Culture, Economic Growth, and Interstate Power Shift: Implications for Competition between China and the United States 1009465503, 9781009465502

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Culture, Economic Growth, and Interstate Power Shift

A country’s culture influences its economic growth, which in turn influences its international position. Confucian heritage appears to be the common factor explaining the rapid economic growth of East Asian countries, including China’s meteoric rise in recent years. Ironically, Confucianism was criticized not too long ago for hindering progress in these countries. At the same time, Protestant countries, once the vanguards of economic development, have seen weak growth. These developed economies are undergoing a cultural transformation from an emphasis on materialist concerns to postmaterialist ones. What do these trends augur for their economic growth and international competitiveness, particularly in the context of ongoing power shifts between China and the United States? steve chan is College Professor of Distinction (Emeritus) at the University of Colorado, Boulder. He has published 22 books and nearly 200 articles and chapters. He has recently authored Rumbles of Thunder (2023), Thucydides’s Trap? (2020), and Trust and Mistrust in Sino-American Relations (2017), and coauthored Contesting Revisionism (2021).

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Culture, Economic Growth, and Interstate Power Shift: Implications for Competition between China and the United States By Steve Chan Endorsements “In Culture, Economic Growth, and Interstate Power Shift, Chan revisits some of the old themes but produces a refreshingly innovative book. The book brings culture back into the debate over China’s growth trajectory. While the literature looks at U.S.-China competition in dyadic terms, Chan’s comparative analysis shows how they each organize their domestic political economy matters, particularly warning against overreach in defense budget while underscoring the importance of technological innovation.” Yong Deng, Professor of Political Science, US Naval Academy, and author of China’s Strategic Opportunity: Change and Revisionism in Chinese Foreign Policy (2022) “Chan’s remarkable book intricately explores the interplay between culture, economic growth, and the enduring competition between the United States and China. It sheds light on the profound influence of economic advancement on a nation’s power and competitive positioning in global affairs. Delving into the essence and potential future of the US–China competition, the book also addresses the pivotal role institutions play in bridging the gap between culture and a state’s capacity for innovation. A compelling mustread for those intrigued by US–China relations and global geopolitics.” Kai He, Professor of International Relations, Griffith University, and author of Contesting Revisionism: China, the United States, and the Transformation of International Order (2021)

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Culture, Economic Growth, and Interstate Power Shift Implications for Competition between China and the United States

steve chan University of Colorado, Boulder

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Shaftesbury Road, Cambridge CB2 8EA, United Kingdom One Liberty Plaza, 20th Floor, New York, NY 10006, USA 477 Williamstown Road, Port Melbourne, VIC 3207, Australia 314–321, 3rd Floor, Plot 3, Splendor Forum, Jasola District Centre, New Delhi – 110025, India 103 Penang Road, #05-06/07, Visioncrest Commercial, Singapore 238467 Cambridge University Press is part of Cambridge University Press & Assessment, a department of the University of Cambridge. We share the University’s mission to contribute to society through the pursuit of education, learning and research at the highest international levels of excellence. www.cambridge.org Information on this title: www.cambridge.org/9781009465502 DOI: 10.1017/9781009465540 © Steve Chan 2024 This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press & Assessment. First published 2024 A catalogue record for this publication is available from the British Library A Cataloging-in-Publication data record for this book is available from the Library of Congress ISBN 978-1-009-46550-2 Hardback ISBN 978-1-009-46555-7 Paperback Cambridge University Press & Assessment has no responsibility for the persistence or accuracy of URLs for external or third-party internet websites referred to in this publication and does not guarantee that any content on such websites is, or will remain, accurate or appropriate.

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Contents

Acknowledgments

page viii

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Introduction

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The Origins of Culture and Its Effects on Economic Development and Political Order

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The Struggle between Materialist and Postmaterialist and China’s Economic Growth in Historical and Comparative Context

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Economic Growth, Interstate Primacy, and Domestic Trade-offs

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Innovation, Leading Sectors, and International Competitiveness

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Conclusion

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4 5 6

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References

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Index

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Acknowledgments

I thank Joe Ng for overseeing the review process for this book, two anonymous reviewers for their helpful feedback, and other colleagues who have shared their thoughtful comments. I am also grateful for a grant from the University of Colorado to assist research by retired faculty.

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Introduction

This book probes the relationship between a country’s international competitiveness and its people’s cultural beliefs and practices, with economic growth providing the critical linchpin in this relationship. Although couched as a general proposition for different countries at different times, the book’s analysis focuses on China and the United States, the world’s current largest economies. It tries to gain a better understanding of how these countries’ respective culture is likely to affect their future growth prospects and therefore their respective position in the interstate hierarchy. Discussions of a culture’s influence on a country or group’s economic and other kinds of performance (such as academic achievements) can be controversial, even though there has been a long tradition of such scholarship with Max Weber’s (1998) work on the Protestant ethic offering perhaps the best-known example. Yet, studies of generally shared cultural traits and their purported effect on national or group achievements have become rarer in recent years, and these studies have often encountered criticisms of racial stereotyping and even racism (e.g., Chua 2011; Chua and Rubenfeld 2014). Such criticism is in my view undeserved even though perhaps understandable. As someone who has been sharply critical of prevailing scholarly and even popular narratives referring to the power-transition view of international politics and the danger ostensibly presented by such transition (dubbed Thucydides’s Trap by Graham Allison 2017), I can see how views that may appear to some as natural and even obvious can strike others as simplistic and even outrageous. This kind of reaction, however, should not prevent us from engaging in an open, honest, and vigorous debate about the validity of those ideas being presented. To be clear, I view explanations of social, economic, cultural, or political phenomena relying on any single variable with skepticism. Monocausal explanations, including those seeking to explain the 1

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occurrence of wars (such as the account given by so-called Thucydides’s Trap), cannot capture the complexity of these phenomena. Thus, for example, there are multiple paths to war, often involving complicated interactions and feedback loops among multiple variables (Levy and Thompson 2010a). This observation also applies to cultural explanations of economic growth. Moreover, cultural traditions often present diverse and even contradictory features, and they are apt to evolve and change over time. Obviously, not every person who is supposed to belong to a cultural group will necessarily subscribe to all the beliefs and values attributed to this group. Most importantly, these beliefs and values interact with other variables, both shaping and being shaped by other pertinent conditions. Thus, for example, the supposed Confucian values of thrift, hard work, and commitment to education cannot in themselves explain why overseas Chinese in Southeast Asia have prospered but China has been beset by economic backwardness during its century of humiliation at the hands of Western and Japanese imperialists as well as economic underperformance under communism until the reforms introduced by Deng Xiaoping in the late 1970s. I offer these caveats at the outset, realizing that there are bound to be controversies over explanations on how a country’s cultural ethos affects its rise and fall in international relations. As just mentioned, this ethos is not fixed or stagnant. It changes and is hence an important part of the story of changing national competitiveness affecting countries’ international ranking. The debate over whether institution or culture is more decisive in influencing economic growth is sterile. Clearly, both are relevant. Moreover, institutions can influence culture, just as culture can influence institutions. Therefore, there can be a two-way causal relationship between culture and institutions, such that “In the case of China, its collectivist Confucian culture may have been more compatible with an authoritarian political system, and the long-lasting historical institution of imperial civil examinations was probably responsible for China’s extraordinary cultural emphasis on education” (Zhu 2021: 166). Confucian culture might have contributed to the relative effectiveness of China’s government and its policies, at least so it appears in comparison with other developing countries and former socialist countries. There are also reciprocal influences and feedback loops between institutions and culture on the one hand and economic development

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on the other. The world does not operate in neat compartments delineated by academic disciplines. As Ronald Inglehart (1997: 217) notes, “Both societal-level and individual-level evidence suggests that a society’s economic and political institutions are shaped by cultural factors as well as economics.” That culture and the economy have a relationship of reciprocal influence should be evident in much of this book’s discussion. I endorse the general idea, originally suggested by Max Weber (1998) over a century ago and subsequently by scholars such as David McClelland (1961), that cultural impulses and dispositions play a large role in economic growth as in the case of the Protestant ethic in Europe’s economic development. I also subscribe to the view that economic development can in turn influence a society’s cultural outlook, such as the shift from materialist to postmaterialist values documented by Ronald Inglehart (1990, 1997, 2004). Indeed, these ideas represent important themes for a major part of this book’s argument. Because culture is the product of a long evolutionary process and represents a country’s heritage, I focus on this variable even though I acknowledge the indispensable contributions of institutions and the economy itself to growth. Naturally, culture, institutions, and the economy not only influence each other but are also influenced by other factors such as geography and climate. There is the inevitable chickenand-egg question about whether culture, institutions, or the economy is causally prior. I engage in cultural explanations in this book because even though cultural norms and practices can be in the first place influenced by geography and climate, they are in my view antecedent to the creation of social and political institutions and the operation of modern economy (e.g., Acemoglu and Robinson 2012; Diamond 2017; Inglehart 1997, 2004; North 1990; Sachs 2003). Again, this is not to argue that these norms and practices are immune from institutional and economic influences. They are not, and coevolution describes best their overtime interactions. There is by now a large and growing literature on the shifting power balance between China and the United States (e.g., Beckley 2011– 2012; Brooks and Wohlforth 2016a, 2016b; Buzan 2004; Chan 2023; Starrs 2013; Tammen et al. 2000). One common feature of these studies is the prognostication of these countries’ relative power and therefore their international status in the coming years. This book shares this interest in trying to understand those forces capable of

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transforming the structure of interstate system. The most important force is in my view domestic economic growth, which is necessary to support and sustain a country’s international position. Economic growth, however, is itself driven primarily by a country’s capacity to invent and innovate and by its ability to pioneer leading industries that drive its own economy as well as the world economy forward. The book’s agenda therefore reflects a simple premise consisting of two propositions. These propositions suggest that a country’s culture affects its economic growth, which in turn buttresses and determines its international standing as indicated by its power relative to its peers. According to this reasoning, shifting power balance at the interstate level is largely a result of states’ relative domestic economic performance which is in turn influenced by their respective cultural practices and institutions as well as by their ability to advance the scientific and knowledge frontier. This framing of the book’s agenda reflects a concern with a serious disjuncture in current scholarship. The fields of economic development and international relations have largely remained separate to their mutual detriment. As William Thompson and Leila Zakhirova (2019: 30) have noted, scholarship on “economic development often tends to be too inward-oriented. International relations [scholarship] often does the opposite, neglecting critical internal changes.” This book therefore joins several notable past studies (e.g., Gibbon 2000; Gilpin 1981; Kennedy 1987; Modelski 1987a, 1987b; Modelski and Thompson 1996) in attempting to address this “missing link” in the discourse on the rise and fall of great powers. All three variables (shifting power balance, domestic economic growth, and cultural proclivities) are not fixed. Thus, for example, Protestant Americans have not done as well economically as other groups in recent years. “Today, American Protestants are below average in wealth, and being raised in an Evangelical or fundamentalist Protestant family is correlated with downward economic mobility” (Chua and Rubenfeld 2014: 8), even though in Max Weber’s (1998) classic analysis the Protestant ethic had provided the key driver for capitalist development. Recent survey data from cross-national research tend to confirm this pattern characterizing differences among groups living in the same country (in this case, the United States). They show that with their rising level of affluence, people in the advanced Protestant economies have become less achievement oriented. “The

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achievement scale correlates negatively with the percentage of Protestants in a given country, meaning that the more the Protestants, the lower the level of achievement motivation” (Lipset and Lenz 2000: 121). This phenomenon teaches us that cultural values are not static and can in fact change significantly over time. As just remarked, this book tries to link a group-level phenomenon (cultural proclivities) to a national-level outcome (economic growth), and this national-level phenomenon is in turn linked to the international-level outcome of competition among members of a small, elite club of great powers. Cultural dispositions’ evolution and national economies’ fluctuations make it possible to link them to the rise and fall of great powers throughout history (e.g., Chatterjee 2016, 2021; Chua 2007; Gibbon 2000; Kennedy 1987; Modelski 1987a, 1987b). Naturally, those topics of interest to social scientists, including this book’s subject matter, are too complex to be captured by monocausal explanations. Therefore, the twostep analytic argument just presented is not meant to suggest that other factors are irrelevant to a country’s economic growth or interstate ranking. As I have already said, these outcomes are usually produced by interactions involving multiple variables. My argument rather highlights the influence of cultural practices and institutions on economic growth, and the importance of economic growth in influencing a country’s relative position in the interstate hierarchy. As already mentioned, cultural explanations of economic performance have a distinguished pedigree even though their popularity has declined in scholarly discourse in recent years. Max Weber’s (1998) study of the Protestant ethic producing in his time the superior economic performance of Protestant countries relative to their Catholic counterparts remains the iconic classic of this genre of scholarship. Other scholars, such as David McClelland (1961), have also pointed to national ethos based on a common psychological need to achieve as the main driver behind economic dynamism and achievement. Still others, such as Marion Levy (1954), have shown cultural or social institutions such as primogeniture to be an important factor contrasting China and Japan’s early experiences in pursuing economic modernization. Although not focusing strictly on the relative economic performance of countries, other authors have written persuasively that culture makes a large difference in a society’s level of interpersonal trust and its people’s feelings of political efficacy. For example, Edward Banfield’s (1958) classic study of southern Italy shows its people’s

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pervasive sense of mistrust of strangers and political institutions, with serious deleterious consequences for that country’s social cohesion, political integration, and economic growth. Gabriel Almond and Sidney Verba’s (1963) comparative study of the civic culture in five countries (the United States, Germany, Mexico, Italy, and Britain) represents another pioneering work on people’s political attitudes, beliefs and values that have a direct causal impact on the health of and the prospects for their respective democratic institutions. More recently, another study of Italy’s political culture by Robert Putnam (1993) has also been influential. It again emphasizes the importance of social trust in encouraging economic development and building democracy. Writing as economic historians, David Landes (1999: 517) argues that “culture makes all the difference” in explaining economic development, and Joel Mokyr (2016) points similarly to cultural changes in Europe during 1500–1700 as a precursor to this continent’s industrialization led by Britain. In recent years, many scholars have pointed to East Asia’s Confucian heritage as the chief explanation of this region’s exceptional economic growth (e.g., Hamilton and Kao 1987; Hofstede and Bond 1988; Kahn 1993; Tu 1996, 2000; Zhu 2021). This tradition’s emphasis on education, thrift, and hard work have also been invoked to explain the academic and economic attainments of Asian immigrants and their children in the United States (Chua 2011). Importantly, these elements accounting for socioeconomic success as conventionally defined are not confined to the Chinese and other East Asians with a Confucian heritage. Other groups with these cultural traits, such as people who emigrated to the United States recently from Cuba, India, Iran, Jamaica, Lebanon, and Nigeria, have also outperformed native-born groups in their academic and economic pursuits, even though they do not enjoy the usual socioeconomic advantages that favor established, affluent, white families in these pursuits (Chua and Rubenfeld 2014). The United States has the world’s best medical facilities and personnel, but in addressing the challenges posed by the Covid-19 pandemic it has done much less well than countries with a smaller resource base but a greater political capacity. Even though they represent only 4.2% of the world’s population, Americans accounted for 18.8% of all the infection cases and 15.8% of all the fatalities caused by this virus as of February 15, 2022 (www.google.com/search?channel=cus5&client= firefox-b-1-d&q=covid+cases+worldwide).

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Francis Fukuyama (2020) suggests that three factors are responsible for this poor performance: leadership, social trust, and policy (or political) capacity. The US political culture as reflected by its relatively low level of social trust is an important part of the explanation for its relatively poor performance in coping with this pandemic. There was widespread skepticism about the efficacy of vaccines to protect against this virus and mistrust of scientific advice and government mandates. As noted by Fukuyama, however, other factors also played a part in the high incidence of infection and death in the United States. Thus, culture alone does not tell the full story. Still, American travelers to East Asia cannot but notice that practically all people there still wear face masks at the time these words were written (March 2023), whereas practically all Americans have given up this practice even when they are in crowded public places. Chapter 2 reviews the literature connecting cultural proclivities to economic performance. This review also includes studies of the influence of a country’s culture on its political order and identity. Karl Wittfogel’s (1957) analysis of hydraulic societies provides an example. He argues that large construction projects to control flooding and provide irrigation required a centralized authority and a large bureaucracy to direct and mobilize collective effort, which in turn gave rise to an authoritarian tradition in societies such as China’s (a view shared by Landes 1999: 27–28). Confucian culture’s hierarchical ordering of social and political relations has led others such as Lucian Pye (1967, 1968; Pye and Pye 1985) to argue that the Chinese (but also other Asians like the Burmese) tend to seek and defer to authority figures. Similarly, according to Richard Solomon (1972), the socialization experiences of the Chinese people, especially their child-rearing practices, dispose them to authoritarian rule. More recently, Samuel Huntington (1996) has written about the clash of civilizations, pointing to the importance of cultural values and religious identities in shaping international relations. The studies mentioned in the above paragraph do not pertain directly to the economic performance of different countries, but they are nevertheless relevant to this performance because political institutions and government policies naturally have cultural roots. Therefore, culture can influence economic performance indirectly by this avenue. Various studies of East Asia’s newly industrializing economies (NIEs) have sought to explain their rapid growth (e.g., Amsden 1989; Berger

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Introduction

1988; Chan 1993; Chan and Clark 1992; Deyo 1981, 1987; Gereffi and Wyman 1990; Gold 1986; Haggard 1990; Haggard and Moon 1989; Johnson 1982; Jones and Sakong 1980; Krause 1988; Rabushka 1979; Rodan 1989; Vogel 1979; Wade 1990; Woo-Cumings 1991, 1999; Zhu 2021). Those political institutions and government policies hypothesized to promote economic growth should be embedded in and compatible with the relevant countries’ existing social and cultural norms (Evans 1995). Naturally, institutions and policies facing resistance or headwinds from existing social and cultural norms are more likely to fail than others that have the advantage of these norms working as tailwinds. One is reminded of Joseph Stalin’s remark that imposing communism on Poland was like fitting a saddle onto a cow. In Chapter 2, I also review the evidence on variations of academic and economic success among different ethnic groups living in the United States. It asks why certain immigrant families, such as those with a Confucian heritage, tend to perform better on conventional measures of such success. Of course, overachievement as thus defined is not limited to immigrant communities, as the remarkable socioeconomic attainments by the Mormons and Jews attest. What are the ingredients of these groups’ recipe for success? Socioeconomic privilege does not explain their and other ethnic communities’ achievements as many of their members had come from poor families with little education and were often refugees fleeing political persecution or economic hardship in their home countries. Not surprisingly, this discussion leads to the conclusion that those societies that have historically tolerated diversity and welcomed immigrants have benefited from their presence, especially from the professional skills and entrepreneurial élan brought by these immigrants. I argue that many common explanations of East Asian NIEs’ economic success should also, in principle, apply to other developing countries whose economies, however, have grown much more slowly or have even declined in some years. For example, low labor cost is a common condition characterizing developing countries in general, and export-led growth is a strategy that can, in theory, be adopted by all countries. They might have encouraged or facilitated the East Asian NIEs’ economic development, but they are only the proximate causes for this phenomenon. What are the ultimate causes that enable the East Asian NIEs to take advantage of such conditions or strategies, and thus

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account for their much better economic performance compared to the rest of the developing world? The pertinent discussion in Chapter 2 sets the stage to inquire about those traits that separate the East Asian NIEs from other developing countries – and, moreover, those traits that are shared by these NIEs, giving rise to the phenomenon that these fast-growing economies have been clustered geographically in East Asia. At the same time, this chapter asks why, with a few exceptions consisting mostly of resource-rich exporters like Botswana and the United Arab Emirates, the rest of the developing world has not been able to attain similar rates of economic growth. This chapter also engages institutional explanations of economic growth, suggesting that these explanations can be limited and inadequate just as an exclusive reliance on cultural explanations can be unsatisfactory. In Chapter 3, I turn to a discussion of how economic changes can bring about cultural changes, focusing especially on the transformation of a society due to the replacement of its older generations with materialist values and attitudes by younger cohorts with a postmaterialist orientation. Economic affluence has the effect of encouraging people to assign greater priority to concerns about self-expression, personal liberty, socioeconomic equity, quality of life, and environmental protection relative to emphasizing the pursuit of further economic growth and more material rewards at the expense of these postmaterialist values and attitudes. People in China and the United States show important differences in their tendencies to subscribe to these materialist and postmaterialist views. Led by Ronald Inglehart (1990, 1997, 2004; Inglehart and Baker 2000; Inglehart et al. 2004; Inglehart and Welzel 2005), survey research in recent decades has produced and compiled systematic data on mass attitudes and values in different countries and at different times. These data demonstrate a process of culture shift whereby young people who grew up during years of economic abundance are likely to hold postmaterialist attitudes and values that emphasize self-expression and personal liberty. In contrast, their older cohorts, especially those who grew up during times of economic hardship or political turmoil, tend to have attitudes and values that place a premium on the pursuit of materialist objectives such as high income and job security. As countries such as China and the United States are at different phases of economic development, their people tend to show different

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Introduction

levels of support for materialist and postmaterialist concerns. China, being an economic latecomer and at an earlier stage of economic development, has a larger portion of its people expressing materialist interests than the United States. In educating their children, Chinese parents tend to emphasize more the virtues of thrift, hard work, and self-discipline. They and their children are also more likely to attribute differences in personal performance, such as a student’s test scores, to work ethic, whereas, in contrast, Americans tend to explain these differences in terms of people’s natural talent. Given the different distribution of materialist and postmaterialist attitudes and values among societies, we would expect their respective prospects for economic growth to vary at least in the short to medium term. Chapter 3 reviews the available evidence pertaining to culture shift over time and across countries, and it discusses the political and economic implications of this shift. Naturally, when people in a country hold sharply different attitudes and values about God, family, country, and other matters, these differences are likely to affect its politics. These differences affect and indeed define people’s self-identities, which can be even more politically potent and salient than their perceptions of their economic selfinterests. The British people’s vote to leave the European Union appears to present such an example. As I wrote these words, French protesters were marching against their government’s decision to delay their retirement age from 62 to 64. In contrast, my acquaintances in China, Hong Kong, and Taiwan were making changes in their lives and careers because they wanted to continue working beyond the government’s mandate to retire by the age of 65. The “culture war” that has divided US politics presents another instance of cultural differences. Political conflicts over issues such as the legality of school prayer, appropriateness of academic curriculum (such as the teaching of so-called critical race theory), access to abortion, and transgender and gay rights reflect people’s self-identities more than their economic self-interests. Whether admission to prestigious universities in the United States should be based only on academic attainment or whether these decisions should include the goals of diversity and inclusiveness shows another sociopolitical disagreement related to the political and cultural divisions separating Americans with different emphases on materialist and postmaterialist attitudes and values. Compared to the United States, there is less controversy

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in China over such issues, because China is dominated by a much larger majority with a materialist inclination. People in East Asia share many similar values and attitudes. As a result, China, Japan, and South Korea consistently cluster together to present a separate, distinct group of countries in multivariate factor analyses undertaken by Inglehart and his colleagues. Thus, those values and attitudes associated with high socioeconomic achievements by ethnic or religious groups living in the United States are also found at the level of cross-national patterns in the World Values Surveys. This correspondence or convergence of evidence is significant, and it provides a more compelling explanation, one based on their shared cultural heritage, of the economic growth and dynamism shared by different East Asian economies in recent decades. In Chapter 3, I also attend to various common explanations of China’s rapid economic development, and I show why most of them are unsatisfactory. By a process of elimination, cultural explanation again seems to offer the most compelling account although it too is not without flaws. This explanation has an advantage of helping us to understand not only China’s economic development but also that of its East Asian neighbors. Other explanations, such as those based on institutions, have a more difficult time in accounting for this regional phenomenon because the relevant economies have featured a variety of institutions. The discussion in Chapter 4 turns to the question of why great powers in the past have risen and fallen. Although multiple factors have surely played their respective part in this phenomenon, I emphasize especially a country’s ability to grow and sustain its economy. Paul Kennedy (1987: 439) notes, “. . . all of the major shifts in the world’s military-power balances have followed alterations in the productive balances; and further . . . the rising and falling of the various empires and states in the international system has been confirmed by the outcomes of the major Great Power wars, where victory has always gone to the side with the greatest material resources” (emphases in original). Rafael Reuveny and William Thompson (1999) have examined extended longitudinal data (1801–1992) for the United States, seeking to identify the sources and bases of its strength as the system leader in the modern era. Their model includes four variables: the US rate of growth in the leading sectors or industries of the pertinent time period

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(e.g., cotton and iron; railroads; steel, chemicals, and electricity; motor vehicles and electronics; and aerospace and information technology for successive technological and industrial eras); the US share of the global aggregate production in the leading sectors or industries; the US capability for global reach as measured by its naval strength; and finally the US level of military preparation as indicated by its military personnel as a percentage of total population. The first two variables just mentioned form an economic block, and the last two variables form a military block. In line with Kennedy’s argument, the economic block influences the military block more than vice versa. In other words, technological innovation and a dynamic economy based on pioneering industries provide the wherewithal for global reach, military mobilization, and world leadership. Put in a different way, the United States’ position as the world’s leader has been buttressed and sustained by its capacity for technological innovation and its strong economy. Although naval prowess and military mobilization also matter as supporting pillars for US preeminence, they are less important than technological innovation and economic growth that provide their backing. Moreover, the whole is more important than the parts, which is to say that US power has reflected a coherent and tight structure with mutually supporting elements. As described by other observers of the structural power of the United States (e.g., Chan 2023; Strange 1987), this ensemble makes it difficult for other countries to resist its influence or to challenge its preponderant position. Thus, Reuveny and Thompson (1999: 570) conclude, “A very tight coevolutionary pattern is found to characterize the economic growth-systemic leadership-military mobilization experience of the United States, thereby underlining the constraints of structural change.” One can also postulate a reverse process to the one just described. As stagnation and decline set in, a country’s economic resources face increasing pressure coming from its domestic needs and foreign missions. This process is apt to become more acute over time, and it may thus compound the various challenges resulting in an acceleration of economic decline. A country facing these challenges will have to confront difficult choices such as whether to retrench and reduce its foreign commitments lest it commits the error of imperial overstretch (Kennedy 1987; MacDonald and Parent 2011, 2018a, 2018b). This latter concept refers to an imperial power’s overtime decline because it

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took on more and more foreign missions beyond its available resources to fulfill these missions, leading eventually to its exhaustion and even collapse. Wars of conquest may add to national strength, but they may also sap a country’s energy, deplete its resources, engender domestic opposition, and distract government officials’ attention from pressing imperatives to undertake economic and political reform. When a country takes on more foreign commitments than its available resources can afford, it runs the risk of imperial overstretch which can in turn accelerate its decline both at home and abroad (Kennedy 1987). A far safer and more reliable way to secure upward mobility in the interstate system is for a country to improve and grow its economy. A vibrant domestic economy supports and sustains a country’s robust policy abroad, including providing it with the wherewithal to maintain a strong military establishment. Significantly, the rise and fall of great powers in the past have always been associated with the outcomes of wars or conquests. For instance, the United States and the USSR became the dominant powers on the world stage after World War II had reshuffled the interstate pecking order. In earlier eras, Portugal, the Netherlands, Britain, and other imperial and colonial powers including Russia, France, Japan, and the United States joined the club of great powers in part by winning foreign wars and acquiring overseas territories (such as the SpanishAmerican War that led to the annexation of Guam and Puerto Rico and the colonization of the Philippines by the United States). Significantly, China’s rise since the late 1970s presents the first time in modern history that an emergent power has reached the front ranks of interstate hierarchy due exclusively to the growth and expansion of its domestic economy. Economic growth can buttress and enhance a country’s foreign position, and, conversely, economic stagnation and decline can enfeeble it and weaken its global position. Moreover, and as implied already, there can be a reciprocal causal relationship between a country’s domestic economic performance and foreign position. Whereas a strong domestic economy provides the most important source of strength when dealing with foreign competitors, a failure to adjust a country’s foreign profile (or its self-perception of its proper role and position in the interstate system) according to its available resources can hurt its prospects for domestic growth. The existing literature on

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the guns-versus-butter trade-off warns us that expenditures intended to support or sustain a country’s international status and position (such as its military spending and its commitments to defend foreign allies) can come at the expense of its welfare programs as well as its level of savings, investment, and human capital necessary to promote future economic growth (e.g., Chan and Mintz 1992; Russett 1969, 1970). Researchers of international relations and especially those who study power shifts in these relations have looked at different indicators of national power. There is a considerable body of studies debating about how to define and measure this variable (e.g., Baldwin 1979, 2016; Beckley 2018; Boudon and Bourricaud 1989; Chan 2023; Cline 2002; Hart 1976; Kugler and Arbetman 1989; Merritt and Zinnes 1988, 1989; Nye 1990, 2002, 2004; Rauch 2017; Shifrinson and Beckley 2012–2013; Singer et al. 1968; Snider 1987; Strange 1987; Taber 1989; Tellis 2015; Wrong 1995). However, despite specific differences that distinguish their views, there is a general agreement among scholars that gross domestic product (GDP) is the single best quantitative measure of national strength. The growth of GDP is in turn influenced by a country’s labor productivity, its investment in physical assets and human capital, and its capacity to innovate and advance the scientific and technological frontier. There is consensus among social scientists about the validity of the above generalization. One may, however, question whether labor productivity, a proclivity to invest, and a capacity to innovate should be taken as a given rather than treated as variables whose origins should be investigated. Put in other words, are the factors just mentioned only the proximate causes of economic growth, for which the ultimate causes deserve to be investigated more thoroughly? What can incline a society to work harder, save and invest more, and engage in successful innovation? Why do some societies exhibit these tendencies more than others? Although economic growth may beget more economic growth, there is a limit to treating this phenomenon endogenously. Technologies inevitably diffuse, and competitors catch up. What exogenous factors can make a difference? We know from history that countries that used to command an impressive innovative capacity and a dynamic economy have subsequently suffered prolonged stagnation and even sharp decline. For instance, China during the Southern Song dynasty was the world’s economic and technological leader, but in the subsequent centuries it was overtaken by other countries. Similarly, the

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Netherlands lost its leadership position to Britain, and Britain in turn lost it to the United States. The relevant questions about power shifts in the interstate system concern the relative performance of a country’s economy and the relative effectiveness of its foreign policy. It is not just about how fast a country’s economy is growing that matters but rather how this growth compares with its peers and competitors. Naturally, states at different stages of development tend to grow at different average rates or speeds. Those that start from a low base and enjoy the so-called advantage of being backward (Gerschenkron 1966) should be able to expand their economy at a faster rate, everything else being equal. Those cultural proclivities mentioned earlier can contribute further to facilitating or hampering this rate of change beyond that which reflects mathematical or economic considerations (mathematical because everything else being equal, it is more difficult to maintain a high growth rate when an economy’s size, the denominator for calculating this rate, becomes larger). Naturally, a comparative perspective is also necessary when evaluating the relative effectiveness of a country’s domestic and foreign policies. These policies can be expected to encounter resistance and even countervailing efforts from another country. Thus, international competition is about relative gain or comparative performance (Grieco 1988; Powell 1991). Moreover, and as also alluded to earlier, in this competition a country’s own prevailing practices and existing institutions can be a source of self-inflicted injuries that hamper growth and diminish its foreign influence. Athens’s leader Pericles warned his compatriots “not to extend your empire at the same time as you are fighting the war and not to add selfimposed dangers, for I am more afraid of our own mistakes than the strategy of our opponents” (Kagan 1969: 192). This is another theme that both Chapters 3 and 4 will address. A country can try to increase its economic output by increasing the necessary input without, however, necessarily raising the effectiveness of its throughput. In other words, economic growth can be achieved by adding more human labor and raw material to a production process without increasing its efficiency or productivity. Paul Krugman (1994) and Alwyn Young (2003) have questioned the true nature of East Asian economies’ growth based on this reasoning, and Daron Acemoglu and James Robinson (2012) have also interpreted in this light Joseph Stalin’s expansion of the USSR’s economy based on the

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Introduction

mobilization of collective efforts and massive amount of resources. They conclude that “. . . [the USSR’s] growth without creative destruction and without broad-based technological innovation was not sustainable and came to an abrupt end” (Acemoglu and Robinson 2012: 94). This assessment can also serve as a warning about China’s economic future. This pessimistic outlook, however, is contradicted by Tian Zhu (2021: 77–78) who argues that China’s productivity has in fact increased significantly over the years, so that this factor has contributed about 40% of its economic growth heretofore. Chapter 5 follows up on this idea about the contribution of science and technology to economic growth. There is a strong, positive relationship between this growth and a country’s capacity to invent and innovate in the long run, even though in the short run these two variables may not be correlated, such as for Japan during the 1990s (Posen 2002). Britain had two economic spurts that kept it at the top of the interstate hierarchy (Modelski and Thompson 1996). How well positioned are China and the United States in competing for leadership in the next generation of science and technology in fields such as artificial intelligence, genetic engineering, robotics, and electric vehicles? In this competition, institutions matter as much as culture. The cultivation of human capital, the protection of intellectual property, and an environment conducive to creativity are all important factors contributing to success in this competition. Moreover, a country’s ability to harness cheap, reliable, and abundant sources of energy and to combine this energy with new ways of making and doing things will be critical in this contest (Thompson and Zakhirova 2019). Research universities, business corporations, capital markets, and the government all have a role to play in this undertaking, and their successful collaboration is important to promote scientific discovery and technological advances leading to greater productivity and consumer welfare (Gordon 2002). Chapter 5 discusses China’s innovation capacity and reviews its recent progress relative to its own past and relative to the United States. It concludes that China has made significant advances in recent decades but still cannot match the United States in basic research at the scientific and technological frontier. Finally, Chapter 6 summarizes this book’s main arguments and conclusions, and it draws from them several pertinent implications for policy and theory.

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The Origins of Culture and Its Effects on Economic Development and Political Order

What is culture? Yaqing Qin (2018: 41) remarks, “Cultural communities are communities of practice and culture is therefore defined in terms of shared background knowledge. Culture refers to the way of life of a people who share a lot in terms of behaviors, values, beliefs, and perspectives without consciously knowing them . . . culture is the invisible bond that ties people into a community.” He continues, “culture is not only culture in action, it is also culture for action. In other words, culture defined in terms of background knowledge is in practice and on practice, reflecting what the community members do and disposing them for certain behavior and action” (Qin 2018: 42, emphasis in original). Qin cites various authors, such as Clifford Geertz’s definition that culture is a “system of inherited conceptions expressed in symbolic forms by means of which men communicate, perpetuate and develop their knowledge about attitude towards life,” and Alexander Wendt’s view of “culture as common and collective knowledge, the former concerning actors’ beliefs about each other’s rationality, strategies, preferences, and beliefs, as well as about states of the external world, or ‘intersubjective understanding;’ and the latter concerning the knowledge structure held by groups which generate macro-level patterns in individual behavior over time.” He concludes by summarizing that “culture is shared knowledge about the way of life of a society and the way of thinking and doing by its members” (Qin 2018: 43). Ronald Inglehart (1997: 217) defines culture simply as “a system of common basic values that help shape the behavior of the people in a given society.” In this chapter, I will first review several classic studies connecting culture to economic development, and then turn to a discussion on the cultural sources of East Asia’s phenomenal economic growth. This discussion is followed by another review focusing on the role of culture in influencing the academic and economic achievements of various ethnic and religious groups in the United States and how immigrant communities have contributed to the prosperity and power of major 17

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states in the past. This chapter concludes with a section on the origins of culture, suggesting that cultural practices and institutions are the evolutionary product of human beings interacting with their environments.

Classic Studies on Culture’s Contribution to Economic Growth Despite starting from relatively similar positions, why was Japan able to launch its economic modernization more quickly and effectively than China? The answer to this question can involve many variables. Marion Levy (1954) points to differences in these countries’ cultural heritage, especially the institution of primogeniture that existed in Japan but not China. Primogeniture confers the right of succession to the eldest son. According to this rule, the whole of real estate and other accoutrements of intestate would be passed on to him upon his father’s death. This practice had the effect of preserving family wealth in Japan. In contrast, all Chinese male offspring were entitled to a share of the family’s properties. One obvious consequence of this Chinese practice was that however well off a family might have been, its wealth would be dissipated over several generations. Japan’s primogeniture had the opposite effect of helping to preserve capital for entrepreneurial undertakings and when such undertakings were successful, to accumulate capital for even more business pursuits. Even a small share of inheritance could enable male children to marry early and have their own children, who in turn contributed to the further division of the family’s fortune, which was typically in the form of land ownership in traditional China. Over time, Chinese farmers’ plots would consequently become smaller and more scattered (because they had to divide their inherited land of different quality among the siblings). This phenomenon in turn had a detrimental effect on agricultural productivity. It also discouraged the mechanization of farming equipment adopted by Americans in practicing an extensive mode of farming. In contrast to Americans’ extensive farming involving huge land areas as exemplified by ranching and herding or largescale mechanized crop cultivation and animal husbandry, East Asians’ intensive mode of farming entailed expending ever larger amounts of human labor to raise crops from small plots of land. Denied a share of patrimony, younger male siblings in Japanese families had to postpone their marriage until they had established

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themselves financially in a trade. That China’s males were able to marry at a relatively early age contributed to its population growth. Primogeniture also prevailed in Britain, where it had had a similar effect to that in Japan of forcing male descendants other than the eldest son to establish a different career from their father’s. Many looked to joining the clergy or colonial administration as an alternative (Holt and Turner 1966). Traditional China featured a meritocracy in principle, providing commoners a path for upward social mobility (Ho 1962). At least in theory and with few exceptions, all Chinese adult males could take part in open competition that examined these candidates’ knowledge of classical texts. Success in these examinations meant that those selected would become a member of the officialdom (the mandarin class). In contrast to China, traditional Japan did not provide social mobility to its people. Except in cases of adoption, one had to be born into the nobility (daimyo) or warrior (samurai) class to be part of the elite. Unlike their Japanese counterparts who were locked into their respective social positions, traditional Chinese could pursue social prestige and respectability in various ways. Land ownership, which was outlawed in Japan, provided one avenue for rich Chinese merchants to secure and enhance their social status. Venality of office in China as well as in France and Spain meant that official titles could be bought for a price. Often these titles could not be inherited, and the descendants of the title holders therefore had to repurchase them to maintain their family’s social status. An important consequence of this practice is that money was diverted from business pursuits to the consumption of social prestige. Successful merchants in traditional China aspired to become a member of the gentry and literati rather than continuing their business pursuits. As merchants had a low ranking in the Confucian order of social hierarchy, this phenomenon led Weber (1951) to argue that in contrast to Protestant Europe, traditional China was unprepared and unsuitable for economic development (Hamilton and Kao 1987). Like other traditional cultures, Confucianism frowned on entrepreneurial pursuits and wealth accumulation in favor of scholarly and agricultural undertakings. It put scholar-officials and the gentry class at the top of China’s traditional social hierarchy. Weber, however, hedged his observation about Confucianism’s negative effects on economic development, remarking that “the Chinese in all probability would be quite

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capable, probably more capable than the Japanese, of assimilating capitalism” (Weber 1951: 248). As I will discuss further later, there has recently been a sharp reversal of opinion concerning the detrimental effects of Confucianism on economic development. This reappraisal has evidently been motivated by the rapid economic growth of those East Asian countries with a Confucian heritage. Indeed, scholars such as Lawrence Harrison (1992) have called attention to important parallels between Confucian and Protestant cultures. Robert Bellah (1957), for example, has argued that Japan’s cultural tradition is compatible with the Protestant ethic. This view receives empirical support from recent survey data showing that Japanese and East German values and beliefs share some important similarities (Inglehart 2000: 87). This phenomenon cautions us against exaggerating the differences between cultures. Like other traditional cultures, Confucianism stigmatized greed and profit-making. However, as just noted, unlike many traditional cultures Confucianism did not seek to block social mobility and in fact sanctioned it. In addition to the imperial examination system, commoners could purchase land and official titles to acquire the outward signs of social prestige and respectability. Rich merchants could also spend money to finance their male children’s education to take part in the competitive examinations to select officials, in the hope that their offspring’s success would further enhance their social and political position. Therefore, merchants in traditional China could divert their wealth to purposes that were not economically productive. In contrast, lacking such options to climb the social ladder, Japanese merchants were forced to invest and reinvest in their businesses. In trying to explain why technology in China stagnated after the fifteenth century, Joel Mokyr (1990: 236) hypothesizes that a conservative elite, specifically the mandarinate (or imperial bureaucracy), had held back progress and that, unlike Europe, the state rather than the private sector had played the crucial role in promoting innovation in traditional China. The underlying logic for this proposition echoes Marion Levy’s (1954) thesis. Mokyr (1990: 236) writes, “In Europe, engineers, inventors, merchants, and scholars rarely belong to the ruling class. Talented men who were not born into the right families could not, as a rule, occupy positions of power, and thus channelled their energies elsewhere.” Marion Levy was not the first to observe how cultural practices and institutions can affect economic development. He was preceded by

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intellectual giants like Max Weber (1998) who wrote about the Protestant work ethic that had contributed to the rise of capitalism and entrepreneurship in Europe. The Calvinists especially were motivated by their religious belief in predestination to excel in their positions and careers assigned to them by God in this world. They pursued perfection in their work for their souls’ salvation. Earthly accomplishments (including commercial successes) were sought not so much for their material rewards but rather as a divine sign that one was among those chosen by God. Religion provided the impetus to excel in various personal endeavors of which business success was but a by-product. Another, though more recent, influential figure contributing to this genre of scholarship was David McClelland (1961). He wrote about a mass psychology labeled “need to achieve” (N-Ach), which is the motivation to excel in one’s work “not so much for the sake of social recognition or prestige, but to attain an inner feeling of personal achievement” (McClelland 1993: 143). When a society is populated by many people with a strong N-Ach, it is likely to reach great artistic and economic accomplishments. McClelland’s analysis supported Weber’s hypothesis about differences in the level of economic development between Protestant and Catholic countries even after controlling for factors such as these countries’ resource endowments. He also found differences in the level of N-Ach in the direction hypothesized by Weber among individuals drawn from these two religions (McClelland 1961: 50–57). The performance differences documented by Weber and McClelland have been hypothesized to stem from Protestant and Catholic parents’ different approaches to raising their children, with Protestant parents generally giving more emphasis to teaching the values of independence and self-reliance to their children and at an earlier age than their Catholic counterparts. These patterns have been supported by subsequent research, although it appears that this divergence between Protestants and Catholics has been diminishing over time, at least in the United States (Alwin 1986; Lenski 1963). Parenthetically, the differences between Protestant and Catholic cultures extend beyond their observed differences in economic performance or their child-rearing practices. In his well-known study, Emile Durkheim (1951) reports the frequency of suicide to be higher in Protestant than Catholic countries (presumably because Catholics value warm personal ties and family bonds that provide support to

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individuals, whereas Protestants place more emphasis on individualism). Ronald Inglehart (1990: 245) shows in his cross-national study that those societies expressing high subjective well-being are in fact associated with higher suicide rates. McClelland and his research collaborators developed various ingenious indicators of N-Ach to discern and track the rise and fall of modern and premodern societies, such as by applying content analysis to folk tales, poetry, drama, children’s stories (from dozens of countries with China being the most conspicuous omission), school textbooks, funeral orations, and other approaches such as studying people’s doodles (when it was difficult to navigate between different linguistic systems). For their dependent variable of economic success, they resorted to (in the case of ancient Athens) archeological evidence showing the geographic spread of vases used to carry olive oil and wine across the Mediterranean Sea (including those excavated from shipwrecks), and electricity generation for more modern economies. They found a general pattern whereby N-Ach is associated with greater entrepreneurial activity. Reporting on his analysis of over fifty preliterate native tribes, McClelland (1961: 67) concludes, “Despite all [the] obvious flaws in the data, a significant relationship exists between n Achievement level in folk tales and presence or absence of full-time entrepreneurial activity in the culture.” McClelland’s ensemble of methodology was used to study a variety of societies, including ancient Greece, Spain in the sixteenth century, and England in the late sixteenth century and again around 1800, to confirm the generalizability of the proposition that societies characterized by a high level of N-Ach were able to attain greater economic and other achievements. He was careful to establish the temporal sequence in the surge of N-Ach among a people and the rise in their entrepreneurial activities. Did change observed for the former precede the latter so that one may infer causality? Parallel investigations were carried out at the individual level of analysis (in Brazil, Germany, India, and Japan) to trace the origins of N-Ach in mothers’ values and their attitudes concerning child-rearing (such as in encouraging their children’s independence and mastery of toilet training) and the effects of N-Ach in influencing adolescent boys’ occupational interests and their performances in executing various tasks. Another component of the multi-prong research approach carried out by McClelland and his collaborators was to inquire whether

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Cultural Contributions to East Asia’s Economic Dynamism

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successful entrepreneurs in four countries (Italy, Poland, Turkey, and the United States) were imbued with or motivated by N-Ach. Just as in their studies of adolescent boys, the variety of countries chosen for this part of their research agenda engages subjects from heterogenous backgrounds and therefore helps to protect against exaggerated generalizations and even false attributions. Even so, not all problems of validity or comparability were overcome (McClelland 1961: 60–61). This said, the multi-prong, multi-method, multi-country, and multimeasure approach adopted in this research program inspires more confidence in its results. These results indicate strongly that N-Ach plays an important role in promoting economic development.

