to believe that the U.K. could by itself
have doubled its share of world manufacturing output in thirty years.
I suspect the reason is an inclusion of the output from India in the U.K. 1860 figures.
(And yes, those are the figures in a hardcover edition of the book.)

[The following table is slightly modified:
I have rounded Kennedy's one-place decimals to the nearest whole integer.]

Table 17. Total Industrial Potential of the Powers in Relative Perspective, 1880‒1938 (U.K. in 1900 = 100)
1880 1900 1913 1928 1938

Britain 73 100 127 135 181
United States 47 128 298 533 528
Germany 27 71 138 158 214
France 25 37 57 82 74
Russia 25 48 77 72 152
14 26 41
Italy 8 14 23 37 46
Japan 8 13 25 45 88

[In endnote 5.23 Kennedy gives the source for Table 17 as
pages 292 and 299 of an article by Paul Bairoch:
“International Industrialization Levels from 1750 to 1980,”
Journal of European Economic History 11 (1982).]

Part III
Strategy and Economics
Today and Tomorrow

Chapter 7
Stability and Change in a Bipolar World,

Section 7.2
The New Strategic Landscape
[The Early Postwar Years]

Simply because much of the rest of the world
was either exhausted by the war
or still in a stage of colonial “underdevelopment,”
American power in 1945 was, for want of another term, artificially high,
like, say, Britain’s in 1815.
Nonetheless, the actual dimensions of its might
were unprecedented in absolute terms.
Stimulated by the vast surge in war expenditures,
the country’s GNP measured in constant 1939 dollars
rose from $89 billion (1939) to $135 billion (1945),
and much higher ($220 billion) in current dollars.
At last,
the “slack” in the economy which the New Deal had failed to eradicate
was fully taken up,
and underutilized resources and manpower properly exploited:
“During the war
the size of the productive plant within the country grew by nearly 50 percent
and the physical output of goods by more than 50 percent.”
[W. Ashworth, A Short History of the International Economy Since 1850, p. 268.]
Indeed, in the years 1940 to 1944,
industrial expansion in the United States rose at a faster pace—
over 15 percent a year—than at any period before or since.
Although the greater part of this growth was caused by war production
(which soared from 2 percent of total output in 1939 to 40 percent in 1943),
nonwar goods also increased so that the civilian sector of the economy
was not encroached upon as in the other combatant nations.
Its standard of living was higher than any other country’s,
but so was its per capita productivity.
Amoung the Great Powers,
the United States was the only country which became richer—
in fact, much richer
rather than poorer because of the war.
At its conclusion,
Washington possessed gold reserves of $20 billion,
almost two-thirds of the world’s total of $33 billion.

“… more than half the total manufacturing production of the world
took place within the U.S.A.,
which, in fact,
turned out a third of the world production of goods of all types.”

[Ashworth, loc. cit.]
This also made it by far the greatest exporter of goods at the war’s end,
and even a few years later it supplied one-third of the world’s exports.
Economically, the world was its oyster.


[T]he [postwar] expansion of American economic influence
was going hand in hand with
the erection of
an array of military-base and security treaties across the globe.
Here, too, there are many parallels with
the expansion of British bases and treaty relationships after 1815;
but the most noticeable difference was that
Britain, on the whole, was able to avoid
the plethora of fixed and entangling alliances with other sovereign countries
which the United States was now assuming....
[T]he blunt fact was that
they involved the United States in a degree of global overstretch
totally at variance with its own earlier history.

Section 7.5
The Changing Economic Balances, 1950 to 1980

Subsection 7.5.5
The United States
Perhaps the only consolation to decision-makers in the Kremlin
was that
their archrival, the United States,
also appeared to be encountering economic difficulties from the 1960s onward
and that
it was swiftly losing the relative share
of the world’s wealth, production, and trade
which it had possessed in 1945.
Yet mention of that year is, of course,
the most important fact in understanding the American relative decline.
As argued above,

the United States’ favorable economic position at that point in history
was both unprecedented and artificial.

It was on top of the world
partly because of
its own productive spurt,
but also because of
the temporary weakness of other nations.

