Which Country Will Be the World Economic Leader in the Next Generation: The United States or China? And the North Korean Factor

Abstract

Is There Another Wave of American Decline?The collapse of the Soviet Union in 1991, along with the unusually strong performance of both the U.S. economy and its stock market during the 1990s, elevated the United States to an unsurpassed level of economic, military, and cultural power. However, in the early 2000s, the United States has faced its sixth wave of decline since the 1950s, a phenomenon largely triggered by its external economic problems and the September 11, 2001, attacks against the World Trade Center in New York and the Pentagon in Washington, D.C. The first wave occurred in 1957 and 1958, when the Soviet Union launched the Sputnik, the first manned satellite. The second wave came at the end of the 1960s, when President Nixon began to prepare Americans for a multipolar world because American decline economically and militarily was inevitable. The third wave followed immediately after the OPEC oil embargo in 1973 and the dramatic increase in oil prices. The fourth wave took place in the later 1970s, because of the Vietnam War, the Watergate scandal, the continued development of Soviet nuclear forces, and the expansion of Soviet power in a half-dozen countries, such as Angola. The fifth wave happened in the late 1980s, largely due to U.S. foreign debt as well as financial threats from Japan.Every single empire and great nation of history has been destroyed or greatly diminished in world influence. Why should we assume that the United States, today's great nation, could defeat the pattern of history? If we assume an American decline for a moment, China seems likely to emerge as a great power, which might end the dominance of the United States in the game of influence on world affairs. We can base the current wave of decline on three bodies of evidence: (1) mounting U.S. budget and trade deficits, (2) economic and military threats from China, and (3) a growing world resistance to American unilateral actions. Let us examine, however, these three bodies of evidence, along with other arguments, before we willingly accept such a gloomy conclusion.Fading America and Emerging ChinaWorld economies strongly affect international politics. At present, about 200 economies interact on the world political and economic stages. This interaction raises important questions. Will the United States maintain not only military superiority but also its economic dominance in the world? Will any country challenge the United States as the superpower? If we assume an American decline for a moment, no other economic leader, with the possible exception of China, seems likely to emerge in the next generation. The question, however, is whether China can actually fulfill that potential. The Chinese leaders have long aspired to a great China- a country with a world-class economy, a strong military, and the restoration of full sovereignty over Taiwan and other disputed islands within its claimed territorial boundaries.Is the United States really passing its baton in the race for world economic leadership to China? Is there anything special about China? Oded Shenkar3 argues that the rise of China in the early 21st century is distinctive and has more in common with the rise of the United States in the 20th century than with the advance of other countries such as Japan. We can find several compelling arguments that such a switch is already under way. For in almost every dimension-population, the numbers of engineers and scientists, trade, international reserves, investment, gross national product, and many other areas-China's activity will challenge that of the United States. At present, China has the world's largest population, graduates the world's largest number of engineers and scientists every year, enjoys the world's largest current account surplus, has the world's largest reserves of foreign exchange and gold, is the world's largest recipient of foreign direct investment, has the largest standing army in the world, and commands the world's second-largest economy in purchasing power parity. …