Cultural Contributions to East Asia’s Economic Dynamism More recently, cultural explanation of economic development came back in vogue after several East Asian economies managed to grow at rates that were much higher than the average for developing countries and to sustain this growth for an extended period of several decades (e.g., Brook and Luong 1997; Hofstede and Bond 1988; Tu 1996, 2000; Zhu 2021). These newly industrializing economies (NIEs) were led by Japan after World War II (which, of course, was already industrialized before this conflict, and the label NIE would be for this reason a misnomer for that country). Japan’s Ministry of International Trade and Industry (MITI) had played an important role in developing initiatives to advance that country’s strategic industries and in launching its export-led growth (Johnson 1982). Other economies followed Japan’s footsteps in a pattern sometimes described as a flying-geese formation. In the 1960s, the so-called Asian tiger economies – South Korea, Singapore, Taiwan, and Hong Kong – launched their own successful export drives. They took over those niches of low technology content and high labor content vacated by the Japanese (such as footwear, textiles, and furniture), who were gradually turning their attention to more capital- and technologyintensive exports such as electrical appliances, consumer electronics, and automobiles. This process was repeated so that Japan and the Asian tigers moved increasingly toward producing and exporting high-end goods (e.g., personal computers, semiconductors, electric vehicles), and the production niches they left behind (because of their declining advantages in these niches) were filled by the even later

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industrializing economies. In the late 1970s, China followed these economies to become another, albeit by far the largest, member of this group of economies pursuing export-led growth. Beijing was successful in accomplishing the amazing feat of raising the living standard of the largest number of people ever in history by the greatest extent and in the shortest amount of time. China’s GDP per capita rose to US$8,000 from US$1,000 in just thirty years (1985–2014) – a third of the time it took Japan and about one sixth of the time it took the United States, even though it has a much larger population than the latter two countries (Woetzel et al. 2015: 20). In the process, it lifted more than 400 million people out of poverty. China’s export-led growth strategy was subsequently imitated by still later comers such as Vietnam, Cambodia, and Sri Lanka. There is by now a large literature discussing the reasons behind East Asia’s “economic miracles” (Amsden 1989; Berger 1988; Chan 1993; Chan and Clark 1992; Deyo 1981, 1987; Gereffi and Wyman 1990; Gold 1986; Haggard 1990; Haggard and Moon 1989; Johnson 1982; Jones and Sakong 1980; Krause 1988; Rabushka 1979; Rodan 1989; Vogel 1979; Wade 1990; Woo-Cumings 1991, 1999; Zhu 2021). These economies’ cheap labor cost is usually among those reasons one often hears about. Another common reason given to explain East Asia’s “economic miracles” is their strategy of export-led growth. Still a third ostensible reason is their practice of mercantilism, including their governments providing subsidies to important industries and putting up barriers to hamper foreign competitors in their respective domestic markets. One major problem with these explanations is that many other developing countries also have an advantage in low labor cost, and they also have the option of pursuing a strategy of export-led growth. Moreover, mercantilist and protectionist policies are also available to them, and were indeed widely practiced by today’s developed countries when they were in the initial stages of their development. The developed economies continue to practice protectionism and mercantilism even today in agriculture and industries that they consider to be strategically important and politically sensitive. Their pontification about free trade even though they themselves were and still are guilty of violating its principles has been described by Ha-Joon Chang (2002) as “kicking away the ladder” after they have secured their economic advantages in leading industries. Kristen Hopewell (2021) documents that the United States has undertaken massive

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state-funded projects to assist research and development in aerospace, informatics, communications technology, biotechnology, and nanotechnology. Federal grants, tax incentives, subsidized loans, and procurement contracts have supported large firms such as Boeing, Intel, and Tesla. In short, state intervention is not limited to the East Asian NIEs, and the tools of this intervention are theoretically available to all countries. Therefore, the puzzle remains why these economies have done especially well in recent decades. What sets them apart from most of the rest of the world? Except for Hong Kong, all East Asian NIEs share a strong administrative state that occupied and continues to occupy a position at the “commanding heights.” Although politicians reign, bureaucrats in the economic ministries rule. Following the tradition of China’s system of meritocratic recruitment for government service through competitive examination mentioned earlier, the economic bureaucracies of the East Asian NIEs continue to attract the best and brightest from their society. Bureaucrats enjoy a degree of social status and prestige that is unfamiliar to Americans, whose most talented college graduates tend to gravitate to law and investment firms on Wall Street. Importantly, the East Asian administrative states are both autonomous from society and yet at the same time embedded in society (Evans 1995). This dual characteristic gives them independence and authoritativeness but at the same time keeps them in close touch with society so that they will not become predatory rent-seekers. This feature may explain in part East Asia’s economic success even though, as just noted, its explanatory reach is compromised by the important exception of Hong Kong, whose former British colonial administration had generally not worked actively to direct and orchestrate economic growth like the other Asian tigers. Other countries have tried a strategy of export-led growth, but they have been less successful than the East Asian economies. What can be the reasons for this difference? In other words, what are the East Asians’ comparative advantages, ones that would also apply to Hong Kong? Those who offer a cultural explanation for their economic success point to traditional Confucian values, emphasizing especially traits such as thrift, perseverance, hard work, investment in education, and having a sense of shame and a respect for ordered relationships (e.g., Hofstede and Bond 1988; Zhu 2021). As we shall see, their explanation is not without problems. It does, however, have one

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advantage over many competing alternatives; namely, it is in a better position to account for the geographic clustering of the most dynamic economies in one region of the world. Random chance would not have produced this geographic concentration. Indeed, some scholars have argued that geography in and of itself has been an important determinant of countries’ economic prospects and their distribution of wealth (e.g., Diamond 2004, 2017, 2019; Gallup et al. 1999; Landes 1999; Sachs 2003). Those located in earth’s temperate zones and endowed with access to the ocean have done better than their counterparts located nearer the equator or are landlocked for a variety of reasons, including protection from the ravages of tropical diseases, and the effects of more fertile soil, more favorable weather patterns, greater opportunities to benefit from water-borne trade, and generally an earlier start in the domestication of plants and animals and hence socioeconomic development. Path dependency confers further advantages to those communities or countries that have had a head start in this development while at the same time limiting the options available to the latecomers. A country also enjoys a location advantage when it operates in an economically dynamic region of the world, so that its neighboring fastgrowing economies can stimulate and sustain its growth. Moreover, this regional effect has an important political aspect, reflecting elite politics and domestic coalition formation between groups with competing visions on how to manage their country’s economy and security. Etel Solingen (1988, 2007) argues that elites espousing and implementing policies of economic openness and interdependence are likely to be supported and legitimated by similar elites ruling neighboring countries. There is therefore an important economic and political synergism created and sustained by this reciprocal effect. Moreover, once a policy orientation and its supporting cast are entrenched, it becomes more difficult to dislodge or overturn them. There tends, therefore, to be a self-sustaining momentum – one based on positive feedback loops among the policies, elites, and countries in the region – that perpetuates growth. In commenting on how the Confucian ethic can be conducive to the functioning of modern society, Herman Kahn (1993) advances an argument that does not simply repeat the usual reference to thrift, hard work, and investment in education. He claims that in contrast to the Western emphasis on individuals qua individuals, Confucianism stresses relations among individuals, such as those governing the ties,

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interactions, and mutual obligations between husband and wife, father and son, elder and younger brothers, and the emperor and his officials and subjects. Significantly, this difference between emphasizing the characteristics of units such as individuals, groups, or countries versus emphasizing the nature of relations among these units has been the key feature that separates Western theorizing about international relations and a Chinese theory of these relations (Qin 2018). “Synergism – complementarity and cooperation among parts of a whole – are emphasized, not equality and interchangeability” (Kahn 1993: 170). Confucian cultures have an advantage in making organizations work well because, “[a]s opposed to the earlier Protestant ethic, the modern Confucian ethic is superbly designed to create and foster loyalty, dedication, responsibility, and commitment and to intensify identification with the organization and one’s role in the organization” (Kahn 1993: 170). In Western cultures that emphasize individualism and personal freedom, groups still have their place. Kahn (1993: 171) cites Chie Nakane (1970), pointing out that groups in Western countries are, however, formed by people sharing the same interests and identities or according to the tendency for “like to join like,” such as with respect to the formation of unions, political movements, church groups, and economic classes. This tendency engenders group politics that pits groups against other groups that have been rallied to support different causes. In Kahn’s (1993: 170) view, the qualities of Confucian cultures make “the economy and society operate much more smoothly than one whose principles of identification and association tend to lead to egalitarianism, to disunity, to confrontation, and to excessive compensation or repression.” In a similar vein, Edwin Reischauer (1974: 347–348) notes approvingly that the peoples of East Asia “share certain key traits, such as group solidarity, an emphasis on political unity, great organizational skills, a strong work ethic, and a tremendous drive for education.” However, he also predicates this positive view on the growth prospects of countries in this region by stressing the priority of their governments undertaking reform policies that would create the necessary space or environment for these traits to thrive.

The Limits of Institutional Explanations As I have already said on several occasions, culture cannot be the only explanation for variations in countries’ economic performance.

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Monocausal explanations are rarely adequate to account for complex socioeconomic phenomena. One alternative to cultural explanation is the institutional perspective on economic growth (e.g., Acemoglu and Robinson 2012; North 1990; Rodrik et al. 2004). As scholars subscribing to this perspective often point out, if culture is the only or the overriding factor, we would not be witnessing the enormous economic disparity between South and North Korea. Similarly, culture cannot easily explain the economic stagnation that had afflicted China for long periods of time, even though overseas Chinese have been known for their entrepreneurial skills and business successes. Moreover, if culture is a relatively constant factor, it cannot account for China’s lethargic economic performance in the first three decades of communist rule (an economic record that had placed it far behind its East Asian neighbors), and its transformation into a dynamic economy whose size has grown to be only second to the United States in a few short decades. It is important to acknowledge and recognize these views questioning the validity or generalizability of cultural explanations. Instead of focusing on culture, institutionalists emphasize the differences in countries’ political and economic systems (such as in their rule of law, protection of property rights, and possession of a free and open market) as the leading cause for the differences in their economic performance. They point to the economic disparities between North and South Korea, between Haiti and the Dominican Republic, and in the case of Acemoglu and Robinson’s (2012) study, also between north and south Nogales (a town divided by the US–Mexican border) as primary exhibits for making their case. The economic disparities that had existed between East and West Germany can also be introduced to support their claim. Of course, this approach of using bilateral comparisons to advance a theoretical argument has also been deployed by scholars who prefer a different perspective to explain economic development. For example, Lawrence Harrison (1985) points to culture as the main reason for the discrepant economic performances between matched pairs of countries that otherwise share important characteristics, such as between Argentina and Australia, and between Haiti and the Dominican Republic (the same pair that has been invoked to support institutionalist claims; thus, in this case institutional and cultural explanations converge and the difference in the economic performance of these two countries is “overdetermined” in social science parlance).

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Moreover, culturalists can point to cases showing the resilience of cultural traditions despite differences in political and economic institutions. Inglehart et al. (2004: 17) argue that “Though they can reshape it to a limited extent, institutions do not determine culture. After 45 years under diametrically opposite political and economic institutions, East Germany and West Germany remained more similar to each other than the United States and Canada.” Likewise, the attitudes and values expressed by people in Taiwan and South Korea are much closer to those held by the Chinese people on the mainland, even though their political institutions are more similar to those of the United States than China’s (Inglehart et al. 2004: 14). These observations raise an important question about causal priority: is culture more likely to shape institutions rather than the other way around? Although there is clearly mutual interaction between them, it appears that the former possibility is greater than the latter possibility. Institutionalists’ arguments run into trouble such as when Tian Zhu (2021: 223) notes that institutional differences in themselves cannot account for the varying economic performances of China’s provinces and municipalities, with some Chinese cities (e.g., Wuxi, Suzhou, Shenzhen) having already reached the level of per capita GDP characterizing developed economies like Taiwan. This phenomenon of variations of economic performance within a country, however, also poses a problem for cultural explanations, because the subnational units share the same culture but show different levels of economic performance. Robert Putnam’s (1993) study of modern Italy has similarly shown great variations in this country’s regional situations, such as in these regions’ levels of economic development and democracy, that cannot be simply explained by the differences in their political and economic institutions (because they all share the same national institutions). In this case, however, a cultural explanation fares better because Putnam offers persuasive evidence suggesting that northern and southern Italy have had very different cultural traditions and tendencies predating their more recent economic and political development. The institutional perspective also does not hold up well in view of cross-national evidence suggesting that democracy does not have a direct impact on economic growth (Doucouliagos and Ulubasoglu 2008). Earlier scholars have argued that we should consider how timing and sequencing can affect a country’s prospects to secure democracy and undertake economic development. For example,

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Huntington (1968) and Huntington and Nelson (1976) have argued that when political participation and mobilization produce struggles for redistribution and when the demands for redistribution happen before economic growth can take hold, the result would be to retard and even derail this growth. Moreover, scholars like Burkhart and Lewis-Beck (1994) have shown that whereas economic development tends to promote democracy, the reverse is not likely true. As just suggested, Acemoglu and Robinson (2012: 63) are among those who criticize cultural explanations of economic growth, claiming, for example, that “. . . current Chinese growth has nothing to do with Chinese values or changes in Chinese culture; it results from a process of economic transformation unleashed by the reforms implemented by Deng Xiaoping and his allies, who, after Mao Zedong’s death, gradually abandoned socialist economic policies and institutions, first in agriculture and then in industry.” They are of course correct in pointing out that the Chinese government in the late 1970s initiated a series of policy reforms that started to open the economy to private enterprises and investors, including those from foreign countries. At the same time, their analysis does not explain why these policies have succeeded in China whereas other countries trying the same reforms have not had the same results. Moreover, what institutionalists like Acemoglu and Robinson emphasize in their studies are a country’s regime characteristics and its rule of law, and more specifically in their case, “inclusive economic and political institutions” (2012: 91), which I take to mean a free and open market accessible to all and a democracy where people elect their leaders. Such an institutional emphasis differs from Acemoglu and Robinson’s reference to Deng’s policy reforms in the above quote because there has not been any deep institutional transformation in China involving its ruling elite’s communist ideology, its authoritarian rule by a single political party, or its autonomous state at the commanding heights of controlling the economy and society – enabling the state to make abrupt policy changes and even reversals without having to be greatly concerned about opposition from society or other parts of the government like the judiciary and legislature. “Mainstream economists have found it difficult to explain China’s apparent economic success despite the fact that China’s market economy has been far from free, and private property rights have been far from secure” (Zhu 2021: 56). The empirical and theoretical puzzle from the

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institutionalists’ perspective is why has China been able to attain rapid economic growth and has thus far been able to sustain this growth for over four decades (albeit at lower rates in the most recent years) despite the absence of those institutions that they see as essential for this growth. The explanation given by Acemoglu and Robinson is incomplete. As Tian Zhu (2021: 5) notes: Today, we all attribute [China’s economic] achievement to the reform and opening-up policy that began in 1978. This is of course correct. However, China’s reform and opening up can only explain its faster growth after 1978, not why it has grown faster than other countries – and not just a little, but much faster. Most developing countries have implemented policies of market reform and openness to varying degrees over the past three to four decades, and many of them have freer markets than China, but no country has grown faster.

How do we explain China’s remarkable economic growth even though it is dominated by authoritarian and even exclusive political and economic institutions from Acemoglu and Robinson’s perspective? From the logic of scientific analysis, China presents an important, even decisive, “deviant case” for institutionalists and its rapid growth demands much greater scrutiny and careful explanation. Acemoglu and Robinson give credit to the Chinese government for its policy reforms that have spurred this country’s rapid growth. As already noted, however, these policy reforms did not entail fundamental institutional transformation as these scholars’ theoretical position would have led us to expect. At the same time, they express doubts about the sustainability of China’s continued growth, remarking that as for the former USSR, “. . . China under the rule of the Communist Party is another example of society experiencing growth under extractive institutions and is similarly unlikely to generate sustained growth unless it undergoes a fundamental political transformation toward inclusive political institutions” (Acemoglu and Robinson 2012: 151). On another occasion in their book, they are even more emphatic in stating, “Our theory . . . suggests that growth under extractive political institutions, as in China, will not bring sustained growth, and is likely to run out of steam – due to the elites’ fear of creative destruction and their fear of its social and political consequences” (Acemoglu and Robinson 2012: 437). This is a

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remarkably unequivocal prediction, and these scholars are to be complimented for staking out such a clear and bold proposition. Time will tell whether the growth of the Chinese economy will slow down. Its relative performance can be evaluated according to its own past record and according to the performances of other countries. It is likely that China will not be able to keep the same pace of growth that it has attained in past decades, but it is a separate matter whether it will still be able to outperform its peers in the developing world or for that matter, countries in the developed world. China has already been growing at a double-digit rate for several decades, and this feat naturally inclines people to ask what time frame Acemoglu and Robinson have in mind when they question the sustainability of China’s economic growth. Although this growth has indeed slowed down recently, it reflects at least in part the Chinese government’s deliberate decision to have a more balanced and sustainable economy and, moreover, this slowdown has also been due to the dislocations and lockdowns caused by the Covid-19 pandemic. Finally, and as already mentioned earlier, for mathematical reasons alone it is more difficult for a much larger economy to maintain or exceed its former rate of growth when it was much smaller. A good test of Acemoglu and Robinson’s prognosis would be to compare the growth rate of China’s economy with those of, say, Japan and the United States which feature inclusive institutions according to their definition. Clearly, policy reforms such as those launched by Deng Xiaoping are the proximate causes of China’s recent superior economic performance. But from the perspective of Acemoglu and Robinson’s study, the ultimate cause of this performance lies in a country’s institutional makeup. Another possible test on Acemoglu and Robinson’s prediction would be to assess Vietnam’s recent and future economic performance. Like China, it features an official communist ideology and does not have the kind of inclusive political and economic institutions insisted by these authors. It does, however, also have a Confucian heritage. To the extent that Vietnam has outperformed other developing economies with more inclusive institutions but without a Confucian heritage and to the extent that it will continue to do so, this phenomenon tends to undermine the institutional argument and support the cultural argument. This example from Vietnam’s experience can serve as the closest thing to a controlled experiment that social scientists can aspire to, one that their counterparts in the natural sciences tend to take for granted.

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Parenthetically, the former USSR does not provide a useful analog for understanding today’s China. China is today far more embedded in the global economy than the USSR ever was. Moscow’s empire was a net financial drain for it, and its defense spending was approaching one fifth of its gross domestic product while its economy was already in severe decline in the 1980s. China is not spending nearly as much proportionately on its military. As a percentage of its GDP, its defense budget was half as much as the United States in 2021 (1.7% versus 3.4%). Compared to the former USSR, China does not have client states abroad to support, nor is it seeking to export its ideology or model of economic development. Finally, China is more connected to its expatriates living abroad, who are more numerous and wealthier than their Russian counterparts. Although scholars such as Acemoglu and Robinson emphasize the influence of institutions on economic performance, just like culture this variable cannot tell the entire story. Japan, during most years of its economic recovery and takeoff after World War II, had continuous one-party rule even though it is conventionally described as a democracy. South Korea and Taiwan were outright autocracies during their initial years of export-led growth. They could even be described as garrison states with their respective history of heavy involvement by the military in their politics (Taiwan was under martial rule until the late 1980s). In contrast, Hong Kong was a British colony that espoused a laissez-faire approach to economic management. Singapore also had a legacy of being a British colony, and after political independence it has had uninterrupted rule by a single party over a multi-ethnic society. Finally, China was and still is ruled by an authoritarian government professing allegiance to communism. Vietnam shares these characteristics. To the extent that the latter two countries’ political institutions have remained largely the same over the years, they cannot account for the variations in their economic performance over time. The same criticisms can be directed against an exclusively cultural explanation. Why have these countries’ economies performed poorly during earlier times but have become more dynamic in recent decades? From the institutionalists’ perspective, the variety of political institutions characterizing the different East Asian economies described in the preceding paragraph also presents a challenge to explaining their similarly impressive economic performance. Important differences are also present in East Asia’s economic institutions and arrangements.

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Whereas small and medium-size firms loomed large in Hong Kong and Taiwan’s economic development, South Korea’s economic landscape was and still is dominated by large conglomerates or the chaebols. As another example, whereas Japan and South Korea have sought to keep international capital at bay, Singapore has actively recruited and cooperated with it. Large banks, owned and operated by foreigners, have had a much larger presence and role in its and Hong Kong’s economies than in Japan, South Korea, and China. Furthermore, China has a much more open domestic market where foreign businesses have invested and operated to a much greater extent than in Japan and South Korea whose domestic markets are much more protected against competition from foreign firms. And as already mentioned, whereas Hong Kong’s colonial government had adopted a laissez-faire attitude, China features an economy actively directed by the state, and one in which state-owned public enterprises represent even today a very large constituent part. Furthermore, the rule of law and protection of private property are weaker in China than in the other East Asian NIEs. The legacy of Japanese colonialism left a deep mark on South Korea and Taiwan’s political and economic institutions, and this legacy’s profound impact on them differs in important ways from the legacy left by British colonialism in Hong Kong and Singapore (Cummings 1984). Although, except for Hong Kong, East Asian countries share to varying extent a tradition of strong states presiding over their respective economies, there are also these other important institutional differences that set them apart. The point of this discussion is of course that East Asia’s “miracle economies” have featured a variety of political legacies, official ideologies, and institutional arrangements. In contrast, they share important cultural traits that appear to have overridden the differences in their political and economic institutions, and these similar cultural traits offer a more persuasive explanation for their common impressive economic performance compared to the institutional alternative. There is furthermore the phenomenon that China and Vietnam have largely kept their basic political institutions even though their economic performances have varied significantly over time. Their much more impressive economic growth in recent decades is more the outcome of changes in their governments’ policies than changes in their basic political institutions. It is common and seemingly trite to declare that both culture and institutions matter and should be given their due.

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It is difficult to imagine anyone who would disagree with this sentiment. The relative importance of these variables for economic development deserves to be investigated as well as the circumstances in which this relative importance is likely to shift.

Some Major Differences between Eastern and Western Cultures Scholars such as David McClelland (1993) point to parents’ childrearing practices as an important influence on their offspring’s future performance. Parents who stress the qualities of self-reliance and work ethic tend to rear children who go on to be achievers in their adulthood. In contrast, in societies where slaves were more directly involved in raising children, the opposite tendencies of dependency and entitlement were fostered, and these societies became more lethargic over time. This view naturally argues that those values that encourage people to excel in their adulthood, including especially the motivation behind entrepreneurship, are taught by parents and teachers to children and internalized by these children. They are not a product of genes and thus inherited over generations. Thus, as we can see from McClelland’s research, the need to achieve can rise and fall substantially in a society in relatively short periods of time such as over a century or so. In her autobiography aptly entitled Battle Hymn of the Tiger Mother, Yale law school professor Amy Chua (2011) recounts her experience in trying to instill in her two daughters the expectation to set high standards for themselves in academic and extracurricular pursuits. She writes about her experience which reflects a common phenomenon in East Asian societies involving parents constantly encouraging, even pressuring, their offspring to excel in those endeavors that are conventionally seen as success (such as getting good grades, being admitted to prestigious schools, and succeeding in careers that are traditionally seen to command high income and especially social prestige like the medical, legal, and academic professions). The deep involvement of East Asian parents in their children’s education (some would say, interference and meddling in their children’s education) and their sacrifices in investing in their children’s education are a distinctive feature of what has been described as the Confucian culture which places a premium on learning. It is a tradition that

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several immigrant communities in the United States continue to preach and practice – at least for the first and second generations until this emphasis dissipates in the third generation and with the increasing incidence of inter-ethnic or inter-racial marriages. An intriguing and revealing difference separating students and parents of Chinese heritage from their American counterparts of European descent is that whereas the former group tends to see good performance on school tests and other life achievements as the result of hard work, the latter group is instead likely to attribute these outcomes to differences in people’s natural talent. Americans in general are usually quite generous in dispensing words like “a great job” when in fact a child has done barely adequately whereas traditional Chinese parents tend to be much more critical and demanding in judging their child’s performances, and as Chua reports, many of them will remain dissatisfied unless their son or daughter brings home a report card consisting of all A grades. This competitive and demanding stance can be disguised in conversations with people outside the family with sometimes an exaggerated sense of diffidence or lack of self-confidence (humbleness and modesty are virtues taught in China; one should not boast publicly of one’s achievements). There is the story that when Western students are unable to follow a speech or lecture, they are inclined to criticize the speaker’s lack of communication skill. In contrast, Chinese and Asian students generally are more likely to blame their own inadequacies in comprehending the speaker. Although stories such as this one are often based on anecdotal evidence, they highlight important differences between the East and West. Not to lose face, not just for oneself but for one’s family, provides a powerful incentive – but also sometimes a debilitating source of pressure – to improve oneself according to conventional (socially approved) standards of achievement. As already mentioned earlier, whereas European settlers in America practiced an extensive mode of agriculture, the Chinese and other Asians pursued an intensive mode of agriculture (Weber 1951). The latter tradition placed a premium on the group and teamwork, whereas in the world of extensive agriculture, perhaps best exemplified by the American cowboy herding cattle over long distances, individuals with their Colt-47 offer the most graphic symbol (for those who are old enough to remember cigarette commercials on television, the Marlboro man was the epitome of rugged individualism). In expanding the

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Western frontier, American homesteaders were separated by long distances which again led to a culture emphasizing individualism and selfreliance. Parenthetically, David Landes (1999: 310–334) contrasts homesteaders in the original American colonies in Northeastern United States with the ranchers (the guachos) roaming Argentina’s open grassland (the pampa) as a decisive difference in the effects that geography has had on their respective cultural heritage and political economy. He acknowledges, however, with the westward expansion of US territory, ranching became more prevalent. “In the last analysis, nature had its say: as one went west and rainfall diminished, more of the land went in large tracts for livestock and herding” (Landes 1999: 320). It is not too difficult to imagine from such differences in environmental context that the Chinese culture developed shame as a mechanism for social control, whereas in Western societies guilt presents an alternative. The difference between the two is of course that the former is about external validation (approval or disapproval by other people) but the latter is about internal validation (one’s conscience provides the check against unacceptable behavior: can you look at yourself in the mirror tomorrow?). One can discern similar differences between these cultural traditions with their respective emphasis on other-directed and self-directed frames. The Chinese typically compliment their children for behaving well (the Chinese word is 乖 or guai), referring of course to a child’s conduct conforming to social conventions and external expectations. In contrast, the typical American compliment is “cute,” a reference to the child’s inherent qualities. I will return later to check whether such attributions are supported by survey data. For now, this discussion highlights the fact that cultural norms do not just happen out of the blue. They tend to evolve from their environment. In the case of extensive versus intensive modes of agriculture, and self- versus other-directed social conventions, the difference between the West and the East in their respective population density is crucial. Although historically the Chinese (especially from southern China) have emigrated, there is nothing comparable to the massive settlement of their population in overseas colonies attested by the experience of some Western countries, especially Britain. I do not have any hard evidence, but it appears to me that push factors (stemming from economic dislocation and hardship) played a larger role in the Chinese experience whereas pull factors (being drawn by opportunities

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abroad) were more important in the Western experience. The truth, as is usually the case, is likely to be a combination of both sets of factors albeit varying in their relative significance. Parenthetically, the reference to the extensive mode of agriculture raises another intriguing question that has thus far not been given sufficient scholarly attention. As Jered Diamond (2017: 424) has asked, “Why was proselyting religion (Christianity and Islam) a driving force for colonization and conquest among Europeans and West Asians but not among Chinese?” Many US scholars specializing in the study of China after World War II were children of Christian missionaries who went to China. Even today, Westerners, especially Mormons, preaching their religion and seeking local converts to their religion is a common sight in East Asia. Why had there not been a reverse traffic of Chinese people trying to spread Confucianism in the West (in fact, many Confucian Institutes have been shut down in the United States because of allegations that they seek unwarranted influence). The West has been waging a campaign to export its economic and political institutions, “making the world safe for democracy and capitalism,” whereas China does not show such inclination to promote regime change or political transformation in other countries. The United States especially has been unabashed in trying openly to change the world in its image. As Diamond has remarked, this phenomenon pertains to broad differences in cultural disposition, and it is not simply a result of geography and politics. As many scholars have reported, China during the Ming dynasty had sent seven naval expeditions for the purpose of overseas trade and exploration. They reached as far as Africa’s east coast. These fleets dwarfed the three ships commanded by Christopher Columbus in his voyage to the New World. The Ming court, however, subsequently banned the construction of ocean-going vessels and indeed most foreign travel. In contrast, Western countries continued their foreign expeditions and conquests that bequeathed them large overseas colonies and transformed them into ocean-spanning empires. It is important to underscore this phenomenon because heretofore all great powers attained their position in the front ranks of interstate pecking order because of foreign wars and conquests. Victory and defeat in wars (including civil wars such as those that led to American, German, and Italian unification) were decisive in shaping the interstate

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system and the major powers’ relative position in it. What is commonly overlooked in Western discourse on China’s rise today is that this country has been the only one thus far in modern history to have risen to the front ranks of the interstate system without having been involved in foreign war or conquest. It is therefore ironic to hear concerns and even alarms about Chinese aggression from countries such as Britain, France, Germany, the United States, and Japan (which of course is not a Western country) even though there has never been a hostile Chinese soldier (or missionary) setting foot on their soil, whereas the reverse claim does not hold. Commentators from these countries often seem to have national amnesia about how their countries had conducted themselves when they were rising powers. Incidentally, when I said above that China has managed to raise its international stature and profile without having been involved in foreign war or conquest, I do not mean to say that it does not have ongoing territorial disputes such as with India and in the South China Sea. China has, however, settled all its land borders with the major exception of its continuing dispute with India. Moreover, these disputes appear puny compared to the territories that the Unites States has won just from Mexico, which include parts or the whole of today’s California, Utah, Nevada, Arizona, New Mexico, Colorado, Wyoming, and Texas. The United States had of course also acquired other territories, such as Puerto Rico, Guam, and its colony in the Philippines after defeating Spain in the Spanish-American war. Significantly, setting aside the question of national reunification for China, Cuba and Taiwan should command similar geostrategic importance for the United States and China, respectively. China has not, however, thus far resorted to practices toward Taiwan like those undertaken by the Unites States toward Cuba, such as Washington’s various efforts to assassinate Fidel Castro, to blockade Cuba economically, to organize an invasion of that island (at the Bay of Pigs in 1961), and to mount a naval “quarantine” against it in 1962.

Why Some Groups Are “Overachievers” in the United States? Amy Chua and her husband Jed Rubenfeld followed the Battle Hymn of the Tiger Mother with a sequel that is highly informative of why some groups in the United States have been able to attain greater social and economic achievements than other groups. Even though various forms

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of discrimination have not disappeared completely, the United States is a land of opportunities compared to most other countries. Many recent immigrants who came to the United States were from poor socioeconomic background, and they also face racial discrimination and other handicaps such as language barrier after their arrival in the United States. Some of these immigrant communities, however, managed to succeed even in the face of many adversities. Americans of Indian, Chinese, and Japanese ancestry have the highest average income in the United States, and they as well as those who have immigrated from Cuba, Lebanon, Nigeria, and the West Indies are disproportionately represented in corporate leadership, business entrepreneurship, legal and medical professions, and institutions of higher education. Obviously, this phenomenon cannot be attributed to these groups sharing a common genetic pool. Moreover, it does not stem from just the fact that many high achievers are immigrants or are children of immigrants. The Mormons, for example, are among America’s high achievers although they have been living in the United States for a long time. Many Jews came to the United States immediately before and after World War II, but their immigrant status again cannot be the only or even the main explanation for their many accomplishments in business, science, and the arts because they were already known for these accomplishments even while they were facing widespread discrimination in Europe. What seems to be a common feature shared by all the high-achieving groups is that they are a minority group and that they have faced serious adversities and marginalization in their collective experience. Therefore, it is not just the cultural traits themselves but also the social and historical context that trigger and intensify those proclivities conducive to economic development that deserve attention. This view explains in part why the Chinese in China have not done well economically until after reforms initiated by Deng Xiaoping in the late 1970s, whereas the Chinese diaspora in Southeast Asia has succeeded spectacularly in their commercial pursuits (e.g., Hawes 1987; Hewison 1989; Jesudason 1989; Robinson 1986). As already mentioned, there is evidence that after just a couple of generations of settling in their new adopted country, those cultural advantages enjoyed by the descendants of immigrants tend to decline and even disappear. The intergenerational transfer of traditional values and efforts to inculcate younger cohorts in these values no longer seem

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to work as effectively in a matter of a few decades. This tendency is important to note because it shows that the process at work is not based on biology or heredity. I will discuss the role of immigrants in contributing to their adopted countries’ prosperity and dynamism in the next section. The Mormons, Cuban and Lebanese Americans, American Jews, and Americans of Chinese, Indian, Iranian, Nigerian, and West Indies ancestry have excelled by conventional standards of achievement such as indicated by their income and professional status. What do these groups have in common? What are those cultural traits that support their drive to achieve and succeed? Chua and Rubenfeld (2014) attribute these groups’ success to three critical motivations. This so-called triple package consists of a superiority complex (a belief in the specialness and superiority of one’s group), a sense of insecurity (a deep social and economic anxiety concerning one’s situation, being still an outsider in one’s own country), and impulse control (resistance to temptation, especially to giving up in the face of adversity). This complex stands against the mainstream US culture favoring egalitarianism (rather than achievement), self-esteem, and instant gratification. There is a significant tension between a sense of group superiority and feelings of insecurity. However, this uncomfortable combination (including resentment about society’s failure to recognize one’s worth and reaction to social scorn, ridicule, and negative stereotyping) provides the necessary drive to achieve and excel (resulting in the I-willshow-you and chip-on-the-shoulder syndrome). Importantly, the triple package does not just produce this drive; it “also delivers on defense – with toughness, resilience, the ability to endure, the capacity to absorb a blow and pick yourself up off the ground afterward” (Chua and Rubenfeld 2014: 15). A superiority complex is associated with the relevant cultural community’s collective recollection of their personal and national achievements in the past. China, India, and Iran were once great powers with a long and distinguished history of political and cultural achievements. Also, not to be overlooked is the fact that a significant portion of immigrants to the United States, such as the Chinese, Cubans, Lebanese, and Iranians, came from established and even privileged positions enjoying high social prestige and substantial economic wealth in their previous homeland where a regime change or domestic

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turmoil has turned them into exiles in a foreign land. The latter fact of being recent arrivals in an adopted country is naturally a source of insecurity and anxiety, feelings that are often compounded by discrimination and gratuitous belittling suffered at the hands of nativeborn Americans. The emphasis on delaying gratification is an important part of the triple package. It is reminiscent of my earlier reference to merchants in Tokugawa Japan incentivized to invest and reinvest their capital in successful business pursuits and the emphasis on living a frugal life despite their accumulated wealth on the part of several Protestant sects, including the Calvinists and Puritans. A person or group’s ability to control the impulse to spend rather than to save and invest is an important part of the formula for their economic success. This ability requires long-term thinking and planning. This consideration of the long haul is not only related to an individual’s career success. It is also associated with whether one sees oneself as an isolated individual or as a member of a larger unit such as the family or clan. Chinese families and even extended clans are known to make large sacrifices for the sake of their children’s education, the rewards of which will only be reaped in the long term and thus would not necessarily benefit those who have made the initial sacrifices or investments. Ronald Inglehart (1997: 225) cites a study by Maria Szekelyi and Robert Tardos (1993) showing that a long-term perspective enhances individuals’ subsequent income after controlling statistically for the effects of antecedent conditions such as their initial income, education, age, gender, race, residence, and region. This long-term perspective is embedded in a general syndrome consisting of confidence that one’s plan will work out, an emphasis on saving rather than spending, and a general and diffused sense of interpersonal trust. This evidence at the individual level confirms and reinforces observations about the differences in economic performance among groups living in the same country, the differences in economic performance of the same nation over time, and the differences in economic performance among nations. The importance of impulse control and a willingness to postpone instant gratification for adult achievement has long been established repeatedly by the marshmallow tests for children (Mischel et al. 1972; Mischel and Peake 1990). In these tests, youngsters were told that if they would wait for an adult to return to the room before eating their marshmallow, they would receive more of this treat. Those children

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who could resist the temptation of eating their marshmallow right away were able to achieve more accomplishments as adults. It is not difficult to understand this phenomenon. Impulse control is related to decision-making involving, for example, premarital sex, single parenthood, substance abuse, dropping out of school, unemployment status, and criminal activities. Culture can be part of it, but according to Herrnstein and Murray (1994), decision-making about those matters just mentioned is also related to people’s intelligence, especially their ability to engage in long-term vision and planning. “Kids who ‘passed’ their marshmallow test, waiting the full fifteen minutes, ended up with SAT [Scholastic Aptitude Test] scores 210 points higher than those who ate up in the first thirty seconds. For college grades, impulse control has proved to be a better predictor than SAT scores – better even than IQ” (Chua and Rubenfeld 2014: 118). As an indication of their impulse control, Asian Americans have lower incidences of premarital sex, single parenthood, substance abuse, dropping out of school, unemployment status, and criminal activities compared to the general US population. They also tend to work longer hours and save more of their income (Costa-Font et al. 2018). A reduced sense of insecurity (such as due to the availability of welfare assistance) and a rise in the demand for instant gratification have conversely been responsible for the declining savings rate for Americans generally, their mounting national debt as well as their rising personal debt fueled by easy credit and lax regulatory oversight as attested by the bursting of the housing bubble in 2008–2009. “. . . America failed the marshmallow test – and paid the price” (Chua and Rubenfeld 2014: 218), and it seems destined to pay even more price. Parenthetically, welfare programs do not necessarily diminish the incentive to save. Switzerland and Singapore provide strong welfare programs and yet their citizens have high savings rates. More systematic evidence, such as the research results reported by Costa-Font et al. (2018) in the next paragraph, also points to this conclusion. Here is another instance that institutions are not always decisive, but culture appears to make an important difference. Thrift or the propensity to save can be another indicator of impulse control or a reflection of a person’s sense of economic insecurity or vulnerability. Costa-Font et al. (2018) studied the savings behavior of immigrants who have settled in Britain. Because Britain as their new adopted country provides the same macro environment for them,

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differences in the immigrants’ savings behavior – after controlling for factors pertaining to their individual circumstances – can only be due to those habits or attitudes transmitted to them from their country of origin. The authors indeed find a high correlation between the immigrants’ savings rate and that of their country of origin, thus demonstrating the persistence of cultural influence at least for the first two generations of immigrants. Those coming from countries with high saving rates also save more in Britain. Among the immigrant communities included in this study, Chinese from China and Hong Kong are by far the highest savers. This cultural effect, however, practically disappears by the third generation. On the matter of self-esteem, Asian Americans are more likely to express their inadequacies, at least they tend to do so in professing publicly. I have already told the story that one sometimes hears in Asia: when an Asian student is unable to understand a teacher or speaker, she often puts the blame on her inability to comprehend whereas when this happens to a white American student, she puts the blame on the speaker for his inability to communicate effectively. Moreover, American parents are quite generous in dispensing compliments such as “good job,” even when a child performs mediocrely out of a fear of hurting this youngster’s self-esteem. Conversely, Chinese parents can be relentlessly critical and demanding even when their student places second or third in his or her class. One indication of a culture emphasizing self-esteem and egalitarianism is the phenomenon of grade inflation in US colleges. Interestingly, “Asian American students regularly report low selfesteem despite their [superior] academic achievements” (Chua and Rubenfeld 2014: 111). One might add that most other Americans have high self-esteem even though they have lower objective performance. In the United States, “Asians said they were the least satisfied with themselves of any racial group: blacks reported the highest positive attitude toward themselves, followed by Latinos, then whites, then Asians” (Chua and Rubenfeld 2014: 111–112). Experiments show that students who were given a boost in self-esteem in fact did worse than other students in their test scores (Chua and Rubenfeld 2014: 213, emphasis in original). Self-satisfaction can be a source of complacency and even arrogance. Tian Zhu (2021: 125–126) cites a 21-country survey conducted by the Pew Research Center in 2011, which reports:

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68% of the Chinese respondents believed that Chinese parents put too much pressure on their children to do well in school, the highest of all countries surveyed. Conversely, only 11% believed that Chinese did not put enough pressure on their children to excel. In the United States, only 11% of the respondents believed that American parents put too much pressure on their children, while 64% thought the opposite.

One can imagine a darker side to the Asians’ drive to succeed. Constant and heavy pressure from family and from oneself can cause immense stress, and it can render failures in schoolwork and career so much more disappointing, even devastating. Such setback can destroy a person’s self-esteem and, in the East Asian context, cause this person’s family to lose face. One often hears stories of children and adults in East Asia committing suicide in the face of such adversity and setback (sometimes parents not only kill themselves but also their young children in committing suicide). It is therefore interesting to refer to the relative incidence of suicide across ethnic/racial and age groups. White Americans had about twice the suicide rate of Asian Americans in 2000–2010 (13.5 compared to 5.6 per 100,000), but Asian women had a comparable suicide rate to whites in the 15–24 age group (3.2 versus 3.5 per 100,000) and it was higher for the over 70 age group (6.8 versus 4.1) (Chua and Rubenfeld 2014: 150–151). Hence, it seems that the pressure brought on by the drive to succeed, which can contribute to suicide rates when it is met with failure, disappointment, and low self-esteem, is offset by traditional Asian emphasis on support from the family unit. That older Asian people are more likely to commit suicide implies that the pressure to succeed, which is felt most intensely by younger people, is less likely to be the leading cause of their behavior. Naturally, this remark does not deny the many well-publicized stories of young people and even adults taking their own lives because of the pressure to succeed and the severe distress and even devastation that ensue when one’s expectations are not realized and one’s hopes are dashed. Hard work and persistence are part of the recipe for achieving. They are motivated by the combination of superiority complex and psychological anxiety (even insecurity) featured by the triple package. “Chinese American children watch about one-third less television than white Americans. Asian kids are more likely to attribute success or failure at school to how hard a student works; by contrast, white Americans are more likely to attribute it to innate talent, luck, or

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teacher ‘favoritism’” (Chua and Rubenfeld 2014: 127). Research by Amy Hsin and Yu Xie (2014) suggests that in fact “the main reason for the better academic performance of Asian-American students than white students is not higher intelligence but more diligence.” Asian parents share this belief, and they are likely to emphasize hard work rather than natural talent as an influence on their children’s schoolwork and other kinds of performance. The drive for conventional achievement by groups such as the Chinese American community, however, places them in a rather paradoxical situation, one that puts their values and beliefs in conflict with other emergent currents in American society. Henry Louis Gates Jr. (2010) was quoted by Chua and Rubenfeld (2014: 323) remarking: I read the results of a poll from the Washington Post recently that interviewed inner-city black kids, and it said, “List things white.” You know what they said? The three most prevalent answers: getting straight A’s in school, speaking standard English, and visiting the Smithsonian. Had anybody said anything like this when we were growing up, they would have smacked you upside your head and checked you into an insane asylum. Somehow, we have internalized our own oppression.

Remarkably, this phenomenon converges with another phenomenon: “what’s rarely observed is the strangely parallel disparagement of discipline and academic striving that has emerged among America’s affluent classes” (Chua and Rubenfeld 2014: 222). This latter current is at least in part associated with the ongoing shift from a materialist to a postmaterialist culture, where self-expression, personal liberation, and non-conformity are valued. But this phenomenon also cannot be entirely attributed to this culture shift typically associated with the political left. Conservatives have increasingly attacked the “ivory tower” mentality, and many have questioned science on questions such as the reality of global warming and the efficacy of anti-Covid vaccines. Obviously, those political institutions like the rule of law and property rights emphasized by Acemoglu and Robinson (2012), North (1990), and other scholars sharing the institutional perspective cannot explain the differences in socioeconomic achievements by groups living within the same country. This observation lends greater credence to the role played by culture. Yet lest we exaggerate the power of the triple package, we should acknowledge that its absence cannot be construed

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as the original cause of various groups’ uneven achievements such as indicated by their wealth or poverty – because groups respond to differences in their environment as suggested by Jared Diamond (2017) and as my subsequent discussion tries to show. Moreover, the groups’ original positions can affect their future options, including their subsequent culture and their drive and ability to achieve as suggested by the idea of path dependency. For example, history and environment have contributed to a culture of fatalism and passivity in the Appalachia region of the United States, where chronic and pervasive poverty has perpetuated itself and this phenomenon has been the result of an environment whereby “the Triple Package [has been sucked] out of a culture” (Chua and Rubenfeld: 180). Chronic poverty, pervasive discrimination, and life’s other hazards (such as drug abuse, obesity, malnutrition, and unemployment) characterize the challenges faced by many African Americans. An inhospitable environment influences a dysfunctional culture, and this culture in turn contributes to and reinforces the negative environment, perpetuating a cycle of deprivation and despondency. We should not overlook the fact that culture and its environment are in constant interaction. Geography, genetic evolution, and immigrant status also cannot explain, for example, the successes of Mormons – the only group that has had an extermination order issued against it (even though other groups have suffered large-scale physical assaults and even legal discrimination, such as the Chinese Exclusion Act of 1882). As already mentioned on several occasions, although I focus in this book on the influence of culture on economic growth and development, I do not suggest that it is the only factor to be considered. Culture, however, is an important factor whose importance to economic growth and development has been neglected in recent years. Of course, some groups, such as the Amish communities, deliberately choose themselves out of the triple package. They are at peace and satisfied. They do not have any insecurity, and they also have nothing to prove to the world. In contrast, Weber’s Protestants have a superiority complex and feel insecure. They want to prove that they are God’s chosen as indicated by their worldly achievements. Motivated by the triple package, those immigrant communities mentioned in this chapter have made great strides in conventional socioeconomic achievements such as high income, good grades, admission to prestigious schools, and establishing themselves as leaders in the business world and traditionally

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esteemed professions such as medicine and the academy. At the same time and as to be elaborated further in the next chapter, mainstream American culture seems to be drifting from this achievement orientation. This development is occurring even though, “[i]n fact, America was for a long time the quintessential Triple Package nation” (Chua and Rubenfeld 2014: 26). It has a superiority complex separating it from Europe’s institutions and traditions, an exceptionalist view of its manifest destiny, and yet also a sense of insecurity and anxiety in a world dominated historically by Europe’s great powers (hence Washington’s traditional preference for isolation and detachment from others’ affairs and a fear of entanglement in foreign relations). The United States has also been the preferred destination for immigrants with a drive for high achievement, and its belated and delayed emergence as the world’s leading power after World War II can also be construed as a sign of delayed gratification. As just mentioned, however, there are changes afoot. Americans routinely describe the United States as the greatest country in the world, something that one does not hear from people from other countries, including China. As Chua and Rubenfeld (2014: 220) have remarked, yet the United States seems to be losing its triple package, while China has it “in spades, with an outsize superiority complex, a Confucian tradition of impulse control, and above all a determination to prove itself once again to the world.” There is danger looming when a community or country loses its sense of insecurity and impulse control (and replaces them with self-esteem and instant gratification). When this occurs, it also loses its entrepreneurial élan and more generally its dedication to personal or national effort mobilization. This situation leaves it with only its sense of superiority and exceptionalism, “which, by itself, is a recipe not for success, but for swagger and self-satisfaction” (Chua and Rubenfeld 2014: 27), and one might add a sense of arrogance, complacency, and entitlement. “There is a disconnect today between the story Americans tell themselves about how to think and how to live – and the reality of what the American economy rewards” (Chua and Rubenfeld 2014: 27).

