Sunday, November 15, 2015

Without the World Wars, Would the U.S. Have Played the Role of a Bigger Canada?

A good way to eclipse your economic competition is for their industrial centers to be flattened by wars twice, within a few decades, and for your own country to be on another continent entirely that is not directly involved in the war (excepting one attack). I've always been curious about the extent to which WWII could explain the eclipse of the UK's role as world police and bankers by the US. As I've traveled around the Commonwealth I can't help but imagine an alternative U.S.: a kinder, gentler, less exceptional Anglosphere nation that retained more of the isolationist flair of pre-WWII politics. If the Archduke had survived that summer day in 1914, and Europe had moved rationally and peacefully into an E.U. with Habsburgs...would not the U.K. have retained its economic, cultural and military dominance?

So I checked the numbers. Perhaps London would have remained the undisputed capital of the world for longer, but it's hard to ignore the already-evident economic trend that pre-dated the wars. In terms of the size of its economy (absolute GDP), the U.S. had already outgrown Britain by 1870. In terms of per capita income, the U.S. was neck and neck with the U.K. from shortly after the turn of the last cenutry until WWII, when it pulled away. The wars no doubt accelerated this process, in particular after WWII when there was an obvious incentive to move toward the American sphere and away from the Soviet, allowing international law and finance to move in discrete steps toward the U.S. But the underlying economic process was already underway. Now that China is eclipsing the U.S. as the absolute largest economy, we should expect that this process will repeat itself, particularly if the country escapes the middle income trap and the PCI of the interior rises as well.