That situation would alter, against the United States,
with Europe’s and Japan’s recovery of prewar level of output;
and it would alter still further
with the general expansion of world manufacturing production
(which rose more than threefold between 1953 and 1973),
since it was inconceivable
that the United States could maintain its one-half share of 1945
when new factories and industrial plant were being created all over the globe.
By 1953, [Paul] Bairoch, calculates,
the American percentage had fallen to 45 percent;
by 1980 to 31.5 percent; and it was still falling.
For much the same reason, the CIA’s economic indicators showed
the United States’ share of world GNP dropping
from 26 percent in 1960 to 21.5 percent in 1980
(although the dollar’s short-lived rise in the currency markets
would see that share increase over the next few years).
The point was not that Americans were producing significantly less
(except in industries generally declining in the western world),
but that others were producing much more.
Automobile production is perhaps the easiest way
of illustrating the two trends which make up this story:
in 1960, the United States manufactured 6.65 million automobiles,
which was a massive 52 percent of the world output of 12.8 million such vehicles;
by 1980, it was producing a mere 23 percent of the world output,
but since the latter totaled 30 million units,
the absolute American production had increased to 6.9 million units.

Yet despite that half-consoling thought—
similar to the argument which the British used to console themselves
seventy years earlier when their shares of world output began to be eroded—
there was a worrying aspect to this development.
The real question was not “Did the United States have to decline relatively?”
but “Did it have to decline so fast?
For the fact was that even in the heyday of the Pax Americana,
its competitive position was already being eroded by
a disturbingly low average annual rate of growth of output per capita,
especially as compared with previous decades.

Once again, it may be possible to argue that
this was a historically “natural” development.
As Michael Balfour remarks, for decades before 1950
the United States had increased its output faster than anyone else
because it had been a major innovator
in methods of standardization and mass production.
As a result, it had
“gone further than any other country to satisfy human needs
and [was] already operating at a high level of efficiency
(measured in terms of output per man per hour)
so that
the known possibilities for increasing output
by better methods or better machinery
were, in comparison with the rest of the world, smaller.”
Yet while that was surely true,
the United States was not helped by certain other secular trends
which were occurring in its economy:
  1. fiscal and taxation policies encouraged high consumption
    but a low personal savings rate;
  2. investment in R&D, except for military purposes,
    was slowly sinking compared with other countries; and
  3. defense expenditures themselves, as a proportion of national product,
    were larger than anywhere else in the western bloc of nations.
In addition, an increasing proportion of the American population
was moving from industry to services, that is,
into low-productivity fields.
[See Lester Thurow, The Zero-Sum Society, passim, but espec. chs. 1 and 4.]

Much of this was hidden during the 1950s and 1960s
by the glamour developments of American high technology
(especially in the air),
by the high prosperity
which triggered off consumer demand for flashy cars and color televisions, and
by the evident flow of dollars
from the United States to poorer parts of the world,
as foreign aid, or
as military spending, or
as investment by banks and companies.
It is instructive in this regard to recall
  1. the widespread alarm in the mid-1960s
    at what Servan-Schreiber called le défi Americain
    the vast outward surge of U.S. investments into Europe
    (and, by extension, elsewhere),
    allegedly turning those countries into economic satellites;
  2. the awe, or hatred,
    with which giant multinationals like Exxon and General Motors
    were regarded;
    and, associated with these trends,
  3. the respect accorded to the sophisticated management techniques
    imbued by American business schools.
From a certain economic perspective, indeed,
this transfer of U.S. investment and production
was an indicator of economic strength and modernity;
it took advantage of lower labor costs
and ensured greater access in overseas markets.
Over time, however, these capital flows eventually became so strong
that they began to outweigh
the surpluses which Americans earned
on exports of manufactures, foodstuffs, and “invisible” services.
Although this increasing payments deficit
did see some gold draining out of the United States by the late 1950s,
most foreign governments were content to hold more dollars
(that being the leading reserve currency)
rather than demand payment in gold.

As the 1960s unfolded, however, this cozy situation evaporated.
Both Kennedy [35] and (even more) Johnson [36]
were willing to increase American military expenditures overseas,
and not just in Vietnam,
although that conflict turned the flow of dollars exported into a flood.
Both Kennedy [35] and (even more) Johnson [36]
were committed to increases in domestic expenditures,
a trend already detectable prior to 1960.
Neither administration liked the political costs of raising taxes
to pay for the inevitable inflation.
The result was year after year of
federal government deficits,
soaring price rises, and
increasing American industrial uncompetitiveness—
in turn leading to
larger balance-of-payment deficits,
the choking back (by the Johnson [36] administration)
of foreign investments by U.S. firms, and then
the latter’s turn toward the new instrument of Eurodollars.
In the same period,
the U.S. share of world (non-Comecon) gold reserves shrank relentlessly,
from 68 percent (1950) to a mere 27 percent (1973).
With the entire international payments and money-flow system
buckling under these interacting problems,
and being further weakened by de Gaulle’s angry counterattacks
against what he regarded as America’s “export of inflation,”
the Nixon [37] administration found it had little choice
but to end the dollar’s link to gold in private markets,
and then to float the dollar against other currencies.
The Bretton Woods system, very much a creation
of the days when the United States was financially supreme,
collapsed when its leading pillar could bear the strains no more.