The Role of Immigration in Fostering Prosperity and Power The preceding discussion has important policy implications and socioeconomic consequences. It also provides part of the explanation for the rise and fall of current and past great powers. Significantly, the United

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States commands a great advantage over China because it receives a large and constant infusion of talented and hard-working immigrants who contribute to promoting and sustaining its economic growth. This infusion improves human capital for a country’s economic dynamism. Enrico Moretti (2013: 242) reports that 15% of the US workforce were foreign-born. These immigrants, however, are over-represented among those who are highly educated, representing about one-third of the engineers and about half of those with doctoral degrees. They are also 30% more likely to start their own businesses than native-born Americans. Moreover, they are disproportionately represented in hightech start-up companies, accounting for one-quarter of these firms with annual sales over $1 million. In view of these figures, the recent backlash from Americans against foreign refugees seeking opportunities for a better life from their homeland is counterproductive. It is an example of what I have referred to earlier as “self-inflicted injury” that handicaps one’s own economic development. As Amy Chua (2007: xxv) observes, past “hyperpowers have fallen prey to fragmentation and disintegration precisely when their core group turns intolerant, reasserting their ‘true’ identity, adopting nativist or chauvinist policies, and attempting to expel or exclude ‘aliens’ and ‘unassimilable’ groups.” She therefore questions people like Samuel Huntington (2004) who are concerned that continued immigration, especially from Spanish-speaking regions like Mexico, will cause the United States to lose its identity and social glue. Recent harsh treatment by the United States and European countries of refugees seeking admission is also disturbing because this treatment abets and is in turn abetted by domestic partisanship and hateful public rhetoric. Reflecting on the histories of past great powers, Chua (2007: 46–47) remarks that “Rome’s color-blind and surprisingly class-blind approach to citizenship was instrumental in spreading Roman culture and values.” Furthermore, “In incorporating different peoples, Rome’s ideal was emphatically not multicultural diversity. It was assimilation . . . Barbarians were not thought to lie forever outside the pale of civilization: they had only to live by Roman practices to be considered part of the empire.” However, as the diversity of its peoples increased, this heterogeneity gave rise to intolerance and bigotry, including religious persecution of Christians first as its victims and then as its source. “Although not the only cause of Roman decline, intolerance helped tear the empire apart” (Chua 2007: 53).

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Traditional China, like ancient Rome, also reflected tolerance and diversity. For example, the Chinese people did not believe in monotheism like Christianity, Islam, and Judaism, but rather adopted different beliefs and practices from different religions that have coexisted in China and indeed in Chinese individuals and families. Confucianism was moreover a philosophy about life in general rather than a religion. The definition of being Chinese was not based on racial or religious grounds but was rather identified with following Chinese rituals and practices, knowing classical Chinese texts, and adopting the Chinese lunar calendar or in other words, being assimilated into the Chinese culture. As Chua (2007: 61) notes, “The Tang [dynasty] was . . . more open, cosmopolitan, and ethnically and religiously tolerant than any other empire of its day, and perhaps than any other period in Chinese history.” The achievements of the Tang dynasty continue to resonate, as even today the Chinese people still often call themselves “the Tang people.” Whereas medieval Europe underwent political fragmentation and religious turmoil, China kept its political unity despite frequent internal warfare and social upheaval. It has managed to maintain this unity over a territory as large as continental Europe because of the triumph of its strategic tolerance and its ability to assimilate people from different backgrounds. “Indeed, over its three-thousand-year history, China has essentially accomplished exactly what the European Union is trying to do today – it has brought and kept together in a single political unit a huge number of individuals from vastly different cultural, geographical, and linguistic backgrounds. Chinese civilization in fact grew out of a great intermixing of diverse cultures” (Chua 2007: 289). Early modern Europe provides contrasting cases of tolerance and intolerance and the role of immigrants in contributing to the vitality of different countries’ economies, or the opposite phenomenon in the case of Spain which sent into exile skilled craftsmen and successful entrepreneurs. Despite its newly found wealth, especially silver, from its conquests in the Western Hemisphere, Spain’s persecution of the Moriscos and conversos (Jews who had converted to Catholicism) and its Inquisition against alleged heretics set its economy on a course of permanent decline. By comparison, the Dutch republics were welcoming to persecuted minorities, such as Jews from Spain and Huguenots from France, precisely those groups high on the motivation to excel in craftsmanship and entrepreneurship as described by Weber

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and McClelland. These groups were a vital part of the impetus that launched the Netherlands’ economic expansion which in turn fueled its geographic expansion to become the leading global power. In contrast to Spain but similar in many ways to Tang China and the Dutch republics, the Ottoman empire in its heydays also featured tolerance, diversity, and open social mobility. “. . . Almost everyone in the [Ottoman] empire, of any ethnicity or social class, could become a Muslim and a member of the askeri [although this term refers literally to the military, it encompasses all high official positions in imperial administration]. Moreover, converted Muslims were every bit as good as ‘natural-born’ Muslims, with virtually no limits on their success” (Chua 2007: 172). National isolation and xenophobia hinder economic growth. Reduced contact from or interaction with foreign sources deny a country the benefits of Smithian growth (i.e., growth based on a division of labor reflecting each country’s comparative advantage) and Schumpeterian growth (learning new ideas and technologies from foreigners that facilitate the process of creative destruction paving the way for invigorated growth) as Mokyr (1990: 4–9), Thompson and Zakhirova (2019: 3), Goldstone (2002: 324), and other scholars have reminded us. Japan’s and especially China’s violent encounters with Western imperialists before their respective modernization demonstrate the disastrous consequences of their policies of self-imposed isolation. In his review of many possible conditions that affect a society’s innovative capacity, Joel Mokyr (1990: 181) remarks, “Whenever religious and intellectual intolerance spread through Europe, as they did in the fourteenth century, their advent coincided with the temporary slowdown in technological development.” Regimes that did not welcome foreign talents, such as medieval Spain and the Ottoman Empire in its later years fell behind those, such as Britain and the Netherlands, that did. The latter countries acquired cutting-edge technologies and political influence “out of all proportion to the size of their populations” (Mokyr 1990: 206). In the same vein, Carlo Cipolla (1972: 52) asserts: Throughout the centuries the countries in which intolerance and fanaticism prevailed lost to more tolerant countries the most precious of all possible forms of wealth: good human brains . . . Inflow of good brains and receptiveness to new ideas were among the main sources of the success stories of

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England, Holland, and Sweden in the sixteenth and seventeenth century. It is gratifying to be able to say that tolerance pays off.

Chua (2007: 267) concludes, “No society based on racial purity, ethnic cleansing, or religious zealotry has ever become world dominant,” with Nazi Germany and Imperial Japan providing the most compelling examples of this proposition. An important part of the not-so-secret recipe for US economic achievements was this country’s attraction to foreigners who are drawn to its opportunities for immigrants to improve their lives and for their children to move up socially. However, in recent years both Europe and the United States are showing difficulties in assimilating their immigrants, and for Europe, especially its Muslim population. The question of Turkey’s accession to the European Union presents another challenge to Europe’s ostensible tolerance. Hindu nationalism, represented by the Bharatiya Janata Party, is also challenging India with its multiple ethnicities and languages in addition to its traditional caste system. Finally, compared to the United States, China is not nearly as capable in attracting and retaining talented and hardworking immigrants. It has instead targeted its 55 million overseas compatriots, seeking to recruit their talent and capital to assist China’s economic growth. China shares with Japan the prospect of continuing demographic decline and thus the shrinking of its future workforce, as well as its relative unpopularity as a destination for immigrants and often its own self-imposed insularity. By restricting immigration, the United States will be forfeiting one of its greatest comparative advantages over China.

Culture as the Evolutionary Product of Human Interactions with the Environment Cultural practices and institutions do not suddenly spring from thin air. They reflect the cumulative product of a society’s adaptation to its environment. Although the culture of another society may appear bizarre, superstitious, and even counterproductive to outsiders, they are rarely irrational. Take the example of Hindus’ worship of cows and the taboo against eating beef (Harris 1966). This practice seems to foreigners puzzling, because many poor Indians are malnourished and some even suffer from chronic hunger, and yet they refuse to take advantage of a readily

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available source of animal protein provided by the bovine population. However, on closer examination their behavior becomes understandable. Cows provide traction power and are needed to plough the land for cultivation during a narrow window defined by the monsoon season. Families that slaughter their cow for food will have to rent or borrow this animal for this crucial agricultural task. Those who do so place their family’s food needs and financial future in jeopardy. Moreover, cows provide other values besides their meat; their milk, dung and hide are useful for other purposes. In short, the rationale for the taboo against eating beef becomes more understandable if one considers India’s ecology, even though this taboo is cloaked in or justified on religious grounds. Consider other examples of people’s dietary habits. Marvin Harris (1978) points out that Jews and Muslims do not eat pork, even though pigs are the chief source of animal protein in Chinese diets. The ban on eating pork was instituted long before the discovery of trichinosis, so that this disease could not have been the reason for this dietary taboo. The Middle East’s ecology, however, makes this taboo more understandable. Pigs are not compatible with the nomadic way of life, because unlike horses, cows, goats, and camels, they cannot travel over long distances. High population density characterized traditional China where limited amounts of land had to support many mouths. The land allocated to cattle grazing would not be available to grow crops for human consumption. Unlike cows, pigs are scavengers that do not compete with human beings. They can be fed with garbage dispensed by people. Traditional Chinese treat these animals practically as members of their family, and often shelter them in their house. The Chinese word for home or family (家 or jia) consists of two characters indicating a roof over pigs. In contrast to China’s historical ecology, the United States featured a small population over a large expanse of land. Thus, Americans practiced extensive agriculture in the sense that a few people (cowboys especially) worked on undertakings such as ranching and herding over a large geographic area. In contrast, traditional East Asia, including China, Japan, and Korea, practiced intensive agriculture in the sense that their farmers tried to gain agricultural productivity by putting more human labor into small, fixed plots of land. No wonder beef is a favorite food item for Americans given this historical and geographic

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context. Despite its name, hamburgers were not invented in Hamburg, Germany. There is also little mystery behind the reason why McDonalds and Burger King were first established in the United States, and Chinese chefs did not invent ice cream or cheesecake. The general conclusion to be drawn from research by anthropologists such as Marvin Harris is that although cultural norms and practices are often couched in religious justifications, their origins can be traced to more mundane ecological conditions. Before the arrival of Europeans, South America lacked large games to provide a source of animal protein to human beings. Could this condition have evolved to create the institution of human sacrifice, whereby the victims’ bodies were thrown from the altar to the crowd waiting at the bottom of the pyramid? Could the absence of large games and the practices of human sacrifice and cannibalism be related (Harris 1977)? People’s dietary habits and preferences tend to reflect the environments in which they live. Their efforts to cope with challenges from their respective environment make deep imprints on their respective culture beyond food. Karl Wittfogel (1957) was a pioneer in the field of ecological anthropology. He coined the phrase oriental despotism to describe the authoritarian tradition of different “Eastern” societies, especially that of China. He argued that the necessity to control floods and provide for irrigation created the impetus to form large bureaucracy and centralized authority in these societies. The so-called hydraulic societies needed to mobilize and coordinate collective efforts to support these large engineering projects. This phenomenon in turn subordinated individual rights and personal freedom to teamwork and group interests, thus accounting at least in part for the phenomenon that Western liberal democracy had encountered difficulties in sinking roots in hydraulic societies (most ancient civilizations developed initially along the banks of large rivers providing easy access to support human settlement, such as the Nile delta in Egypt, the Tigris and Euphrates in the Fertile Crescent, the Ganges and Indus rivers in India, and the Yellow River and the Yangtze in China). Generalizations such as this proposition often contain a kernel of truth, but they can also present caricatures if people fail to grasp important nuances and qualifications. Thus, we can draw useful lessons from commentaries from people such as the political scientist Lucian Pye (1967, 1968), whose publications have emphasized the Chinese people’s supposed abhorrence of

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chaos and disorder (亂 or luan) given their country’s experience with chronic warfare and civil unrest. This tendency is in turn supposed to produce a psychological need on the part of contemporary Chinese to search for authority figures in their politics and to give deference and respect to these figures. The other-directed nature of Chinese society is also supposed to foster an emphasis on “face,” or showing outward signs of giving and saving “face” – that is, to recognize and accommodate the need to maintain one’s own and others’ social standing. As I show in the next chapter, such views sometimes present stereotypes that are not supported by evidence. One may also question the supposed psychological origin for the Chinese people’s proclivity to accept authoritarianism. For instance, did not Europe also have periods of intense conflict and turmoil such as the Thirty Years’ War? Compared to China, did Europe suffer more such turbulence and should therefore be expected to exhibit greater authoritarian tendencies according to Pye’s reasoning? In fact, many scholars (such as Jerad Diamond, David Kang, Joel Mokyr, and Charles Tilly, to mention just a few) have commented on European countries’ constant rivalry and frequent warfare in contrast to East Asia’s experience with “universal peace” under China’s imperial rule. Both the logic and evidence pertaining to propositions such as Pye’s require clarification and confirmation from systematic and comparative analyses. Whether one agrees with inferences and attributions based on observations of another country’s culture such as those mentioned in the preceding discussion, they suggest that culture is something that is not only taught and learned as abstract concepts but is practiced routinely and constantly by members of a cultural community. Moreover, the beliefs, attitudes, and values of individuals belonging to such a community are the cumulative product of their predecessors’ attempts to manage and adapt to their social and physical environment. Culture is in other words a living thing (Qin 2018; Wendt 1999).

Conclusion The political and economic institutions of the United States and West European countries have by and large remained the same since 1945, although their popular culture has undergone significant change in recent decades as documented by Ronald Inglehart and his colleagues (Inglehart 1990, 1997, 2004; Inglehart and Baker 2000; Inglehart et al.

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2004; Inglehart and Welzel 2005), especially pertaining to the major shift from people’s materialist concerns to postmaterialist concerns. Holding the influence of political and economic institutions constant, this situation presents a quasi-experiment to discern the possible effects of changing culture on changing economic performance. This topic is taken up in the next chapter. Similarly, China’s authoritarian regime, its one-party rule, and its official communist ideology have remained as constants during both its years of economic stagnation and fast growth. Rather, it seems that in this case a change of government policies – as opposed to a transformation of political institutions – has sparked rapid growth and sustained it. Even in the aftermath of the Covid-19 pandemic and the drop from its previous double-digit rate of economic growth, China’s economy is still expected by experts to expand faster than the United States and most other countries. The conditions described in this paragraph also help provide the setting for a quasi-experiment. What could have changed China’s economic performance since its macro political institutions have remained the same? This situation creates an opening to investigate more thoroughly the role played by culture and, equally important, the role played by policy changes that can release the energies embodied in a traditional culture but that which have been held back heretofore by hostile policies and/or an inhospitable economic environment. What were, then, those policies that effectively unlocked and released the pro-growth cultural impulses that had previously laid dormant? I argue that removing the policies blocking these impulses is a large part of the story. This view suggests that what is required is for the government to refrain in the first place from adopting policies that impede economic growth, and next for it to discontinue those policies that discourage or retard this growth – or in other words, for the government to simply stand aside and allow the society’s natural dispositions to take over. As in the case of Hippocratic oath for physicians, the first motto is to do no harm. This part of the story is as important as for the government to actively engage in policies that promote growth. The key is for the government to work with rather than against those ingrained cultural norms and inclinations that facilitate and encourage growth. It is remarkable that, as many observers have commented, the Chinese people were so quick and adept in taking up business pursuits after three decades of communist rule and

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indoctrination compared to the more lethargic response on the part of Russians to their country’s economic opening. The second order of business is to get the basics right. An old commercial from the investment firm Smith Barney used to boast “We make money the old fashion way.” Beyond a facilitative culture, East Asia’s economic successes also owe much to its governments’ ability to get the fundamentals right – or at least not to adopt policies that undermine the basics. There is no mystery to their policy package to promote growth. It includes encouraging savings and investment, balancing expenditure with revenue, curbing inflationary pressure, providing incentives for hard work, and supporting education and learning. This endeavor involves an ensemble of social and economic policies. And there does not appear to be any shortcut or easy substitution to gain economic growth. After that, a third priority is to encourage innovations to raise productivity and thus to sustain growth. Scientific and technological breakthroughs can be game changers putting an economy on a new, higher trajectory, such as in the history of Europe’s technological innovations launching the Industrial Revolution (Landes 1969). Joel Mokyr (1990) argues that, contrary to popular beliefs, “free lunches” are possible because of the radical improvements in people’s lives made possible by fundamentally new ways of making and doing things. However, innovations are hard for corporations and governments to engineer or plan for. This will be the topic for Chapter 5. Because it is easier to change policies than institutions, the line of reasoning presented in this chapter suggests that effecting economic growth may not be as challenging as institutionalists sometimes imply. At the same time, because cultural dispositions cannot be easily transplanted, East Asia’s economic experience also cannot be easily replicated. Lee Kuan Yew, Singapore’s former prime minister, avers, “If you have a culture that does not place much value in learning and scholarship and hard work and thrift and deferment of present enjoyment for future gain, the going will be much slower” (quoted in Zakaria 1994: 116–117). He continues, “Now if you gloss over these kinds of issues because it is politically incorrect to study them, then you have laid a land mine for yourself.” David McClelland stresses that N-Ach is not something that is inherited but is rather instilled in a people such as by educating and socializing young people in school, and by parents teaching their

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children to be responsible and self-reliant. Indeed, cultural traits that enable or encourage people to excel in various endeavors are not uniquely East Asian. As shown by Chua and Rubenfeld (2014), people from non-Confucian backgrounds often have similar, generalizable characteristics that motivate their drive in economic and non-economic pursuits. It remains finally to be said that a long and rich culture such as China’s can feature multiple facets and sometimes it even presents seeming contradictions. The latter tension gives a culture suppleness and flexibility, enabling it to endure and adjust to the test of time. We sometimes encounter this situation in the form of bimodal injunctions, such as when people are enjoined to be both cautious and audacious, to be rigid in principle but flexible in tactics, to fully mobilize their effort and yet to avoid unnecessary exertion, and in the parlance of Chinese communists, to be both red and expert (e.g., Bobrow 1969; Bobrow et al. 1979). Thus, opposing views can often draw support from the same cultural tradition (e.g., Johnston 1995). Justin Lin (2014) is critical of cultural explanations of economic performance, and he is right to remind us that it was not so long ago that Confucian culture was widely seen as an obstacle that hampered China’s social, political, and economic progress. Confucianism has been attacked as a conservative force hindering China’s modernization from different quarters, such as by Chinese republicans who wanted to overthrow the Qing dynasty and the Red Guards during the Cultural Revolution. It was only recently that various commentators and scholars attribute to it those qualities that have assisted East Asia’s rapid economic growth.

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The Struggle between Materialist and Postmaterialist and China’s Economic Growth in Historical and Comparative Context

In November 2022, Harvard and Yale announced that they would no longer respond to data requests from U.S. News and World Report for the compilation of this journal’s annual ranking of law schools. Their announcement was followed by similar ones by Stanford and the University of California at Berkeley. These announcements were made in the wake of earlier decisions by over 1,700 US colleges to abandon the requirement that applicants for undergraduate admission must take the Scholarly Aptitude Test (SAT) or American College Testing (ACT). According to these schools, their decisions were motivated to advance the inclusiveness and diversity of their student body. Their admission policies in the name of affirmative action were controversial. In July 2023, the US Supreme Court rebuffed their argument, ruling that except for the military academies, it is illegal to consider race in school admission decisions. Students of Asian heritage claim that they have been discriminated by the implementation of affirmative action (Unz 2012). They, rather than white applicants for admission, have borne the main burden of this policy. If admission decisions were to be based strictly on the applicants’ academic credentials, nearly half of the incoming classes of many prestigious universities would be of Asian descent (the most recent information indicates that the admission of students of Asian ancestry has increased nearly ten points to about 29% of Harvard’s incoming class). Issues implicated in this controversy naturally reflect the clash between materialist and postmaterialist values in American society at large. But this phenomenon is not limited to the United States. Demonstrators in France protesting their government’s decision to raise that country’s retirement age from 62 to 64 have of course acted in part out of their self-interest. But their protest also indicates what these demonstrators consider to be their government’s infringement on an important part of their French identity, or what it means to be 59

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French. In other cases of social conflict, self-identity appears to trump self-interests. For example, an unemployed steel worker in Ohio should support a candidate from the Democratic Party if he is motivated primarily by pocketbook issues, but he often votes for the Republican Party’s candidate because of his cultural values and identifications (Inglehart 2018; Norris and Inglehart 2019). Ronald Inglehart (1990: 179) had already noticed this developing phenomenon in 1990 when he observed insightfully that “the rise of the ‘Moral Majority’ in the United States [might be interpreted] as a reaction to recent cultural change by groups who are less educated, have fewer resources, are less secure, and therefore are more threatened by change.” He continues, “. . . when Postmaterialist issues (such as environmentalism, the women’s movement, unilateral disarmament, opposition to nuclear power) become central, they may stimulate a reaction in which part of the working class sides with the Right, to reaffirm the traditional Materialist emphasis on economic growth, military security, and domestic order” Inglehart (1990: 259). This phenomenon has already manifested itself in America’s working class abandoning the Democratic Party to join the Republicans, and in the fragile coalition of supporters for the Democratic Party consisting of constituents with both postmaterialist and materialist dispositions (the number of the latter group is declining, many of whom have come traditionally from labor unions whose membership has fallen significantly over time). Parenthetically, traditional parties on the left, such as the Democratic Party in the United States, are faced with challenges from two fronts (Inglehart 1990: 378). They struggle to retain their traditional political base consisting of working-class materialists, who are increasingly shifting their support to the parties on the right, like the Republican Party. They also must attract voters who have postmaterialist values, and who consider these traditional parties on the left to be insufficiently committed to their agenda. Thus, these parties are based on an uneasy coalition, and find themselves necessarily having to present a Janus-like face to voters. Many of the issues involved in America’s so-called culture war, such as those pertaining to gender, family, religion, and country impinge on people’s identity rather than their economic interests. To paraphrase Italian prime minister Giorgia Meloni, the new left’s political agenda assaults her identity as a woman, mother, Christian, and Italian. As a

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neo-conservative, she was determined to stand up and fight for these traditional roles and identities and the values embodied in them. Significantly, this declaration and other similar ones are battle cries calling for a return to materialist or perhaps even pre-materialist concerns, if you will, to revisit “history” (Fukuyama 1992, 2014). Anticipating the ongoing culture war in the United States and other developed countries, Ronald Inglehart (1997: 58, emphasis in original) commented two and half decades ago that, for example: Clearly, the pro-[school]prayer and Right to Life movements do have devoted partisans. But their revival of religious issues reflects a reaction among a gradually dwindling traditionalist sector, rather than a surge toward cultural conservatism among the population at large . . . The intensity with which religious issues have been raised in recent years reflects their adherents’ alarmed and passionate conviction that some of their most basic values are rapidly eroding – and not the growth of mass support for traditional religion.

Inglehart is certainly prescient. The Make-America-Great-Again movement led by Donald Trump has drawn most of its support from those white, evangelical, blue-collar, and high-school graduates who have experienced downward social mobility in recent decades. But importantly, the traditionalist sector referenced by Inglehart in the above quote appears larger and more vocal in the United States than in the European democracies. Indeed, as to be discussed below, beliefs in family, country, and God are more strongly held by more Americans than their European counterparts. Issues such as abortion rights and gay rights have been settled in West European countries for some time now, but they continue to rage in US politics. In this respect, the United States is an outlier whose value outlook is in many ways closer to the views held by people in Poland and Turkey than those in Sweden and the Netherlands. As remarked briefly earlier, American conservatives have also led the charge against the “ivory tower” and scientific evidence. They have, for example, cast doubts on the phenomenon of global warming and the efficacy of Covid vaccines. Inglehart (1997: 79) associates such skepticism with postmaterialists who are supposed to be more critical of science, technology, and rationality. Yet, the loudest opposition to scientific reasoning and conclusions has come from conservative traditionalists, or those who are more inclined to hold materialist values, in controversies characterizing current US political divisions.

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This chapter addresses the interaction between cultural change and economic change. As I have argued earlier, culture exercises an important influence over economic growth. This growth, however, also engenders cultural change. The subsequent cultural change in turn affects future economic growth, thereby forming a feedback loop of reciprocal influences. Neither culture nor the economy are static entities. They coevolve over time. What does this macro view say more specifically about how their respective culture is likely to shape the prospects of economic growth for China and the United States? In turn, what do these countries’ prospects for economic growth augur for their international power and position in the coming years? I will take up the first question in this chapter, and I will return to the second question in the next chapter. A large part of this chapter’s discussion is based on the seminal work presented by Ronald Inglehart and the data gathered by him and his collaborators in multiple surveys on people’s beliefs, attitudes, and values in different countries and at different times.

Changing Culture in the Wake of Economic Growth and Affluence A good starting point for this discussion is to recognize that people’s beliefs, attitudes, and values are based on their socialization experience during their childhood. The beliefs, attitudes, and values learned or acquired during these early years tend to stay with a person during the rest of his or her life. Because people of different generations grow up in different environments, especially for our purpose in different economic circumstances of hardship or affluence, they come to have different views, understandings, and preferences about politics, economics, and life in general. As older people die and younger cohorts replace them, a society’s culture undergoes change. New views and values supplant the old ones. The relevance of this cultural change for this book’s purpose is stated succinctly by Ronald Inglehart (1990: 57): The wealthier societies are least likely to produce Materialist publics, but Materialist publics seem to produce high economic growth rates. Or, reversing labels, though wealthier societies are most likely to produce Postmaterialists, after an appropriate time lag, the more Postmaterialist

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societies have the lowest growth rates. The long-term result is that high growth rates eventually lead to lower growth rates. Prosperity engenders a cultural shift toward Postmaterialist values, which eventually leads to a less intense emphasis on economic growth.

By materialist values, Inglehart has in mind economic concerns such as job security, high income, career mobility, and fast economic growth (even if it causes ecological damage). Materialist values also include a traditional interest in protecting or promoting a country’s social order and national security. In contrast, postmaterialist values emphasize personal liberty, self-expression, quality of life, a sense of subjective well-being, and environmental protection. Postmaterialists prioritize these values over materialist ones such as economic growth. Given this outlook, it is perhaps not surprising to learn that controlling for education and family background, “a majority of Postmaterialists earn less than their Materialist counterparts. They are economic underachievers” (Inglehart 1990: 175, emphasis in original). Materialists and postmaterialists have other differences in their outlook and behavior. For example, societies that are predominantly materialist have markedly higher birth rates and lower divorce rates than those that are predominantly postmaterialist (Inglehart 1990: 432). The materialist-postmaterialist dimension of culture is remarkably resilient and persistent in patterns shown by survey data gathered from dozens of countries. Six items in the World Values Survey conducted in these countries were intended to capture the priorities given by the survey’s respondents to materialist goals: strong defense forces, fight rising prices, fight against crime, maintain order, economic growth, and maintain stable economy. Another six items were intended to reflect the respondents’ emphasis on postmaterialist goals: less impersonal society, more say on job, more say in government, ideas count more than money, freedom of speech, and more beautiful cities. To a remarkable degree, the six items indicating materialist values show up statistically as a cluster in factor analysis, and except for “more beautiful cities,” the five items indicating postmaterialist values also form a separate, independent cluster. These patterns are supported by data from advanced postindustrial countries in Western Europe and North America, developing countries in Latin America, former socialist countries in Eastern Europe, and Confucian cultures in East Asia. This is not to deny that there are also interesting and important variations among

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countries in each grouping, but the available evidence offers strong support for the view suggesting a general cultural division between people having a materialist versus a postmaterialist outlook for all countries included in the World Values Surveys, albeit with different proportions of people having these opposing outlooks in each country. Moreover, there is a strong tendency for postmaterialist values to be associated with affluent, mature economies where people no longer worry about their economic or physical survival (Inglehart 1997: 108–130). It is not difficult to grasp the implications of Inglehart’s analyses for our study. Because culture changes and changing culture affects economic growth, a country is not guaranteed to retain its economic preeminence in perpetuity. Likewise, a culture once known to promote economic growth can subsequently produce economic lethargy and even decline. I have already remarked that although the Protestant ethic pioneered capitalist entrepreneurship in Europe, Protestants in today’s United States have relatively low income, and they have experienced downward social mobility as conventionally defined. Inglehart (1990: 60) concurs, observing that “[h]igh economic growth was once an almost uniquely Protestant phenomenon; today it has become global in scope and is less likely to be found in the Protestant nations than elsewhere.” China is still in the early stages of its economic development compared to those parts of the world that have already reached mature development (which includes Japan and Hong Kong). Thus, “In striking contrast to what we find throughout the West, Japan, and Hong Kong, in China the young are more apt than the old to emphasize Materialist goals” (Inglehart 1990: 156, emphasis in original). A logical inference from this observation is that populated by more materialists whose number will remain large and even dominant for some time before they are replaced by later generations of postmaterialists, China still has a long runway ahead of it to strive for materialist goals, including most importantly the goal of national economic growth. Put differently, in a national debate about whether to prioritize national economic growth and national security (the latter is also a materialist value), Chinese materialists are likely to prevail over their postmaterialist counterparts in at least the next few decades. Inglehart (1990: 375) states succinctly this proposition’s implication, “. . . nations with relatively high proportions of Postmaterialists show

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significantly lower rates of economic growth than those nations with high proportions of Materialists.” Another implication of this discussion is that Chinese politics is less likely to be mired in culture wars between materialists and postmaterialists, because the former group is much larger numerically than the latter group. One caveat applies to the above discussion. Because China’s economy has undergone rapid growth, one would expect this rapid growth to be followed by a similarly rapid change in the values of those Chinese who were born during the years of economic improvement and prosperity. That is, we would expect larger cohorts of Chinese postmaterialists to replace older generations of materialists and to do so relatively quickly. As Inglehart (1997: 47, emphases in original) puts it, “. . . high levels of prosperity should be conducive to high levels of Postmaterialism and other Postmodern values; high rates of economic growth should produce relatively rapid rates of value change and relatively large intergenerational differences.” Future survey research on Chinese people’s values and attitudes will help to clarify whether these expectations come to pass and if so, how quickly. For now, the fact that younger Chinese are more materialist than their elders seem to presage a different trajectory than suggested by these expectations for at least the next few decades. The United States has of course a more advanced economy than China. It can therefore be expected to have more postmaterialists than China. This is the basic situation differentiating these two countries. This said, the United States is also a deviant country because compared to the other advanced economies such as those located in Western Europe, it shows more traditional values and attitudes (Inglehart et al. 2004: 15). Americans’ beliefs about God, family, and country are often closer to those held by the Poles and even the Turks than the Western Europeans. Thus, for example, 53% of Americans said that “religion is ‘very important’ in their lives,” a level comparable to the Poles. This figure is higher in Nigeria at 85%, South Africa at 66%, and Turkey at 61%. But it is much lower even in Catholic Italy at 34%, and lower still in Britain, France, and Germany at 16%, 14%, and 13%, respectively. Americans assign great importance to God in their lives, an attitude that puts them in a group consisting of countries such as Brazil, Ireland, Mexico, Poland, South Africa, and Turkey. At barely 1%, the Chinese are the least religious people among dozens of countries covered by the World Values Survey in 1990 (Inglehart 1997: 84–86).

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Nationalism is another indicator of traditional or conservative attitudes associated with a materialist outlook. It is not surprising that a strong belief in religion and God is associated with a strong sense of national pride. China turns out to be a deviant case in this respect, because even though the Chinese people show little faith in religion and God, they express strong national pride. The level of national pride expressed by Americans, however, is nearly twice as high as the Chinese level (Inglehart 1997: 86). Along with the Irish, Americans showed the highest level of national pride among the twenty-one countries covered by the World Values Surveys (Inglehart 1997: 304). This phenomenon again sets the United States apart from most other countries. Although there is much reference to Chinese nationalism in Americans’ writings about Beijing’s foreign policy, these writers almost never acknowledge that nationalist sentiments are even stronger among Americans. The paradox presented by Inglehart’s analysis is of course that wealth begets slower economic growth, which over time tends to cause the wealthier countries’ economies to decline relative to those economies dominated by materialists, the ones that are lagging today but are expected to grow faster in the future. Materialist values provide a stronger motivation for the people of poorer countries to emphasize and pursue economic growth, which over time tends to close the economic gap separating their countries from the rich ones, and perhaps even enabling them to catch up to and overtake the latter countries. We have already seen this phenomenon in the case of Britain whose per capita income has been surpassed by Singapore’s, its former colony. Even though the existing literature stresses East Asian NIEs’ strong, administrative state as a major reason responsible for their economic success (a generalization that obviously does not apply to Hong Kong), Singapore’s former prime minister Lee Kuan Yew (1994) points to their cultural heritage and the primacy of family, not the state, as an anchor for stability and achievement. He insists that personal freedom can only exist in an ordered state and orderly society. He is skeptical about big governments’ ability to solve socioeconomic problems, and he attributes the problems facing the United States partly to this popular expectation, to its overemphasis on individual freedom, and to its loss of moral compass that has produced the phenomenon of pervasive drug abuse, single parenthood, school dropout, and gun violence. Although, as I have already said on several occasions, culture is not everything, this variable holds up better than other explanations of

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national economic performance. This chapter calls on it to explain the relative differences in economic performance on the part of materialist and postmaterialist societies. Cultural explanation appears to also offer a more compelling story and thus to provide greater credence when we try to understand variations in economic performance among the developing countries. As Tian Zhu (2021: 7) points out, various conventional explanations of China’s rapid economic growth, such as those referring to the advantages of starting from a low initial level, the reform and opening-up policy, the role of cheap labor, the demographic dividend, and an export orientation during the age of globalization, should also apply to other developing countries but they are unable to account for these latter countries’ much poorer economic performance compared to China’s. Nor does China have freer markets or more inclusive institutions emphasized by some analysts as determinants of economic performance. As Zhu suggests, “if these explanations are correct, at least some, if not all, developing countries should have been able to achieve rapid growth similar to that of China.” Factors commonly included in conventional narratives, such as those mentioned in the above paragraph, do not differentiate China from other developing countries. Rather, in Zhu’s (2021: 12) view, “. . . conditional on the market reform and openness policy adopted, the main differentiating factor behind China’s rapid growth in recent decades is not some unique institutions or judicious policies, but traditional Confucian culture, especially its emphasis on thrift and education.”

Cross-National Comparisons of Achievement Values The discussion in Chapter 2 on the values and attitudes characterizing some immigrant communities (but also non-immigrant communities like the Mormons) has focused primarily on variations among groups residing in the United States. Do we see similar patterns when we study the distribution of values and attitudes across different countries? A good starting point is to draw on the evidence from the World Values Surveys conducted by Ronald Inglehart and his colleagues in forty-three countries (and subsequently extended to over eighty countries). The respondents were asked the following question: “Here is a list of qualities that children can be encouraged to learn at home. Which, if any, do you consider to be especially important?”

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(Inglehart 1997: 220). Two of the qualities presented to the respondents are “thrift, saving money and things” and “determination,” which are supposed to reflect values of autonomy and economic achievement. Two other qualities presented to the respondents are “obedience” and “religious faith,” which are hypothesized to reflect an emphasis on conformity to traditional social norms. An index of Achievement Motivation was developed by summing up the percentage of people in each country emphasizing the first two goals, and then subtracting from it the percentage emphasizing the latter two goals. This Achievement Motivation shows a robust statistical association with economic growth across forty-three countries. It “shows a .66 correlation (significant at the .001 level) with the economic growth rates observed from 1960 to 1990 in these societies” (Inglehart 1997: 220). Unsurprisingly, China and Japan showed the highest scores on this measure of Achievement Motivation, and they were followed closely by South Korea to form clearly a distinct East Asian cluster in Inglehart’s (1997: 223) factor analysis. These three countries, joined by Romania, were the fastest growing economies during this period. Analyses of interview data produced by subsequent waves of the World Values Survey confirm this general pattern, thus testifying to its resilience and validity (e.g., Inglehart and Baker 2000: 29). Significantly, even though Confucian culture is supposed to teach obedience or deference to authority as suggested by some Sinologists like Lucian Pye (1967, 1968) and Richard Solomon (1972), this claim is disproven by the survey data. The outlook of the Chinese people is dominated more by thrift than obedience, a phenomenon that contributes to their very highest scores on Inglehart’s index of Achievement Motivation. In contrast, obedience and faith in religion dominate the outlook of Nigerians and South Africans, who occupy the opposite end of the spectrum on Achievement Motivation. Indians’ and Americans’ views fall between these opposite poles. Inglehart concludes that thrift and determination are values that promote economic growth, whereas obedience and religious faith stress conformity to traditional norms and authority and they tend to discourage economic growth. “The relative priority accorded to these two types of values is strongly related to a society’s growth rate” (Inglehart 1997: 222). Different model specifications and estimation procedures produce similar statistical results that confirm the same conclusion from Inglehart’s analyses. As just mentioned, analyses of data from later

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waves of World Values Survey also tend to replicate these results. They all point to the robustness and resilience of Achievement Motivation as described above. This variable is associated with a high rate of investment. In addition, a high level of human capital (as reflected in a population’s education level) and a low initial level of economic development are correlated strongly with faster economic growth. Inglehart’s (1997: 228–236) multivariate regression analyses point to the inescapable conclusion that Achievement Motivation holds the key to economic development and as such, cultural factors contribute to explaining why some countries grow faster than others (they account for data variance that remains unexplained after considering variables that are strictly economic). An even more compelling study was undertaken by Sala-i-Martin et al. (2004). This study included eighty-eight countries and a variety of independent variables, such as education, religion, geography, democracy, colonial legacy, and international relations to explain the average annual rate of growth in these countries’ GDP per capita. This multivariate analysis led to the conclusion that “if all other factors are the same, the annual growth rate of GDP per capita of an East Asian economy should be 2 percentage points higher than another country, a very large effect as the average growth rate of these eighty-eight economies was only 1.8 percent during this period” (Zhu 2021: 163). As Zhu also notes, because Sala-i-Martin et al. have placed Southeast Asian countries, such as Indonesia and the Philippines (with Islam and Catholicism as the dominant religion in these two countries, respectively), in the East Asia region, they have lumped them with the Confucian economies in one single group. As a result, their analysis has underestimated the superior growth performance of the Confucian economies because the Southeast Asian countries had lower growth rates. Let us turn to examine more closely each of those components that constitute the Confucian ethic or that make up the Achievement Motivation. An emphasis on hard work is not unique to Confucian cultures. Indian, Ghanian, and Nigerian parents also stress this trait. Compared to parents from most other countries, however, more Chinese parents place an emphasis on this quality in teaching their children: 75.3% compared to 59.5% among the parents of the other sixty countries participating in a more recent World Values Survey (Hofstrede et al. 2010). In citing this study, Tian Zhu (2021: 90–93) notes that hard work does not in itself increase the rate of growth (as distinct from its

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level). Hard work needs to be combined with thrift (savings) to bring about this result. In this respect, the Chinese do stress thrift more than people from other cultures, with 50.7% of Chinese parents stressing this quality compared to a world average (based on sixty countries) of 39.1%. Guiso et al. (2006) show that parents’ emphasis on thrift “affects the national savings rate, even after controlling for the rate of economic growth” (Zhu 2021: 96). Again, it bears repeating that those traits associated with a Confucian heritage are not unique to the Chinese. Joel Mokyr (2016: 236) remarks that Puritan parents taught their children that “useful knowledge, hard work, frugality, and honesty were virtues . . . demanded by God,” and Robert Merton (2002) credits Puritanism with the rise of science and Britain’s industrial takeoff. These authors also agree that values such as hard work, frugality, an emphasis on education, and a willingness to defer gratification contribute to economic development. As I have discussed in Chapter 2, a stress on thrift and hard work is likely to be related to a long-term orientation stressing effort, perseverance, and deferred gratification, a dimension on which the East Asian Confucian cultures tend to score high. Zhu (2021: 94) reports that based on the survey data from Hofstrede and Minkov (2013), South Korea scores 100 on this long-term orientation, Taiwan 93, Japan 88, and China 87. In comparison, the Latin American countries and the United States tend to have much lower scores: the United States 26, Mexico 24, Argentina 20, Venezuela 16. Significantly, this phenomenon cannot be explained by the rise of postmaterialism because people in the Latin American countries, like their East Asian counterparts, are still characterized by predominantly materialist values and motivations. Moreover, these countries have less generous welfare programs, a condition that should decrease their expectation to rely on the state to help them and should therefore encourage them to make greater efforts to ensure their own long-term well-being. An important takeaway from this discussion is therefore that even among societies where materialist values and motivations are dominant, people may still not have the same drive to work hard and save more as manifested in the Confucian cultures. Naturally, if one’s income is very low, nothing will be left to save after taking care of one’s subsistence needs. A person’s level of income and savings rate should be correlated. It is well known that people with higher income tend to save more. Still, as reported later, even the poorest segments of Chinese society have a very high propensity to save.

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Tian Zhu (2021: 170–171) brings up another very important point on social trust and its relation to a society’s outlook for the long haul. For longterm investment to occur and bear fruit, there must be pervasive social trust. He notes that “. . . Fast growing China is the most trusting nation among all the developing nations according to the WVS [World Values Survey] . . . Just over half of the Chinese respondents answered yes to the WVS question of whether ‘most people can be trusted,’ making China the third most trusting society behind Sweden and the Netherlands.” The United States ranks eleventh in this survey. People on the Chinese mainland also show more general trust than people in Taiwan, including the belief that government officials can be trusted to do the right thing (Shi 2001). I have referred to various studies (e.g., Almond and Verba 1963; Banfield 1958; Putnam 1993) calling attention to how a low level of interpersonal trust has impeded economic development and democracy in countries such as Italy. Inglehart (1990) has studied the opposite side of this phenomenon, finding that the extent of a country’s level of average social trust has a positive influence on the stability or longevity of its democracy. He reports: Levels of interpersonal trust among mass publics are closely linked with the number of years for which democratic institutions have functioned continuously in those societies, showing a highly significant .72 correlation globally. In most stable democracies, at least 35 percent of the public express the opinion that “most people can be trusted”; in almost all of the nondemocratic societies, or those that have only recently started to democratize, interpersonal trust is below this level. (Inglehart 1997: 173)

Inglehart then turns his attention to China which has shown a very high level of interpersonal trust as noted above, a level that is much higher than any other nondemocratic or newly democratic society. He refers to another study carried out by Ichiro Miyake and Kazufumi Manabe that also shows a very high level of interpersonal trust in China, thus confirming the finding by the World Values Survey (the research conducted by Miyake and Manabe was published by Manabe in Japanese in 1995). China’s high level of interpersonal trust facilitates its economic growth (such as in extending credit and loans and minimizing transaction costs for business deals beyond one’s immediate family), although obviously it has not produced democracy. Compared to people in China and Taiwan, Americans show a lower level of trust (Inglehart 2000: 90). This level puts the United States

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below Protestant European countries and Australia, New Zealand, and Japan, although above Catholic European countries such as Italy, Belgium, Austria, France, Spain, and Portugal. The cultural division between Protestant and Catholic countries on this variable is quite stark with Ireland providing the only exception (the Irish show a higher level of interpersonal trust than Americans, putting them in the company of people in most advanced Protestant economies and Japan). Alexis de Tocqueville (2000) and Robert Putnam (1993, 2000) have both pointed to social connectedness as another contributing factor to building democracy. Extended networks of voluntary associations buttressed and supported American democracy in de Tocqueville’s view. Social capital is reflected in a society’s level of trust and tolerance. It is also indicated by its level of civic engagement and membership in various social groups. Social capital is important not only for democratic development but also for economic development in Robert Putnam’s influential study. Different regions of Italy manifested different levels of social capital dating back to 1900, and these differences have influenced their subsequent economic development more than their prior economic conditions. This finding shows indisputably that in this case cultural proclivities affected economic development rather than the other way around. As documented by Putnam (2000), the phenomenon of bowling alone points to Americans’ declining level of social involvement, presenting a disturbing sign pointing to not only increasing social isolation but also political disaffection and alienation (Pharr and Putnam 2000; Norris 1999, 2011; Sandel 1996), with Americans’ trust in their political and social institutions falling recently to new lows. Significantly, in this respect China is again a deviant case compared to other developing countries. Inglehart (1997: 189) comments, “Although China shows a lower rate of organizational memberships than most advanced industrial societies, it has a high rate for a largely rural society.” Its score on this variable was even higher than that of some advanced industrial democracies such as France, Italy, and Japan (Inglehart 1997: 190). There has been a persistent and precipitous decline in Americans’ confidence in various institutions such as Congress, mass media, and the police. Their attitudes about politicians and government officials have also turned decidedly negative and even cynical, with a majority believing that “quite a few” of the people running the government are

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“crooked,” and that the government itself is corrupt (Brown 2022; Inglehart 1997: 291). Parenthetically, Mancur Olson (1965, 1982) has argued that based on his theory of collective action and public goods, advanced industrial societies tend to accumulate rent-seeking groups that hold back their economic growth and contribute to their institutional sclerosis. Although Olson’s argument appears to contradict Putnam’s view on extended networks of voluntary associations as a contributing factor to economic growth, Inglehart (1997: 224–228) shows that their propositions are not actually incompatible. It appears that Olson’s claims are more relevant to advanced developed societies that have enjoyed uninterrupted peace and stability for a long time, whereas Putnam’s argument is more applicable to countries that are at the beginning stages of economic development and can thus benefit more from the social capital represented by a high level of citizens’ membership in or engagement with civic associations. In addition to social trust, one might add that China scores relatively high on its people’s level of subjective well-being. These are two of the most important variables in initiating and sustaining democracy (Inglehart 1997: 194). Despite their lower average income, the Chinese expressed higher subjective well-being than almost all the former socialist countries. They also showed greater satisfaction with their lives than people in other developing countries such as India and Nigeria (Inglehart 1997: 62). And as noted already, they scored very high on interpersonal trust. This evidence should place the Chinese toward the high end of the spectrum referred to by Inglehart as “prodemocracy culture.” Besides relatively high levels of political participation, organizational membership, subjective feeling of well-being, and interpersonal trust, Inglehart mentions relatively low levels of income inequality and support for extremism, and additionally the existence of pervasive postmaterialist values as interrelated components of this complex of “prodemocracy culture.” That China is not a democracy today thus presents a deviant case to this expectation based on a large body of cross-national empirical evidence. This evidence suggests that the Chinese culture is in fact in some important ways predisposed to democratization, at least compared to many former socialist countries in Eastern Europe and most developing countries today. It at least appears to be not hostile to democracy as I will try to show more

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specifically later. Therefore, we should not be surprised if this development should occur one day. Whether Confucian culture is or is not inherently hostile to democracy should no longer be a matter of controversy. We have already seen democratic institutions sinking roots in Taiwan, South Korea, Japan, and Singapore. Dalton and Ong (2005) have demonstrated that Asian values are not incompatible with democracy (see also Dalton and Shin 2006). That the Confucian ethic also stresses education and investment in human capital is another part of the ensemble providing for fast economic growth. Tian Zhu (2021: 109–111) observes that the annual rate of increase in school enrollment is not a good predictor of contemporaneous economic growth rate, but the level of education stock prior to economic takeoff is a predictor of long-term growth prospects. He quotes Amartya Sen (1999), who argues that “the whole East Asian miracle was, to a large extent, based on the expansion of basic education before the economic takeoff.” Naturally, investment in education does not pay off immediately in faster economic growth. It again takes a long-term view to make this investment because its dividends will not become apparent until after some considerable lag time. However, these dividends can be substantial. Each additional year of education that a male citizen receives after primary school has been estimated to contribute 0.44% to a country’s economic growth rate (Barro 2001). The initial stock in human capital possessed by a backward country is a critical variable in influencing whether its economy will be able to catch up. China’s accumulated human stock before its economic reforms assisted the success of these reforms once the economy was liberalized to allow private enterprise and foreign investment. Although the quality of China’s primary, secondary, and especially tertiary education is inferior to those of the United States, the relatively high quality of China’s basic education, especially compared to other developing countries, enables it to adopt new technologies and catch up technologically (Zhu 2021: 117–118). Quality of education is more important than its quantity (Hanushek and Kimko 2000), and test scores from the Program for International Student Assessment on cognitive skills and math and science achievement have shown students from China and other East Asian Confucian cultures outperforming students from member states of the Organization for Economic Cooperation and Development (OECD) by a large margin. Furthermore, Eric Hanushek and Ludger

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Woessmann (2012) report a cross-national estimate, indicating that “between 1960 and 2000, after controlling for the initial level of education and GDP per capita, for every one point difference in the ‘cognitive skills’ index, the annual growth rate of GDP per capita will differ by about 2 percentage points” (Zhu 2021: 114–116). An alarming sign for the US education system points to declining proficiency levels for students at their grade levels. Public Broadcasting Service reports in April 2023 that just 29% of US eighth graders were proficient in reading at or above their expected level, and only 26% reached this level in math. Yet, 90% of American parents thought that their children were doing fine in school (www.pbs.org/newshour/show/ study-shows-parents-overestimate-their-students-academic-progress). There exists therefore a large discrepancy between the students’ actual scholastic achievements and their parents’ perceptions. In concluding this section, I want to repeat that those traits promoting economic growth and other achievements are not biological or inherited. They are cultural traits, and as such they can change over time in adapting to a changing environment. There is a literature claiming that East Asians have a higher average intelligence quotient (IQ). This claim has been challenged by other studies. I have avoided this controversy here because my argument does not depend on the settlement of these contested views (e.g., Flynn 1987; Herrnstein and Murray 1994; Lynn and Meisenberg 2010; Lynn and Vanhanen 2002).

