GEOPOLITICS, INSTITUTIONS, AND ECONOMICS: ON THE RISE AND DECLINE OF CIVILIZATIONS

Abstract

The purpose of this paper is to combine the analysis of geopolitics and economics. Such a project is necessarily ambitious and likely to suffer from many deficits. Since the literature in both fields is huge, important contributions must have been looked. But global reality is insufficiently reflected by the departmental structure of academic studies. Geopolitics does affect the economy and our prosperity. Economic freedom and limited government are the fruits of geopolitical accidents like European disunit)' as well as the ultimate source of the rise of the West. The export of economic freedom which we call globalization has contributed to catch up growth elsewhere, particularly in East Asia, thereby reducing global income inequality somewhat, challenging Western dominance, but simultaneously raising the prospect of a capitalist peace between the West and its challengers. While economic freedom and markets generate miracles, governments tend to fail. They build unsustainable welfare states in aging societies, run up ever higher mountains of debt, establish unviable monetary unions, and permit a type mass immigration that undermines human capital as well as economic freedom and thereby the growth prospects of Europe. Western governments, more so in Europe than in America, do not only fail at home. As the Euro crisis and the Ukrainian crisis demonstrate, responses to interstate disputes neglect the likely consequences as much as many domestic policy choices do. Self-defeating policies undermine the viability of capitalism or free markets in Europe, thereby endangering the prospect of a capitalist peace between rising and declining powers. In such a disorderly situation, attempts to combine the analysis of geopolitics and economics have to be undertaken.1. Economic Growth, Prosperity and Global Power BalancesEconomic growth determines human well-being as well as power balances. Because of its rapid economic growth it has long been predicted that the Chinese economy is likely to become equal to the American one in size - but, of course, not yet in living standards - before 2020 (Maddison 1998: 17, 96). The rise of and more slowly of India will continue to make global poverty rates and even inequality between human beings on earth fall (Bouguignon 2015) and simultaneously affect the global balance of power.1 According to Maddison's (2007: 343) estimates, might control about 23%, the USA 17%, and India 10% of gross world product in 2030. In the long run, economic development determines the rise and decline of nations which affects power balances, power transitions and the risk of war (Organski and Kugler 1980; Kugler and Lemke 1996).2 Although this is not the place to attempt analyzing the two world wars and the subsequent cold war of the 20th century, it is obvious that the world wars could not have happened without rapid German economic growth before 1914 and the Anglo-German power transition (Organski 1958), that the Asian-Pacific part of the second world war could not have happened without Japan's successful industrialization after the Meiji restoration, and that the Soviet Union could not have challenged American primacy after World War II without its establishment of a huge military-industrial complex. Although the Soviet Union never satisfied consumer wants, it built rather strong armed forces on a comparatively weak economic foundation (Luttwak 1983).The most likely future power transition concerns the United States and China. Since neither the Russian, nor the Indian economy come even close to half the size of the Chinese economy, since Europe and Japan are allied with the United States as well as still disinclined to remilitarize, the only conceivable challenger of US hegemony on the horizon is the People's Republic of (Weede 1999). According to Mearsheimer (2001: 14), China and the United States are destined to become adversaries as China's power grows. For adherents of the Realist school of thought in international relations, the two strongest powers in the world are likely to become enemies because of what they are capable to do against each other. …