China's global influence won't be determined by the size of its economy
Alexander van Kemenade says history shows that advantages in finance and technology matter more
With claims that China is now the world's largest economy, talk of an impending Chinese century has reached fever pitch. Yet, economic size is a poor predictor of global power. Throughout history, technological and financial sophistication have mattered much more in determining a country's ability to project influence beyond its borders. So far, China does not impress in either category.
Portugal ranked 21st in the world in 1500 and the Netherlands 12th in 1600 before building their global empires, according to Angus Maddison's historical dataset. In 1700, before Britain defeated France in India, its economy ranked only seventh. As the first global power that is also the world's largest economy, the US is the exception rather than the rule.
Advances in navigation and shipbuilding enabled the Portuguese and Spanish to embark on their voyages of discovery.
Innovations in cartography and finance allowed the Dutch not only to discover unknown sources of wealth but also to fund new expeditions. Industrial revolution inventions such as the steam engine and the telegraph were instrumental in projecting and maintaining Britain's global power.
The establishment of the Bank of Amsterdam, often referred to as the world's first central bank, turned the Dutch city into the centre of the global monetary system in the 17th century.
Financial power subsequently became a vital competitive advantage in the world. Amsterdam eventually lost its status to London during the 18th century following the establishment of the Bank of England in 1694. By the early 20th century, the crown had passed to the US.
The common feature of global powers is that they all had high degrees of economic sophistication rather than a large economy. Using gross domestic product per capita as a proxy for sophistication, we see that the Netherlands and Britain ranked first and second in the world for nearly four centuries, beginning well before their respective peaks of power. The US reached the top spot on the eve of the first world war, shortly before it began to assert itself on the global stage.