A Deeper Look at the Validity Cultural Attributions I have mentioned various cultural traits attributed to groups (such as immigrant communities) and countries (such as developed and developing countries). I have also cited earlier studies making such attributions such as the works by Lucian Pye (1967, 1968), Richard Solomon (1972), and Karl Wittfogel (1957) about ostensible Chinese personality and mentality, such as their authoritarian tendencies. Are these macrolevel attributions backed up by microlevel evidence drawn from survey interviews of the Chinese? How are the attitudes and values disclosed by these surveys different for the Chinese compared to other nationalities such as Americans? The following discussion is based on data from the World Values Survey in Inglehart et al. (2004). In addition to responses to the pertinent questions by the Chinese respondents, I include those by

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Table 3.1 Children’s education

1. Good manners 2. Independence 3. Hard work 4. Feeling of responsibility 5. Imagination 6. Tolerance and respect for others 7. Thrift, saving money and things 8. Determination, perseverance 9. Religious faith 10. Unselfishness 11. Obedience

China

Taiwan

USA

Canada

53 74 86 64 35 73 57 16 1 37 15

70 66 42 81 15 59 49 34 9 21 33

76 61 61 72 30 80 23 45 52 39 32

75 62 53 77 33 81 27 48 31 45 30

Americans, Taiwanese, and Canadians for comparison and crossvalidation. As mentioned earlier, Chinese parents are supposed to emphasize the virtues of hard work and learning in teaching their children. Conventional narrative also suggests that Chinese parents tend to stress the values of obedience to authority and compliance with social conventions, and that they encourage sheltering relationships and learning by rote. Conversely, American parents are supposed to emphasize the values of independence, imagination, and tolerance and respect for other people. I expect that the response patterns of Taiwanese to be more aligned with those of the Chinese on the mainland, and likewise for the Canadians’ response patterns to be closer to those of Americans. Table 3.1 presents this evidence (for a more detailed explanation of its contents, see Chan 2008, which is the original source for the four tables presented in this chapter). Unless explained otherwise, the figures in this and the following tables refer to the percentage of respondents agreeing with the stated propositions. The evidence from Table 3.1 supports only some conventional attributions of Chinese and American emphases in teaching their children, and it contradicts others. For example, it shows that Chinese parents do tend to place a greater emphasis on the value of hard work than their American and Canadian counterparts but significantly, among the four respondent groups Taiwanese parents appear to give the least importance to this value. According to Table 3.1, Chinese and

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Table 3.2 Family, faith, and fatherland

1. 2. 3. 4. 5.

Making parents proud Family is very important Religion is very important Proud of being [nationality] Willing to fight for country

China

Taiwan

USA

Canada

61 61 3 26 97

65 78 13 15 86

83 95 57 72 73

81 94 30 67 67

Taiwanese parents do emphasize more thrift and savings than American and Canadian parents, but contrary to conventional expectation, they give less importance to “good manners” and “determination, perseverance.” Significantly, and again contrary to common expectation, among the four groups considered here, Chinese parents give the most importance to teaching their children the value of independence and the least importance to obedience. They do not differ from American and Canadian parents in emphasizing the value of imagination, again another contradiction to their supposed tendency to stress learning by rote. Table 3.2 reports on traditional values of family, faith, and fatherland. Although many commentators have emphasized the importance of family in Confucian cultures, compared to the Chinese and Taiwanese many more Americans and Canadians report that family is “very important” to them and, moreover, there are more of them agreeing strongly with the statement “One of my main goals in life has been to make my parents proud.” And as mentioned earlier, there are more Americans and Canadians expressing pride in their country than Chinese and Taiwanese, even though they express less willingness to fight for their country. These response patterns again contradict conventional narratives, and for some of the items in Table 3.2, strongly so. Americans and, to only a lesser extent, Canadians show stronger attachments to and support for family, faith, and fatherland than the Asians. In these respects, their outlook is much more traditional than the Asians. How much can we trust this evidence? That the American and Canadian response patterns tend to converge and at the same time, they diverge from the Chinese and Taiwanese patterns is encouraging

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Table 3.3 Trust, order, and competitive merit

1. Interpersonal trust 2. Greater respect for authority 3. Personal conviction 4. Competition is good 5. Efficiency above equality 6. Maintaining national order 7. Less impersonal society

China

Taiwan

USA

Canada

55 64

38 45

36 70

39 66

67 80 93 57

56 60 92 69

20 71 91 33

31 70 84 22

7

19

19

20

in suggesting the validity of this evidence. That the responses to individual survey questions tend to cluster in a meaningful way rather than randomly also contributes to their credibility. Yet a third way to check the validity of these data is to examine how responses to different survey questions are associated with each other. For example, we would expect an individual’s attitudes toward family, faith, and fatherland to be correlated with his or her answers to questions on interpersonal trust, respect for authority, the importance of personal conviction rather than just following a superior’s order, support for competition, the maintenance of order, and the promotion of a less impersonal society. Significantly and as to be expected from previous discussion, the evidence presented in Table 3.3 shows that Chinese respondents are more likely than their American counterparts to express interpersonal trust, to show reluctance to follow an order without being personally convinced that it is right, and to view competition more positively. They do not indicate greater respect for authority as conventional narrative would lead us to expect. The conventional narrative, however, is borne out by the Chinese respondents’ greater support for maintaining national order and less support for a less impersonal society since they are less likely to have postmaterialist values. Moreover, Chinese and Taiwanese respondents in the survey do tend to reflect more traditional views on matters such as gender roles, sexual mores, and when responding to questions about whether abortion, divorce, euthanasia, and prostitution are ever justifiable. Seemingly paradoxically, they are also less likely to subscribe to absolute moral

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Table 3.4 Confidence in political institutions and support for democracy

1. Confidence in armed forces 2. Confidence in the press 3. Confidence in the police 4. Confidence in parliament 5. Confidence in the civil service 6. Confidence in the government 7. Confidence in political parties 8. Satisfaction with officials 9. Satisfaction with democracy 10. Having strong leader 11. Having experts decide 12. Having army rule 13. Democracy poor on economy 14. Democracy indecisive 15. Democracy poor on order 16. Democracy is better

China

Taiwan

USA

Canada

97 69 73 95 66 97 93 73 88 19 30 45 74 65 82 90

76 41 59 46 60 70 36 38 n.a. 41 60 16 74 39 66 84

82 27 71 38 55 38 23 67 65 30 44 9 78 61 78 88

63 35 79 41 50 42 23 65 67 23 44 6 73 50 71 87

standard (36% for Chinese, 28% for Taiwanese, 49% for Americans, and 42% for Canadians). We turn finally to Table 3.4, which presents the respondents’ confidence in their political institutions and their support for democracy. This evidence supports what has been widely reported in the mass media and scholarly analyses, namely, Americans’ (and to a lesser extent Canadians’) confidence in their political institutions have fallen to very low levels. The one apparent exception to this generalization is that Americans still have a great deal of confidence in their armed forces, a sentiment that is even more strongly shared by the Chinese. Less expected are the positive views held by the Chinese about democracy and democratic performance. The responses to the pertinent items in this table report the percentage of those “disagreeing” or “strongly disagreeing” with the proposition that democracy does poorly in managing the economy, maintaining order, or is indecisive. Thus, in these cases, the higher the figure reported, the greater the level of support for democracy. Chinese evaluations of democracy and democratic performance are about as positive as those indicated by Americans and Canadians, and in some cases even somewhat more so.

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Three items in Table 3.4 deserve more explanation. These items refer to the percentage of respondents saying it would be “very good” or “fairly good” to have “a strong leader who does not have to bother with parliament and elections” (item 10); to have “experts, not government, make decisions according to what they think is best for the country” (item 11); and to have “the army rule” (item 12). There are more Americans (30%), Canadians (23%), and Taiwanese (60%) than Chinese (19%) expressing support for letting a strong leader rule without parliament and election. It is certainly concerning and distressing that so many people in these democracies hold this anti-democratic view. These respondent groups also show greater support than the Chinese to let experts rather than the government decide policies. Conversely, more Chinese show support for the army to rule, probably reflecting their positive view of the historical role played by the People’s Liberation Army in China. What are we to make of the evidence introduced in this section? Survey research has by now become a regular feature of social science research, not only in the developed economies but also in heretofore less accessible countries like China. The claim that survey data, based on carefully designed interview questions and sampling procedures, can provide useful and valid information has by now been widely accepted by researchers. Moreover, it has been demonstrated that survey data drawn from diverse countries can still provide broadly similar information. They can therefore be useful for making cross-national comparisons. This conclusion is also no longer subject to controversy. One may ask whether responses from the Chinese respondents can or have been distorted due to their fear of being charged with political incorrectness. This doubt or skepticism can be checked in several ways such as by studying the number of “do not know” responses and the size of intercorrelations among the various response items. The correspondence between responses from Chinese and Taiwanese interviewees, and that between Americans and Canadians offer another way to gauge the general validity of the evidence being considered here. Having considered these checks for validity, it appears to me that if they exist, the distortions tend to be minor. We should also recognize that the surprises in the data patterns, such as those about democracy and democratic performance, can be interpreted to go against political correctness from both the Chinese and American perspectives. Because Beijing does not advocate democracy,

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political correctness should depress the level of support for democracy among the Chinese respondents. One may of course question whether the Chinese understand the concept of democracy, but this question also applies to Americans and Canadians. Although 88% of Americans agree or strongly agree with the statement that democracy is superior to alternative forms of government, 30% of them also think that it would be “very good” or “fairly good” to have a strong leader rule without being bothered by parliament and election. We can try to discern the validity of the Chinese respondents’ positive evaluation of democracy as a principle by studying their answers to other items pertaining to democracy’s performances. Those who have a negative view of democracy as a principle are unlikely to evaluate positively a democratic government’s management of the economy, its maintenance of social order, or whether it is prone to indecisiveness. That these views tend to be congruent gives us more confidence in their validity (Eckstein 1998). There are still other survey items, such as those instilling important values in children, that do not have an obvious politically correct or incorrect answer. One caveat, however, is pertinent, and it refers to American and Canadian tendencies rather than those of the Chinese and Taiwanese. I refer here to the respondents’ indication of how important family is to them. As Table 3.2 shows, the percentages of Americans and Canadians’ saying that family is very important to them exceed by a wide margin the percentages of Chinese and Taiwanese expressing the same view. As noted earlier, many more Americans and Canadians also say that one of the main goals in their life is to make their parents proud. Some people may be a bit skeptical of these responses in view of the decline of traditional two-parent families in the United States and Canada, and the high incidence of divorce, teenage pregnancy, and single parenthood. Perhaps these responses reflect changing American and Canadian views on the meaning of family, which can encompass units headed by single parents or parents of the same sex and also units without children. There can also be the possibility of a gap between professed attitude and actual conduct. This discrepancy can provide another way to check the validity of survey responses. People can voice certain values without following through by acting accordingly. Not many people will openly profess to be racists or terrorists to their interviewers or for that matter, to confess that they have not voted in an election.

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The evidence introduced in this section should caution us against making strong claims about cultural norms and values without solid empirical support. This does not mean that such claims are always wrong. They might have been valid at one time, but the relevant norms and values have changed since then (considering especially the huge political and economic change that China has gone through in the past century). Naturally, we should also be wary of cultural stereotyping, especially the tendency to project negative traits to out-groups and appropriating positive traits for one’s own group. Of course, some cultural traits attributed to the Chinese people specifically and to people with a Confucian heritage more generally can have a kernel of truth. The supposed emphasis on hard work and thrift is borne out by the survey data, and it offers a sharp contrast to the views of Americans and Canadians. Subscribed to by many Sinologists, the idea that Chinese people abhor chaos and value order also receives some support from the survey data. Other supposed traits, especially concerning obedience to and respect for authority and attempts to make one’s parents proud, become more questionable as a strong, even unique, component of the Chinese or Confucian value complex, considering that Americans and Canadians show an even greater tendency to emphasize them. Judging from the survey data from the World Values Survey, Chinese parents do not appear to emphasize much less than their American and Canadian counterparts the values of independence, responsibility, imagination, and tolerance in teaching their children. They are also no less supportive of democracy, more skeptical of democracy’s performances, and less confident of their political institutions than Americans and Canadians. If anything, they show greater confidence in their government institutions and government officials. They also tend to show more interpersonal trust, value competition more, and express a greater willingness to defy a superior’s order unless personally convinced that it is the right thing to do. These dispositions are decidedly not the ones that we typically attribute to traditional cultures. In contrast, Americans and Canadians’ attitudes toward family, religion, and country are decidedly more traditional than those held by the Chinese. For example, when they were asked whether “politicians who do not believe in God are unfit for public office,” only 36% of Americans disagreed compared to 59% of Canadians, 64% of Italians, 71% of British, and 84% of Swedes. One does not see bumper

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stickers proclaiming national pride outside the United States; and although the Chinese apply strongly negative labels to criticize and attack their political opponents, being un-Chinese is not one of them. Ronald Inglehart and Wayne Baker (2000: 31) point out that, “On the traditional/secular-rational dimension, the United States ranks far below other rich societies, with levels of religiosity and national pride comparable to those found in developing societies.” “Indeed, compared to the other advanced industrial democracies, the United States tends to be an outlier in its incidence of crime, incarceration and capital punishment, its rate of litigation, its level of voter turnout, its extent of income inequality, and its relative tax burden and contribution to international assistance” (Chan 2008: 244). This phenomenon has led Seymour Lipset (1996) to write about “American exceptionalism.” The available evidence suggests that on some matters of socioeconomic and political importance, both China and the United States are deviant cases compared to their contemporary peers. The puzzle pertains not just to why the Chinese exhibit higher levels of interpersonal trust and confidence in their political institutions and lower levels of emphasis on obedience and expressions of religious faith and national pride, but also why the Americans show lower levels of interpersonal trust and confidence in their political institutions, and higher levels of emphasis on obedience and expressions of religious faith and national pride. As I have written elsewhere: Research on ethnic stereotyping warns one to guard against phenomenological absolutism, a tendency to follow received wisdom and assume that the other is as one perceives her. There are also the danger of cultural absolutism and false dichotomization. The former error results from an over-emphasis on inborn cultural traits in determining behavior, and overlooks the influence of environmental factors. The latter error exaggerates the other’s uniqueness, and fails to recognize similarities between the other and oneself. (Chan 2008: 245, emphases in original)

Putting China’s Growth in Historical and Comparative Perspective Various parts of this book’s discussion pertain to four separate questions, and it would be useful to disentangle them and state them clearly (Zhu 2021).

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First, why are today’s developed countries better off economically than their developing counterparts? Studies by Diamond, Acemoglu and Robinson, and others such as Weber and Kennedy mentioned in Chapter 2 shed light on this question. Some of these authors mention culture, others geography, and still others point to institutions as the determining factor. Jeffrey Sachs (2003) and his collaborators (Gallup et al. 1999) argue, like Jared Diamond, that geographic and climate conditions affect countries’ growth prospects. Others have proposed democracy as the overriding factor, such as Mancur Olson’s (1993) discussion of roving versus stationary bandits. According to him, rulers belonging to the latter type expect to remain in power for some time and thus have an incentive to encourage economic growth to allow them to extract more resources over the long run. These rulers are motivated to provide a peaceful environment and other public goods such as infrastructures in the hope of encouraging long-term prosperity. In contrast, rulers of the former type (namely, the roving bandits) expect a short political tenure and therefore have little interest beyond raiding and confiscating properties. This argument in favor of democracies’ role in promoting economic growth, however, does not receive support from Doucouliagos and Ulubasoglu’s (2008) survey of studies on this association or from the cross-national quantitative study conducted by Burkhart and Lewis-Beck (1994). Second, why have countries with Confucian cultures located in East Asia done better than other developing countries in recent decades (and not by a bit but by a lot)? The discussion in Chapter 2 referring to McClelland’s N-Ach and the rise of the East Asian NIEs addresses this question. The discussion on the socioeconomic achievements of immigrant families in the United States, especially those with a Confucian heritage, also offers indirect though highly relevant evidence for this second question. The advantages deduced from this culture include thrift, hard work, emphasis on education, dedication to teamwork, and a willingness to defer immediate gratification. A large part of the discussion in this section is also pertinent, if for no other reason than to cast doubts on some competing explanations of China’s recent economic growth. By ruling out these other plausible reasons for China’s rapid economic growth, an explanation based on culture gains more credibility. Third, why have Confucian cultures done better economically in some eras than others? The discussion on policy reform in the absence of fundamental institutional transformation presented in Chapter 2

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and the continuation of this discussion in the next section address this question. The gist of these discussions is that by simply removing obstacles that suppress cultural dispositions that would otherwise encourage or facilitate economic achievement, a state’s policies can accomplish a great deal even without engaging in more basic institutional transformation, such as installing a democracy and free market, as emphasized by institutionalists. This conclusion, of course, assumes that cultural impulses conducive to economic growth already exist, albeit in a dormant state, before the government decides to stand aside and allow them to work their magic. Fourth, what are the likely prospects for China’s future growth compared to the United States? The discussion on culture shift and the struggle between materialist and postmaterialist values earlier in this chapter tries to provide a partial answer, even though prognostication of the future is always fraught with a large amount of uncertainty. A country’s consumption and export of goods only influence its economy in the short term. In the long term, investment, human capital, and a capacity to innovate hold the key to economic growth. The Confucian ethic emphasizes thrift and education as inherent virtues. It is therefore likely to have a positive influence on long-term growth. Most importantly, a country’s economic future depends on its ability to invent new technologies and develop pioneering industries, which will be the topic for Chapter 5. Take the example of thrift or savings which is obviously related to capital formation or investment. Ross Levine and David Renelt (1992) report that the relationship between capital investment and the rate of GDP per capita growth is one of the most robust and resilient crossnational patterns, and Tian Zhu (2021: 80) points out that at 40.2% of its GDP compared to the global average of 23.8%, China led the world in domestic investment during 1982–2012. Most countries depend on domestic savings for this investment, and China has a large advantage in this regard. Considering their level of low income, Zhu (2021: 85) marvels that “it is amazing that China’s poorest 20th percentile households managed to save 30 percent of their income in 2012. If not culture, how else can we explain it?” In contrast, personal savings of disposable income in the United States was 3.3% in 2022 (www.google.com/search? client=firefox-b-1-d&q=what+is+the+u+s+national+rate+of+savings). China’s predominant materialist orientation, even among its younger cohorts, is remarkable and significant in view of its double-digit

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economic growth until the last few years’ lockdowns caused by the Covid pandemic, disruptions in supply chains, and the Beijing government’s own decision to emphasize the quality of growth rather than its speed. One would expect that it is more difficult to jumpstart the economy of a large country and to sustain its growth over a protracted period. However, China has been the world’s fastest growing economy for about nearly four decades despite its large size. Its growth record is historically unprecedented. This astonishing achievement stands even if we acknowledge exaggeration and distortion in some of the statistics announced by the Chinese government (Zhu 2021). It would be helpful to put China’s recent growth in historical perspective. The following long quotation from Tian Zhu (2021: 29) is especially instructive: You will be surprised to find out that the annual GDP per capita growth rate of the United Kingdom during the Industrial Revolution (around 1750–1850) was actually less than 0.5%. You may wonder how such “slow” growth can be called a “revolution.” But consider this: in the 250 years before the Industrial Revolution, GDP per capita in the United Kingdom grew at an annual rate of only 0.18% according to Maddison’s data, while its growth rate before 1500 was almost 0. In fact, before the Industrial Revolution, the growth rate of per capita income of every nation in the world was close to 0. In 1940, China’s GDP per capita was in fact lower than in 1850. It is very possible that the living standard of the Chinese people in 1940 was not much better than a thousand years earlier during the Song dynasty.

In comparison to the above historical data from Britain, China’s gross domestic product grew at an average annual rate of 10.2% and its GDP per capita grew at an average annual rate of 9.12% between 1982 and 2012 (Zhu 2021: 13). China has outpaced by a large margin most developing countries which have a per capita income growth rate of less than 2%, and its rate was three points higher than Bhutan (the second fastest-growing developing country) and India, which featured 4.41% during the same period of 1982–2012 (Zhu 2021: 36). To keep China’s accomplishment in historical perspective, even during past “golden ages” when various countries experienced rapid spurts of economic growth, they never sustained this growth over 1 percent per annum (Goldstone 2002: 357–358). China also had earlier in its history periods of “efflorescence” when its economy grew at a pace faster than its population growth. For

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example, during the high Qing era in the 1700s it outperformed European states like the Netherlands and Britain. Although its much larger population doubled, it still managed to maintain its people’s income at a high level and even raised it slightly (Goldstone 2002). It was unable to sustain this feat, however, because of technological stagnation and energy limitations which I will discuss in Chapter 5. Growth was slow before technological advances, and much of each year’s economic gain would be offset by population growth. This said, small incremental gains can compound over time to result in very large increases. Zhu (2021: 29–31) gives an example: “if, during the reign of Emperor Zhengzong in the Song Dynasty, China had a per capita income of US$300 measured in current currency, then with an average growth rate of 1 percent per year, it would have reached an incredible US$6 million today.” Thus, the “puny” average annual increase of 0.5% in British per capita income gain during the Industrial Revolution justifiably warrants the description of being “revolutionary.” Before World War II, “the average annual growth rate of GDP per capita in Western countries never exceeded 2 percent” (Zhu 2021: 31), and this figure gives context to China’s recent economic performance. It also highlights the economic growth of the other five Asian economies (Japan and the four East Asian tigers) which, in addition to China, have been the only economies to sustain their rapid growth for over three decades in the absence of abundant natural resources (such as in the cases of Saudi Arabia and Botswana due to their respective natural bonanza in oil and diamond). Demographic dividend has contributed to China’s economic growth as well as that of East Asia’s other NIEs. As Tian Zhu (2021: 38) explains, “Simply put, a demographic dividend is a growth benefit resulting from an increase in the share of a country’s working-age population or, equivalently, a decrease in the dependency ratio (i.e., the number of dependents divided by the number of working-age people).” As the proportion of working-age population in the total population increases and that of dependent children decreases, GDP per capita increases even without any gain in productivity by the workers. In addition to this direct benefit, there are indirect benefits because households with fewer children can save and invest more, and the country benefits because of this improvement in its human capital due to the better education received by those cohorts yet to join the workforce.

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China’s fertility rate was already falling before its one-child policy, and this decrease in fertility rate also has characterized other countries without restrictions on the number of children each family can have. “Therefore, the one-child policy may not be the only reason for China’s declining fertility rate. In fact, it may not even be the most important reason. As such, although the policy has been abandoned, China’s fertility rate may not increase significantly and may even continue to decline” (Zhu 2021: 39). According to the estimates reported by Zhu (2021: 40), China’s demographic dividend might have only contributed 2.3% to its average annual rate of increase in per capita income during 1982–2012 (or about one quarter this growth rate). Even this large estimate of the demographic dividend still leaves the question why China, after accounting for this 2.3% rate, was still able to outperform the other developing countries by more than 4.5% during 1982–2012. According to the World Bank, the direct contribution made by demographic dividend to China’s average annual rate of growth in per capita income during 1982–2012 was only 0.5% (Zhu 2021: 41–42). This means that the indirect benefits of demographic dividend have made a bigger contribution (1.8% compared to the direct benefit of 0.5%). This observation in turn calls attention to the country’s savings and investment, especially investment in human capital that promotes technological advances. This observation reminds us about the role played by the Confucian ethos emphasizing thrift and education. Naturally, a demographic dividend can turn into a demographic deficit as a population ages, so that more working people are needed to support each retiree. The crucial question then turns to whether improvements in human capital and technological advances can offset this increasing burden. In this respect, China shares with the other East Asian NIEs facing the same demographic challenge. Their disposition to stress savings and education places them in a better position to cope with this challenge even though they do not have natural endowments (such as oil for Norway) as an asset. Conventional explanations that single out the role of exports in China’s economic growth should also be considered in a historical and comparative context. China’s exports usually have a larger proportion of imported foreign parts, technologies, and even investment, a phenomenon which in turn exaggerates the value of its exports when these foreign inputs are not discounted. Although compared to the

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United States and Japan, China’s economy may appear to be more export oriented, as a proportion of its GDP China has in fact exported less than South Korea, Germany, and Mexico. This proportion has been comparable to other countries like Turkey and India. Moreover, although they have roughly the same export orientation as China, India, Turkey, and Mexico have much lower growth rates in average annual per capita income during 1982–2012, which were 4.4%, 2.8%, and 0.7%, respectively, all much lower than China’s. Furthermore, if protectionism abroad should be a factor, it should hinder the larger export economies like China and India more than the smaller ones. Yet, it is China and India that have had much faster growth rates in their per capita income. These considerations led Zhu (2021: 48) to conclude that “China’s extraordinary export growth should be seen as a result, not the cause, of its rapid economic growth.” The phenomenon of state intervention in the economy is also not restricted to China or East Asia’s tigers. The state has played a large and influential role in directing and managing the economy in countries such as Brazil, Chile, India, Mexico, and other countries in subSaharan Africa, Latin America, and Southeast Asia (e.g., Bates 1981, 1989; Biersteker 1987; Doner 1991; Gereffi 1983; Gereffi and Wyman 1990; Kohli 2004; Moran 1974; O’Donnell 1988; Stepan 1978; Tugwell 1975). There has been little systematic evidence to suggest that China’s economic bureaucrats have been more competent than those in these other countries or those working for its East Asian neighbors (e.g., Amsden 1989; Berger 1988; Chan 1993; Chan and Clark 1992; Deyo 1981, 1987; Gold 1986; Haggard 1990; Haggard and Moon 1989; Johnson 1982; Jones and Sakong 1980; Krause 1988; Rabushka 1979; Rodan 1989; Vogel 1979; Wade 1990; WooCumings 1991, 1999), nor is there systematic evidence to suggest that Chinese officials’ policy decisions have been more effective than their foreign counterparts’. Even though China is widely supposed to have an effective government, it ranks 92nd in a cross-national survey, only slightly higher than the world’s average, leading Zhu (2021: 65) to conclude, “In summary, there is no clear evidence that China has a distinct advantage in its political system or government quality over many, if not most, developing countries.” “Why have market reforms worked wonders in China and India but not in most other developing economies? Could it be that other developing countries have not carried out economic reforms as

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thoroughly as China and India?” Zhu (2021: 53–54) goes on to answer his own question, stating that: On the contrary, according to the two well-known country rankings of the degree of economic freedom produced by the Heritage Foundation in the United States and the Fraser Institute in Canada, China and India rank far below the world average, even after decades of reform; not only lower than almost all of Latin American countries but also lower than many African countries.

Furthermore, “China’s double-digit growth in the 1990s presented an especially stark contrast to the economic failures of countries emerging from the former Soviet Union, some of which implemented more reforms in the areas of price and trade liberalization and privatization than China” (Zhu 2021: 56). Some Chinese scholars such as Yingyi Qian (2003) have suggested that China succeeded precisely because it did not adopt conventional Western advice on introducing free market and private property rights in the early stage of its reform. It instead adopted “transitional institutions” in response to China’s actual circumstances, such as “the famous ‘dual track’ in price reform, collectively owned rural township and village enterprises (TVEs), and fiscal contracting between the central and local governments.” Tian Zhu’s (2021: 48–49) final cautionary remark acknowledges that: China is certainly no model for fair trade, good protection of IP [intellectual property] rights, or strict environmental protection. However, if these “weapons” have made China the fastest growing economy in the world in the past few decades, we have found the magic bullet for economic development: subsiding domestic companies, undervaluing currencies, not protecting IP rights, and sacrificing the environment. If economic development were that simple, at least many small developing countries would have gotten rich long time ago.

In short, then, many of the popular explanations presented in prevailing narratives about China’s recent economic growth are questionable when they are examined in a comparative light. They are often inadequate in accounting for China’s much faster growth than the rest of the developing world, including India which is its closest counterpart. Those reasons commonly mentioned in conventional accounts of China’s rapid economic growth do not appear to be the relevant

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differentiating variables setting this country apart from others. Culture, however, is one factor that does appear to distinguish it from the rest and, moreover, it is also a heritage shared by China and its other fast-growing East Asian neighbors.

Policy Reform as a Spark for Releasing Cultural Disposition Earlier discussion in this chapter has suggested that changing culture, specifically a shift from materialist values to postmaterialist ones, has been responsible for the slowing of economic growth on the part of the advanced economies in the West and at the same time, the faster growth of developing economies in East Asia, where most people still have materialist values. This is, however, only part of the story. The account presented so far does not and cannot explain why previously stagnant economies suddenly become more dynamic. Why were the Asian tigers once economic backwaters but are now economic dynamos? Why was China’s economy anemic until Deng Xiaoping’s reform policies in the late 1970s, and then it started to take off? If the people in East Asia have always been endowed with the Confucian ethos, how can we account for their different economic performances at different times? Jered Diamond (2017: 418) argues that China’s political unification and its relative lack of geographical barriers for people to move around the country are an important consideration in explaining its economic history. In comparison to China, Europe since the Middle Ages has been characterized by political fragmentation, religious decentralization (because of the Reformation movement and the ensuing breakaway by Protestant sects from the Pope’s authority), and a political landscape that impedes any great power from imposing its will on its neighbors. In his words, “. . . the real problem in understanding China’s loss of political and technological preeminence to Europe is to understand China’s chronic unity and Europe’s chronic disunity” (Diamond 2017: 419). In contrast to China, Europe has less geographic connectedness due to its multiple peninsulas (Greece, Italy, Iberia, Denmark, Scandinavia compared to China’s smoother coastline), more mountainous barriers, larger offshore islands, and shorter navigable waterways (Rhine and Danube compared to Yellow River and Yangtze). Diamond deduces from these facts that in a system where power is highly centralized, one

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such as China’s, there can be little political or social resistance to oppose a bad decision by the governing authority from being carried out. In Europe, however, it was impossible to enforce such a decision everywhere. China suffers from this political liability even though its centralized system has enabled it to maintain its political and cultural unity with a single writing system and national language. David Landes (1999) and Joel Mokyr (2016) have also commented on Europe’s political fragmentation and its implications. For example, Mokyr suggests that this phenomenon provided a sanctuary for Europe’s heterodox and creative thinkers. Compared to China, Europe permitted a relatively open and free intellectual environment for these thinkers to communicate and circulate their ideas. These factors were in his view decisive in explaining why the Industrial Revolution happened in Europe and not China, where orthodoxy and centralized power hindered discovery and innovation. Moreover, he points to European countries’ competitive dynamic stemming from their persistent rivalries, remarking that “competition among the different states was important not only for the creation of new techniques but also for the absorption and diffusion of ideas generated elsewhere” (Mokyr 1990: 207). Writing about Europe’s medieval age, Landes (1999: 38) remarks, “fragmentation was the strongest brake on wilful [sic], oppressive, behavior. Political rivalry and the right of exit made all the difference.” The Reformation movement undermined homogeneous orthodoxy, and decentralized political authority “made Europe safe from one-stroke conquest” (Landes 1999: 38; although these words referred to physical or military conquest in the original context, Landes might as well be speaking also about devastating policy errors committed by unchecked paramount leaders). “Europe, in contrast [to centralized political systems], did not have all its eggs in one basket” (Landes 1999: 39). Many examples of China’s bad decision-making tantamount to national folly come to mind. One example would be the decision by the Ming emperors to ban ocean voyages and overseas expeditions. Other examples include Mao Zedong’s decision to launch the disastrous Great Leap movement and again, the so-called Cultural Revolution. In contrast, Europe’s political diversity and multi-state system means that it would be difficult for any sovereign to cause system-wide damages. When one state fails to adopt an innovation, others will pick it up and if successful, still others will quickly follow by imitating this example.

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Jered Diamond (2017: 429) concludes, “. . . geographic connectedness and only modest internal barriers gave China an initial advantage.” But this initial advantage subsequently faded because in Europe: If one state did not pursue some particular innovation, another did, forcing neighboring states to do likewise or else be conquered or left economically behind. Europe’s barriers were sufficient to prevent political unification, but insufficient to halt the spread of technology and ideas. There has never been one despot who could turn off the tap for all of Europe, as of China.

Diamond’s remarks help to explain why China lost its early economic lead over Europe. His observation about how a bad policy can have system-wide deleterious effects in China, compared to a politically fragmented Europe, helps to explain another puzzle. That is, what can account for China’s different economic performances at different times? Presumably, the answer lies in the policies adopted by its government (because after all, geography and culture are relatively constant factors. This remark of course does not deny that the effects of geography can be altered by modern transportation and communication, and that cultural outlook and norms can change more rapidly in the contemporary world). I will return to this topic shortly. Other scholars have applied a logic like Diamond’s in analyzing the different developmental paths taken by Europe and China. In the famous words of Charles Tilly (1985, 1990), war makes states, and states make war (parenthetically, this aphorism is borne out by strong statistical patterns associating wars and especially global wars with major states’ expansion of their taxes and expenditures, see Rasler and Thompson 1985a). Europe’s political division into independent, competing states engendered chronic warfare and constant armed rivalry, which provided a strong motivation for these countries to undertake industrialization. In this vein, Paul Kennedy (1987: 70) remarks, “. . . it was war, and the consequences of war, that provided a much more urgent and continuous pressure toward ‘nation-building’ [in Europe] than . . . philosophical considerations and slowly evolving social tendencies.” In contrast, China occupied a preeminent place in premodern Asia which was characterized by “universal peace.” This situation deprived China of the urgent and constant need to prepare militarily and therefore the impetus that this preparation could have provided for industrialization and economic development. China’s historic preeminence

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also led to its complacency and smugness when it encountered European intruders in the 1700s and 1800s. In international relations as in many other relations, it is relative performance that counts (Grieco 1988; Powell 1991). How much better, or worse, is a person or state doing compared to their relevant counterparts? In this competition, one can try to put in place wise policies that promote better performance – or at least, remove unwise policies that impede it. Thus, in explaining Europe’s rise over other regions and empires, Kennedy (1987: 30) says, “In most cases, what was involved was not so much positive elements but rather the reduction in the number of hinderances which checked economic growth and political diversity. Europe’s greatest advantage was that it had fewer disadvantages than the other civilizations” (emphases in original). One such advantage was, as Eric Jones (1981: 124) points out, that despite local repression and setback, “Europe as a whole did not experience technological regression. The multi-cell system possessed a built-in ability to replace its local losses . . . and was more than the sum of its parts.” Of course, political fragmentation was not a sufficient condition for technological progress, nor political unification necessarily an impediment to such progress – as such progress was made during some periods of imperial China. The more important point, however, is that unlike China, Europe’s “political fragmentation guaranteed that no single decision maker could turn off the lights, that the capriciousness or piety of no single ruler could prevent technological advances and the economic growth they brought” (Mokyr 1990: 208). This perspective calls attention to the nature of China’s reform policies and those of other East Asian NIEs. Although the introduction and implementation of pro-growth policies have assisted their economic ascent, it is equally important to recognize the contribution made by discontinuing those policies that had hindered growth previously. This recognition in turn suggests that a state can induce economic development by dismantling those policies and practices that have heretofore obstructed growth, thereby providing a more conducive environment in which preexisting cultural dispositions to achieve can thrive. I have asked earlier why policies that should in theory be available to other developing countries, such as adopting a strategy of export-led growth or one that takes advantage of cheap labor costs, have not worked as effectively outside of the East Asian region. A plausible answer is that the other countries lack the conducive

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cultural dispositions characterizing the Confucian ethic. Therefore, their policies did not have the same results as in the Confucian cultures in awakening dormant but preexisting impulses. We are reminded of the differences in Russia and China’s results obtained from their respective reform policies. Evan after living under a communist system of command economy for three decades, the Chinese quickly embraced entrepreneurship after their government opened the economy to private businesses. The Russians were slower to start private businesses, especially family-owned small and medium businesses, and their economy has been more stagnant than China’s after governmentinitiated reforms. Even to this day, Russia’s economy is dominated by its export of raw materials, especially oil and natural gas. One may also cite the experiences of East and West Germany. The East Germans quickly abandoned their habits acquired during the days of communist rule and adopted capitalism and entrepreneurship. The two parts of Germany underwent a smooth process of economic integration. This discussion suggests that even supposedly good policies (such as those promoted by the International Monetary Fund) cannot be expected to deliver good results unless they can work on the fertile grounds prepared by favorable cultural dispositions. At the same time, bad policies can hold back or suppress a culture’s pro-growth impulses. This reasoning suggests the importance of synergism or mutual support between culture and policy. Conducive culture and policy are each necessary for economic growth. Moreover, the examples from China and Germany just mentioned suggest that cultural heritage can be quite resilient. It can outlive the countervailing influence of official ideology. This discussion introduces another implication. In conducting international relations, officials often take actions designed to hurt or constrain another country’s economy. Various sanctions adopted by Washington and its allies have this intended purpose directed against Russia and China. This tendency is often not matched by an equal amount of attention or emphasis to improve one’s own economy by undertaking the necessary reforms. In other words, judged at least by prevailing narratives presented by the mass media, officials are often more energetic and proactive in trying to affect the growth trajectory of their competitors and adversaries than in undertaking urgent adjustment that would improve their own economy – even though in principle it should be easier and more within their control to influence their own country’s economic prospects than those of other countries.

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Differences in economic performance often reflect to a not insignificant extent ineffective and even counterproductive policies, that is, handicaps introduced by one’s own action or inaction. As mentioned earlier, various growth-retarding policies point to self-inflicted injuries or obstacles in international competition. The rise of postmaterialist values, such as prioritizing equality over merit, has this effect. Policies that encourage consumers to spend to satisfy instant gratification at the expense of savers are another example. Other policies concerning the length of the workweek and the mandatory age for retirement provide still another example. There is an unavoidable trade-off between spending and saving (for individuals as well as for the national budget), and between leisure and work. Pericles’s warning to his fellow Athenians, quoted in the previous chapter, is pertinent; one’s own mistakes can have even more devastating consequences than an enemy’s plots.

Conclusion This chapter has highlighted a seeming paradox. High economic growth produces an affluent society where people can take their economic survival for granted. This phenomenon suggests that further economic growth produces diminishing returns to the extent that this growth comes at the expense of leisure, personal freedom, quality of life, and environmental health. People in these affluent, advanced developed countries therefore gradually give less emphasis to the acquisition of material goods and the pursuit of further economic growth, and they turn increasingly to postmaterialist concerns. This culture shift has been occurring mainly in the mature economies of Western Europe and North America. The overtime trend pointing to this shift is unmistakable. The economic consequences of this shift are also beyond dispute. In particular, the economies of societies dominated by postmaterialist concerns and values tend to have slower rates of growth compared to their less developed counterparts still populated by a majority of people concerned with materialist concerns and values. Over time, this trend is likely to narrow the economic gap between these countries, or, more accurately, between today’s developed countries and some of the rapidly growing developing countries (not all developing countries will succeed in catching up). As just noted, not all developing countries will be able to launch their economic takeoff successfully. Many of these countries have been

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mired in poverty and backwardness, and lives in some of them are likely to continue to be short, nasty, and brutish. Even though starting from a low initial level of economic development, a condition that is associated with faster growth in cross-national studies, these countries will see the gap separating them from the affluent, developed countries getting wider rather than narrower. We have, however, also seen some countries managing to close this gap. Historically, economic development has spread from Protestant areas of Europe to Catholic areas. More recently, we have also seen the emergence of the East Asian NIEs. Japan, South Korea, Taiwan, Singapore, Hong Kong, China, and most recently, Vietnam, have grown much faster economically than other developing countries. Their rates of economic growth have been not just a bit higher than those of their counterparts, but rather exceed their counterparts’ rates by a very large margin. One would naturally want to ask what distinguishes these two kinds of countries so that we can explain their discrepant economic performance. This chapter argues that Confucian heritage with its emphasis on work ethic, thrift, education, and impulse control to defer immediate gratification, and a perspective stressing teamwork and planning for the long haul hold the key to explaining the large, observed differences in economic performance among the developing countries. This explanation at the national level corresponds with the evidence presented in the previous chapter at the individual and group levels. It also receives strong support from data obtained from the large-scale, crossnational surveys conducted by Ronald Inglehart and his colleagues. Of all the variables considered by these researchers, the one single factor that stands out to consistently explain the greatest amount of variance in cross-national economic growth is the Achievement Motivation. As described earlier, this index juxtaposes the priorities given by the respondents of the World Values Surveys to thrift and determination on the one hand, and obedience to authority and faith in religion on the other hand. The Achievement Motivation is not only able to explain the largest amount of empirical variance on crossnational differences in economic growth, but it is also able to account for some of the explanations given by economic variables on this variance. In other words, cultural traditions and emphases appear to be the original source motivating such economic variables as investment in physical assets and human capital. Thus, cultural factors have

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a large and independent effect on economic growth, and they also contribute indirectly to this growth by encouraging habits such as saving, deferred gratification, and long-term planning and thinking. Studies by Inglehart (1997), Zhu (2021), and other authors (e.g., Gorodnichenko and Roland 2011; Michalopoulos and Papaioannou 2014; Tabellini 2008) concur with the view that culture has a longterm impact on economic development even after controlling for the effects of institutions and other factors. This chapter also questions the credibility of many common but facile explanations of China’s economic growth. The reasons given by these explanations should in many cases also apply to other developing countries. This observation in turn returns us to the question why China has been better able to take advantage of factors such as cheap labor cost, demographic dividend, export-led growth, and a strong, autonomous state. The presence of these factors does not distinguish China from many other developing countries. Indeed, upon further reflection, it is appropriate to ask why China has been able to grow so fast even though it does not have some of the most important prerequisites insisted by institutionalists. It does not have a freer market than many other developing countries, nor are the rule of law and the protection of private properties more securely established in this country than many of its counterparts in the developing world. This observation naturally begs the question why China has been able to grow quickly despite these apparent impediments to its economic performance. Scholars such as Yushi Mao and Dong Su (2012) claim that China does not enjoy any institutional advantage over other countries; rather, its culture of frugality and work ethic enables it to offset its institutional disadvantage. They argue that China would have done even better without its institutional hindrance. To the extent that other explanations of China’s growth performance are put in doubt, cultural explanation gains more credibility even though it is not without problems. The one advantage enjoyed by this explanation is that its competitors are unable to account for the clustering of fast-growing economies in the East Asia region, and the fact that they all happen to have a Confucian heritage. Climate, physical features, official ideology, and political and economic institutions are unable to offer a unifying theme to explain this clustering phenomenon, but Confucian culture can. Moreover, it is able to distinguish East Asia with its superior economic performance from other regions of the developing world with a more mediocre economic record.

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Lest the reader gets the misimpression that Chinese cultural traditions only have positive socioeconomic effects and little or no negative effects, it is important to acknowledge that rising affluence has also revived some old bad habits and fostered some new ones. First, there is the widespread practice of ostentatious and wasteful consumption by the nouveaux riches to display their wealth. Even those who are not nearly as well off often spend beyond their means to enhance their “face” and to satisfy social expectations. Second, the Chinese predilection for hard assets is reflected in excessive investment in the real estate market, with the more affluent families owning multiple housing units that are often left vacant (hence a wasting and unproductive asset). Third and as mentioned earlier, when a high level of achievement motivation is combined with limited opportunity to gain socioeconomic recognition, we encounter pervasive corruption and graft. Even though the government has tried repeatedly to crack down on such criminal behavior and has administered severe punishments to the wrongdoers, it has not been able to eradicate these transgressions. As also mentioned earlier, intense social and family pressure to achieve can produce severe disappointment, stress, and trauma for many individuals, especially young people, with deleterious consequences for society. Finally, rising affluence has been accompanied by increasing socioeconomic inequity. Graduates from institutions of higher learning are attracted to career opportunities to make money rather than to pursue academic excellence. Finally, this chapter reports data drawn from the World Values Surveys that are pertinent to not only China’s economic development but also for its prospects to initiate democratization and to consolidate democracy. Contrary to some prevailing stereotypes, the Chinese people do not in fact express a great disposition to obey authority or display national pride. Nor do they exhibit lower levels of interpersonal trust and associational membership as is typically the case in less developed countries. In fact, evidence shows that they tend to be more trusting, less nationalistic, and less disposed to obey or defer to authority than Americans. Recognizing these data patterns, especially when putting them in a comparative context, is helpful to correct national stereotypes and the tendency to “other” perceived competitors or outsiders. China is in these and some other respects a deviant case when compared to the rest of the developing world. The United States is also a deviant case in that its political culture in some respects has

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more in common with Poland, Turkey, and Brazil which are developing countries or former socialist countries than Norway, Germany, and the Netherlands which feature advanced economies, liberal democracies, and predominantly postmaterialist values. It has “a much more traditional value system than any other advanced industrial society” (Inglehart and Baker 2000: 31), presenting a cultural complex that has been described by Seymour Lipset (1996) as American exceptionalism.