The detailed story of the ups and downs of the dollar in the 1970s,
when it was floating freely, are not for telling here;
nor is the zigzag course of successive administrations’ efforts
to check inflation and to stimulate growth,
always without too much pain politically.
The higher-than-average inflation in the United States
generally caused the dollar to weaken
vis-à-vis the German and Japanese currencies in the 1970s;
oil shocks [1973, 1979],
which hurt countries more dependent upon OPEC supplies (e.g., Japan, France),
political turbulence in various parts of the world, and
high American interest rates
tended to push the dollar upward, as was the case by the early 1980s.
Yet although these oscillations were important,
and tended to add to global economic insecurities,
they may be less significant for our purposes
than the unrelenting longer-term trends, which were
  1. the decreasing productivity growth,
    which in the private sector fell
    from 2.4 percent (1965–72),
    to 1.6 percent (1972–77),
    to 0.2 percent (1977–82);
  2. the increasing federal deficits,
    which could be seen as giving a Keynesian-type “boost” to the economy,
    but at the cost of sucking in so much cash from abroad
    (attracted by the higher American interest rates)
    that it sent the dollar’s price to artificially high levels
    and turned the country
    from a net lender to a net borrower; and
  3. the increasing difficulty American manufacturers found in competing with imported automobiles, electrical goods, kitchenware,
    and other manufactures.
Not surprisingly,
American per capita GNP, once the highest in the world,
began to slip down the list.

There were still consolations,
to those who could see the American economy and its needs
in larger terms than
selected comparisons with Swiss incomes or Japanese productivity.
As Calleo points out,
post-1945 American policy did achieve some very basic and significant aims:
  1. domestic prosperity, as opposed to a 1930s-type slump;
  2. the containing of Soviet expansionism without war;
  3. the revival of the economies—and the democratic traditions—
    of western Europe, later joined by Japan
    to create “an increasingly integrated economic bloc,” with
    “an imposing battery of multilateral institutions ...
    to manage common economic as well as military affairs”;
    and finally
  4. “the transformation of the old colonial empires
    into independent states
    still closely integrated into a world economy.”
In sum,
it had maintained the liberal international order,
upon which it, itself, increasingly depended;
and while its share of world production and wealth had shrunk,
perhaps faster than need have been the case,
the redistribution of global economic balances
still left an environment
which was not too hostile to its own open-market and capitalist traditions.
if it had seen its productive lead eroded by certain faster-growing economies,
it had still maintained a very considerable superiority over the Soviet Union
in almost all respects of true national power and—
by clinging to its own entrepreneurial creed—
remained open to the stimulus of managerial initiative and technological charge
which its Marxist rival would have far greater difficulty in accepting.

Chapter 8
To the Twenty-first Century

Section 8.6
The United States:
The Problem of Number One in Relative Decline

Although the United States is [in 1987] still in a class of its own
economically and perhaps even militarily,
it cannot avoid confronting the two great tests
which challenge the longevity of every major power
that occupies the “number one” position in world affairs:
whether, in the military/strategical realm,

it can preserve a reasonable balance between
the nation’s perceived defense requirements and
the means it possesses to maintain those commitments;

and whether, as an intimately related point,

it can preserve the technological and economic bases of its power
from relative erosion
in the face of the ever-shifting patterns of global production.

This test of American abilities will be the greater because it,
like imperial Spain around 1600 or the British Empire around 1900,
is the inheritor of a vast array of strategical commitments
which had been made decades earlier,
when the nation’s political, economic, and military capacity
to influence world affairs
seemed so much more assured.
In consequence, the United States now runs the risk,
so familiar to historians of the rise and fall of previous Great Powers,
of what might roughly be called ‘imperial overstretch’:
that is to say,
decision makers in Washington
must face the awkward and enduring fact that

the sum total of the United States’ global interests and obligations
is nowadays far larger than
the country’s power to defend them all simultaneously.

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