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Economic Growth, Interstate Primacy, and Domestic Trade-offs

The discussion in the previous chapter argues that even though culture is not the only determinant of economic growth, it is an important factor influencing it. In addition to this influence, culture can also shape a country’s formulation and conduct of foreign policy. Some scholars see Confucianism’s influence in shaping China’s foreign policy today. Quansheng Zhao (2023: 130) states, “With confidence, one can argue that Confucianism will continue to serve as a leading source of ideas in China for its effort to pursue modernization.” Other scholars have studied China’s conception of tianxia or “all in heaven” (e.g., Callahan 2008; Zhao 2005), the legacy of its tribute system (e.g., Kang 2007, 2010, 2012, 2020), and traditional Chinese views on the efficacy of force in international relations as revealed by China’s classical texts (e.g., Johnston 1995). As referenced earlier, Yaqing Qin (2018) proposes a Chinese theory of international relations and differentiates it from Western formulations by emphasizing the importance of relations among the constituent units of the international system rather than the characteristics of the units themselves. Therefore, the influence of Chinese culture extends beyond the realm of economic development. Given space limitation, I will not be able to pursue this line of inquiry, tracing current Chinese foreign policy to its possible cultural origins. I will instead focus in this chapter on the second proposition in my two-part thesis, namely, how well a country does in growing its domestic economy is the most important determinant of its international competitiveness and standing. Put in other words, I argue that a strong, dynamic economy provides the wherewithal for a state to maintain and improve its position in the interstate hierarchy. Nothing is as important as this economic basis of national power. When a country has a leading economy, it can extend its influence abroad, and in the past acquire territories and markets to build an empire. Conversely, when economic decay and stagnation set in, a country is increasingly strained to meet competing demands for domestic needs, 101

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including the need to rejuvenate its economy. If its leaders are unable to halt and reverse this deleterious trend, this country’s foreign missions will come into doubt. A failure by these leaders to align their country’s international profile and commitments with its shrinking domestic resource base in turn creates the problem of imperial overstretch, which in its turn further exacerbates this country’s economic difficulties and accelerates its decline. In this scenario, there is a powerful feedback loop operating so that poor domestic economic performance makes the pursuit of foreign policy goals set at an earlier, more prosperous time increasingly dubious and burdensome, and the pursuit of these goals in turn causes further strain on the domestic economy, and, in the process, contributing to more serious domestic social dislocation and political discord. Although the earlier signs of decline may be barely perceptible, challenges mount over time and their debilitating effects accumulate. The result can be a frightening downward spiral, leading sometimes to collapse. This has very much been the chain of events leading to the disintegration of the former Soviet Union. This chapter discusses different conceptions and measurements of national power, and their implications for our understanding of the evolving international pecking order. It examines the successes and failures of past great powers and the recent achievements of the socalled strategic and trading states. What policies and conditions can explain these countries’ rise and fall, and what have been the effects of their domestic political economies on their relative international performance, and particularly on the evolving international stature of Britain and the United States, the two most recent system leaders? On this latter subject, I will review the debate on the so-called defense–growth trade-off and the defense–welfare trade-off. What does the available evidence tell us about the web of interactions pertaining to military expenditures, private consumption, capital formation, the government’s spending on social programs, and a country’s economic growth? Which variable affects which others and, equally important, which ones fail to influence the others’ secular trends?

The Debate on National Power I turn first to a discussion about what constitutes national power based on my earlier review of the relevant literature (Chan 2023). There has

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been a long continuing debate among social scientists about the definition and measurement of power. This debate can be dated in contemporary times to at least James March’s treatise on the power of power in 1966. There have been in its wake many other thoughtful discussions about the nature of power and how it affects social, economic, and political relations. For example, Michael Barnett and Raymond Duvall (2005) make an important contribution to this literature by delineating different conceptions of power in international relations. Joseph Nye (1990, 2002, 2004) invites his readers to consider national power beyond military muscle and economic clout. He introduces the idea of “soft power,” suggesting a country’s normative appeal to others and its ability to coopt others to share its values and vision to be the more important source of its international influence. According to Nye, this is the greatest asset commanded by the United States in competing with its international rivals. Still others like Ashley Tellis (2015) offer their insights such as in differentiating power as the possession of raw resources versus power as the ability to mobilize and deploy these resources effectively and to overcome resistance from opposing quarters in shaping the outcome of events. Finally, authors like Robert Keohane and Joseph Nye (1977), Susan Strange (1987), and, more recently, Barry Posen (2003), Michael Beckley (2011–2012), Sean Starrs (2013), and Henry Farrel and Abraham Newman (2019) draw attention to the distinction between bargaining power and structural power. They show convincingly the enduring structural advantages enjoyed by the United States as the predominant global hegemon. Although students of international relations have their differences in defining and measuring national power, there is a general agreement that a country’s economic size is the best single indicator of its power (Haynes et al. 2012). This is the position adopted by A. F. K. Organski and Jacek Kugler (1980) in their analysis of how changes in the relative power of the world’s two leading states can presage an armed clash between them, thereby bringing about a cataclysmic world war that rearranges the international order. More recent analysis by Carsten Rauch (2017) also relies on a country’s gross domestic product as the best approximation of its relative international standing to determine the extent, timing, and speed of any power shift characterizing its relations with other countries. Naturally, depending on the measure of national power adopted by an analyst, the results of their assessments will vary. Thus, Rauch

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shows the existence and timing of alleged power transitions among states in the past to be different in theoretically meaningful ways depending on whether GDP or CINC (the Composite Indicator of National Capability developed by the Correlates of War project at the University of Michigan) is used to indicate national power. For example, did the United States continue to behave like a “satisfied” country after it had overtaken Britain, arguably in the world’s only power transition in the modern era and one that turned out to be peaceful contrary to the prediction of the power-transition theory (Organski and Kugler 1980)? Variables that make up CINC emphasize “bulk” measures such as a country’s population size, the number of its military personnel, and the amounts of its coal consumption and iron/steel production. In this respect, these variables share the same tendency to stress “largeness” when we use GDP as an indicator of national power. However, the collective emphasis of the CINC variables exacerbates to a much larger extent the assumption that large means powerful. It has been rightly criticized for being outdated in the contemporary world when economic and military power depend more on, for example, information technology and precision weapons. An emphasis on “bulk” tends to exaggerate the power of countries such as China today and the USSR in the past (Beckley 2018). Moreover, the world’s system leaders are distinguished by their ability to project power over long distances. These are maritime rather than continental states (e.g., Genoa, Venice, Portugal, the Netherlands, Britain, and, most recently, the United States). “Bulk measures are particularly bad at capturing the ability to project power at long distance. The largest states and empires throughout history have not always been very good at operating beyond their immediate borders. Therefore, we need to differentiate between more local and more global capabilities” (Thompson 2022: 29). As another example, Ned Lebow and Benjamin Valentino (2009) have measured the relative power of major states by multiplying their population with their gross domestic product. On this basis, they conclude that Spain was dominant from 1640 until it was overtaken by Russia in 1795. In their view, there were only two other power transitions in the modern era, namely, the overtaking of Russia by the United States in 1895 and the overtaking of the United States by China in the early 1980s. Contrary to power-transition theory’s expectation,

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all these three cases of power transition ended peacefully. Moreover, if one accepts Lebow and Valentino’s measurement of national power, China had already overtaken the United States some forty years ago. As already noted, these countries’ relations have remained peaceful since then despite the power-transition theory’s prediction that such occasions are likely to produce violent conflicts. Of course, people may or may not agree with Lebow and Valentino’s measurement of national power or for that matter, any of the many other attempts to do so. The larger point of this discussion is that depending on the measurement approach adopted, we will reach very different conclusions about the power relations among major states, including the presence, extent, and timing of any power transition between specific dyads. Naturally, when an analyst does not disclose the empirical evidence and the rules applied to interpret this evidence that were used to identify the specific states implicated in a possible power transition and to measure the magnitude, speed, and timing pertaining to these states’ relative power gains and losses, other analysts will not be able to replicate or verify her empirical claims. This is one of the major reasons undermining the credibility of claims advanced by Graham Allison’s (2017) well-known book on Thucydides’s Trap (Chan 2019, 2020, 2021).

Economic Size Matters, But … In line with the preceding discussion, the sheer size of a country’s economy can also be misleading in judging its power. An obvious example would be contemporary energy-exporting countries, which feature large gross domestic product and high personal income but lack other crucial ingredients of national power such as a large stock of human capital and command of advanced technologies. Beckley (2018: 22) reminds his readers that China “had the largest GDP and military in the world until the 1890s, and the second largest GDP and military until the 1930s.” However, China had clearly been on a course of steady and sharp decline long before the 1890s and certainly before the 1930s. It had suffered repeated setbacks in its encounters with Western and Japanese imperialists. It suffered defeat in various wars against foreign countries, and it was coerced to cede important territories and pay large sums of indemnity to them. Thus, size – even when it refers to an economy – is not necessarily a reliable indicator of a country’s national strength.

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In the case of traditional China just mentioned, a large population consumed practically all that an economy had produced, leaving little to be saved and invested. Indeed, to the extent that population growth exceeds economic growth, the average income of a people would in fact decline. Thus, as remarked earlier, Chinese people’s living standard in 1940 was probably lower than in 1850, and it was not much better than a thousand years earlier (Zhu 2021: 29). Beckley therefore argues that “gross” indicators of power should be abandoned in favor of “net” indicators accounting for not only a country’s assets but also its liabilities. Although “most people in most countries [in polls conducted by the Pew Research Center in 2017] think that China is overtaking the United States as the world’s leading power,” this view is mistaken because “the hype about China’s rise . . . has been based largely on gross indicators that ignore costs. When costs are accounted for, it becomes clear that the United States’ economic and military lead over China is much larger than typically assumed – and the trends are mostly in America’s favor” (Beckley 2018: 11). Beckley recommends a measure of national power based on a country’s GDP multiplied by its GDP per capita. This measure accounts for both the size of its economy and its economic productivity or efficiency. If people overlook the latter factor, their view of the distribution of interstate power can be seriously distorted. For example, whereas GDP and CINC figures suggest that China was much stronger than Japan in 1930 (because China had a larger territory, population, and even economy), Beckley’s (2018: 28) alternative measure points to the opposite conclusion. Similarly, although in 1850 Britain’s GDP was only half of India’s, its GDP per capita was four times higher and this factor made all the difference in the former’s ability to conquer and colonize the latter (Beckley 2018: 54). If the average Chinese worker had the same level of productivity as an average American worker, we would expect the Chinese economy to be over four times larger than the US economy (because the Chinese population is 4.25 times larger than the US population). In fact, it is much smaller than this expectation, because American workers have a much higher level of productivity compared to their Chinese counterparts. China’s GDP in 2022 was US$18.3 trillion compared to US$25 trillion for the United States (www.statista.com/statistics/1356755/ share-global-economy-country/). The World Bank’s data give a somewhat different estimate: US$14.72 trillion for China and US$20.89

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trillion for the United States (https://globalpeoservices.com/top-15countries-by-gdp-in-2022/). Adjusting for purchasing power parity (PPP), China’s economy in 2022 was estimated by the latter source to be US$17.204 trillion (compared to US$20.89 trillion for the United States). The US economy was thus 1.42 times larger than China’s economy in nominal terms, and 1.21 times larger in PPP terms. However, in both nominal and PPP terms, US GDP per capita was much higher than China’s (US$63,413 for the United States compared to China’s US$10,434 in nominal terms, and US$17,204 for China after PPP adjustment). By these measures, the US level was 6.08 and 3.69 times higher than China’s, respectively. We reach a similar conclusion from the International Monetary Fund’s data, indicating the US GDP per capita in 2022 to be much higher than China’s: US$75,180 for the United States compared to China’s US$12,970 in nominal terms and US$21,291 after PPP adjustment – or by a margin of 5.8 times and 3.53 times of the respective levels for China (https://en .wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita). Thus, it is important to consider GDP per capita in evaluating the relative power of states. Without considering this factor, one will get the wrong impression that China is much closer to catching up to the United States when reality points in the opposite direction, suggesting that the United States still commands a huge edge in its GDP per capita. Because many existing studies evaluating relative national power have overlooked this important factor, “many of the cases identified as power transitions may not have involved an actual transition in power, and, conversely, many genuine power transitions may not have . . . been identified as such” (Beckley 2018: 42). The above comments should not be construed to suggest that economic size is unimportant. Indeed, a country must meet a minimum threshold in terms of its economic or, for Tammen et al. (2000), demographic size to be considered a great power. At some point, the differences separating the competing countries’ economic size are so lopsided that even higher productivity and more effective mobilization of the available resources would not be able to alter the outcome of their contests. Germany’s GDP might have exceeded Britain’s on the eve of both world wars, but its GDP per capita was lower. Although Germany had a larger and stronger army, its navy was eclipsed by Britain’s. And although Germany had a larger population than Britain, the British

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Empire had more people than Germany. We should consider carefully the appropriate unit of analysis when studying international contests. Great-power wars are won by coalitions. They are multilateral affairs, and not to be treated as a bilateral struggle between just the world’s two leading states as presented by the power-transition theory (Organski and Kugler 1980). In Chapter 1, I quoted Paul Kennedy’s (1987: 439) remark that “. . . all of the major shifts in the world’s military-power balances have followed alterations in the productive balances; and further . . . the rising and falling of the various empires and states in the international system has been confirmed by the outcomes of the major Great Power wars, where victory has always gone to the side with the greatest material resources” (emphases in original). Seen in this light, Germany’s coalitions in both world wars clearly could not match the collective strength of its opponents’ coalitions on these occasions. Judged by their relative economic size, Germany’s enemies were more than two times stronger. Even without counting the contributions of its allies, the United States had always enjoyed a large lead over the USSR during the Cold War. Its economy was at least twice as large as that of the USSR, and as the Cold War unfolded, this US advantage became even larger (Tammen et al. 2000: 55). When we add the other developed economies (e.g., Britain, France, Germany, and Japan) to the US column, this alliance enjoyed at least a three-toone lead over the opposing Warsaw Pact. Given this large edge, the outcomes of the two world wars and of the Cold War would have been expected, even though (as we shall see) a greater capacity to extract and mobilize resources by the weaker side could have postponed its inevitable defeat. This said, it is also useful to remind ourselves of the danger of hindsight bias (e.g., Fischhoff 1975; Fischoff and Beyth 1975). After learning the outcomes of historical events, people tend to convince themselves that they have known all along that these outcomes would come to pass, when there was in fact a considerable amount of uncertainty in their foreknowledge. On this point, Kennedy (1987: 72) has remarked that “The victory of the anti-Habsburg forces was . . . a marginal and relative one. They had managed, but only just, to maintain the balance between their material base and their military power better than their Habsburg opponents.” He quotes the Duke of Wellington saying, it was “a damned close-running thing.”

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Economic Vitality, Trading States, and World Leadership Even a casual review of the global leaders in previous eras will show that those who had ascended to the pinnacle of the interstate hierarchy were not the largest in their population or territorial size, nor those that had the biggest army. Portugal, the Netherlands, and Britain were outmatched by their opponents according to these measures. Spain, France, and Russia were larger and, in some cases much larger according to these measures. Similarly, during the Cold War the USSR was larger than the United Sates in its territory and population, and it had more military personnel. If one were to base one’s estimates of national power solely on these measures of size, Spain, France, or Russia/the USSR should have become the world’s leading power in their respective heydays. They did not, even though these countries were during different epochs serious contenders for either regional domination in Europe or global primacy. Nor was China able to resist Western and Japanese encroachments during its “century of national humiliation,” even though it has always had the world’s largest population and has always been one of its largest territorial states. What distinguished Portugal, the Netherlands, Britain, and most recently the United States in their respective international rivalries was not their physical size or “bulk.” Instead, entrepreneurial élan and economic dynamism made the critical difference. These countries featured the most competitive commercial institutions and the most creative entrepreneurs for their time and in the cases of Britain and the United States, also the most advanced industries and technologies. These advantages enabled them to outcompete their rivals, who were often unable to keep up because their economies were less robust and innovative. This weakness contributed to their imperial overstretch, and the burden imposed by large miliary expenditures led the Spanish monarchy, for example, to debase currency and declare bankruptcy on numerous occasions and in the case of the USSR, literally exhausted its economy. It became increasingly difficult for Moscow to sustain its military expenditures which were consuming about 40% of its budget and 15–20% of its GDP (Brooks and Wohlforth 2000–2001: 22–23). The USSR was simply unable to keep pace with the United States in an arms race. Although the Hapsburgs, the Bourbons, and the Soviets appear formidable in physical size (including the size of their military

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establishment), they had a much weaker economic foundation compared to their smaller but wealthier and more dynamic competitors. Moreover, their overweening ambitions were a source of self-inflicted liability. By repeatedly lashing out against their neighbors and by taking on multiple adversaries at the same time, Charles V, Philip II, Louis XIV, and Napoleon created a countervailing coalition by their own action (Schroeder 1994). The USSR also committed a similar mistake when it escalated its dispute with China, thereby contributing to the Sino-American rapprochement (when Richard Nixon visited Beijing in 1972) to Moscow’s detriment. Two factors usually work against the lumbering behemoths commanding large armies, territories, and populations in the past. The first concerns statecraft, and the second pertains to economic resilience. As explained below, these factors are interrelated. I mentioned earlier that the larger and seemingly more powerful countries often engage in self-harming policies that result in their selfencirclement. That is, their conduct mobilizes their opponents to join hands to resist their attempts at domination – even when these opponents were initially not disposed to mount a direct confrontation against them. As Paul Schroeder (1994) has observed, when faced with an emergent and even existential threat, these other states did not choose to balance against them as realist theorists (e.g., Mearsheimer 2001; Waltz 1979) would have predicted. Rather, appeasement, “hiding,” “binding,” “transcending,” and “bandwagoning” were their first policy choices. They were usually forced to fight back and to form a countervailing coalition only after they had been attacked. This tendency fits well the behavioral patterns of Napoleon’s victims as well as those of Hitler and Tojo. Thus, countries that might have wished to sit on the sideline or were pressured to do so by their domestic politics (such as isolationism in the United States before both world wars) were eventually forced to join the fray due to Germany’s invasion of the USSR and Japan’s attack on Pearl Harbor. Repeated bids for regional hegemony by Europe’s land powers (Spain, France, and Germany) were frustrated by the intervention of states on its western and eastern flanks. These flanking states, respectively, the maritime ones whose strength came from their navy and transoceanic trade (most notably the Netherlands and Britain; Modelski and Thompson 1996), and the other continental ones with large standing armies (most notably the Ottoman Empire and Russia),

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played a pivotal role in maintaining Europe’s political fragmentation and its balance-of-power system. Ludwig Dehio argues that had Europe been a closed system without the “extra-regional” powers intervening from its west and east, campaigns by land-based hegemonic aspirants would have succeeded (Thompson 1992). These aspirants, however, made the huge error, and repeatedly so, of engulfing themselves in wars not only against their immediate continental neighbors but also taking on the flanking powers. In the process, they exhausted themselves and sealed their own fate. It does not take too much imagination to see parallels to contemporary China which is also hemmed in geographically and faces flanking powers bordering it to its west, north, and east – India, Russia, Japan, and the incomparable United States. In contrast to European continental powers’ often reckless, aggressive behavior described in the preceding paragraph, the winning side in the struggle against these aspiring hegemons undertook more judicious policies. For example, prior to World War I, London conciliated with the United States, settled its accounts with France and Russia, and even joined an alliance with Japan to focus its attention and resources on the nearby threat coming from Germany. This disposition distinguishes British diplomacy from, for example, the Hapsburgs who were intent on crushing all foreign opponents, thereby causing them to be involved in chronic warfare often against multiple adversaries at the same time. This tendency sapped their energy and depleted their resources (Treisman 2004). By their very nature, the larger, continental powers tend to pose a greater threat to their neighbors. These countries, such as Spain, France, Germany, and Russia/the USSR during different periods of European history, have possessed large armies which can be called upon to invade and conquer their smaller neighbors. In contrast, their opponents – principally those that thrive on overseas commerce and rely on their navy for protection (e.g., Portugal, the Netherlands, Britain) – do not pose the same kind of threat to other countries’ survival. Their much smaller armies and the stopping power of water (Mearsheimer 2001) suggest that they pose much less of an existential threat to conquering and occupying other countries compared with the continental powers commanding large armies and easier land access to their potential victims. These tendencies and dynamics suggest that there is to begin with less incentive for other countries to undertake balancing policies

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against those naval powers pursuing overseas commerce as a source of their national power in comparison to the “strategic states” (Rosecrance 1986) pursuing territorial expansion and physical control as a path to increase their power (Levy and Thompson 2006, 2010b). This statement does not suggest that the Portuguese, the Dutch, and the British had somehow refrained from taking over others’ territories. They did in their colonial conquests and imperial expansion. But their territorial gains were made at the expense of indigenous peoples outside Europe, and this aggrandizement was not directed against other European states. This discussion argues that different incentives were operating in how other countries perceive and react to continental versus maritime powers. Instead of being feared and becoming the target of other countries’ balancing policies, the maritime powers are more likely to be recruited by them as allies to check and balance against the continental powers. Land-based power appeared to them more threatening than sea-borne power for the simple reason that the latter did not have the same capacity to invade, conquer, and occupy them compared to the much larger number of infantries commanded by the continental powers. Research by Jack Levy and William Thompson (2006, 2010b) provides persuasive evidence supporting these propositions. As remarked above, the natural inclination on the part of continental powers’ neighbors is often further intensified by the latter countries’ overweening ambitions and reckless policies. The above discussion should not be taken to mean that a country’s international orientation is immutable. Before it adopted the profile of a trading state after World War II, Japan had sought to expand its territorial conquest on the Asian mainland by invading China and colonizing Korea and Taiwan. Although the Portuguese, the Dutch, and the British had started as trading states relying on their naval prowess to advance and protect their overseas trading networks more in the interest of pursuing commercial profit than acquiring territorial gains, they were all subsequently drawn to extend their footholds abroad further inland. This creeping temptation to conquer and rule over more foreign land and indigenous peoples sometimes became irresistible. This tendency in turn increased the overhead cost for administering their overseas holdings (a cost that strategic states are traditionally burdened with, and that constitutes a comparative disadvantage for them in competing with the trading states). It became a

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source of distraction draining these trading states’ resources and distracting their attention, and it could have been one of the factors contributing to their imperial decline. William Thompson and Gary Zuk (1986) studied this problem for the British, showing a long-term secular trend after the Napoleonic Wars that except for brief periods (such as during the Anglo-German naval race prior to 1914) pointed to an increasing portion of London’s military expenditures being allocated to its army to the detriment of its navy. A larger army became increasingly necessary to garrison and protect overseas possessions in Canada, India, and South Africa among other places, even though Britain’s core strategic interest in transoceanic trade and its key strategic asset (the navy for protecting its home islands and overseas empire) had remained the same. Britain’s policy drift unintentionally added to its imperial overstretch. The second factor mentioned above, resilience, argues that dynamic enterprises, extensive commercial networks, and competitive banking institutions enable the smaller but economically more vibrant countries to outlast their larger counterparts. The royal houses of the latter countries often hurt themselves by ostentatious consumption which, combined with chronic warfare and self-harming domestic institutions (such as those related to the venality of office and the tax-exemption of religious and charitable endowments and entrenched landed interests in association with the Mesta in Spain), produced recurrent fiscal crises and inflationary pressure (for a statistical analysis of the historical effects of war on inflation in the British and the US cases, see Thompson and Zuk 1982). The French and especially the Spanish crowns were forced to default repeatedly on their debt, which in turn increasingly undermined their creditworthiness and thus raised their borrowing cost. In contrast, the smaller but more vibrant economies were in a much better position to finance their wars by borrowing from both internal and external sources. Their vibrant commercial base, extensive financial institutions, and more liberal politics endowed them with greater creditworthiness. Being able to borrow funds more easily and cheaply to support states’ foreign policies has played a large role in determining the course of past conflicts (Rasler and Thompson 1983; Tomz 2007). One would not want to minimize the role of financial credit and international capital in influencing the outcome of wars and national economic development.

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I have already quoted Charles Tilly’s famous aphorism that war makes states, and states make war. Chronic warfare in Europe had the effect of encouraging nation-building and industrialization efforts. In the words of Paul Kennedy (1987: 77), “In many respects, [the] two-way system of raising and simultaneously spending vast sums of money acted like a bellows, fanning the development of western capitalism and of the nation-state itself.” Finally, and as hinted already, the smaller maritime, commercial states were able to draw support from their overseas bases to an extent unavailable to their continental rivals. For example, Australians, Canadians, Indians, and Nepalese contributed to Britain’s fighting forces during both world wars. This observation again underscores the importance of getting the accounting unit right. Systemic wars are fought by rival coalitions. They are not a bilateral struggle between just two belligerents. In the years after World War II, among those countries that managed most successfully to rise internationally turned out to include Germany and Japan, countries that were defeated in that conflict. They were successful in restoring their economies from the ashes of war devastation, and in resuming and even exceeding their prewar growth trajectories (Organski and Kugler 1977; a subsequent study by Rasler and Thompson 1985b suggests that for the major belligerent countries, the effect of global war on their postwar economic growth, whether positive or negative, tends to be transitory). In this endeavor, they were spectacularly successful in reclaiming their status as major powers in international relations, albeit not because of their military strength but rather due to their economic vitality and commercial expansion. These countries were spared the burden of having to spend heavily on their own defense because they were protected by the United States by virtue of their security treaties with Washington. Richard Rosecrance (1986) has aptly described Japan, Germany, and others such as the East Asian NIEs as “trading states,” that sought economic growth and commercial expansion as a path to improve their international stature rather than the traditional approach exemplified by the so-called strategic states. In many ways, Portugal, the Netherlands, Britain, and one might add, Venice and Genoa in earlier times, were predecessors to these modern trading states. Their economic prowess and commercial drive were among those factors that enabled them to reach international prominence and even preeminence despite their smaller physical size. Arguably, these countries punched above their respective weight.

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In contrast to the trading states, the so-called strategic states are distinguished by their emphasis on pursuing ideological proselytization, political protégés, and military allies and bases overseas in their effort to increase their power and security. A large military establishment and sphere of influence (if not outright physical control) are seen by these strategic states to reflect and support their international standing. Above all, strategic states had in the past sought territorial expansion and armed conquest to increase their power and enhance their position. As a result, they were more liable to run the risk of imperial overstretch, whereby their foreign commitments and overseas interests exceeded their available resources to sustain these commitments and interests, even when these resources were urgently needed for domestic investment and consumption. Nazi Germany, Imperial Japan, and most recently, the Soviet Union exemplified the model of strategic states. They and their predecessors such as the Hapsburgs and Bourbons had met devastating defeat in their bid for hegemony. It is important to emphasize in this context that the danger of overreaching is not limited to established powers; rising powers can also commit this mistake. The policies of Imperial Japan come to mind. In the years leading up to World War II, Tokyo took on many enemies, including China, Britain, and the United States (Japan had also fought the USSR in the battles of Nomonhan or Khalkhin Gol in 1939). Its self-defeating policies caused its self-encirclement, and they brought about an opposing coalition that was much stronger than it. To compound this mistake, Tokyo fought its war in the Pacific without coordinating its military actions with its allies in Berlin and Rome. Fascist Italy provides another example of overreach, seeking overseas aggrandizement such as in North Africa more than it could manage. More recently, Susan Shirk (2023) uses overreach to describe not only China’s more assertive foreign policy, but also its political tightening domestically under Xi Jinping. She attributes the recent estrangement between China and the United States and more negative views of China abroad to Beijing’s overreaching rather than applying this term to refer to a mismatch between Chinese objectives and capabilities. Her warning about overreach, however, is relevant to the danger that a country’s policies can boomerang and cause its self-encirclement. Wars have become exponentially more lethal and costly over time (Levy and Thompson 2011). This change has been accompanied by the emergence of developed industrialized democracies in some parts of the

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world, where the emphasis of public opinion has increasingly shifted from warfare to welfare. Concomitantly, in other parts of the world the rise of nationalism and the consequent prospect of fierce resistance against foreign rule have made attempts to pursue territorial conquest or physical control increasingly unattractive. Naturally, industrialization and technological advancement have also had the effect of diminishing the attractiveness of waging war because not only do they suggest the greater opportunity costs of belligerence but also point to alternative ways to achieve wealth and influence. A country does not need to conquer another country to obtain its resources; it can buy them. Finally, memories of the horrendous destruction caused by the two world wars have dampened the enthusiasm felt by a large part of the elites and publics of victors and vanquished alike to fight again, especially against other modern industrialized states. There has therefore been an increasing aversion to war reflecting an ideational change (Mueller 1989). But quite aside from any increased pacifist attitudes or moral revulsion against war, this discussion argues that there has also been a change in people’s views on the costs and benefits of using military force and seeking territorial expansion (Kaysen 1990; Levy and Thompson 2011). The prospective costs of following the path of strategic states to grow national power have increased with respect to both their peers who are also major powers as well as the less powerful peripheral parts of the world, but especially relative to the former group. This said, we should not exaggerate these tendencies. The prospects of strategic competition and alien rule cannot be entirely ruled out as evidenced by the increasingly acrimonious relationship between the United States and China and by the US invasion and occupation of Iraq and Afghanistan. Importantly, unlike the former USSR, China is not engaged in an ideological competition with the United States, seeking foreign converts or recruiting military or political protégés. Although China has extensive trade with many countries, it does not have a military footprint abroad and overseas commitments anywhere comparable to the United States. Contrary to other rising states in the past, its recent ascendance to the front ranks of international politics and economics has not been associated with colonial war or territorial expansion, but it has rather been due exclusively to the growth of its economy, growth that has been propelled by its foreign trade. Thus, compared to the United States, China is closer to being another contemporary example of trading states.

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Can the United States avoid repeating the mistakes of strategic states? Paul Kennedy (1987: 515) warns that: . . . the United States now runs the risk, so familiar to historians of the rise and fall of previous Great Powers, of what might 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.

Power as Ability to Mobilize Resources and Influence Outcomes When we measure a state’s power by the size of its economy (or the size of its population, territory, armed forces, or industrial output), we are implicitly treating power as a state’s possession of tangible resources. This approach has of course been the dominant one when people talk about and study the relative strength of states and when they attempt to discern any evidence suggesting a power shift among them. Based on prior research by sociologists Raymond Boudon and Francois Bourricaud (1989), Ashley Tellis (2015) describes this common approach as conceiving “power as resources.” “Power, in this conception, is dispositional. It refers not to actual performance but merely to the capacities or assets possessed by any given entity, resources that either may enable certain outcomes to be produced by the very fact of their existence or could be utilized subsequently to produce particular outcomes through intentional action” (Tellis 2015: 5). The mere possession of certain resources may influence other states’ behavior. For example, other countries may be deterred from taking aggressive action when managing their relations with a state armed with nuclear weapons. Having nuclear arms also gives its owner certain policy options that are unavailable to other countries without these weapons of mass destruction. Our discussion thus far reflects this logic that countries endowed with large and vibrant economies will have the wherewithal to expand their international power or influence, such as by building a strong military. The view of power as resources is particularly appealing to theorists of international relations who often treat countries as “bordered power-containers”: the country is akin to a receptacle and the resources it possesses are

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akin to stock, allowing the latter to be measured, quantified, and compared with the holdings possessed by others. Although there may be disputes about which particular resources, such as population, natural wealth, productive capabilities, and military strength, are best suited to describe a country’s national power, the utility of having a standardized set of measurable variables allows for cross-country comparisons and the global rank ordering of nations. (Tellis 2015: 5)

Significantly, how the state in question will choose among its available options made feasible by its possession of the relevant resources and how well it will be able to execute this option are left unanswered in this approach to studying national power. In other words, whether the possession of resources is tantamount to obtaining successful outcome is an open question. The connection between these two variables is usually assumed rather than proved. Despite this limitation, the practice of equating national power with the possession of tangible resources is attractive to researchers because quantitative indicators relevant to this approach (such as a state’s economic, territorial, and demographic size) are readily available for many countries and often over a considerable number of years. They thus facilitate crossnational and overtime analyses. As already hinted, a state needs to extract, mobilize, and deploy those resources made available to it by its economy and society. This second conception of “power as ability” by Boudon and Bourricaud (1989) argues that merely “possessing” the pertinent resources does not mean that a state can in fact translate them into power. This view suggests that the available resources need to be first extracted from society and economy, and they need to be “activated” according to a deliberate plan to serve the purposes of foreign policy. This notion of power as ability is a valuable complement to the conceptualization of power as resources because it emphasizes intentionality and the active dimension of the actual-potential dichotomy that inheres in any notion of power centered on brute capabilities. This approach, by focusing on the idea of the power “to do” something, as opposed to the notion of power emanating from a stock of resources, opens the door to thinking about power as strategy in which the processes, relationships, and situations that shape purposeful action all play an important role. (Tellis 2015: 5)

Whereas those who view power as resources assume that leaders have full access to their countries’ resources and can utilize these resources

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effortlessly for foreign policy purposes, those who take the perspective of “power as ability” see this assumption to be highly problematic. They raise questions about a state’s autonomy from society, the power of its vested domestic interests, and the extent of its elite consensus and social cohesion, considerations that can interfere with leaders’ ability to access or apply available resources (Lobell et al. 2009). Thomas Christensen (1996) shows this domestic-foreign linkage in his analysis of how Mao Zedong and Harry Truman pursued foreign policies toward their respective adversary to gain domestic popularity and advance their grand strategy. Steve Lobell (2006) and Kevin Narizny (2007) have also written about how Britain’s foreign policy and its spending on military preparation before the two world wars had been influenced by its leaders’ calculations on the domestic economic and political fallout of these policies on their key constituents. In a similar vein, Randall Schweller (2006) calls attention to the domestic origins of British and French foreign policy, pointing to elite dissension and social discord as the source of these countries’ incoherent, insufficient, and tardy response to the rising threat from Germany. Fareed Zakaria (1998) takes up another puzzle: why did the United States not pursue a more prominent role in its foreign policy that would have been commensurate with its growing power during its earlier years of ascent in international relations? He explains that the reason lies with its weak executive branch hamstrung by a powerful legislature and strong social groups. As a final example, Jack Snyder writes about the influence of powerful domestic coalitions in Germany and Japan, drawing support from their respective ultranationalist politicians, ardent militarists, and influential industrialists, in advancing these countries’ agenda of military buildup and imperial conquest. These groups were able to capture the commanding heights of these countries’ policy processes and set them on a course of catastrophic defeat in their respective bid for regional hegemony. The common theme running through these studies is that domestic conditions matter for a country’s “power as ability.” This discussion points to the importance of a state’s “embedded autonomy” (Evans 1995). Its embeddedness suggests its close and intimate ties with society, whereas its autonomy enables it to reach and penetrate society and command the economy. With respect to the latter ability, levying direct personal or corporate taxes (as opposed to indirect tax such as from tariffs) provides one indication of a state’s

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political or policy capacity. Another indicator comes from the size of the so-called underground economy. The rate of labor participation offers another possible indicator. School enrollment, especially in rural areas, provides still another indicator of the effectiveness of implementing government mandates of compulsory education. Finally, even after the necessary resources have been extracted, there is the matter of planning and coordinating their use and the question of how much, if any, of these resources are siphoned off due to graft and corruption. How effectively can governments allocate and deploy the resources they have raised from their society and economy? Abdollahian et al. (2012) show that Pakistan allocates and utilizes its resources poorly due to waste, graft, and poor planning, whereas South Korea demonstrates both high political reach and effective allocation. These remarks are obviously relevant to my earlier discussion of the relationship between state and society and that between state and economy in the context of East Asian institutions. The state should be sufficiently autonomous to direct and coordinate collective efforts to grow the economy but also at the same time, sufficiently embedded in society to prevent it from engaging in predatory, rent-seeking behavior. Even though some states, such as those exporting natural resources, are blessed with wealth, they lack these qualities to effectively mobilize and deploy their resources. Their bureaucracies are not as independent, powerful, and competent as those of East Asia. As remarked earlier, East Asia’s bureaucracies benefit from a long tradition of administrative state, and they tend to attract the best and brightest in their society as their recruits. Organski and Kugler (1980) have argued along a similar line, emphasizing a state’s political or policy capacity as a necessary consideration in evaluating its power. That the United States has suffered a larger number of infections and fatalities resulting from the Covid-19 pandemic can in part be explained by its more limited political capacity even though it commands a larger resource base than most other countries. Thus, for example, due to its federal system of government, Washington is limited in extending its authority to jurisdictions where the fifty constituent states have traditionally reserved for themselves. Moreover, strong social groups in the United States tend to hamstring the power of government at all levels. In contrast, the Chinese state is much more powerful in its relationship to society. Here again, social capital and traditional mistrust of government as discussed earlier

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come into play. Those countries with low levels in these regards would obviously encounter greater obstacles and opposition in delivering “power as ability.” The resistance against government mandates to wear face masks and the opposition to vaccination against Covid-19 point to the limits of political authority in the United States to override societal resistance. There are other examples of political or policy capacity making a difference in international relations. The side commanding fewer resources nevertheless manages to sometimes prevail in highly asymmetric international contests. The example of repeated Israeli victories in wars against its larger Arab neighbors comes to mind. The North Vietnamese also have successfully resisted a much more powerful United States in part because of their ability to mobilize their resources effectively and certainly much more effectively than their South Vietnamese counterparts who lost the contest even though they had the advantage of massive US assistance. Marina Arbetman and Jacek Kugler (1997), Jacek Kugler and Ronald L. Tammen (2012), and Jacek Kugler and William Domke (1986) have studied various belligerent countries’ effectiveness in extracting and mobilizing resources from their society and economy as a factor determining the outcomes of different combat theaters during the two world wars and other conflicts such as the RussoJapanese War and the contest between North and South Vietnam. Their results again show that actual performance on the battlefield depends on the effective mobilization and deployment of available resources rather than just possessing them. Both authoritarian Russia and democratic France failed to extract resources effectively during World War I, whereas authoritarian Japan turned out to be the most effective among the belligerent states in World War II to extract and mobilize its available resources – but this performance was not sufficient to compensate for its much smaller resource base compared to its adversaries, especially the incomparable United States (Kugler et al. 2012: 85). Whether a country has democratic or authoritarian institutions does not appear to have any bearing on how effectively it can extract, mobilize, and deploy its resources. Arbetman-Rabinowitz et al. (2012: 43) conclude that, “While wealthier societies are more stable and more consistent, they do not necessarily extract, reach, and allocate resources more efficiently than their authoritarian counterparts.” Of course, poorer countries tend to

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score low on all three dimensions of “power as ability”: extraction, reach, and allocation. In established democracies, governments face pressure from various competing interest groups. Moreover, many entrenched and powerful veto groups can block policies that are evidently necessary for an economy’s long-term health and viability. The political controversy and struggle over France’s mandatory retirement age furnishes but just one recent example. Although authoritarian systems also face interest groups, they have a smaller “selectorate” than democracies and are less accountable to their publics (a “selectorate” is the group of people whose support is necessary for a leader to maintain her power; Bueno de Mesquita and Smith 2012; Bueno de Mesquita et al. 2003). That democracies have larger selectorates means that their leaders will have to please more constituents if they want to be reelected, and this fact makes putting together a policy deal more challenging for them, everything else being equal. When facing opposing demands to increase welfare programs, to protect defense spending, and at the same time to keep taxes low and even to slash them, these politicians often take the path of least resistance by borrowing their way out of their dilemma. When I wrote these words in early April 2023, the US national debt stood at nearly US$31.7 trillion or just over 120% of its GDP (www.usdebtclock.org/). American politicians are further constrained in making fiscal decisions because much of the spending has already been pre-committed to entitlement programs (with Medicare/ Medicaid and Social Security being the largest budget items, followed by defense spending) leaving them with even less wriggle room. In theory at least, it should be easier for authoritarian leaders to satisfy their selectorate. This should at least in theory permit them more policy leeway in allocating the resources at their disposal. Concurring with other scholars like Diamond and Kennedy, I have remarked earlier in Chapter 2 that political fragmentation has distinguished modern European history in contrast to China’s unity. This phenomenon, in addition to the concentration of power in the hands of a single authority in China, has meant that political and social opposition to a ruler’s bad decision is less likely to materialize and to prevent it from being carried out. This decision would then have system-wide repercussions. In contrast, Europe’s political fragmentation meant that an authoritarian ruler cannot enforce a bad decision across the entire continent. The damage he could cause would therefore be more

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localized, and the harmful effects of this decision on the economy or society would cause his country to lose its competitive edge and make it more vulnerable to being attacked by its enemies. In other words, a self-correcting mechanism would be operating in the competitive environment of European politics. It would tend to eliminate those rulers who commit repeated errors. The same mechanism would not apply to traditional China because its region was characterized by “universal peace” compared to Europe’s continuous armed rivalries. This is not to deny that for significant periods of time in China’s history, it faced foreign threats from nomadic raiders to its north. Despite this fact, it was clearly the preeminent power in its region and therefore did not face the same extent of constant pressure to reform and innovate felt by the Europeans in their rivalries. Chinese rulers therefore were less restrained by the consequences of bad decisions on their national security because they did not usually face the same pressure to keep up with rivals as in the European context. How do these remarks pertain to contemporary United States and China? Given the authoritarian nature of its government that dominates over society, a bad decision in China is more likely to go unchecked. As in the past, a single ruler or group can impose a bad decision on the entire country, such as when Mao Zedong ordered the Great Leap movement and the Cultural Revolution, with severely harmful consequences to the country. The self-inflicted injury stemming from these disastrous decisions has been far more harmful than that which can be imposed by hostile foreign countries. Even today, China lacks strong, institutionalized safeguards to prevent such occurrences. The zero-Covid policy offers a recent example of “oversteering.” China’s policies tend to reflect a top-down process with relatively few guardrails or self-correcting mechanisms to check against mistakes and mitigate their negative consequences. In sharp contrast, the division of power between the federal and state governments, the separation of power at the federal level introducing checks and balances, and the existence of numerous, powerful institutions such as the mass media and large corporations in the United States provide guardrails that help to prevent bad decisions by any individual or group from being carried out. The many established institutions and entrenched interests tend to have the effect of delaying and even immobilizing government’s decision processes. The opposite situation prevails in China where its centralized, authoritarian, and top-down political system

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is better able to penetrate society and mobilize resources. This seeming advantage, however, comes at the expense of weak or non-existent checks against arbitrary power and disastrous decisions as already noted. Kugler et al. (2012: 94) projected that China’s economy would overtake the United States around 2035, assuming it maintains high extractive and reach capacity according to their definition. Assuming low US policy capacity, this overtaking would occur sooner around 2025. However, should both countries be characterized by low policy capacity or should the United States maintain high capacity and China show low capacity, there would not be an overtaking until at the earliest in 2050 – if ever. These are of course very preliminary and tentative estimates, and they are best considered as interesting heuristics rather than firm predictions. Nevertheless, they serve the purpose of pointing out the importance of policy capacity in affecting a country’s growth trajectory. Moreover, they remind us that this capacity reflects each country’s domestic conditions, and that the growth of a country’s economy should be considered in a comparative context (i.e., relative to the economic growth of other countries). Thompson (2022) offers a compelling account on how relative decline at the international level can be compounded by dysfunctional domestic conditions. He sketches conditions such as those brought about by globalization, immigration, demographic transition, and partisan competition in the United States that have contributed to and, in some cases, exacerbated social discord, economic grievances, and political gridlock, constituting what he considers to be relative domestic decline. He concludes that “It is also unquestionable that domestic decline processes diminish the probability that domestic actors will be able to respond to external decline and turn things around. At the very least, domestic decline slows down and may block any effective responses to external decline” (Thompson 2022: 130). Elite consensus and social cohesion are necessary conditions for developing a strong policy capacity, which is in turn necessary for system leadership in world affairs. The provision of public goods required of this leadership is less likely to be forthcoming if policy capacity is severely compromised and public opinion is sharply divided. Domestic divisions tend to also have the effect of drawing policy makers’ attention to making short-term compromises, and to neglect the long-term consequences of their policy choices such as shown by the mounting level of national debt and the chronic underinvestment on physical infrastructure in the United States.

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In addition to “power as resources” and “power as ability,” Ashley Tellis presents another third conception of “power as outcome” or specifically, the power to control or shape the outcome of events: [This] third notion discussed by Boudon and Bourricaud centers on “the strategic character of power,” namely that “ultimately it is exercised not only against the inertia of things, but against the resistance of opposing wills.” This conception of power, which focuses fundamentally on the consequences of a given action, comports with the common human intuition of what it means to be powerful: getting one’s way. In its strongest form, this understanding of power incorporates the simple question of whether an agent is able to influence the targeted entity to act in a desired way, even if that entails undermining the target’s own interests – an idea that was later encapsulated in Robert Dahl’s now classic definition of power as the ability of A to get B to do something B would otherwise not do. (Tellis 2015: 6)

According to this perspective, power is not equivalent to just possessing certain resources or even the ability to mobilize and deploy these resources effectively. This perspective takes the further step of interrogating the likely results of one’s actions when they meet resistance from another state with a different agenda and opposing interests. This conception of power calls attention to the interactions between two or more parties. As Tellis notes in the above quotation, this view reflects Dahl’s (1957) well-known definition of influence (or power) as A’s ability to get B to act in a way that is contrary to B’s initial intention. Significantly, power in this conception is an inherently relational idea grounded in specific relations and contexts. It is not an abstraction but rather refers to efforts made by one state to impose its will on another (Chan 2023). The extent to which A can get its way reflects its relative power over B, and it is conditional on B’s sensitivity and vulnerability to A. In their well-known work on power and interdependence, Robert Keohane and Joseph Nye (1977: 12, 13) explain that sensitivity “involves how quickly do changes in one country bring costly changes in another, and how great are the costly effects?” whereas “vulnerability can be defined as an actor’s liability to suffer costs imposed by external events even after policies have been altered.” Chan (2023: 100) refers to the example of US efforts to ban the Chinese telecom company Huawei from accessing its market and technologies. The extent of Huawei’s reliance on the United States in these respects points to its sensitivity to Washington’s actions. In view

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of those actions taken by the United States, one can expect Beijing to take countermeasures to limit their negative effects on Huawei and China’s other enterprises related to information technology. Beijing will likely undertake countermeasures such as by increasing its efforts to gain market shares and recruit technology suppliers in other parts of the world and to develop its own indigenous capabilities. Such adjustments will take a long time to implement and bear fruit. The impact of the US ban even after Beijing’s attempts at mitigation points to China’s vulnerability which “can be measured only by the costliness of making effective adjustments to a changed environment over a period of time” (Keohane and Nye 1977: 13). As Chan (2023) points out, the adjustments undertaken by Beijing in response to the US sanctions can themselves be costly besides those brought about by the original US denial of access to its market and technologies. Chan (2023: 100–101) introduces a recent project by Moyer et al. (2021) to further clarify the conception of “power as (the ability to influence) outcome.” This study tries to get a grip on two important considerations: A’s potential opportunity to influence B and B’s potential costs for resisting A’s influence attempt. Naturally, these factors depend, respectively, on the extent of interactions between these two actors and the extent of asymmetry in their interactions. A’s attempt to influence B is contingent on the existence of some relationship between them, and A’s success in this potential attempt depends on its bargaining leverage over B, which is reflected by B’s extent of dependency on A. Moyer et al. (2021) compile data indicating the extent of Chinese and American relations with each of the other countries in the world. These data reflect multiple aspects of these relations such as those pertaining to economic, political, and security ties. The authors aggregate these data and use them to construct an index called Formal Bilateral Influence Capacity (FBIC). This index reflects the extent of relationship for each dyad (e.g., China and Burma, United States and Burma, China and Japan, and United States and Japan), and the extent to which one party in this dyad is more reliant on the other. Thus, for example, what is the extent of relationship between China and Burma as indicated by the volume of their political, economic, and security interactions, and how much is China or Burma more dependent on the other party in these interactions? The FBIC index indicates that Beijing’s global influence has increased in size and reach in recent years, whereas Washington’s

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influence has fallen. According to it, Beijing’s influence exceeded Washington’s influence in 61 countries in 2020, whereas Washington’s influence was greater than Beijing’s in 160 countries (Moyer et al. 2021: 12). These figures suggest that China has made relative gains at the US expense in the sense that there are now more countries where its influence has eclipsed US influence. Nevertheless, potential US influence exceeds potential Chinese influence in a larger number of countries than vice versa. It is also worth noting that these figures may not be as important as the identity of those countries susceptible to Chinese or US influence. That the United States has greater influence over Japan and Germany presumably matters more than China having more influence in Laos and Cambodia. Therefore, it makes a difference who are the potential targets of these countries’ influence attempts and how influential these targets are themselves. The study by Moyer et al. (2021) improves previous attempts to measure national power. It is typical for studies based on “power as resources” to report a single aggregate measure of this power. The assessment of each country’s power based on CINC exemplifies this approach. It does not consider specifically how A’s ostensible power stacks up against B’s ostensible power. In contrast, FBIC shows variations in A’s potential power when it is matched against B, C, D, and so on. In other words, FBIC recognizes that just because China, for example, has power over Burma does not mean that it also has power over Japan and the United States. It therefore takes seriously the relational aspect of power. It does not treat a country’s foreign influence, be it China, the United States, or some other country, in an undifferentiated way without recognizing that it can be quite different depending on the target country in question for A’s influence attempt. Moyer et al. (2021) are also sensitive to the concern that a country’s influence can vary across issue areas. Thus, for example, Switzerland may be more influential in matters pertaining to international finance and banking, while Saudi Arabia may be in a stronger position to influence the price and supply of fossil fuel, and likewise for Argentina with respect to the price and supply of grain. By their very nature, quantitative measures of power covering many countries and over time are less able to deal with some other important nuances as suggested by Dahl’s definition of power or influence mentioned earlier. For example, FBIC only suggests the potential for A to influence B; it thus says nothing about whether A has in fact intended

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to do so. This index refers only to some aspects of B’s prospective costs of resisting A but does not indicate A’s chance of succeeding in a possible attempt to influence B. The answers to these questions can depend on, for example, B’s ability to find alternative markets or suppliers for its export and import needs, respectively. Dahl’s definition requires the analyst to engage in counterfactual reasoning. As Chan (2023: 102) asks: How would B have acted in the absence of A’s influence attempt? A’s influence, after all, is the difference between how B would have acted in the absence of A’s attempt to alter its behavior on the one hand, and how B has in fact behaved after A’s influence attempt on the other hand. How do we know that B’s behavior has been altered by A’s influence attempt? How do we know that A has in fact attempted to influence B? Indeed, can B’s conduct be altered by A, even without A trying to influence B overtly?

The last question raised in the preceding paragraph turns us to what has been described as a country’s structural power. This conception of power suggests that A does not even have to try overtly or directly influence B for B to behave in a way desired by A. All that is required is for B to be aware of A’s possession of certain important resources or in some formulations of structural power, not even that because B has internalized A’s values and preferences or because B has been socialized to comply with prevailing social norms and practices instituted by A. According to this view, “power as or over outcomes” presented in the discussion thus far is too narrow and even deceptive because structural power can influence behavior in a more subtle but also more profound and lasting way. Barnett and Duvall (2005) refer to structural power as A’s ability to shape B’s environment and destiny, and thus to constrain the latter’s available choices even without it being aware of or only subconsciously aware of this situation. They point to the mutually constitutive relationship between A and B such as those between capital and labor, master and slave, employer and employee, and teacher and student. These relationships are inherently asymmetric, conferring advantages and privileges to some while denying them to others. Structural power can be pernicious and powerful because it influences people’s selfunderstandings and subjective interests. In this way, people are made to believe that the existing socioeconomic order is natural, legitimate, or inevitable, thus inclining them to identify with the existing power

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holders and to accept their role and fate in this order (Lukes 1975: 24). This conception of structural power encompasses the Marxist view of false consciousness and Joseph Nye’s idea of soft power. It is the power to coopt people and get them to share a hegemon’s agenda, preferences, and even identity without B, C, D, and so on even being aware of it. Allan et al. (2018) show that democracy and free market have made a deep, indelible impression on the people around the world. A vast majority of them associate themselves with these ideals, thus aligning themselves with the values and norms professed by the United States. In contrast, China does not have nearly the same normative appeal. In fact, it has to overcome widespread mistrust, even hostility, in the views held by many people in many countries. This asymmetry suggests that China will have a difficult time in establishing itself as the global hegemon. Even if it acquires the hard power for this preeminent position, it lacks the soft power that is necessary to attract a popular following. Like Japan, it is more known for its checkbook diplomacy than its projection of a normative package of ideas and ideals. This discussion is important because even a hegemon cannot rule by the bayonet; it needs legitimacy and voluntary compliance in order to sustain its preeminence. Economic power constitutes only a part of the structure power commanded by the United States. None of the three conceptions of power as resources, power as ability, and power as control over outcome quite captures the nature of this structural power which is based on and reflects to a large extent ideational construct. Discourse on the three conceptions of power just mentioned tends to miss or underestimate the nature and extent of Washington’s structural power (e.g., Buzan 2004; Chan 2023; Danzman et al. 2017; Oatley et al. 2013; Russett 1985; Starrs 2013; Strange 1987). A simple example may help to make this point. To the extent that a country’s financial assets are denominated in US dollar, it acquires a vested interest in the US economy doing well and the dollar remaining strong even if it is only dimly aware of or even completely unconscious about how this connection will affect its behavior. In this way, US interests have become its interests. By virtue of its centrality in global networks of financial institutions and internet communications, the United States enjoys a pivotal and powerful position to cut off other countries’ access to foreign capital

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and to surveil and monitor global information flows (because of Washington’s control of the Society for Worldwide Interbank Financial Telecommunications or SWIFT for short, and because the main nodes of global communications, social media platforms, and ecommerce transactions are operated by US companies and domiciled in the United States; Farrel and Newman 2019). The structural power of the United States enables it to set the rules of the game in international relations, but it also does more than that. It gives this country a huge advantage in enabling or constraining the choices other countries have available and shaping the perceptions, expectations, and even identities of people living abroad as suggested by Joseph Nye’s (1990, 2002, 2004) presentation of American soft power.

Do Military Expenditures Hurt Economic Growth? The preceding discussion on US structural power does not imply Washington will be able to count on it in perpetuity. Although it is difficult in the short run to overturn the huge advantage conferred by this power to Washington, it can be eroded in the long run if the United States loses its edge in military, financial, productive, and knowledge competition. Already, we have seen some incipient signs of this erosion as evidenced by countries like Brazil, China, India, Russia, and even Saudi Arabia moving increasingly to settle their trade in non-US currencies, thereby threatening the dollar’s preeminence that has been a tremendous asset and a source of leverage for Washington. As already alluded to, one source of this erosion is slower US economic growth compared to other countries, including China. This situation in turn means a smaller resource base to satisfy competing domestic and foreign demands. A failure to juggle prudently various priorities can in turn exacerbate economic challenges, social dislocation, and political discord at home, and make the problem of imperial overstretch more acute. One can already notice some signs of the latter problem. One of the main reasons behind building the US-led alliances in Europe and Asia has been to discourage the reemergence of militarism and nuclear armament by US allies in these regions. Lord Hastings Ismay, the first secretary general of the North Atlantic Treaty Organization (NATO) has reportedly remarked that this organization was intended “to keep the Russians out, the Americans in, and the Germans down” (https://

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goodreads.com/author/quotes/1375210Hastings_Lionel_Ismay). Commentators on international relations have suggested that alliances are not exclusively or even principally intended to aggregate the military assets of their member states. They often observe another purpose of alliances for controlling allies and preventing them from taking unwanted actions (Schroeder 1976). In discussions with Chinese officials and scholars, Americans often mention that the US–Japan security pact has the effect of “leashing” Japan and discouraging the development of an independent Japanese armed force and especially the prospect of a nuclear-armed Japan. As the world’s premier military power, it was not critical for the United States to combine its own capabilities with those of its allies to defeat the USSR or China. What was more important in the 1950s, 1960s, and even 1970s was to prevent the revival of an independent German or Japanese military. In exchange for eschewing this option, the Germans and Japanese accepted US military protection. Moreover, these US allies and others (such as South Korea and Taiwan) agreed to follow US political leadership in return for access to the US market. It seems that this grand bargain (sometimes named after Japan’s prime minister Shigeru Yoshida as the Yoshida doctrine) has recently come under increasing strain. One notable development is that Washington is now urging and even insisting that its allies contribute a larger share of the burden of collective defense. Thus, it seems that the United States is becoming less concerned about its allies’ growing military capabilities, which could eventually mean their less dependence on the United States to protect them. Another part of the grand bargain has come under pressure because the US market and the US dollar are not nearly as important as before. Many US allies now have China as their main trade partner, and they are concerned about the dollar as a store of value and its possible use by Washington as a tool of economic coercion. These are all signs pointing to cracks appearing in Washington’s still preponderant power. Its twin deficits, referring to its chronic budgetary shortfall and trade imbalance, also attest to a widening gap between existing obligations or objectives on the one hand and available resources to meet them on the other. A decision to take a hardline against a rising China has increased international tension and raised the financial support needed to compete with Beijing. This situation has been compounded by Russia’s invasion of Ukraine, which has caused the United States and its allies to

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confront that country, thus bringing about a closer alignment between Moscow and Beijing. In addition to its nemesis Iran, Washington’s position in the Middle East has come into question because of increasing signs of its estrangement from Saudi Arabia. In East Asia, Taiwan and North Korea present the usual danger spots that can provide the fuse for escalating tension and even a possible military confrontation. Carlo Cipolla (1970a: 1) summarizes the experience of imperial decline, stating succinctly that “whenever we look at declining empires, we notice that their economies are generally faltering.” Paul Kennedy (1987: 533) explains in more detail: . . . it has been a common dilemma facing previous “number one” countries that even as their relative economic strength is ebbing, the growing foreign challenges to their position have compelled them to allocate more and more of their resources into the military sector, which in turn squeezes out productive investment and, over time, leads to the downward spiral of slower growth, heavier taxes deepening domestic splits over spending priorities, and a weakening capacity to bear the burdens of defense.

Scholars have studied the economic decline of various former empires, including Rome, Byzantium, China, Spain, the Netherlands, and the Ottomans (Cipolla 1970b). A common theme of these studies is that imperial expansion brings about new wealth which increases new demands for consumption. These demands come not only from the existing elite but also from the masses who now want to share the new wealth. Both public and private consumption tends to rise over time. Yet, oftentimes productivity is unable to keep up with this rising consumption. Moreover, as prosperity spreads to nearby neighbors, their growth becomes a source of threat. This development in turn causes military expenditures to increase, thereby further straining the domestic economy. The processes just sketched may not apply exactly in the same way to each case of imperial decline, but they all point to a potential feedback loop of reciprocal influences between three pairs of relationships: those between domestic consumption and economic growth, between economic growth and foreign competition, and between foreign competition and domestic consumption. The pertinent relationships can be positive or negative, and the signs of these relationships can vary over time. Because all these processes can be operating concurrently, this phenomenon complicates empirical investigations

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to determine their temporal order and lead/lag time. Moreover, we can disaggregate the concepts just mentioned by differentiating them, for example, between private and public consumption, and we can also introduce additional variables that are hypothesized to affect or be affected by economic growth, such as investment, taxation, public and private debt, inflation, and currency stability. Cipolla (1970a) remarks that in all mature empires, public spending increases rapidly (albeit possibly for different purposes such as building temples and monuments, supporting the monarchs’ extravagant lifestyles, or financing large bureaucracies or military establishments) with concomitant increases in the tax burden on the civilian sector of the economy, sometimes to the point that those who tilled the land could no longer feed their families. The situation just described raises several significant questions. For example, does imperial decline precede the intensification of international competition and foreign threat, or vice versa? Is rising demand for domestic consumption (and, if so, whether public or private consumption, or both) an antecedent condition for a lethargic economy, or does an already declining economy further strain politicians’ choices between different kinds of domestic consumption, and between them and military spending? Do we see spending on “guns,” “butter,” and “circuses” rising at the same time albeit at the cost of rising debt, falling investment, mounting inflation, and depreciating currency? How long can politicians put off hard fiscal choices before a crushing debt and/or tax burden produces a collapse? Or would a slow, gradual decline be more likely than a quick and sharp collapse? If so, what processes distinguish these different outcomes? Unfortunately, we have more questions about these matters than answers. I share below research results that help illuminate answers to some of these questions. That there is a “chronic gap between commitments and demands on the one hand, and disposable resources, on the other” (Sprout and Sprout 1968: 661) is of course not a unique problem facing former empires. Their experiences, however, can help us understand better the challenges confronting modern-day great powers like the United States. The Sprouts emphasize two variables affecting how effectively politicians and officials manage to juggle various competing demands facing them: “(1) the degree of consensus within the community regarding goals and (2) the level, or quality, of public order that

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prevails. Communities exhibit wide differences with respect to consensus and public order, with deterioration of one or both likely to accompany stresses set up by rapidly changing conditions” (Sprout and Sprout 1968: 661). How politicians and officials manage their fiscal priorities, satisfy their international ambitions, and address perceived foreign threats requires us to understand and develop theories about the politics of budgetary processes (e.g., Wildavsky 1964) as well as about the politics of domestic coalition formation (e.g., Schweller 2006; Snyder 1993; Solingen 1988, 2007). Thus far, research on the defense–growth and defense–welfare debates (discussed below) has unfortunately not been informed by much theorizing on these matters. As the following discussion indicates, we are still at an early stage in trying to unravel various putative causal connections, to assess their relative strength (and even the direction of the pertinent relationships), and to determine which phenomena are antecedent to which others. The unavailability of good time series quantitative data is naturally a problem, especially as we go back in time. That historians studying this general topic tend to eschew comparisons between different cases of imperial decline poses another problem (Thompson 2004). A third problem, as it should become apparent from the literature review below, is that we have thus far only resorted to relatively crude methods such as looking for simple contemporaneous correlations in bilateral relationships (i.e., without regard to controlling for plausible intervening factors and distinctive features of various political economies, ancient as well modern). But most importantly and as already mentioned above, we have been handicapped by the lack of strong and explicit theories that can serve as a guide for our historical research, as Richard Eichenberg (1992) has argued persuasively. This said, I will introduce later the important work undertaken by Karen Rasler and William Thompson (1983, 1985b, 1988, 1991a, 1991b, 1992) in their empirical attempts to sort out the causes and conditions involved in the case of Britain’s decline as a system leader. Since the pioneering work by Bruce Russett (1969, 1970), asking who pays for defense (and who benefits from it) and what is the price of (military) vigilance, there have been many studies looking into the effects of military spending on a country’s economic growth and on the government’s other spending such as on its welfare programs. Naturally, there were others before Russett who theorized about the

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role of military spending in capitalist economies, such as Friedrich Engels and Vladimir Lenin. More recent neo-Marxist formulations (e.g., Baran and Sweezy 1966; Melman 1970, 1972) have pointed to the outsized role that the military–industrial complex has played in the US economy, the inherent tendency for capitalist economies to push for foreign expansion and thus to cause war, and the use of military spending as a counter-cyclical tool by the government in its effort to address increasingly acute and chronic economic crises in advanced capitalist countries. These formulations have generated some hypotheses about the origins and consequences of the so-called war economy, but not to my knowledge any thorough and systematic empirical agenda to analyze the available evidence. This is not to say that there have not been many empirical studies on this subject. In fact, there was a surge in the number of these studies in the 1970s, 1980s, and 1990s. A large part of this literature asks whether military spending hurts or helps economic growth and if so, how. Several causal connections between this spending and economic growth received particular attention. These connections may be discussed separately in terms of the three categories of factors contributing to economic growth. These factors are labor, capital, and technology. The following discussion follows (Chan 1992) in reviewing how a high level of military expenditures can affect economic growth via each of these pathways. Emile Benoit (1972a, 1972b, 1973, 1978) was the earliest and most prominent advocate of the view that although defense spending can reduce civilian production and crowd out investment for this production, its negative effects are more than offset by positive ones. He emphasizes that this spending helps to teach modern skills and habits (and thus develop human capital) and enhance the social mobility of disadvantaged groups in society. As such, his argument should apply more specifically to the military’s recruitment of personnel rather than its spending level, and to its role as the best organized and forward-looking modernization agent in developing countries. He concludes that “heavy defense expenditure does not . . . appear to have been associated with lower [economic] growth rates” (Benoit 1973: 4). Although some scholars have reported positive evidence supporting this conclusion (e.g., Babin 1989, 1990; Kick and Dev Sharda 1986; Weede 1983; and in the case of Dixon and Moon 1986, the fulfillment

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of basic human needs), many more have questioned it for various substantive and methodological reasons (Ball 1983; Biswas and Ram 1986; Brzoska and Wulf 1978; Deger 1986; Deger and Smith 1983; Dorfman 1972; Faini et al. 1984; Frederiksen and Looney 1983; Hagan 1972; Huisken 1983; Kaldor 1976; Lebovic and Ishaq 1987; Lim 1983; Nabe 1983; Smith and Smith 1980; Terhal 1981). The overall conclusion to be drawn from this debate is that most studies have either failed to support Benoit’s argument or contradicted it (Grobar and Porter 1989). Because this debate has focused on developing economies, its relevance to the topic at hand – the economics of imperial or great-power decline – is limited. Ron Smith (1977, 1978, 1980) has led the argument that military expenditures harm economic growth because this spending displaces civilian investment. When a government engages in deficit financing and goes to the credit market to borrow money for its spending (including, of course, defense spending), private enterprises seeking investment will have to compete with the government’s borrowing and thus pay a higher interest rate for their funding needs. Smith suggests that there is roughly a one-to-one trade-off between a country’s military spending and its total investment. Contrary to the studies referenced in the previous paragraph addressing primarily the economies of developing countries, this body of literature focusing on capital formation attends to the advanced developed economies, and it is therefore more relevant for our purpose here. Based on their research, Saadet Deger and Ron Smith (1983: 346) argue that “the negative effect of military expenditures on saving (and investment) outweighs the positive modernization and technological effect on the [economic] growth rate.” Other studies, such as Cappellen et al. (1984), Deger (1986), and Lindgren (1984) have also reported evidence suggesting that military spending comes at the expense of investment. Still other studies, however, introduce various caveats. For example, Rasler and Thompson (1988: 76–77) show that the available historical evidence is more supportive of the existence of a trade-off between defense spending and investment for the United States during 1946–1978 than for Britain during 1831–1913. Rasler (1990) has subsequently questioned the extent to which this trade-off has played in the former country’s relative decline. I will return later to these colleagues’ research on the interactions between investment, public and private consumption, and imperial decline in the British case. For

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now, we should note that the evidence pertaining to the defense– investment trade-off is mixed and contested. Thus, David Gold (1990: 3) argues that “defense spending is not an important determinant of investment” for the USA. A more recent review of the pertinent literature, focusing just on the United States, concludes that although defense spending has on the average a positive impact on economic growth with a multiplier effect between 0.6 and 1.2 (more likely at the lower end), direct spending on infrastructure has a greater positive impact on economic growth than defense spending. Moreover, to the extent that defense spending hurts infrastructure investment and raises public debt, it undermines long-term growth (Rooney et al. 2021). Research by others, focusing on developing economies such as India, Taiwan, and those in the Middle East from the 1960s to the 1980s failed to turn up significant evidence associating higher defense spending with lower civilian investment (e.g., Chan 1988; Faini et al. 1984; Lebovic and Ishaq 1987). As these studies examined only the relatively short-run impact of defense spending on capital formation, they did not speak to whether this impact might exist in the longer run (Smith and Georgiou 1983). Smith (1977) connects his research on the defense–investment tradeoff explicitly to the question of hegemonic decline. According to him, international leadership has significant long-term costs. As suggested by Mancur Olson’s (1965) theory of public goods, the leader of an alliance contributes more to the burden of collective defense than the alliance’s other members (Olson and Zeckhauser 1966). Free riding by the latter countries tends to erode the leading country’s economic advantage, thus causing its relative, if not also absolute, decline. This phenomenon suggests that the international system tends to undergo a process of power deconcentration over time, perhaps even eventuating in a power transition so that the leading power loses its preeminent position to a latecomer (Gilpin 1981; Modelski 1987a, 1987b; Organski and Kugler 1980; Thompson 1990). A third strand in the literature on the potential impact of defense spending on economic growth focuses on the role of technology. It argues that this spending diverts talent and money from improving a country’s technological foundation for civilian production and especially its most dynamic export sectors engaged in international competition (Rothschild 1973). This tendency seems to be supported in the export of automobiles, electrical appliances, electronics, and

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semiconductors, where the pertinent US manufacturers have lost much of their competitive edge to their Japanese, German, and South Korean counterparts in recent decades. The earlier US lead in aerospace has also been eroded, as shown by the emergence of Airbus as Boeing’s competitor. Although defense spending has led to some innovation and invention in technology, critics argue that it would be more efficient to directly support civilian efforts to achieve this goal rather than hoping for the indirect benefits of spin-off from defense-related research. In his review of technological innovations in the past, Joel Mokyr (1990: 184–186) observes, “Indeed, it is surprising how little evidence there is that military activity created positive externalities for civilian production given the apparent opportunities . . . weapons were more often borrowers of civilian technology than sources of inspiration for it.” Various analysts have also hypothesized that a loss of international economic competitiveness has a deleterious effect as shown in a country’s trade deficit, currency depreciation, structural unemployment, income inequality, and inflationary pressure (e.g., Abell 1994; Deger 1986; Dumas 1977, 1980; Melman 1970, 1972, 1974). Although the loss of US manufacturing jobs and the outsourcing of these jobs to other countries in recent decades, many of them in East Asia, is not in dispute, its causal connection to a high level of defense spending has yet to be proven conclusively. Gold (1990: 3), for example, has argued that a high level of military expenditures was not responsible for the decline in US trade competitiveness. Empirical evidence for this impact is also lacking for Taiwan, a trading state whose economy is heavily reliant on its export sector (Chan 1988). The general question about the technological displacement effect caused by high defense spending hinges on the argument that the defense establishment siphons off talent from the civilian sector to do research and development for military technologies (e.g., Dumas 1980; Russett 1970). As in the case of other propositions about the effects of defense spending on the civilian economy, researchers have not found any strong and unequivocal statistical evidence supporting this hypothesis. For example, Nils Gleditsch et al. (1988) failed to establish the funding of military research and development being related to civilian productivity in eight advanced Western economies. Based on his review of available evidence for the United States, David Gold (1990: 3) concluded, “there is no long-term trade-off between defense spending and civilian R&D.” Evidence from a developing country also

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points to this conclusion. Studies by Deger and Sen (1983) and Terhal (1981) were also unable to show conclusively any impact that India’s defense spending has had either positively or negatively on its technological advancement or civilian productivity. There is one further aspect to defense spending that deserves brief attention. It does not pertain to economic growth per se but refers rather to its impact on socioeconomic distribution. Some parts of the literature on this general topic argue that this spending tends to favor the more educated and privileged segments of society, such as people with advanced scientific and technological academic degrees. In the United States, this spending tends also to be heavily concentrated geographically, such as in California and Texas. Moreover, military expenditures can abet inflationary pressure, especially if an economy’s production capacity is already being fully utilized. These expenditures are not economically productive. They raise demand without increasing the supply of civilian goods. These effects have a more damaging impact on the more disadvantaged and vulnerable groups in society. They widen income inequality between the rich and poor, and they exacerbate the differences in the job opportunities available to the more and less educated segments of society. High inflation, for example, will pinch the pocketbooks of low-income groups more than high-income groups. To the extent that military expenditures compete with and have a negative impact on the government’s other programs such as spending on social services (including subsidies for housing, health, education, food, families with dependent children, and welfare and unemployment benefits), their economic burden tends to fall disproportionately on the shoulders of those citizens who are already at a socioeconomic disadvantage. This is my topic for the next section.

Is There a Defense–Welfare Trade-Off? In addition to the literature asking about whether a heavier defense burden is related to slower economic growth, there is another area of inquiry investigating whether military expenditures tend to crowd out government’s spending on civilian programs such as those supporting welfare, housing, and education intended to assist and protect the poorer segments of society. Here again, the available evidence appears to be mixed and inconclusive despite the fact that, as mentioned in the literature review by Chan (1992), many analysts have examined this

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topic (e.g., Caputo 1975; Dabelko and McCormick 1977, 1984; Domke et al. 1983; Hollenhorst and Ault 1971; Johnson and Wells 1986; Lyttkens and Vedovato 1984; Mintz 1989; Peroff and PodolackWarren 1979; Pryor 1968; Russett 1971, 1982). Military expenditures can have an income-shifting effect directly or indirectly. Money spent on the military will necessarily be unavailable for spending on other programs. Seen in this way, a direct trade-off exists by definition between these two types of expenditures. This view assumes that the size of the government’s budget is fixed. However, politicians have often increased spending for both purposes by resorting to borrowing to cover budget deficits. Because reducing funding for either defense or welfare can be expected to encounter resistance from important vested interests, and because raising taxes can also be unpopular, the path of least resistance would be to maintain and even increase both kinds of spending at the same time, resulting in ever expanding budgets and deficits. Indeed, the historical trend for US federal spending tends to follow this pattern (Clayton 1976), with the cost of deficit financing falling on those who are too young to vote and who have not yet been born. The years of Ronald Reagan’s administration were an exception to the pattern just mentioned; it raised defense spending and cut social spending. An indirect trade-off can result if defense spending causes higher inflation, higher unemployment, and slower economic growth. To the extent that it has these consequences, this spending has an incomeshifting effect to the detriment of poor people. To the extent that it raises the income and employment prospects of the already advantaged individuals with resources such as capital and desirable skills, it further exacerbates income inequality and social inequities. We still lack, however, rigorous analyses that trace the hypothesized effects through these multiple channels and that document these effects empirically and systematically. Moreover, as discussed in the last section, we still need to establish the opportunity costs of military expenditures on future economic growth. More recent research by Goldsmith (2003) pertains to the opposite side of the coin, suggesting that faster economic growth and greater wealth tend to result in more funding for the military. Studies by Domke et al. (1983) and Russett (1982) failed to find any zero-sum effect showing that defense spending has displaced social spending. More fine-grained analyses by Mintz (1989) and Mintz and Huang (1991), employing defense spending disaggregated according to

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its component categories (e.g., personnel, procurement, research and development), were also unable to show any evidence of such displacement for the United States. There was also an absence of negative or positive correlations between changes in defense and welfare spending in the time series data for Taiwan (Davis and Chan 1990). This discussion should not be taken to imply that the possibility of trade-offs among different categories of public consumption can be ruled out. In fact, existing studies usually just examine the contemporaneous spending figures for a government’s different fiscal categories without, however, engaging in more comprehensive investigations. I have already mentioned above that a government’s defense and civilian programs can both grow based on increasing deficit financing. In this case, the trade-off pertains to funding the expenses of these programs by current taxpayers versus payment by future generations. In some years before 1853, as much as four-fifths of Britain’s budget went to pay for loan interests and military spending, leaving little for other kinds of expenditures. Loans borrowed to finance wars, especially global wars, and the interest payments for them have usually become a permanent feature of global leaders’ political economies. As Karen Rasler and William Thompson (1983: 504) have remarked, “To the extent that war-induced debt levels are relatively permanent, the full costs of war (especially in the case of global wars) are nearly perpetual.” Naturally as just noted, high debt squeezes government’s ability to pay for other programs. Whether relative debt burden (debt as a proportion of GDP) falls depends of course on the rate of economic growth. Neither Britain nor the United States were able to return to the pre-1914 level of relative debt during the interwar years (Rasler and Thompson 1983: 510–512). Until the 1920s and 1930s, government’s funding for social services was not a priority in either Britain or the United States. As Jerry Hollenhorst and Gary Ault (1971) observed some time ago, the evidence on trade-off may vary according to the methods used to fund defense spending as well as different period effects (such as during war or peace time, and during times of economic prosperity or austerity). In this respect and as already pointed out, the years of Ronald Reagan’s administration show an exception to the generalization indicating an absence of a direct guns-versus-butter trade-off for the United States (Mintz 1989; Russett 1982). Besides deficit spending, governments have tried to skirt a direct defense–welfare trade-off in their spending in other ways. One example

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comes from South Korea which had instituted a sales surtax at one time to fund defense spending. In this case, the trade-off involved consumer spending and defense spending. India provides another example of how a spending trade-off might be evaded at least superficially: the central government had shifted some of the burden for financing welfare programs to subnational levels. France’s recent change of retirement age from 62 to 64 furnishes still another example, albeit in this case the trade-off involves working for more years to sustain funding for existing pension plans. Discussions along these lines have also taken place in the United States where Social Security and Medicare/Medicaid programs face impending funding shortfalls, and postponing the age of retirement, raising people’s contributions to these programs during their working life, and reducing the benefits for some retirees are among the options being discussed. There has also been a greater reliance on corporations to play a role in their employees’ retirement plans. In these many forms and ways, we see displacement and substitution effects related to government’s fiscal policies, even though direct competition between its expenditures for different programs may not always be disclosed when we examine aggregate categories. As a final example, as I write these words in late May 2023, there is a looming deadline for the White House and Congress to reach an agreement to lift the US debt ceiling to avoid default. Negotiations have reached an impasse. Republicans are insisting that government spending be capped at last year’s level and additional work requirements be imposed on recipients of certain kinds of public assistance as a condition for them to agree to lifting the US debt ceiling. Democrats are resisting these Republican demands. This ongoing drama demonstrates that one can kick the can down the road only so long before there is a reckoning with the trade-off consequences of military expenditures – which Republicans have refused to cut. The US Treasury has announced that unless the debt ceiling is lifted by June 1 (later amended to June 5), it will be unable to pay its outstanding obligations after that date, including possibly Social Security and Medicare/Medicaid that many Americans rely on. As hinted earlier, the spending categories used in existing studies are often quite lumpy, which is to say that should these expenditures be disaggregated into subcategories (such as if the government’s civilian programs are broken into separate items like for education, health, housing, and welfare, and if defense spending is separated into items

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such as for personnel, procurement, and research and development), there may be more discernible or stronger evidence pointing to displacement and substitution effects at this lower level of analysis. Moreover, the pertinent trade-offs may come in forms other than changing funding levels. As just mentioned in the last paragraph, more stringent requirements for people to qualify for government assistance represent a kind of trade-off albeit not directly in the level of authorized spending. Moreover, because existing studies do not always account explicitly for the influence of other pertinent factors in their statistical analyses, it is possible for them to overlook evidence of direct or indirect defense– welfare trade-offs. One such obvious factor is whether an economy is already operating at full capacity. If so, government spending, including its defense expenditures, can exacerbate inflationary pressure which in turn hurts low-income households more than their more affluent counterparts. However, if there is considerable slack in the economy and if especially it is in recession, government spending in general can work as a counter-cyclical tool to stimulate it and thus boost economic activities and employment without abetting inflation. Still another relevant factor would be resources from abroad, such as assistance from a foreign ally. This assistance can mitigate the severity of defense–welfare trade-off and perhaps even help the recipient country to avoid it entirely. Finally, trends pointing to a trade-off between defense and welfare spending may become only apparent in the long haul. Thus, this evidence may not be discernible when a study only looks for effects in the short run (Domke et al. 1983; Mintz and Huang 1991). Indeed, when a country runs a chronic budget deficit to support public spending without investing enough to enhance productivity to support this consumption, the incremental negative effects of this practice may appear to be small initially. However, over time these effects can accumulate and accelerate to the point that they precipitate a run-away downward spiral.

The History and Dynamics of Britain’s Imperial Decline In the modern era, we have seen several international hegemons or near-hegemons come and go. We lack good longitudinal data, however, to study the causes and conditions of the decline of Venice, Portugal, the Netherlands, and their peer competitors Spain, France,

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and the Ottoman Empire. The case of the United States is still ongoing, and there is much debate about the extent to which it has suffered a relative decline but is still managing to maintain its unprecedented supremacy in modern history (e.g., Beckley 2011–2012; Brooks and Wohlforth 2016a, 2016b; Buzan 2004; Chan 2023; Farrel and Newman 2019; Oatley et al. 2013; Starrs 2013; Strange 1987). There is of course no contradiction between observing that the US dominance over other countries has diminished and stating that it still commands a vast lead over the rest of the world. This situation leaves us with the British case with sufficiently good data, and with a settled historical outcome of imperial decline ending with this country losing its leadership position in world affairs. In an article referred to briefly earlier, Harold Sprout and Margaret Sprout (1968) provide an account that differs in some important ways from the usual defense–growth and defense–welfare debates reported in the last two sections. How have British officials and politicians sought to cope with rising and competing demands for resources when the supply of these resources is growing much more slowly? The Sprouts start by pointing out that Britain has always been heavily dependent on importing its foodstuffs and industrial raw materials. To pay for these imports, it needs to export to earn the necessary foreign revenues. The need to sustain competitive export industries in turn requires continuous and large investments in infrastructure and machinery. It also requires technologies and raw materials from abroad. Escalating private consumption naturally also plays its part in raising demand for imports. These demands further intensify the pressure to export. There is therefore a feedback loop between imports and exports. A major part of Britain’s policy dilemma has also stemmed from the fact that rising private and public consumption tends to hamper investment, which in turn would have a deleterious effect on its export competitiveness. Declining export competitiveness would be a serious threat to Britain’s economy, draining further its dwindling foreign reserves and causing the pound sterling to lose its value. This development would in turn have other negative consequences for funding investments and imports. The economic story told by the Sprouts therefore consists of interrelated moving parts with multiple, reciprocal influences operating directly and indirectly. This story also has an important political component. It pertains to Britain’s democratization process, and the concomitant rise in the

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political awareness, mobilization, and power of its traditional underclass that used to be largely excluded from its economy’s benefits. The rising demand from an expanding electorate for a larger share of these benefits became increasingly effective. Politicians were leery to resist the popular demand for more personal consumption and pressure on the government to provide social services such as subsidized housing, national health, unemployment and pension benefits, and support for education and childcare. Electoral pressure meant that it became “politically inexpedient to dampen private spending severely or to cut back governmental spending for the social services” (Sprout and Sprout 1968: 678). The dilemma posed by escalating demands and insufficient resources obviously means that something must be sacrificed to make up for the shortfall. According to the Sprouts, Britain’s answer was to reduce military expenditures in favor of private consumption and funding for government’s social services, and insofar as possible, sustaining investment at a reasonable level to maintain export competitiveness. General trends point to private consumption and public spending on civilian programs taking up an increasing share of the economy and government’s budget. The trade-off was Britain’s reduced international profile. Sprout and Sprout (1968: 676) argue that these trends were already evident before World War II. From 1921 to 1938, military expenditures were consistently lower than allocations to pay for social services. The widest gap between them occurred in the depression year of 1932 when the government’s expenditures for social services were more than four times greater than military expenditures (12.9% of the budget versus 2.8%). After 1950, expenditures on social services continued to rise while defense spending stayed at about the same level except during the Korean War. By 1966, funding for social services was about three times larger than for the military. British politicians and officials’ menu for choice was severely constrained. The Sprouts summarized the fundamental dilemma confronting them to be the problem of not having enough resources to fund escalating popular demands plus accumulated commitments made over time. Given this resource gap, which needs should receive priority and others be sacrificed? British leaders decided that priority must first go to sustaining their country’s exports to pay for its imports. Their next priority was to provide popular social services to secure political tenure. “These imperatives take precedence over foreign commitments

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and military demands in the prudential calculus of contemporary British politics” (Sprout and Sprout 1968: 681). On these points there has been broad elite consensus despite the different political leanings of the two competing parties. Thus, British politicians’ “decisions in recent years have rather consistently given high priority to personal consumption and the social services, nearly as high priority to exports and industrial modernization, and much lower priority to overseas commitments and the military establishment” (Sprout and Sprout 1968: 681). This view contrasts with the suggestion from much of the literature reviewed earlier, suggesting that military expenditures hamper economic growth and moreover crowds out the government’s spending on civilian programs. The Sprouts’ argument reverses the causal arrow, suggesting that anemic economic growth caused Britain’s military spending to be reduced. Moreover, and again contrary to the literature just reviewed on the guns-versus-butter trade-off, in the Sprouts’ view Britain’s experience points to defense spending losing the budgetary competition to welfare programs rather than the reverse. As already mentioned, unravelling this story would entail establishing temporal precedence (e.g., did imperial decline set in before slower economic growth, or did slower economic growth precede imperial decline?), and disentangling possible reciprocal influences (e.g., did rising civilian consumption drive down defense spending, or did slashing defense spending enable increasing civilian consumption, or both). Of course, it would also be useful to distinguish primary from secondary sources contributing to Britain’s relative decline. In a series of analyses, Karen Rasler and William Thompson took on these and other related questions. They note: Some causes may in fact be more accurately perceived as consequences of decline. Consumption-investment tradeoffs may offer one of the better examples we have. These types of factors may facilitate further decline and in that sense may deserve the causal label. But we need to distinguish as best we can the second-order causes from the roots of relative decline. (Rasler and Thompson 1992: 39)

Besides looking into propositions derived from the Sprouts’ discussion, Rasler and Thompson also considered several other theories on why countries experience decline. I have already mentioned earlier Carlo Cipolla’s (1970a) observations, suggesting that rising demand for both

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private and public consumption, combined with increasing defense spending, have led to a faltering economy, which in turn has been in his view the usual cause behind the fall of former empires. Robert Gilpin (1981, 1987) considers four parts making up the domestic economy: protection costs (i.e., military expenditures), public nonmilitary consumption, private consumption, and investment. As Rasler and Thompson point out, if the first three categories of spending rise concurrently at rates greater than economic growth, investment must suffer. “As a consequence, the efficiency and productivity of the productive sector of the economy on which all else rests will decline. If the productive base of the economy erodes, it becomes more difficult to meet the rising demands of protection and consumption without further cutbacks in productive investment, thus further weakening the future health of the society” (Gilpin, 1981:158). Thus, Gilpin concurs with the Sprouts’ view that declining investment means eventually lower productivity, slower economic growth, and erosion of international competitiveness. For Gilpin, investment is the primary driver of economic growth, although other factors such as technological innovation and international borrowing also enter the picture. Rasler and Thompson also introduce Ron Smith’s (1977, 1978, 1980) thesis of a defense–investment trade-off reviewed earlier. This thesis shares the Sprouts’ view that in advanced capitalist democracies, politicians and officials would be reluctant to resist private consumption or to roll back government’s social services. Disagreeing with the Sprouts, Smith sees international ambitions inclining these politicians and officials in advanced capitalist economies to continue their support for large and increasing defense outlays. Falling investment is the result, and this tendency is in turn the leading cause for economic decay and the erosion of a country’s international position. As mentioned earlier, Smith connects his thesis of a defense–investment trade-off to the costs of collective defense borne disproportionately by the system’s leader. This phenomenon and the concomitant tendency for this leader’s allies and protégés to free ride tend to exacerbate its downward mobility in the international pecking order. The overhead cost of being the global cop on the beat would strain the hegemon’s resource base. There are important similarities and differences in the interpretations of those scholars mentioned above. The Sprouts’ interpretation suggests that Britain’s international decline preceded and exacerbated

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the competing domestic demands for consumption and investment. Gilpin’s analysis, however, points more in the other causal direction, suggesting that domestic choices made in favor of consumption at the expense of investment lead to a country’s deteriorating international position. Cipolla was less clear about his view on the main driver responsible for imperial decline. Rasler and Thompson see an emphasis by him on declining productivity being the main reason, whereas I give more weight to rising demand for consumption as the culprit in his account. Finally, Smith’s thesis is rather straightforward: military expenditures hamper capital formation, and insufficient investment in turn causes slower economic growth and eventually relative (if not also absolute) decline. Regardless, Rasler and Thompson (1992: 44) are certainly right in reminding us that these theoretical questions “need not be an either/or proposition. First-order tradeoffs could easily lead to consequent, second-order tradeoffs. Nor is it clear that all preeminent powers must experience the same exact processes of decline. What is first-order for one case may be a second-order consideration in another setting.” The results of Rasler and Thompson’s (1992) longitudinal analysis suggest that Britain started to experience decline as early as the 1870s when its lead in naval power started to erode. Another indicator, reflecting production by Britain’s leading industrial sectors, also showed signs of decline about the same time. The United States overtook Britain’s naval power in the early 1920s, and this overtaking occurred even earlier around 1890 if we point to these countries’ industrial production. Britain’s share of global trade presents another plausible indicator to track its changing international position. According to this measure, the onset of decline occurred even earlier around 1840. From then on, steady erosion of Britain’s premier status as a trading state continued with only a brief rebound in this position in the years immediately before and after World War I. By the end of World War II, the United States had also overtaken Britain as the largest trading state. Although, as just indicated, different variables show different timing for the onset of British decline, it seems that this process was well under way by the last two decades of the nineteenth century, and Britain had lost its international leadership position certainly not long after the conclusion of World War I. That Britain had lost its preeminence in international industrial, financial, and naval power was no longer in

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doubt during the interwar years. Thereafter, there was a continuous process of relative decline. After World War I Britain had already fallen from the pinnacle of interstate hierarchy and thus, as Rasler and Thompson (1992: 38) note, “the question of systemic leadership was no longer involved.” Significantly, in these authors’ view the Sprouts have traced the original sources of Britain’s decline to a considerable extent to developments outside its borders. They mention four changes that eroded Britain’s leadership position: changes in naval technology; emergence of competitors also with significant resources; London’s diminishing comparative advantages in industry, commerce, and finance; and political mobilization of subjugated peoples both at home and abroad. The last factor meant that the British elite had to manage increasing demands from its own citizens for private consumption and social services while at the same time, to face the rising costs of maintaining its rule in overseas colonies. In combination, the four developments just mentioned were supposed to initiate the onset of decline, and subsequently set the stage necessitating hard choices to be made when British leaders confronted the dilemma of not having enough resources to meet escalating demands and continuing commitments. What can we learn from multiple empirical studies undertaken by Rasler and Thompson addressing not only the case of British decline but also comparing the histories of other major powers’ political economies? Their evidence from researching the experiences of other countries provides an important backdrop for the British case. Although their studies could not resolve conclusively all the questions raised in this discussion, they make significant contributions to advancing our understanding of these topics. I review the ensemble of their research findings. Looking for evidence of a trade-off between defense spending and investment, Rasler and Thompson (1988) engaged in time series analyses for the pre-1914 era for Britain as well as for the United States, France, Germany, and Japan. Controlling for the effects of economic growth, military expenditures (as a share of gross national product or GNP) were regressed against fixed capital investment (also as a share of GNP). This exercise failed to turn up any statistically significant evidence of a defense–investment trade-off for four of the five countries, including Britain as the global hegemon. France (1821–1913) was the exception showing the existence of a defense–investment

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trade-off. The post-1945 era produced different results. There was a statistically significant result confirming a defense–investment trade-off for the United States. Thus, the experiences of post-1945 United States and pre-1914 Britain show that defense burden has had different impact during their respective years of relative decline. Karen Rasler (1990) sheds further light on the US case. She shows that during 1948–1986, there were negative relationships between US investment and the federal government’s total spending, its spending on defense and welfare separately, and its deficit spending. When this entire period is divided into two segments (1948–1970 and 1971–1986), the negative relationship disappears for the earlier segment but remains for the later segment. These relationships were stronger and more pervasive after 1970 when the downturn in US productivity appeared to have already been occurring for some time. This phenomenon led to the conclusion that the defense–investment trade-off did not cause the US productivity decline but was rather derivative of it. Naturally, decreasing productivity after the onset of decline could have made this trade-off even more likely and more difficult to manage. Did rising consumption lead to decreasing investment and declining growth? Or does the available evidence point in the other direction, showing falling investment and slowing growth causing consumption to drop? Or do reciprocal influences characterize the relationships among these variables? Rasler and Thompson (1991b) take on these questions for pre-1914 Britain and post-1945 United States. Evidence from the British case does not show various types of consumption to have impacted investment or economic growth. In the US case, only private consumption has influenced economic growth. In both cases, public consumption (i.e., government spending) did not have a significant discernible effect on investment or economic growth. Their several analyses led Rasler and Thompson (1992: 47) to conclude that the available historical evidence does “not support the argument that consumption-driven investment tradeoffs are critical to an understanding of the relative decline of system leaders. The evidence suggests that they are derivative phenomena of decline.” This conclusion, however, does not rule out the possibility that “these tradeoffs [could] act as second-order influences on continuing decline.” This latter tendency may plausibly characterize the results for the US case reported by Rasler (1990).

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Returning to our focus on the British case, I have already mentioned that the available evidence does not support the proposition that defense spending had hurt investment in the years prior to World War I. Moreover, during the 1831–1913 period Britain’s consumption did not affect its investment or economic growth. What about the 1950–1980 period? Although some prior patterns may persist, one can also expect from the Sprouts’ discussion to see high levels of consumption (both private and public) to reduce investment in the more recent years (Rasler and Thompson, however, are more agnostic about whether in the Sprouts’ view the British government’s spending on social services would receive a higher priority than investment). Moreover, that discussion would imply that lower investment and slower growth should reduce military expenditures. The Granger coefficients for these relationships, however, point in the other direction, suggesting positive investment and growth to have had a depressing effect on military expenditures in the post-1950 period, albeit with a lag from four to six years. As Rasler and Thompson (1992: 48) suggest, if the Sprouts are right, “we should not expect to find any reciprocal relationships or causal arrows pointing from military consumption to investment and growth.” The Granger analysis results indicate that this has indeed been the case for Britain in the post-1950 period. It is not clear whether the Sprouts would expect that a larger public sector as implied by the government’s nonmilitary spending would slow the economy. The Granger results indicate no such impact. As mentioned previously, Cipolla expects private and public consumption (including defense spending) to rise concomitantly, and this tendency should in his view influence economic growth negatively. Although private consumption turned out to be causally antecedent to the government’s nonmilitary spending, neither had a statistically significant effect on Britain’s post-1945 economic growth. Also contrary to Cipolla’s expectation, defense spending did not show any significant effect on this growth. In Gilpin’s view, if consumption reduces investment, we should expect to see falling investment to produce slower growth. Smith’s formulation follows the same general script except that he would focus on the impact of military consumption on investment rather than that of consumption in general. As already mentioned, however, Rasler and Thompson’s Granger results do not indicate the existence of a statistically significant trade-off between the British government’s military or nonmilitary spending and investment.

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With respect to the proposition of a defense–growth trade-off, these colleagues’ analysis has also failed to turn up evidence supporting it for Britain in either 1831–1913 or 1950–1980. Although most of the signs for the latter period were in the right (negative) direction as this proposition suggests, none of the coefficients were statistically significant (Rasler and Thompson 1992: 56–57). On the other hand, and as one would have expected from conventional wisdom, prevailing economic theory, and discussions by those scholars mentioned above, their analysis finds investment and economic growth to be reciprocally and positively related for Britain during both periods. High investment produces high economic growth, and vice versa. Is there evidence of a trade-off between the British government’s spending on military and civilian programs? The Granger results for the pre-1914 period show that while its nonmilitary consumption had a positive influence on its military consumption, its military consumption had a negative influence on its nonmilitary consumption. As both influences manifested themselves with a lag of one or two years, it is difficult to interpret them substantively. The results are easier to interpret for the post-1950 period, with the government’s nonmilitary spending anteceding positively its military spending. This tendency would support Cipolla’s view of rising government consumption in general (i.e., increasing nonmilitary spending producing further military spending), a view that is given further force because private consumption was also encouraging further increases in the government’s funding for social services. This latter tendency for private consumption to stimulate more nonmilitary spending by the government and the tendency for the government’s nonmilitary spending to stimulate its military spending (albeit with a lag of five and six years) would be a worrisome sign from Gilpin’s perspective. Yet as reported earlier, there was no evidence from post-1950 Britain showing that public consumption has had a direct negative impact on investment. If anything, rising private consumption lifted investment with a lag of two years. Contrary to Smith’s expectation and Gilpin’s fear, neither private nor public consumption (including the government’s military spending) has hurt investment or, for that matter, growth in both periods of British history. Finally, that there is no evidence of a direct trade-off between private consumption and military spending seems to be damaging to the Sprouts’ account. Moreover, this account appears to be

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contradicted by the tendency for the government’s nonmilitary spending to have in fact produced higher military expenditures (albeit with a lag of five and six years as already noted). But the Sprouts had it right when we consider the military to have been accorded less fiscal importance than other spending items. And indeed, the Granger analyses conducted by Rasler and Thompson show that military spending did not influence these other variables but was itself more likely to be influenced by them. This result implies that military spending has been subordinated to other higher fiscal priorities. Except for the positive influence of investment on economic growth, none of the other variables being considered here (private consumption, government military consumption, and government nonmilitary consumption) is found to influence economic growth in either pre-1914 or post-1950 Britain. Moreover, with the exceptions of private consumption and economic growth stimulating more investment, investment is not affected by any other variable in the post-1950 period for Britain (as already mentioned, a growing economy produced higher investment in the pre-1914 period). Finally, in post-1950 Britain, economic growth did not elevate private consumption or defense spending, although it did raise the government’s funding for social programs with a lag of two years. These are the three main conclusions to be drawn from the above discussion. Stated in another way, some of the most rigorous research to date has not been able to turn up any evidence of military spending hurting investment and hindering economic growth (although the pertinent signs were negative, the coefficients were not statistically significant). Economic growth in post-1950 Britain produced more government provision of social services but not more defense spending.

Conclusion We have visited a considerable number of topics in this chapter. On its surface, the claim that a country’s international position is dependent on its economic prowess is eminently reasonable. Similarly, that wars are won by the side with greater economic resources seems also a sensible generalization. This does not mean that the size of a country’s economy is the only thing that matters. It is not. Thus, it is important to consider not just the stock of resources a country has, but also its effectiveness in extracting, mobilizing, and deploying the resources available to it. Mere possession of resources is not enough.

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Relationships also matter. A country’s position in networks of international interactions, especially the number of its connections to other entities and its centrality in these networks, is a critical consideration for its structural power. According to network theory, positional advantage is important. Structural power can influence other people’s views and conduct without them even being consciously aware of this fact. Significantly, pairwise comparisons of the tangible stock of assets or material resources possessed by two countries, such as the number of missiles or the volume of exports commanded by the United States and China, can be very misleading for this and other reasons mentioned in the preceding paragraph. Moreover, as suggested earlier, interstate contests are usually settled not by a dyadic struggle between just two countries. Their outcome rather depends on the relative strength of opposing coalitions. The discussion in this chapter considers not only the proposition that economic prowess determines a country’s international standing, but also invites the readers’ attention to consider the reverse question of how the search for foreign influence can undermine a country’s domestic economy. Few people are likely to question the proposition that in the final analysis, a country’s security protection and military power rest on a foundation of strong economy and technological progress. But can it try to have both “guns” and “butter”? A large military establishment, a vibrant economy, generous welfare programs, and a low tax burden, all at the same time? Thus, this chapter also engages the debate about whether and how a country’s economic performance and other desirable socioeconomic objectives can be compromised by its foreign policies intended to advance or protect its interests abroad. There is a considerable literature suggesting that a country’s international commitments and especially its defense expenditures can have a deleterious effect on its economic performance such as depressing its investment, reducing its export competitiveness, and diminishing the available pool of talent and funds for developing new technologies to enhance productivity. It has also been suggested that military spending can displace a government’s provision of social services to its citizens. Research to date, however, has not produced strong evidence in support of many of these claims about the existence of a defense–growth trade-off and a defense–welfare trade-off. Longitudinal data from Britain do not indicate that private or public consumption has increased at the expense of investment. There is also

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scant evidence of a direct trade-off between the government’s spending on military versus its spending on nonmilitary programs in the post1950 period. During this same period, military spending appears to have been subordinated to changes in investment, consumption, and economic growth rather than the other way around. Naturally, Britain’s experiences need not be replicated in exactly the same way in other countries. As pointed out earlier, in the post-1970 period, time series data for the United States indicate a statistically significant negative impact of defense spending on investment. That research thus far has not generally found strong evidence supporting trade-off claims of various kinds can simply reflect the relatively simple research design and methodology used in the relevant investigations to date and their failure to control properly for other important factors. One particularly salient issue pertains to the possibility that the trade-off effects may not be discernible in the relatively short run, but that they can accumulate over time and suddenly accelerate to precipitate a major systemic transformation. Paul Kennedy (1987: 445) has averred that “there is a certain trade-off between short-term military security and long-term economic security.” But how long is the long term and what are feasible policies to mitigate, offset, and overcome those tendencies that hamper economic performance, whether their sources can be traced back to excessive military spending or some other reasons? In the next chapter, I will discuss the importance of and conducive conditions for a country’s efforts to facilitate technological innovation and promote the growth of its leading industries, and thereby to sustain and improve its international competitiveness and position.

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The future relationship between China and the United States is not preordained. It is contingent and can evolve in different ways depending on their respective leaders’ choices and on the different scenarios that changing domestic and international environments can present (Kugler et al. 2012; MacDonald and Parent 2011, 2018a, 2018b; Rapkin and Thompson 2013). This said, these leaders are still coauthors of their countries’ destiny even though their menus for policy choices are naturally constrained by their respective domestic and foreign environments. I have argued that a country’s economic growth is the key determinant of its international competitiveness and position, and this growth is in turn dependent on its culture and its capacity to innovate and invent. This latter capacity holds an important key to its growth prospects (Landes 1969, 1998; Mokyr 1990, 2016). Increasing productivity results from innovations and inventions, and this increased productivity can offset or at least mitigate the effects of trends such as demographic decline, rising consumption demands, and diminishing returns from past investments. It can catapult a country to international economic preeminence and sustain its economic leadership, thereby also improving or maintaining its political influence and military capability in the international arena. This chapter takes up this discussion on China’s past record and prospective performance in its technological competition with the United States.

Historical Precedents Portugal rose to become the world’s first leader in the modern era. It was followed by the Netherlands. Unlike Britain and the United States that succeeded them, these countries’ wealth and power were based on lucrative long-distance trade of cash crops like spice, sugar, and tobacco. They were trading states like their predecessors Venice 156

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and Genoa. Their naval prowess enabled their global reach, undergirding this trade, protecting their overseas outposts and commercial vessels from being raided and at the same time, helping them to exclude interlopers challenging their trade monopolies. They were the first countries to establish a global reach, connecting different parts of the world in a vast trading network (Modelski and Thompson 1996; Wallerstein 1974). In contrast to their successors, Britain and the United States, Portugal and the Netherlands did not have a domestic industrial base (or a rather limited one in the Dutch case). That development had to wait for the arrival of the British on the scene. Like its predecessors, Britain had also established itself as a dominant sea power and a transoceanic trader but to a much greater extent than Portugal and the Netherlands. It eventually colonized large expanses of foreign territory to create an empire that dwarfed its predecessors’ overseas acquisitions. What distinguished the British, and later the Americans, however, was their development and possession of a vibrant industrial base at home. These countries’ inventions and innovations launched them on a course of economic development that placed them at the pinnacle of the interstate hierarchy and consolidated their leadership position in the world. The British had two economic spurts that enabled them to sustain this position until the last two decades or so of the nineteenth century, when its economy was overtaken by the United States. Not long after the conclusion of World War I, Britain’s loss of this position was no longer in dispute. Its navy and foreign trade had also been eclipsed by the United States (Rasler and Thompson 1992), although Washington continued to be a reluctant hegemon outside its home region until World War II. As George Modelski and William Thompson (1996) and Rafael Reuveny and William Thompson (1999) have shown, different industries played the role of being the leading economic sectors during different eras. This role was assumed by textiles, iron production, and the steam engine in Britain’s industrial revolution. Railroads then took over as the key to industrial dynamism in subsequent years as shown especially by the construction of railways in the United States’ push to extend and consolidate its westward frontier. In the years prior to World War I, the production of steel, chemicals, and electricity emerged as the leading sectors of a modern economy. Germany’s rise to become a great power was propelled by these sectors. This wave of industrial innovation and modernization was followed by the

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automobile industry as the growth engine that led the expansion of the US economy after World War II. Electronics, aerospace, and semiconductors then followed, and the United States again led in pioneering these industries, even though its edge in these sectors as well as in the manufacturing of automobiles had already diminished considerably before the 1990s (Modelski and Thompson 1996). Other countries have also been catching up in information technology, telecommunications, and e-commerce where the initial US lead has also eroded. We are now transitioning to the next generation of innovations featuring artificial intelligence, bioengineering, robotics, and electric vehicles. They have emerged as the most critical sectors that will drive national economic expansion and indeed, as technologies diffuse and spread, propel the global economy forward. “. . . [C]lustered and radical innovations [have been] the main driver of long-term growth . . . Innovation is what drives the rapid growth sectors” (Thompson 2020: 82–83). The development of leading sectors usually displays an S-shape pattern (Modelski and Thompson 1996; Thompson 2020). There is a long gestation period followed by an abrupt and sharp ascent as new innovations take off and become widely adopted and commercialized. This spurt improves efficiency and creates demand for auxiliary infrastructure (such as highways and petroleum for motor vehicles). The new leading sectors fostered by radical innovation have a multiplier effect on the economy, propelling it forward. Old methods of doing or making things are displaced by what Joseph Schumpeter (1949) has famously described as a process of “creative destruction.” What were once leading technologies and industries inevitably mature and become increasingly obsolete over time, and they eventually lose the power they once commanded in driving the economy as a whole forward. Diminishing returns set in, and therefore these technologies and industries’ economic centrality levels off gradually. These technologies or industries also inevitably spread to foreign countries. Technological diffusion to and learning by the latecomers allow them to catch up. The search for and development of the next generation of leading sectors then begin over again with a gestation period initiating the next cycle. Schumpeter (1939) studied these cycles of economic activity, each lasting about fifty years, and attributed their discovery to the Russian economist Nikolai Kondratieff. Naturally, the leading sectors are the focus of intense international competition, especially because the system leader and its challengers

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tend to concentrate their scientific and industrial efforts and seek commercial expansion in the same sectors. As already mentioned, these sectors create multiplier effects that stimulate overall economic growth. They place a country at the cutting edge of the scientific and engineering frontier, and thus help it to secure its economic dominance. This dominance supports its export competitiveness as Kurt Rothschild (1973) has emphasized. Export competitiveness in turn contributes to the creation of jobs, the stimulation of consumer demand, and the accumulation of national wealth. It moreover enhances the power of a country’s financial institutions and its currency. Reuveny and Thompson (1999) emphasize that the rate of growth of a country’s leading sectors and its share of the world’s aggregate production in these sectors are the most important indicators of its economic competitiveness, and for a country like the United States occupying the position of world leadership, its ability to support and sustain this leadership. “Economic innovation and economic leadership bring on an expansion of global reach capabilities and military mobilization for warfare and vice versa,” and at the same time, systemic leadership entails “pioneering innovation in leading economic sectors and development of a lead economy that acts as a principal source of long-term growth for the world economy” (Reuveny and Thompson 1999: 572). How well is a country performing in pioneering innovation relative to its peers? This is the most important aspect of economic performance, which I argue to be the key determinant of a country’s position in the interstate pecking order. Karen Rasler and William Thompson (1991b: 142) have studied the experiences of the two most recent global leaders, Britain (1780–1913) and the United States (1870–1980), and their research underscores “empirically the dependence of system leader’s relative economic and military position on dynamic economic growth and technological leadership.” Following George Modelski (1987a, 1987b), they argue that there are regular long waves of power concentration and deconcentration spanning about a century each, and these cycles follow the rhythms of technological innovation (Rasler and Thompson 1991b; Thompson 1990). Not only has innovation affected the economic and military positions of countries competing to improve their international position, it also has been an indirect source of systemic war as technological breakthroughs cause the distribution of global power to concentrate

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in its wake, and the leading state’s subsequent technological stagnation and eventual decline are associated with a deconcentration of power in the interstate system, which in turn augurs another bout of war. This contest inaugurates a new system leader, and power is again concentrated in this winner. Over time, however, power becomes deconcentrated again because this country’s pace of innovation slackens (and/or technological innovations diffuse and spread to other countries which catch up), and this development in turn weakens its international economic and military position. The erosion of the system leader’s international position presents an opportunity for challengers to dislodge it. From the ensuing systemic war, a new leader or hegemon emerges, and the cycle of concentration and deconcentration renews. Modelski and Thompson (1987a, 1987b) and their associates trace regular periodicity from the Southern Song dynasty (1127–1279) in China, followed by Genoa, Venice, Portugal, and the Netherlands, to the two modern-day hegemons Britain and the United States. Trade tends to expand when there is a system leader, and war is likely when this leader declines. The intensity of war, the scope of systemic leadership, and the volume of trade have all expanded dramatically over time (Rasler and Thompson 2005). The available data, however, are not quite sufficient for documenting the nature and extent of the leading states’ international positions before the Dutch. There can be a variety of non-mutually exclusive reasons behind the hegemon’s slowing pace of innovation, including diminishing returns, complacency, institutional rigidity, rising production costs, and the diffusion of knowledge that enables late starters to catch up. In addition, other factors such as those reviewed in the previous chapter, namely, overconsumption, underinvestment, and overcommitment to foreign missions can accelerate a hegemon’s decline or compound its problems once decline is underway. The general picture painted by Modelski, Rasler, and Thompson connects innovation to the economic performance of nations, and through this pathway to their international economic and military position, to the interstate system’s phases of power concentration and deconcentration, and to the eventual occurrence of another systemic war introducing a new hegemon. Having studied this web of interactions, Rasler and Thompson (1991b: 424) profess that they “are confident that innovation is a central component of long-wave processes.” In the most recent iteration to update and review the long-cycles theory motivating the various studies just mentioned, Thompson and

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Zakhirova (2019) introduce an important new variable that influences international power shifts and leadership transitions. They emphasize the availability and development of energy sources necessary to support the adoption of new technologies and increase the scale of new industrial processes. Global leaders in the past have led in commerce, technology, and energy use (peat and windmills for the Dutch, coal and steam engine for the British, and petroleum and electricity for the Americans). These three pillars of international power are of course mutually reinforcing. Thus, to the extent that a leading state commands an unassailable edge in all these areas, its dominant position is more secure and likely to endure. Conversely, if a state lacks in competitiveness in one or more of these areas such as in the cases of earlier contenders for international supremacy like Portugal, Venice, and Genoa, its grip on its leadership position is more tenuous. That Britain and especially the United State have been dominant in all three areas accounts for an important part of the explanation for their ability to exercise far greater international influence and power than their predecessors and for a longer period of time. Thompson and Zakhirova (2019) argue that harnessing the interactions between new technologies and new energy sources is critical in the next phase of competition among the world’s major powers. A strong energy foundation is necessary for a vibrant economy and commercial expansion. Jack Goldstone (2002) points to energy scarcity as a bottleneck limiting the growth potential of premodern economies, emphasizing both the amount and concentration of energy as important determinants in fueling, literally and figuratively, industrial processes. Advances in these processes depend on the invention of new machines such as the steam engine and their integration with a cheap and plentiful source of energy such as coal. This combination enables scaling which in turn contributes to market expansion at home and abroad. Countries that initiated breakthroughs in inventing new technologies and discovering new ways of harnessing energy have a tremendous first-mover advantage in global economic, commercial, and military competition. Finally, energy is an obviously important factor in the future and not only with respect to global power shifts and systemic leadership transitions. We are facing the catastrophic consequences of global warming. The discovery of cheap, clean, abundant, and easily accessible energy sources to replace fossil fuels is imperative to arrest the deterioration of the earth’s environment due to carbon emission.

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China’s History of Innovation Economists such as Alexander Gerschenkron (1966) have argued that there is a certain advantage to being “backward.” In other words, when a country is trying to catch up economically, it can borrow from existing technologies and learn from the experiences of the more advanced countries. When it has grown to become a leading economy itself, it will have to rely more on its own innovation to compete with other advanced economies and thus to sustain and even improve its position at the top of the international hierarchy. In other words, indigenous efforts to innovate will become more imperative. Heretofore, China has been a “sponge” absorbing foreign technologies. From now on, it will have to strike out more on its own because, among other things, it will no longer have easy access to foreign technology (as the United States and other Western countries are mounting an embargo to prevent or limit China’s access to the most advanced technologies). How successfully is China likely to manage this challenge? As remarked in Chapter 3, there is sometimes a stereotypical view that Asian or Confucian cultures encourage conformist thinking and rote learning. Imagination and creativity are unlikely to thrive in this tradition. Innovation suffers especially when this tendency is compounded by restrictions on the transmission and circulation of new information and controversial ideas, inadequate protection of intellectual property, an absence of established, strong infrastructure for research and learning, and the heavy hand of government regulators. Carly Fiorina, a former Chief Executive Officer at Hewlett Packard and a contender for the Republican Party’s presidential nomination in 2016, was quoted by Clay and Atkinson (2023: 10) claiming that, “Although the Chinese are a gifted people, innovation and entrepreneurship are not their strong suits. Their society, as well as their education system, is too homogenized and controlled to encourage imagination and risk-taking.” These authors also refer to a senior advisor and Trustee Chair of Chinese Business and Economics at the Center for International and Strategic Studies Scott Kennedy’s description of China as a “fat tech dragon,” because it has been largely unable to turn its investments to enhance innovation into actual improvements in tangible outcome. Outward signs of progress, such as the number of patents filed, tend to reflect incentives encouraged by the government

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and are often of limited practical value. Michael Pettis, a professor at the Guanghhua Management School of Peking University, has similarly declared that “This is not a country [meaning China] we can expect major innovations from.” Fareed Zakaria reflects a significant reason for this skepticism about China’s capacity to innovate. His question, posed to Singapore’s former prime minister Lee Kuan Yew, does not explicitly mention East Asia’s cultural tradition and stresses instead the character of its governments. It deserves to be quoted in its entirety. A key ingredient of national economic success in the past has been a culture of innovation and experimentation. In their rise to great wealth and power the centers of growth – Venice, Holland, Britain, the United States – all had an atmosphere of intellectual freedom in which new ideas, technologies, and methods and products could emerge. In East Asian countries, however, the government frowns upon an open and free wheeling intellectual climate. Leaving aside any kind of human rights questions this raises, does it create a productivity problem? (Zakaria 1994: 115–116)

Lee Kuan Yew seems to have understood the subtext of Zakaria’s question about East Asia’s culture, and his answer is instructive: Intellectually that sounds like a reasonable conclusion, but I am not sure things will work out this way. The Japanese, for instance, have not been all that disadvantaged in creating new products. I think that if governments are aware of your thesis and of the need to test out new ideas, to break out of existing formats, they can counter the trend . . . In any case, in a world where electronic communications are instantaneous, I do not see anyone lagging behind. Anything new that happens spreads quickly, whether it’s superconductivity or some new life-style. (Zakaria 1994: 116)

Innovations have historically been concentrated spatially and temporally. That is, they tend to happen within a restricted geographic area (such as a country or a particular part of it) and limited to relatively short time periods (say, a few decades or generations) that are accompanied or followed by spurts of economic growth led by those leading sectors that have benefited from these innovations. Lee’s observations above suggest that the spatial dimension of this phenomenon may no longer apply to the contemporary world, or it has at least been greatly attenuated. The spread or diffusion of new ideas and technologies from the country of original innovation to other countries has been greatly speeded up and, by implication, at least some of the latter countries are

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now in a better position to adopt new ideas and technologies quickly. At the same time, the tempo of innovations and inventions has accelerated as technological cycles have become shorter, making it more difficult for latecomers to catch up given the rapid speed of change. In explaining the erosion of the economic and technological edges of the United States, Richard Nelson (1996: 271) emphasizes “the most basic [factor] of these is that over the post-World War II era, commodity and resource trade, business and finance, and technological communities have all become increasingly transnational rather than national.” He argues, “It is increasingly difficult to create new technology that will stay contained within national boundaries for very long in a world where technological sophistication is widespread and firms of many nationalities are ready to make the investment needed to exploit new generic technology” (Nelson 1996: 272). In answering Fareed Zakaria, Lee Kuan Yew could have referred to not only the rapidity of Japan’s technological catch-up in the late 1800s and early 1900s, but also China’s innovations dating back to the early years of the Common Era. I have mentioned earlier Goldstone’s (2002) argument that China has had growth spurts assisted by new methods and discoveries, and the one during the high Qing era in the 1700s was especially impressive. That growth spurt happened when China doubled its population (whether this demographic expansion was stimulated by the growing economy or had in turn stimulated it, or most likely both) while maintaining and even raising slightly a high level of average income by the standards prevailing at that time. This was an impressive feat, because the Chinese population was many times larger than those of Britain and the Netherlands. Indeed, as William Thompson has mentioned in several studies, Europe had benefitted from many earlier Chinese inventions and discoveries that contributed to its later economic and military development. Genoa, Venice, and Portugal served as the transmission agents in conveying Chinese inventions and discoveries to Europe. China was the world’s technological leader until Britain launched its industrial revolution. “New technologies created in China made it the world’s most advanced economy by the end of the first millennium CE [Common Era] and into the beginning of the second millennium” (Thompson and Zakhirova 2019: 88). These authors enumerate a long list of Chinese innovations and inventions such as porcelain in the third century, use of petroleum

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and natural gas as fuel in the fourth century, steel production made possible by high blast furnace in the sixth century, gunpowder in the ninth century, woodblock printing and clockwork in the eighth and ninth centuries, paper currency in the eleventh century, and mobile type of printing and the spinning wheel in the eleventh to thirteenth century (Thompson and Zakhirova 2019: 89). They could have added to their list other Chinese inventions such as the wheelbarrow, the stirrup, the rigid horse collar, and the compass (Landes 1999: 55) before the Common Era and the adoption of this last device for navigation purposes in the eleventh century along with other Chinese contributions to shipping such as improvements on the rudder, anchor, masts, sail designs, and watertight compartments. Other authors, such as Joel Mokyr (1990) and Joseph Needham (1969a, 1981), have also documented and studied China’s technological accomplishments in the first half of the second millennium, accomplishments that put it way ahead of Europe at that time. Eric Jones (1981: 160) remarks that “China came within a hair’s breadth of industrializing in the fourteenth century,” and Mokyr (1990: 219) even claims, “The Chinese were, so to speak, within reach of world domination, and then shied away.” These observations and propositions about China’s historical record of innovation do not quite correspond with the description that it is today a “fat tech dragon.” What happened? Reviewing China’s historical accomplishments and summarizing conclusions reached by students of Chinese history, George Modelski and William Thompson (1996: 142) state, “the idea that the China of a thousand year ago . . . was the most developed part of the world economy and the seat of a number of crucial socioeconomic transformations is now beyond doubt, and a thought familiar to scholars.” They trace the world’s first development of a national market to Song China with its leading sectors in printing and paper providing the sparkplug for its economic dynamism. These and other radical transformative changes such as those just mentioned happened in the same environment of Confucian heritage and authoritarian governance that has been criticized for holding back innovation and invention in China. It is true that China, like other countries, has experienced long periods of technological stagnation, but it is doubtful that this phenomenon can be attributed entirely to its people’s cultural proclivities. China has during different times experienced technological progress and technological stagnation, even though Confucianism was a

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constant factor at least since the Han dynasty. The key question is not so much why it lagged the West technologically after the Industrial Revolution. Rather, it should be why China stopped innovating after the heyday of the Song dynasty. “The greatest enigma in the history of technology is the failure of China to sustain its technological supremacy . . . Between the medieval era and the modern age something was lost in China” (Mokyr 1990: 209, 220). Put this way, we may also appropriately ask what made the Europeans more innovative after the medieval age. They were not always so compared to the Chinese and compared to their own prior history. Although I will not be able to answer these questions in detail here, a satisfactory account would need to address not only differences between countries or regions but also differences for the same entities’ performance over time. Obviously, culture cannot explain the difference between China’s earlier period of rapid and radical technological innovations and its subsequent period of stagnation. Thus, we need to explain a similar puzzle to the one raised earlier in Chapter 3, namely, why did China experience long periods of economic lethargy and even decline but also periods of rapid growth such as during the high Qing dynasty of the 1700s and in the years since 1979? As it is a relatively static factor, culture alone cannot explain these differences. This remark, of course, does not deny the fact that cultural values and norms can and do change, such as discussed earlier in the context of postmaterialist values replacing materialist ones in the Western advanced economies. Neither China nor Europe are unchanging cultural entities. Moreover, as discussed in Chapter 3, we may often exaggerate the differences between cultures, such as overemphasizing the Chinese people’s tendency to be conformists or to defer to authority. We need to also consider culture’s interacting effects with other variables. As argued earlier, changes in government policy were critical in turning China’s economy around in the years after Deng Xiaoping’s economic reform. Joel Mokyr (1990) has also argued that government policy made the critical difference in China’s different experiences with technological progress and stagnation in its long history. Furthermore, given Europe’s political fragmentation, it was difficult for any one person or government to switch off the light of innovation. Political centralization and unification suggest the opposite for China such as when the Ming court discontinued overseas expeditions and banned the construction of vessels necessary for oceanic travel.

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Other likely causes behind the historical expansion of China’s economy and its technological innovations appear to be its extension of its interior frontier with population migration to the southern part of the country and the ensuing agricultural and trade expansion. When the limits of this internal expansion to exploit new resources were reached, innovations slackened. Parenthetically, European countries had also taken advantage of exploiting untapped resources by expanding their frontier, except that their major expansion was directed externally. Trade with their overseas colonies, such as sugar, tobacco, and cotton produced by slave labor, was a part of the history of Portuguese, Dutch, and British political economy. One might add in this context silver extracted by the Spaniards in Bolivia and Mexico. Joel Mokyr (1990: 209–238, 2016: 287–320) has reviewed other hypotheses concerning the reasons for China’s technological stagnation after the Song dynasty. Among various competing explanations, he tends to give more weight to more supportive government policies before the 1400s than subsequently. “Before 1400, the state played a far more important role in generating and diffusing innovations in China than it did in Europe” (Mokyr 1990: 233). But this role diminished and even ceased in China in subsequent years. In contrast to Europe where “technological change was private in nature and took place in a decentralized, political setting,” “there were no substitutes for the state in China” (Mokyr 1990: 238). This view can of course be controversial because there are some who see the government as a hindrance to innovation in at least China’s historical experience if not also generally (e.g., Landes 1999: 56–58). Yet even a casual perusal of assessments on the recent innovation performances of different countries, including the most advanced market economies, cannot but notice that the government is seen to play a major, perhaps even critical, role in this pursuit (e.g., Steil et al. 2002). Government support continues to be an important and relevant factor in spurring innovation in China to this date as Beijing has made large investments in funding research and development to catch up technologically. The government’s role is of course not limited to such funding, but rather encompasses many more policies such as protecting intellectual property, negotiating with foreign companies to transfer their technology, providing subsidies to nurture infant industries, and assisting strategic industries in other ways (e.g., tax holidays, government procurement contracts, protectionist measures to fend off foreign

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competitors). Like their Chinese counterparts, large US corporations, such as Intel, Boeing, and Tesla, have benefited directly and indirectly from this array of policies. Goldstone (2002) and Thompson and Zakhirova (2019) suggest another possible reason for China’s failure to make further major technological advances after the Song dynasty. They point to its failure to overcome the bottleneck imposed by insufficient energy. Although coal was mined many years before the Common Era and it was used to produce iron during the Han dynasty not long after the start of the Common Era, little further progress was made in China marrying new technologies to this source of energy, as the British succeeded in doing so with the steam engine much later. Complacency was also perhaps a major factor because unlike Europe’s political fragmentation and its constant interstate warfare and armed rivalry, China enjoyed long periods of supremacy over its periphery, and it was also not spurred to search for maritime trade as in the case of European states. This explanation reflects arguments advanced by scholars such as Jared Diamond (2017), Albert Feuerwerker (1996), and Charles Tilly (1985, 1990). It is of course also a generalization that does not deny that China had faced serious threats from nomadic raiders and it was even conquered by its neighbors to the north (the Mongols and the Manchus establishing the Yuan and Qing dynasty, respectively), or that it had made oceanic forays such as during the earlier part of the Ming dynasty (especially the seven grand expeditions led by Admiral Cheng Ho that reached Southeast Asia, South Asia, the Persian Gulf, and the east coast of Africa during the early 1400s). Before concluding this section, we may wish to generalize the question asked about why China had a period in its history when innovations thrived and then sank into technological torpor for a protracted duration. For example, why did Britain fail to continue its technological lead in the Industrial Revolution and lose its technological edge subsequently to the United States? Cardwell’s Law claims that no country can retain its technological lead for extended periods of time. But why is this lead so ephemeral, and this phenomenon so pervasive as Mokyr (1990: 269) has remarked? Economic historians continue to debate about the many plausible causes that have been proposed to explain this phenomenon. It appears that those conditions that have been proposed to promote innovations and inventions can have a downside as well. That is, they

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may constitute double-edged swords. For instance, patent laws help encourage the development of new technologies by providing financial incentives to their creators. Yet these laws can also have the effect of hindering the diffusion of new methods and erecting barriers against further innovations and more vigorous competition (Nelson 1996: 120–144). As another example, a large, liquid equity market provides capital necessary for companies to undertake innovation. It has, however, also been hypothesized that the ensuing market reliance inclines management to become too focused on short-term profits to the detriment of innovation that requires a long-term view. This proposition has been advanced to explain Britain’s recent experience (Nickell and van Reenen 2002: 192). Still another example points to sociopolitical stability which is obviously important because innovations and inventions may take a considerable gestation period before coming to fruition. A long-term perspective is necessary to test ideas in laboratories and then to commercialize these ideas for profit. The incentive to innovate and invent will naturally be greatly diminished when there is social turmoil and political upheaval. Yet sociopolitical stability also tends to foster and entrench vested interests, such as guilds, cartels, or more generally what Mancur Olson (1982) has called particularistic distribution coalitions that tend to hold back progress threatening their income or status. These groups’ attention can turn increasingly to efforts to lobby for favorable government policies rather than concentrating on increasing their productivity. Rent seeking then takes precedence over the pursuit of new technologies. Institutional sclerosis tends to develop in stable societies, and democracies with decentralized governments are especially open to access by private interests such as those that have a vested stake in an economy based on burning fossil fuels. By comparison, centralized bureaucracies and authoritarian governments can be better positioned to break policy gridlocks and to overcome the resistance of particularistic distribution coalitions. The autonomy of political institutions, however, needs to be complemented by their social embeddedness lest they themselves become predatory and a conservative force that resists technological change. In considering these topics, it is useful to keep in mind that it is relative performance that matters. Britain had greater success in industrialization in part because guilds, cartels, and formal entry barriers were far more common among its competitors on the continent (Mokyr 1990: 268).

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Compared to Britain, these countries’ markets were also less integrated due to impediments from poor transportation and higher internal tariffs (e.g., Landes 1999: 245–247). Although size does not guarantee success, it does matter in economic and technological competition. Hence, each technological leader in history appears to have been displaced by a larger competitor (the Dutch by the British, and the British by the Americans). Everything else being equal, a larger domestic market implies greater consumer demand and therefore more incentive to innovate. And, if we assume that talent is distributed equally across populations, those entities with larger populations should have more innovators and inventors. That they have often failed to do so points us back to those social, cultural, and political conditions that hinder technological progress. As just alluded to, government policies can impede economic growth, including obstructing the spread of technology, by creating negative social and economic incentives in response to demands by rent-seeking groups. Contemporary Japan offers an example of sharp contrasts. Although it has been highly effective in absorbing foreign technology and developing its own innovations to become a world-class exporter in sectors such as automobiles and electronics, a large part of Japan’s domestic economy is characterized by low productivity (e.g., in consumer services, construction, transportation, banking, retailing, distribution networks). The Liberal Democratic Party, which has dominated the government, has over many years deliberately adopted policies that built protectionist barriers and discouraged economies of scale in these sectors to cater to its key political constituents. Japan, more than any other developed country, features a dual economy where a highly competitive export sector coexists with an inefficient non-traded sector which has represented as much as ninety percent of its workforce (Posen 2002: 104–107). This phenomenon cautions us against making the facile assumption that just because a country has a robust innovation system and is highly competitive in foreign commerce, the diffusion of technology will be fast or easy for it – even within its own borders. We have one more question before concluding this section. What can explain the Great Divergence (referring to the phenomenon that Europe’s economies and technologies overtook China’s by a large margin after the eighteenth century)? Scholars have proposed different explanations although they have yet to reach a consensus (e.g., Greif and Tabellini 2017; Lin 1995; Needham 1969a, 1969b).

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As suggested by Cardwell’s law, China’s inability to sustain its technological lead after the Song dynasty is not unusual. What is more remarkable is why Europe, especially Britain, managed to take off economically and technologically. “What was exceptional was not what happened in China but what happened in Europe” (Mokyr 2016: 288). Mokyr shows that during 1500–1700 the development and networking of a small but vibrant intellectual elite, inspired by the writings of such luminaries as Francis Bacon and Isaac Newton, created a huge cultural transformation in Europeans’ outlook on science, socioeconomic progress, and adherence to received orthodoxies. This Enlightenment movement provided the sparkplug for technological innovation and economic growth. Yet this was a highly contingent occurrence because conservative forces, such as those represented by the Counter Reformation and the Jesuits, could very well have won the contest, and Europe’s history could have therefore taken a very different turn. In this connection, Europe’s political geography is again relevant. The political fragmentation and arms competition among its rulers allowed the new thinkers the necessary room to maneuver (sometimes literally, travelling from one place to another to avoid persecution). Rivalries motivated Europe’s rulers to seek an edge, especially military advantage based on innovations, over their competitors. China’s supremacy in its region and long periods of “universal peace” under its domination did not provide the same motivation to advance science and technology and, as noted above, tended to instead foster complacency and even smugness and overconfidence. Finally, as discussed in Chapter 1, traditional China featured a system of open mobility at least in principle, whereby aspiring scholars could participate in the imperial examination in the hope of joining the officialdom. In contrast, like commoners in Tokugawa Japan, this avenue was ruled out for many Europeans who were not born into the nobility or upper class. They were rarely part of the ruling elite as Mokyr has noted. Upward mobility in traditional China, however, meant that talented and wealthy people abandoned commerce to seek the opportunity for themselves or their male descendants to become a member of the gentry or mandarinate as suggested by Levy (1954). Because candidates who passed China’s examination system were tested on their knowledge of classical texts, this system had the effect of putting people committed to orthodoxy and reverence for received

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wisdom in powerful positions, thereby perpetuating political and cultural conservatism. The idea of path dependency suggests that these tendencies became more entrenched over time. There is nothing inherent in China’s culture that is hostile to innovation as attested by the record of technological achievements before the fifteenth century. But as just suggested, institutions such as China’s examination system to recruit officials can shape and influence culture. They and government policies can also encourage preexisting proclivities in a culture, such as during the Song dynasty and after Deng Xiaoping’s initiation of economic reform. In Britain and in Europe more generally prior to industrialization, innovation tended to be carried out by the private sector. In contrast, the government played a much larger role in traditional China, and this role continues today.

China’s Innovation Imperative and Recent Performance Paul Krugman (1994) has questioned the quality of East Asia’s economic growth, arguing that this growth was due to increasing input without improving throughput. That is, increased economic output was in his view largely a result of adding more and more labor and capital to production without any appreciable improvement in productivity. As mentioned earlier, others like Acemoglu and Robinson (2012) have also been skeptical about the sustainability of China’s economic growth. They point to the economic spurt that the former USSR had accomplished under Stalin’s leadership, who mobilized massive amounts of human and material resources to attain this feat. However, this growth soon lost its momentum, and Acemoglu and Robinson believe that China also cannot sustain its economic growth without establishing inclusive economic and political institutions. In their view, authoritarian leaders are worried about the consequences of creative destruction (Schumpeter 1949) that would threaten their rule but that would be essential to advance economic progress. China’s economic growth has until recently benefited from the demographic dividend and a high domestic savings rate contributing to capital investment. However, the country is now facing an imminent decline in its workforce as the rate of childbirth has not quite kept up to replace the parent generation. Its population growth has stalled, and even with the lifting of the former restriction that each family could only have one child, its birthrate is not expected to increase (a situation

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that is also facing East Asia’s other advanced economies like Japan, South Korea, and Taiwan). China’s demographic dividend is about to turn into a demographic deficit as its population ages, and a decreasing number of workers need to support an increasing number of retirees. A quarter of China’s population is projected to be over the age of 65 by the year 2050, and its working-age population will be 16% smaller by then (Woetzel et al. 2015: ii, 15). At the same time, China’s rate of return on fixed asset investment has been declining. McKinsey Global Institute estimates that it was taking China 60% more capital in 2015 to generate one unit of GDP growth than during 1990–2010 (Woetzel et al. 2015: ii). To sustain an economic growth rate of 5.5%–6.5% through 2025, innovation would have to contribute to 50% of China’s GDP growth. Ian Clay and Robert Atkinson (2023: 66) report also that China has been suffering from declining return on its investment, suggesting that three times as much investment was needed in 2018 to produce the same increase in output as in 2007. Thus, it is imperative for China to raise its workers’ productivity to sustain its economic growth. China’s challenges are compounded by its large and sluggish public sector of the economy. Although the Chinese state seems to have an advantage in extracting, mobilizing, and deploying resources compared to its Western counterparts, its allocation decisions have not always been efficient. A 2020 World Bank report estimated that the ROA (Return on Assets) of its private and foreign-owned enterprises was approximately 7% in 2018 while that of its state-owned enterprises (SOEs) was approximately 3%. Increased political and economic support for SOE production, especially in key industries, would further reduce the overall efficiency of China’s economy (Clay and Atkinson 2023: 66). How well has China done in upgrading its technologies and improving its economic efficiency compared to the United States? There is general agreement that its progress has been uneven and that although it has accomplished some important advances in selective areas, it is still significantly behind the United States, especially in basic scientific research. Moreover, although China has increased its supply of human and financial resources that are necessary to enhance its capacity for technological innovation and scientific discovery, it has yet to make large gains in achieving significant positive outcomes from this investment. Its investment appears to be impressive in quantitative terms but

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the returns from this investment have been uneven qualitatively. This said, China is catching up. A recent report from the Atlantic Council summarizes the situation in these words: There is no question that China has been closing the gap with the United States in many, if not most, areas. For instance, since the mid-2000s, China has consistently graduated more science, technology, engineering, and mathematics PhDs than the United States. China has also been gaining in scientific research. Studies focused on measuring China’s progress in research generally conclude as much – over the past decade, for example, Chinese scientists have produced a growing share of the world’s top 5 percent AI [artificial intelligence] publications. (Engelke and Weinstein 2023: no page number)

In a similar vein, Tian Zhu (2021: 144) notes, “Only twenty years ago, in 2000, China had 26,445 patent applications, ranking seventh in the world, which was less than 10 percent of the US level and less than 2 percent of Chinese applications in 2018. In 2012, China overtook the United States to become number one in patent applications.” He also reports that based on data from a National Science Foundation (2019) report, China has in 2016 overtaken the United States in producing the largest number of science and engineering articles in the world. As mentioned already, however, quantitative measures such as the number of students with advanced degrees in the STEM (Science, Technology, Engineering, and Mathematics) fields, the frequency of journal articles published, or the number of patents filed can be misleading without some qualifications. Some people have questioned the productivity of Chinese engineers, and whether it is equivalent to that of US engineers. Others have pointed out that many articles published by Chinese authors are typically for domestic circulation and consumption. Given the incentive system for scholars’ career advancement, there has been an emphasis on the quantity rather than quality of such publications. Similarly, the government encourages people to file patent publications. When judged by the criterion of whether patents have been filed in multiple countries (such as the triadic standard of being filed in the United States, Japan, and Europe) which serves as an indicator of their potential international significance, the sheer quantity of Chinese patent filings looks less impressive in this light. Woetzel et al. (2015: 22) report that China was lagging badly behind both the United States and Japan by a factor of one to nine according to this standard. Clay and Atkinson (2023: 28) report another

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astonishing figure: “Despite progress in developing and retaining researching talent, a Center for Security and Emerging Technology study from earlier this year [2013] found that 90 percent of Chinese nationals who received a STEM PhD in the United States between 2000 and 2015 remained in the country as of February 2017.” These caveats do not deny that China has also made some significant qualitative advances in addition to its quantitative achievements as the following discussion shows. The quality of Chinese publications has improved. According to the US National Science Foundation’s index of highly cited articles, China has risen from 0.33 in 1996 to exceeding the threshold level of 1 since 2015, thus putting it above the levels reached by Japan and India (Zhu 2021: 146–149). Tian Zhu (2021: 150) quotes data from Web of Science in 2019: the United States had 2,737 highly cited researchers, representing 44 percent of the total. China (mainland only) had 636, or 10.2 percent, ranking second in the list of top ten countries with 100 of more highly cited researchers. The rest of the list included the United Kingdom (516), Germany (327), Australia (271), Canada (183), the Netherlands (164), France (156), Switzerland (155), and Spain (116). Japan, with 98, was not in the top ten.

Thus, judging by the number of patent applications and grants, that of scientific publications and researchers, and expenditures on research and development (R&D), not just the raw figures but adjusted for population size, China is catching up to the levels of developed countries. The direction of trajectory is upward. The pace and nature of its innovation are equally pertinent. How quickly is China catching up, in which areas, and how has it managed to do so? The short answer is that much of its success has stemmed from its ecosystem of large, vibrant, and integrated manufacturing and from process knowledge gained through learning by doing rather than from basic research conducted at university, corporate, or government laboratories. China’s biggest advantages lie in its large consumer market, quick commercialization of new ideas, and as just mentioned, the world’s most extensive manufacturing ecosystem. Concomitantly, it needs to overcome its greatest limitations in a lethargic regulatory regime and weak protection for intellectual property. In a report issued by the McKinsey Global Institute, Woetzel et al. (2015) point out that China has done well as a “sponge” in absorbing foreign technologies, but it has yet to fully develop its indigenous capabilities to advance the cutting edge of science and

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technology and to become more competitive in those most demanding sectors requiring the largest amount of innovation and at the same time offering the greatest potential reward for producing future economic growth. In this latter endeavor, it faces high entry barriers and first mover advantages presented by the established leaders, such as the patents held by US, European, and Japanese conglomerates. Although China has had some success in reaching the lower-hanging fruits as described below, it will have greater difficulty in dislodging these existing leaders. There is a large literature on innovation and its importance for economic growth (e.g., Mokyr 1990, 2016; Nelson 1996; Reuveny and Thompson 1999; Steil et al. 2002; Thompson 2020; Thompson and Zakhirova 2019). In his pioneering study, Joseph Schumpeter (1949) identified five types of innovation: new products, new methods of production, the exploitation of new markets, new sources of supply, and new methods of organizing business. In this discussion I will adopt Woetzel et al.’s (2015) framework for reviewing the progress China has made and the challenges that remain. This framework considers four areas or “archetypes” pertaining to China’s economy. The first area or archetype concerns the consumer sector where China has had its greatest success in technological innovation. It has taken advantage of the large size of its domestic market and made substantial innovations to improve a variety of consumer products such as internet services, household appliances, consumer electronics, and smartphones. Chinese companies have cut their technological teeth in this area, utilizing their practical experience in especially responding quickly and effectively to consumer feedback. Given the relatively low cost of their products, emphasis on durability, and a preference for basics without frills, Chinese companies are especially equipped and prepared to compete in emergent markets, whose consumers will become an increasingly larger portion of the global total. China features industrial clusters in places like Shenzhen where there is an extensive and integrated network of designers, parts suppliers, logistic support, and manufacturers that can turn a commercial idea into a product in less than half the time and at a quarter of the price compared to competitors elsewhere in the world. Speed, cost, adaptability, and an ability to scale up production give Chinese companies a large competitive advantage in this consumer-focused area. The second area refers to China’s efforts to improve its industrial efficiency. This is an area where China can also leverage its vast

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manufacturing ecosystem to its advantage. Chinese companies have done well in selective sectors such as producing and exporting solar panels, construction machinery, steel, generic drugs, and commodity chemicals. The size of China’s domestic market and the accumulated practical experience of learning by doing have assisted in catapulting it into a global leadership position in some of these products. Its efficiency gains have increased its export competitiveness. It has established a large lead in solar panels, followed by generic pharmaceuticals, and then steel, textiles, construction materials, construction machinery, electrical equipment, commodity chemicals, and oil and gas production and refining (Woetzel et al. 2015: 38). The third area refers to engineering-based innovation such as in automobile manufacturing, commercial aviation, and communications equipment. China has established industrial clusters to make advances in this area. Research hubs and manufacturing groups around Beijing have focused on the internet and software development, those centered around Shanghai have emphasized health sciences, and the Shenzhen hub has specialized in electronics and telecommunications. There thus appears to be a deliberate attempt to promote regional specialization based on a division of labor. China has been most successful in some engineering niches such as wind turbines and high-speed rail, but it was underperforming in manufacturing automobiles when the McKinsey report was issued in 2015. But even at that time, China was on a path to making competitive gains in nuclear power, electric vehicles, and medical equipment. For example, it was able to produce computed tomography (CT) scanners and magnetic resonance imaging (MRI) machines to supply the domestic market and has been pushing sales of these devices in foreign markets. Although it has also made impressive progress in manufacturing passenger jets, the McKinsey report (2015) noted that at that time it was still significantly behind foreign competitors like Boeing and Airbus. Here again, the size of China’s domestic market is an advantage that the government can lever in its efforts to persuade foreign companies to share their knowledge and to scale up production. China has made the biggest advances in railroad equipment, wind turbines, and communications equipment. The construction of rails, highways, bridges, and the provision of communications equipment have led China’s foreign commercial forays, especially in its Belt and Road Initiative. Moreover, in reference to the importance of energy for the next possible transition of world

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leadership, China has already established itself as one of the global leaders in wind, nuclear, and hydroelectric power. The fourth area addresses science-based innovation in pharmaceuticals, biotechnology, semiconductor design, and specialty chemicals. Innovation in this area is especially research intensive and requires close collaboration with scientists working at the frontiers of knowledge. Compared to global leaders in these sectors, China continues to be significantly behind. It does not have as strong an infrastructure in basic research as in applied research. Despite government spending on research and development that now places China as the largest spender for this purpose in the world just behind the United States, it continues to come up short in situations when a long time, say twenty to twenty-five years, is required to translate laboratory ideas to commercial products. Between 2010 and 2020, China’s R&D expenditures rose from $104.3 billion to $352.9 billion, or about 25% and 49% of the US levels, respectively. Basic research, however, only represented 6% of China’s total R&D spending, even though it had risen from 6.4% to 19.7% of the US level (Clay and Atkinson 2023: 16). At the same time, the US federal government’s share of support for R&D has declined steadily since the 1960s, whereas the share taken up by business corporations has risen, suggesting that “the U.S. government, wittingly or otherwise, has traded off a commitment to public basic research for private applied research” (Thompson 2022: 141). As just noted, the United States has still outspent China on R&D by a significant amount. The general picture to be drawn from this discussion is that China has been making more investment in research and development, and that it has been closing the spending gap separating it from the United States, but this spending has not yet delivered significant results. Naturally, one would not expect this payoff to materialize immediately. How can we assess China’s global competitiveness? One way to answer this question is to determine whether China has a higher share of global revenues from an economic sector or industry than its share of global GDP, an approach similar to the one adopted by Reuveny and Thompson’s (1999) study cited earlier. For example, Chinese companies have captured more than 36 percent of global appliance industry revenue, or almost three times of their GDP-based share based on China’s GDP. In generic pharmaceuticals, where innovation is based on creating more efficient processes, Chinese companies also have

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about 30 percent of global revenue, and Chinese companies have 20 percent or higher shares in textiles and metals. One of China’s greatest successes is in solar panels, an efficiency-driven industry in which Chinese companies have 51 percent of global revenue. (Woetzel et al. 2015: 33)

In contrast to innovations focusing on consumer products and industrial efficiency, there was still a large gap separating China from the world leaders in industries that rely on science- and engineering-based innovation. When Woetzel et al. (2015) undertook their study in 2014–2015, in the science-based area or archetype China had less than 1% share of global revenue in branded pharmaceuticals, and about 3% each in biotechnology, semiconductor design, and specialty chemicals. In the engineering-based industries, China had done well in some areas but not others. Its shares of global revenues were low in automobile manufacturing and medical devices (8% and 3%, respectively), but very high in railroad equipment (41%) and to a lesser extent in telecommunications equipment (18%). Changes are, however, occurring rapidly. Thus, in a more recent review Engelke and Weinstein (2023) report that China has been able to dominate the global trade in batteries for electric vehicles and renewable energy systems, and that it is now making a concerted effort to upgrade its semiconductor sector and improve this sector’s autonomy in view of the US embargo of high-end chips. Similarly, even though China’s automobile manufacturing had received a low rating from the McKinsey report in 2015 (Woetzel et al. 2015), it was already the world’s largest automobile producer in 2009 and has now become the world’s leading manufacturer and exporter of electric vehicles (Clay and Atkinson 2023: 11). As another example of the rapid change occurring, the McKinsey report’s reference to China’s limited success to produce a civilian aircraft has become outdated. On May 28, 2023, the Chinese-made C919 took its maiden passenger flight from Shanghai to Beijing. This narrow-body jet has a seating capacity of 164, and it may soon present a challenge to Airbus and Boeing which have dominated this market thus far (this Chinese jet, however, continues to rely on foreign engine and avionics). China has recently accomplished some other major technological and engineering successes, such as landing on the dark side of the moon and sending multiple manned missions to its Tiangong space station completed in 2022.

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Most importantly with respect to the emphasis given by Goldstone (2002) and Thompson and Zakhirova (2019) to the development and exploitation of new energy sources, China has raced to the top in installing or producing wind turbines, solar panels, and nuclear power. In these respects, it is well positioned to compete in the next round of contest for systemic leadership. As just mentioned, it is now also a leader in manufacturing electric vehicles and their batteries, another area for achieving more efficient use of energy and one might add, one that is less polluting and based on more renewable sources of energy. Furthermore, in those areas where China had already made substantial progress as shown by the McKinsey report, it has moved further ahead in the last few years. For instance, it has now established strong infrastructures for digital payment and e-commerce, and these infrastructures are every bit as advanced and perhaps in some respects even more advanced than those found in the more developed economies like Japan and the United States. It is also moving rapidly ahead in the fields of artificial intelligence and big data computing. Finally, Clay and Atkinson (2023) argue that Scott Kennedy’s description of China as a “fat tech dragon” is unwarranted. Citing the 2022 edition of the World Intellectual Property Organization’s Global Innovation Index (GII), they observe that China ranks 11th overall (and Hong Kong ranks 14th overall), ahead of countries such as Japan (13th) and Canada (15th), and that China’s efficiency in converting technology input to output in productivity gains has improved since Kennedy’s comment in 2016. This level of efficiency ranked it seventh among all countries. Germany placed ninth, the United States twenty-fifth, and Japan sixty-fifth. One can, of course, argue about the technicalities in constructing this efficiency score. Clay and Atkinson’s own aggregate measure of innovation, adjusted for economic and population size, suggests that China has gained on the United States, moving from 57.6% of the US level to 75.0% in the ten short years between 2010 and 2020. Again, the assumptions on which such estimates are based can be questioned and the results can be quite different if different assumptions are made. Nevertheless, these figures give the general impression that although China is still significantly behind the United States and some other advanced economies in some areas, it has made significant technological advances in other sectors, and that it is catching up rapidly. Evidence from different areas converge to support this general picture

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(Clay and Atkinson 2023: 21, 24, 36, 44, 55–57). Although China produces a larger number of undergraduates in science and technology than the United States, it still lags in the training of doctoral students. Similarly, although China’s publications on mathematics and statistics have exceeded those by the United States, in science and engineering Chinese articles in 2018 were only about 60% as likely to be among the top 1% in citations compared to US articles. As another example, although China’s international receipts for its patents had tripled just between 2016 and 2017, it still only reached barely 7.5% of the US amount. China’s supercomputers are estimated to have reached 85% of the US level, and its robotic usage about 95% of the US level in 2023. Therefore, to reiterate, China has come a long way in closing the technological gap between it and leading countries like the United States, but it is still not an equal match relative to the US technologically. Finally, venture capital plays a critical role in financing startup firms in their early stages, providing the necessary funds to encourage and sustain innovation. In this area, although China is still behind the United States, it has also been catching up. Clay and Atkinson (2023: 21) report: China’s VC investments relative to the United States’ doubled over the previous decade from 23.2 percent to 46.6 percent of U.S. levels . . ., with China’s VC investments totaling $60.2 billion in 2020. However, this is down from its absolute peak of $74.8 billion in 2018 and its relative peak of 87.9 percent of U.S. levels in 2016. Nonetheless, China was still the second-largest VC market in the world in 2020, and VC continues to become a more instrumental part of China’s financial framework.

Conclusion Several implications or conclusions emerge from this chapter’s discussion. First, timing and location matter. Britain was able to take advantage of the steam engine after knowledge about its workings developed over a protracted period of gestation at home and abroad. The need to evacuate water from flooded coal mines provided the impetus to adopt this new machine. But as Thompson and Zakhirova (2019) have emphasized, what is critical was the marriage or interaction between a new technology and the energy required to power it. In isolation, neither of them would have provided the spark to initiate an industrial

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revolution. Of course, human ingenuity and imagination also mattered as much as fortuitous circumstances. Britain was fortunate to have a readily available and abundant source of energy, coal, at home. It also had an extensive transportation system, especially coastal and inland shipping, that facilitated the delivery of this fuel to its industrial centers. It did not suffer the liability of having to import its energy from abroad due to the danger of supply interruption and foreign dependency as shown by the recent experiences of those countries relying heavily on oil imports from the Middle East. Second, size matters even though it is not everything. From Venice and Genoa to Portugal, Portugal to the Netherlands, and the Netherlands to Britain and then on to the United States, each successive transition of systemic leadership involved the displacement of a smaller country by a larger one whether in territory, population, or economy. Naturally, as I have stressed earlier, being big is not a sufficient condition for being powerful economically or militarily. There are many historical examples of a larger country being eclipsed by a smaller but more vigorous counterpart, such as China being overtaken by Japan in the late 1800s and contemporary Russia being overtaken by Germany. Yet size does have some definite advantages. As discussed earlier, China commands a huge consumer market and it has a very extensive manufacturing ecosystem, which give Beijing a very important edge in scaling production, expanding exports, and negotiating with foreign companies for sharing technology. It has been said that China’s gaming industry is larger than the automobile industry in some countries. The economy of a Chinese city or province is larger than the national economy of many countries. Given its physical size, if China reaches a productivity level that approaches that of the advanced countries, it will have by far the world’s largest economy. Barry Supple (1994: 15) was quoted by Thompson and Zakhirova (2019: 184) remarking about Britain’s decline: . . . such a diminution of power could hardly have been avoided. A country with such a small proportion of the world’s resources and population cannot indefinitely deal on equal terms with developed nations bigger by anything between 50 and 400 percent. Indeed, Britain’s transformation from imperial power to global innocuousness turned out to be a relatively and (surprisingly) sluggish process. And it is perhaps the slow pace, rather than the rapidity, of Britain’s decline on the world scene that is the more interesting historical problem.

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Third, a culture’s influence on economic growth and technological innovation depends on specific circumstances and conditions. For example, the British innovators’ practice of learning by doing (especially trial and error on the shop floor) worked well in developing the steam engine and cotton gin, thus launching their country’s successful Industrial Revolution. But this approach did not serve them well in subsequent rounds of technological competition requiring more systematic and focused research and development, especially in those areas relying on basic research. An exception to this generalization is the contemporary excellence of Britain’s pharmaceutical companies with their close liaison with researchers affiliated with Cambridge University. As another example on how social conditions and culture interact pertains to the limitations to technological diffusion in the Japanese case. Even though Japan has some of the world’s most innovative sectors (such as electronics and automobiles), a large part of its domestic economy (such as retailing, construction, transportation, and banking) is quite inefficient and resistant to technological changes. This phenomenon stems mainly from the incentives of Japanese politicians to protect their key constituents from the forces of innovation and competition. It is also pertinent to point out that cultural practices can influence a country’s socioeconomic and political circumstances. For example, a cultural emphasis on thrift and savings produces capital from domestic sources to fund economic development. Contrast this phenomenon for China with Latin America’s chronic dependency on foreign investment and loans to finance its needs and the consequent deleterious effects decried by the dependentistas. As another example, ties that bind people from the same extended family, clan, region, or school help to overcome the traditional absence of banking institutions and laws protecting private property in East Asia, and they help to reduce business transaction costs and foster interpersonal trust. A reliance on personal connections or family associations provides a bridge until the time when impersonal institutions, such as corporate banking and the judiciary, can become established. Fourth, Thompson and Zakhirova (2019: 185) mention the phenomenon that has been described as Caldwell’s law or Jan Romein’s law of interrupted progress, stating the general proposition that “lead economies will eventually encounter barriers to further growth that will make it less probable that they will be responsible

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for the next breakthrough; instead, another economy with fewer obstacles will be more likely to spearhead such a breakthrough.” The basic idea is that when a system leader’s energy foundation becomes outdated or exhausted, it will have more difficulty transitioning to a new source of power. One major reason for this tendency is that stakeholders with a vested interest in perpetuating this existing foundation will be reluctant to make the necessary switch and can be expected to lobby the government to limit emergent competition from newer alternatives. The leading economy is therefore likely to be slower to adapt. This perspective suggests that compared to the United States which has been heavily reliant on petroleum, other countries will be quicker to search for and develop other sources to meet their energy needs. Of course, China has been heavily dependent on coal. In fact, at 63.7% of its energy consumption, China’s reliance on coal in 2015 was greater than US reliance on oil at 37.3% (Thompson and Zakhirova 2019: 201). However, Mancur Olson’s (1982) theory of institutional sclerosis and the influence of concentrated, particularistic interests is more applicable to democracies that have enjoyed uninterrupted stability fostering a proliferation of entrenched pressure groups or cartels with easier access to influence their government’s decision processes. Fifth, coal, petroleum, and natural gas are territorially bound, and economies that are heavily reliant on importing them are vulnerable to supply interruptions and embargoes. In contrast, wind power, solar power, nuclear power, and hydroelectric power (such as electricity generation by the Three Gorges Dam on China’s Yangtze River) do not suffer from this liability of being potentially subjected to politically motivated sanctions. Moreover, they tend to be cleaner and more inexhaustible compared to coal, petroleum, and natural gas. China has developed strong, even leading, industries in all these renewable sources of energy. It led the world in installed capacity for renewable energy, taking the first place internationally in solar, wind, and hydroelectric power, and placing second in biopower (converting biomass to heat and electricity) in 2015. The United States ranked first in biopower and geothermal power, and second in its overall capacity for renewable energy (Thompson and Zakhirova 2019: 344). For both countries, however, renewable fuels still constitute a rather small portion of their overall energy consumption which continues to depend heavily on coal for China and petroleum and natural gas for the United States.

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Finally, the technology competition between China and the United States has intensified. Washington has placed bans on exporting highend technologies with potential strategic value to China. It has also lobbied its allies and neutral countries to deny China’s access to their markets and supply chains. For instance, it has sought other countries’ help in erecting entry barriers against China’s telecommunications giant Huawei in installing 5G networks. It has also tried to put barriers against Chinese investment in US technology firms, and to restrict popular Chinese internet and social media companies such as Tik Tok already operating inside the United States. Beijing has thus far moved cautiously in responding to Washington’s policies of economic decoupling and technological embargo. It has been reluctant to start a full-scale technology war with the United States, preferring instead to compromise, to work around impediments erected by the United States, and to continue technological exchange and trade with the United States while at the same time, investing in its own domestic autonomous capacity to innovate and catch up (Engelke and Weinstein 2023). As just suggested, the technology contest between China and the United States has a multilateral dimension involving other countries. The US technology embargo directed at China has ramifications for its allies and partners. This policy and other US actions seeking economic decoupling from China are tinted with mercantilism and protectionism. For example, the subsidies provided by the Inflation Reduction Act to assist US producers of electric vehicles and semiconductors hurt the sales of European, Japanese, and South Korean manufacturers, who are also being asked to limit their technology-based trade with China. US actions directed against China can be seen by other countries to have a negative effect on them as well. Thus, American taxpayers are given a rebate for only US-made electric vehicles, not those produced abroad. Denials of market access to Chinese telecommunications companies like Huawei would increase further the monopolistic power of US multinational giants operating in the same sectors abroad. This possibility has not escaped the attention of other countries and can thus limit their cooperation with US policies seeking to isolate China. For example, Microsoft’s attempt to acquire Activision Blizzard has encountered opposition in Britain and the European Union. The strain on its alliance relations caused by the US technology embargo against China also provides an opportunity for Beijing to

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engage in wedge policies against Washington’s efforts to build a coalition to hinder its technological progress. Summarizing their study of Kondratieff cycles of economic upswings and downswings and long cycles of leadership transition, Modelski and Thompson (1996: 228) conclude, “As long as there is an important linkage between the ability to act beyond domestic borders and the economic resources to pay for such acts, changes in economic and technological pecking orders imply changes in political orders.”

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The unipolar moment turned out to be quite brief for the United States. In retrospect, the euphoria after the demise of the former USSR, celebrating the end of history and the triumph of liberal democracy and capitalism (Fukuyama 1992), was unjustified. Authoritarianism has made a comeback in many countries, and democratic institutions have come under assault even in long-established democracies like the United States. Moreover, there is widespread disenchantment with the disparities and dislocations in capitalist economies, and a rising rejection of globalization and the tenets of the liberal international order. The phenomenon of illiberal democracy has emerged in a considerable number of countries, and authoritarian populism and right-wing extremism have also gained political traction even in established democracies (Norris 1999, 2011; Norris and Inglehart 2019). China’s authoritarian system has managed to attain impressive economic growth since the end of the Cold War, even though it does not practice capitalism as understood in the West. In the meantime, Donald Trump’s America First policies reflect and capitalize on popular discontent and cultural backlash against postmaterialist values. This phenomenon is symptomatic of relative US decline, and it also contributes to and further accelerates this decline (Thompson 2020). Various forms of domestic dysfunctions, reflecting sharp political partisanship and cultural discord, have hampered effective foreign policy. At this writing, Trump has announced his candidacy for the 2024 presidential election. Whether he wins or not, it appears that Trumpism will remain. He enjoys support from a large segment of the US public, who are disaffected and even angry about recent trends affecting themselves, their families, and their country. Trump has a strong political base among Republican voters, and he is, at the time of this writing, far ahead of his rivals in a crowded field of candidates seeking the Republican Party’s nomination to be the next US president. As an indication of the deepening schism characterizing 187

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US domestic politics, practically all polls show that about thirty-five percent of Americans disagreed with Trump being indicted for mishandling classified documents. A constant and major theme of this book is that a country’s international strength derives from its domestic base, economically as well as politically. The overwhelming economic and technological edge enjoyed by the United States after World War II has begun to diminish as early as 1973 and it has continued to erode since then (e.g., Nelson 1996). However, this relative decline has been gradual and may settle at a high level because the US preponderance was so great after World War II. British primacy during its years of world leadership did not come nearly close to this level of US preponderance. Moreover, as William Thompson (2022) has remarked, there is a significant discrepancy between the economic and military dimensions of US preponderance. Although the United States has slipped economically, its military is still overwhelmingly powerful compared to the other countries, including China. This mismatch between US economic and military power has naturally called attention to whether a shrinking economic base can continue to sustain Washington’s overseas commitments. Debates about the desirability of retrenchment to bridge the gap between ends and means reflect this concern (e.g., MacDonald and Parent 2011, 2018a, 2018b). Paul Kennedy (1987: 534), who has warned about the danger of imperial overstretch, cautions Americans that “. . . the only serious threat to the real interests of the United States can come from a failure to adjust sensibly to the newer world order.” In view of the earlier discussion, the United States has behaved more like a traditional strategic state than China. It has been involved in more wars, armed interventions, and militarized disputes than China, and it has outspent China by a large margin both absolutely and relatively (as a percent of their respective GDP) on its military. Compared to the United States, China has behaved more like a trading state. As remarked earlier, its international ascendance has been largely due to its economic expansion and successful export drive. This distinction separates China’s rise from that of other great powers that have preceded it. The rise and decline of previous great powers in shuffling the international hierarchy have been invariably associated with the outcomes of wars and military conquests. Although there has been much concern over the so-called Thucydides’s Trap and alarms about rising Chinese military capabilities and foreign ambitions,

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analysts have not paid nearly enough attention to this distinction as they should when they try to apply the history of past struggles among great powers to Sino-American relations today. Most Western analysts also do not give enough attention to the frequent resort to arms and the large military expenditures on the part of the United States. These tendencies are concerning because they are reputation damaging and resource draining. Judging from the historical record of past military episodes, other countries have more to worry about being invaded and occupied by the United States than China. No other country comes close to the extent that the United States has relied on the use of military instruments in statecraft. Nor, as remarked below, has any country come close to the application of frequent and heavy-handed economic coercion, such as trade and financial embargoes, as the United States. Such behavior is likely to be counterproductive, as it compromises US reputation and erodes confidence in it, especially when Washington targets small, weak countries that cannot by any stretch of imagination be said to pose a serious threat to its national security (e.g., Grenada, Panama, Venezuela). Strategic states in earlier eras have made the error of arousing doubts and suspicions on the part of other countries and of overreaching beyond their means by taking on multiple adversaries at the same time. Their mistakes had the effect of causing their self-encirclement. The literature on guns-versus-growth and guns-versus-butter tradeoffs reviewed in Chapter 4 are typically concerned with the short-term effects of large military expenditures. They do not usually address cumulative long-term effects and have not attended to nonlinear relationships. It is possible that the deleterious effects of a heavy defense burden will take time to reach a tipping point after which the cumulative damage done to the civilian economy and domestic welfare will accelerate. There are already visible warning signs coming from deteriorating physical infrastructures and declining human capital (as attested by the persistent underperformance of US pre-collegiate students in their academic tests). In view of these conditions that impinge on economic growth, it is legitimate to ask whether current US policies are mortgaging the country’s future. The culture shift from materialist to postmaterialist values, discussed in Chapter 3, tends to further impinge on future economic growth. As pointed out earlier, the United States has today a significant lead over China in all dimensions of power, military, economy, finance, and

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technology. Moreover, rather than considering each of these dimensions individually, the ensemble is more important because its components are mutually reinforcing, and it points to the more enduring and profound structural power commanded by Washington. To say that this structural power is more enduring and profound than its individual components is not the same as arguing that it will never change. There may be initially incremental changes causing small cracks in this US structural power, but over time these changes can result in an avalanche if not counteracted. The idea of punctuated equilibrium describes such patterns in biological evolution. There are long periods of gestation suggesting apparent stasis to be only followed by sudden, sharp, and basic transformation. Political scientists have applied this idea in their studies of policy or political processes (e.g., Baumgartner and Jones 1993; Cioffi-Revilla 1998). China has managed to close the gap separating it from the United States in many conventional measures of national power, even though the United States continues to be ahead albeit in a less dominant position than before. The direction and momentum of ongoing changes appear clear. Here again, the idea of punctuated equilibrium may be apposite. In a world characterized by overwhelming US power, leaders of other countries are wary of antagonizing Washington. The fate of Saddam Hussein, Muammar Gaddafi, and Manuel Noriega serves as ample warning about what can happen if they cross the United States. In a unipolar world or a world that is leaning heavily to US power concentration, these dissenters or “troublemakers” can be easily picked off and snuffed out by Washington before a countervailing coalition against the United States has had a chance to coalesce. China is threatening to the United States because it can become the center for such a coalition. It may take a long time for such a coalition to materialize but once it forms, an enormous change in the structure of international relations can follow in its wake. Once in motion, such change can accelerate a precipitous US decline. Parenthetically, current US policies have the effect of drawing China and Russia closer together in an incipient alliance. Judging from the number of countries that have shown an interest in joining the BRICS group (referring to Brazil, Russia, India, China, and South Africa), this circle is widening. It appears already that traditional US allies or clients, like Saudi Arabia and the United Arab Emirates, are inching closer to China, which has recently played an influential role in bringing about a rapprochement between Riyadh and Tehran.

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Returning to the theme that a country’s international position derives from its domestic base, the characteristics of its domestic politics also matter in addition to its domestic economy. The previous discussion on power as ability calls attention to domestic hindrances that can impede leaders from fully extracting, mobilizing, and directing their country’s resources. In other words, a government’s political or policy capacity is relevant to its ability to develop effective policy to compete internationally, and domestic dysfunctions and preexisting cultural tendencies can severely constrain this capacity. Domestic politics in the United States and the nature of its political system tend to engender policy gridlock, whereas in China the opposite danger of unchecked power lurks in the absence of effective safeguards against bad policies stemming from too much power being concentrated in a small elite circle and the domestication of dissenters. Ongoing socioeconomic changes have sharpened political divisions and cultural conflicts in the United States, and these cleavages have abetted intense partisanship and are in turn abetted by this partisanship. This phenomenon of culture war is compounded by US politicians’ electoral incentives, inclining them to accept policy gridlock over concerted efforts to resolve looming problems. They kick the proverbial can down the road even though delay means more serious and costly crises in the future. An obvious example is the impending insolvency of Social Security in about nine years. Another example of political dysfunctions is provided by the deadlock on how to resolve the country’s mounting debt, with a deadline on defaulting on US loans and inability by its Treasury Department to pay its outstanding obligations in less than ten days when I wrote these words. As many scholars have pointed out, the United States appears to be the only country that has decoupled the approval of its spending programs from the necessary authorization to fund these expenditures. These domestic problems have ramifications for a country’s international position. Again, effective foreign policy requires a strong domestic economic and political base, a cohesive society, and a coherent policy agenda. As Pericles had famously warned his fellow Athenians, a country’s self-inflicted injuries can often do more harm than its foreign adversaries can inflict on it. Donald Trump had done more harm to the US image abroad and Washington’s ties with its allies than anything that the Chinese or Russians could have done. Charles Kupchan and Peter Trubowitz (2021) have emphasized that a strong domestic political foundation built on elite consensus and

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popular support is necessary for effective foreign policy. Yet as these authors point out, bipartisan support for America’s traditional liberal internationalism has collapsed (Kupchan and Trubowitz 2007, 2010), and there is nothing in sight to indicate that a new consensus on US foreign policy will emerge soon. In 2010 before the most recent round of deterioration in Sino-American relations, these authors have already noticed, “Ironically, the only foreign policies that are likely to garner bipartisan support are those that the extremes in each [political] party find appealing – most notably, getting tough with China” (Kupchan and Trubowitz 2010: 107). During times of economic hardship and political turmoil, scapegoating foreigners and immigrants has been commonplace (Colaresi 2005). Although China’s economic growth is widely expected to slow down and has in fact already shown a lower rate in the last several years, it is still likely to grow faster than the United States. There appears to be a general agreement among analysts that China’s economy will grow at about 5.5% annually in the next decade, compared to about 2% for the United States. Tian Zhu (2021: 214) projects that “if the average annual GDP growth rates of China and the United States over the next thirty years are 4% and 2%, respectively, then in 2050, China’s total GDP will be 22% higher than that of the United States, and its per capita GDP will be 45% of the US level (48,000 versus 105,000 in today’s [2021] US dollars).” In 2019, economies with about 45% of the US per capita GDP were represented by countries like Spain and South Korea. This figure is important because it shows how much China will still be behind the United States. Moreover, as pointed out earlier, the United States still enjoys overwhelming structural power that is unlikely to disappear in short order (e.g., Brooks and Wohlforth 2016a, 2016b; Buzan 2004; Chan 2023; Farrel and Newman 2019; Posen 2003; Russett 1985; Starrs 2013; Strange 1987). Thus, the United States will likely continue to be a dominant power in world politics and economics, even as China closes the gap between these two countries. As various studies by William Thompson have argued persuasively, we need to distinguish between the nature of these countries’ power. Whereas the United States is a global power with many interests around the world, China is a regional power with more limited interests focusing on its region. The loss-of-strength gradient (Boulding 1962) and the stopping power of water (Mearsheimer 2001) suggest that China does not necessarily have to match the overall

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power of the United States to the extent that their rivalry pertains to China’s immediate neighborhood. In the past, the most devastating systemic wars have been waged between a global hegemon and a dominant regional power, although the lethality and economic costs of modern warfare will hopefully discourage a repeat of history in the case of contemporary Sino-American relations (e.g., Levy and Thompson 2006, 2010a, 2010b, 2011). This said, a dominant power in decline has in the past been motivated to wage a preventive war against an upcoming challenger before its window of opportunity closes (Copeland 2000; Van Evera 1999). Jack Levy (2008) has shown that democracies, including the United States, are not exempt from this preventive motivation. William Thompson (2020: 174) notes, “Should older powers, most especially the United States, perceive that they are losing the competition to develop new leading sectors and that their challengers are succeeding because they are playing unfairly, the likelihood of greater global conflict also is all the more substantial.” From Beijing’s perspective, Washington has intensified its efforts to organize an international coalition to block its ascent, including reneging prior commitments or tacit understandings that threaten to infringe on its core interests such as with respect to Taiwan’s status. As explained elsewhere (Chan 2023), the danger of this island presenting a flash point leading to a Sino-American conflict has increased significantly in recent times because of a confluence of developments. I have argued that culture has a major influence on a country’s economic performance and in some ways, also on its political performance. Certain traits such as an emphasis on hard work, thrift, education, and deferred gratification contribute to economic growth. There is much evidence in support of this proposition from different levels of analysis across individuals, groups, and nations. Cultural variables can account for a significant portion of the empirical variation pertaining to economic growth that is left unexplained by standard economic variables (e.g., Inglehart 1990, 1997). They also help explain why rapid economic growth has been clustered geographically in East Asia. Moreover, even though many countries have followed similar policies such as export-led growth and market reform, the East Asian countries have been much more successful in reaping the results of these policies. Some people who favor this cultural explanation have predicted some time ago that Vietnam, a country that also shares tenets

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of the Confucian ethos, would be the next rapidly rising economy. Their forecast appears to have been borne out. Culture also affects a country’s political discourse and its government’s policy capacity. East Asian cultures tend to be collectivist, and Western cultures, especially the US culture, tend to be individualist. Of course, politicians and people in East Asia can disagree with each other strongly. There is, however, a much greater inclination on the part of people in East Asia to accept conformity, value social order, and trust in authority than Americans. One can observe such differences from their willingness to follow a government’s mandate to wear face masks and its recommendations for vaccination to protect against the Covid-19 virus. As another example, arguments that bans on private gun ownership infringe on individual rights and personal freedom would appear alien to most East Asians. Public opinion in the United States is sharply divided over issues such as abortion and gay rights, even though these same issues have been settled in most other liberal democracies. The survey evidence presented in Chapter 3 cautions us against exaggerating cultural differences and the tendency to project unfavorable traits to other groups while minimizing these same traits for one’s own group (or the opposite phenomenon of appropriating favorable traits for one’s group while denying them to other groups). One example is the ostensible Chinese proclivity to search for and defer to authority figures. Other examples pertaining to the levels of trust, nationalism, emphasis on obedience to superior orders, and support for democratic institutions disclosed by Chinese and American respondents to survey questions indicate that popular beliefs about or attributions to their respective national characters can be quite problematic. It is also important to reiterate that cultural traits are not biological, and that people without a Confucian heritage have also subscribed to similar traits encouraging achievement. Naturally, culture alone cannot explain everything. As emphasized before, those phenomena studied by social scientists are too complicated to be subject to monocausal explanations. A skeptic can legitimately ask why, if culture is so important, did China experience protracted periods of economic stagnation and even backwardness prior to recent years of economic growth. I argue that policies also matter. Deng Xiaoping’s economic reforms in the late 1970s provided the sparkplug activating the pro-growth cultural impulses that had been suppressed or dormant

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previously. Thus, it takes both facilitative policies and a conducive culture to initiate economic growth. As argued earlier, even when politicians undertake appropriate policies, this may not be sufficient to spur this growth in the absence of favorable cultural conditions. Russia’s much more lethargic economic performance compared to China’s provides an example even though both countries undertook mostly similar policies to reform their economies. As I have also emphasized, culture is not static. It evolves. Therefore, even though the Protestant ethic was responsible for Europe’s economic takeoff, Protestants do not outperform other groups economically or socially in the United States today. In fact, they tend to fare worse than other religious or ethnic groups. Similarly, and as emphasized in Chapter 3, increasing affluence has changed people’s values and attitudes in the advanced economies from an emphasis on materialist concerns to postmaterialist ones such as personal liberty and selfexpression. We can already see signs of change occurring in Chinese people’s attitudes and behavior. The younger generation is not as committed to traditional values, such as thrift, hard work, and deferred gratification, as their older cohorts. For example, young people in Taiwan and Singapore tend to save less and consume more than their parents’ generation. They also put a higher premium on leisure than work, and they are much more willing to incur debt to finance their purchases. There is substantial evidence suggesting that traditional values and outlook tend to disappear after the third generation of an immigrant family settling in their new adopted country. Thus, after receiving an initial boost to their economy, it is not likely that the East Asian countries can rely on traditional values and norms to sustain their economic growth forever. Even though he has proclaimed that “culture makes all the difference” in economic development, David Landes (1999: 516–517) qualifies this sweeping proposition by acknowledging that “culture does not stand alone. Economic analysis cherishes the illusion that one good reason should be enough, but the determinants of complex processes are invariably plural and interrelated. Monocausal explanations will not work.” This latter caveat is important to stress. It is also good to note that cultural explanations can sting. As Landes (1999: 516–517) notes, “criticisms of culture cut close to the ego, injure identity and self-esteem. Coming from outsiders, such animadversions, however tactful and

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indirect, stink of condescension. Benevolent improvers have learned to steer clear.” By their nature, cultural explanations draw on comparisons (even if implicitly) and can thus be a source of discomfiture, dismay, even anger. Yet being controversial does not necessarily mean that these explanations and the evidence supporting them are invalid. Cardwell’s law claims that no country can retain economic or technological leadership for a long time. Technological advances and innovations in leading sectors provide the basis for economic growth. This observation appears to be as valid today as in the experiences of global hegemons in the past (e.g., Modelski and Thompson 1996; Thompson 1990, 2020). China has caught up to the world’s technological standards in many areas although it is still significantly behind the United States in basic research. Cultural stereotypes about the tendency for people reared in a Confucian culture to follow conventional thinking and subscribe to received orthodoxies appear to be exaggerated. China’s innovations before the 1400s and its recent technological advances challenge this view. Whether Confucian culture facilitates scientific or technological breakthroughs is subject to debate, but it does not appear to be necessarily a hindrance to starting or accepting such radical changes. There tends to be a lag between the emergence of conducive social, economic, and cultural conditions and the appearance of scientific discoveries and technological innovations (Mokyr 1990, 2016). For example, the number of US Nobel laureates did not overtake that of the European recipients of this award until a considerable delay after the United States had become an economic powerhouse. If one shares the view that size, economically or demographically (Tammen et al. 2000), makes a difference in mobilizing resources (including human resources) for undertaking projects to advance science and technology, China is likely to be among the leading countries in this competition. Leading countries tend to compete in the same technologies and strategic sectors perceived by their officials to be important for economic vitality and national security. They tend to have similar views and beliefs about the identity of these technologies and sectors, such as artificial intelligence, robotics, biotechnology, information technology, aerospace, and electric vehicles. This tendency to compete in the same technologies and sectors intensifies their rivalry. In the past, it has also created surplus production, thereby increasing competitive pressure to promote exports to foreign markets (Thompson 2020: 163–164).

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In this light, economic interdependence can abet commercial rivalry, thus causing more tension rather than pacifying international relations as liberals expect. This said, we have also seen recent US policies to disengage technological exchanges with China and to decouple from it economically. As the dense commercial and financial ties between these two countries have served as a ballast to steady their occasionally tumultuous relationship in the past, this development can also be worrisome. These paradoxical views argue that like most things in life, economic interdependence can be a double-edged sword. Indeed, cultural traits can also have this double-edged quality. Their impact on economic performance is contingent or context dependent. For example, conducive government policies are important to enable pro-growth cultural tendencies to take effect. This proposition explains why East Asian countries’ economic performances have varied so significantly during different eras. Cultural traits that are supposed to promote growth in one context may have a different effect in another context. Thus, during its years of recession, the Japanese people’s high savings rate turned out to be a liability in the government’s effort to encourage consumer demand to stimulate the economy. As another example, although education improves human capital for raising productivity, the nature of this education is also pertinent. It is one thing to study classical Confucian texts, another to conduct scientific inquires. Although Chinese students usually concentrate in the STEM fields, US students are more likely to major in the liberal arts and be interested in a future career in the legal and business professions. With rising affluence, more Chinese students studying abroad are interested in acquiring a diploma as a status symbol. As another example, when a society shows high achievement motivation but does not offer sufficient opportunity for socioeconomic advancement, its people are more likely to engage in corruption and graft (Lipset and Lenz 2000). By pointing to the relevance of a government’s facilitative policies in enabling preexisting pro-growth cultural impulses to thrive, I suggest the importance of attending to the interaction effects among variables rather than their separate individual impact. I also call attention to feedback loops that characterize empirical relationships such as the effects that heavy military expenditures can have on economic growth. These effects may not appear until after a considerable lag, and the relationship between these variables is unlikely to be linear as usually

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assumed by our research methodology. Similarly, economic decline may involve a long, gradual process until it reaches a critical point when it accelerates and causes a major transformation in international relations. Moreover, reciprocal influences rather than one-way causality usually characterize the interactions among variables of interest to our inquiry. Thus, culture influences institutions and vice versa. Similarly, cultural attitudes affect economic growth and are in turn shaped by economic growth. As already mentioned on several occasions, monocausal explanations or cultural determinism tend to mislead rather than clarify. Serendipity and even accidents play a role in history, such as in scientific discovery and technological progress. These features suggest that it is difficult for governments and corporations to encourage or plan for specific innovations. Path dependency is also a consideration. The adoption of a policy or practice creates certain possibilities but also tends to foreclose others. It is difficult to reverse existing practices and policies for reasons of vested interests whether psychological, organizational, or political. The maintenance of a large military establishment and extensive foreign commitments, and a continued reliance on fossil fuel come to mind as examples. The status quo is usually the default choice. It takes political will and capital to alter established practices and policies. This view also suggests, for example, that after their recent acrimonies, it will take a major effort and considerable time for the United States and China to restore their mutual trust. It is easier to undermine this trust than to build it (Chan 2017). Finally, there is the matter of unintended consequences. The emergence of postmaterialist values is not deliberately sought by any one person or group but is rather the natural outcome of economic development. Such social and cultural changes are also largely beyond a government’s ability to control. As another example of unintended consequences, Washington’s actions to curtail economic and technological ties with China can increase strains with its own allies and its policies to sanction Russia for its invasion of Ukraine can push Moscow closer to Beijing. Mark Twain was supposed to have said, “History never repeats itself, but it does often rhyme.” William Thompson argues that the real policy question facing us is not whether the United States is ahead of or behind China but, rather, whether it will remain possible in the future for a single state to lead the global system. As technological

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innovation, energy consumption, and global reach capability grow less concentrated, the prospects for any country to assume the mantle of systemic leadership shrink. “Whatever else might be said, we do not seem to be viewing a future in which one state predominates economically, and especially technologically, over others to the extent that has been observed in the past” (Thompson 2020: 228). Although prediction is a risky business, it appears to me that the next few decades will likely feature an increasingly bipolarized world. The United States will remain as the dominant global power (especially militarily) in the immediate future, but its economic, financial, and technological leadership will likely suffer further erosion. For example, more and more countries (including members of the BRICS group) are talking about and in fact doing something about replacing the US dollar with alternative currencies such as China’s renminbi. Media reports suggest that they are being joined by other countries. Although in the short run, the dollar’s dominant position seems rather secure, there are changes afoot that will undermine it in the long run. Much of this movement has been motivated by Washington’s selfharming and heavy-handed attempts to coerce other countries by weaponizing the dollar. At the same time, we are also witnessing developments pointing to the increasing fragility and obsolescence of international institutions such as the Bretton Woods regime sponsored by the United States immediately after World War II. Today Washington is less able to sustain these post-1945 institutions. Indeed, it has less incentive and has shown less interest in doing so. Although some scholars, especially John Ikenberry (2001, 2008, 2011, 2012, 2017), have argued for the attractiveness and thus the resilience of the liberal international order, there are others who have questioned the extent to which such an order has existed and the extent to which it has worked to promote interstate cooperation and global stability (e.g., Allison 2018; Mearsheimer 2019; Schweller 2001; Zakaria 2020). There is now considerable evidence suggesting that this order is in trouble and that one of the causes contributing to its decline and perhaps even demise is that Washington’s own policies have increasingly abandoned it. This situation suggests that we will be experiencing a period when the rules of the road are in limbo and no country is willing or able to forge a consensus on a new international order. It is in some ways reminiscent of the interwar years when Britain was too weak to lead,

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and the United States was not quite ready and willing to lead. During this transition period when the old rules are no longer applicable or seen to be legitimate, and the new ones are not yet widely accepted to replace them, disorder and contestation are likely. This is especially so not only because the normative order has become problematic but because the power necessary to sustain it is also shifting rapidly.

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Index

Abdollahian, Mark, 119 Acemoglu, Daron, 15, 28–33, 46, 84, 172 achievement motivation as driver for economic development, 5, 21–23, 68, 97 child-rearing practices influence on, 35–36, 57 components of, 69–75 controversy in discussions on, 1–2 high-achieving groups in the United States, 39–48 materialist vs. postmaterialist orientation effects on, 63 negative correlation with Protestant percentage of population, 4 with triple package of cultural traits, 41–48, 84 World Values Survey results, 67–75 affirmative action policies, 59 agricultural practices, extensive vs. intensive, 18, 36–37, 53 aircraft industry, China’s progress in, 177, 179 Allan, Bentley, 129 alliances. See also coalitions costs of leadership of, 137, 147 US-led, 130–132, 185–186, 190 war outcomes influenced by, 108, 111, 115 Allison, Graham, 1, 105 Almond, Gabriel, 5 American-Sino relations. See SinoAmerican relations Arbetman-Rabinowitz, Marina, 121 Argentina long-term orientation score, 70 ranching tradition, 37 Asia. See East Asia; specific countries

Asian Americans impacts of affirmative action policies, 59 impulse control among, 43 self-esteem expression among, 44–45 Asian tiger economies. See also Hong Kong; Singapore; South Korea; Taiwan economic growth rates, 87 export-led growth strategy, 23–27 Atkinson, Robert, 162, 173–174, 180–181 Ault, Gary, 141 authoritarian systems. See also centralized bureaucracies in China, 7, 54–55, 187 lack of consequences for poor decisions, 91–93, 122–124 mobilization of resources not influenced by, 121–122 origins of, 7, 54–55 resistance to particularistic distribution coalitions, 169 rise in, 187 selectorate size in, 122 threats from creative destruction, 172 automobile industry, China’s progress in, 177, 179 backward, advantage of being, 15, 162 Baker, Wayne, 82 Banfield, Edward, 5 bargaining vs. structural power, 102. See also structural power Barnett, Michael, 102, 128 Beckley, Michael, 102, 105–106 Bellah, Robert, 20 Benoit, Emile, 135–136 Boudon, Raymond, 117–118, 125 Bourricaud, Francois, 117–118, 125

226

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Index Brazil achievement motivation in, 22 currency for trade, 130 traditional values in, 65, 99 BRICS (Brazil, Russia, India, China, and South Africa), 190, 199 Britain as trading state, 111–112, 114 colonialism by, 37, 111–113, 167 consumption–investment trade-off, 150–153 costs of administering overseas holdings, 112–113 cycles of power concentration and deconcentration, 66, 112, 143–153, 157, 159–160, 182 defense–economic growth trade-off in, 136, 144–154 defense–investment trade-off in, 149–153 defense–welfare trade-off in, 141, 154 democratization in, 144 domestic origins of foreign policy, 118 economic vitality of, 109–110 energy sources and utilization, 160, 181 GDP and GDP per capita, 107 historical economic growth rates, 86–87 industrialization rates vs. continental Europe, 169–170 innovation capacity, 157–158, 181, 183 judicious diplomacy by, 111 net indicators of power, 106 overtaking by the United States, 148, 157, 168 primogeniture in, 18 religion importance, 65 role in European balance-of-power, 110 savings rates among immigrants, 43 tolerance and diversity in, 51 budgetary processes, politics of, 134 Burkhart, Ross E., 29, 84 Canada child-rearing practices, 75–77, 82 confidence in political institutions, 79–80, 82

227 family importance, 81–82 religion importance, 82 social trust in, 78 support for democracy, 79–80, 82 technological innovations, 180 traditional values in, 77–78, 82 capacity to innovate. See innovation capacity Cappelen, Ådne, 136 Cardwell’s law, 168, 170, 183, 196 Catholic heritage economic development vs. Protestant heritage, 5, 21–23 social trust and, 71 centralized bureaucracies. See also authoritarian systems embedded autonomy of, 25, 119–120 in East Asian growing economies, 25, 89, 120 innovation hampered by, 91–93, 166–167 large projects managed by, 7, 54 resistance to particularistic distribution coalitions, 169 child-rearing practices achievement motivation influenced by, 35–36, 57, 69–70 cross-national studies, 75–77, 82 lifelong beliefs, attitudes, and values influenced by, 62 varying approaches to self-esteem, 44–45 China achievement motivation in, 68–69 as outlier on cultural values, 83 as trading state, 188 authoritarian system in, 7, 54–55, 187 child-rearing practices, 44–45, 69, 75–77, 82 Christian proselytizing in, 38 closer relations with Russia, 131, 190 confidence in political institutions, 79–80, 82 Confucian heritage in, 2, 67–68, 101, 165–166 contradictions in culture of, 58 cultural similarities with Taiwan and South Korea, 29 cycles of power concentration and deconcentration, 160

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228 China (cont.) decreasing fertility rates in, 88 domestic market, 34 Eastern culture in, 35–39 economic efficiency in, 173–175, 180 economic growth of concerns about sustainability of, 15, 31–33, 172 cultural explanation of, 11, 67, 98–99 demographic dividends and deficits, 87–88, 172 export-led growth strategy and, 88 future prospects vs. the United States, 85, 192 historical and comparative perspective on, 83–91 limits to institutional explanation, 29, 84, 98 other developing countries vs., 67, 97 policy reforms influence on, 30–33, 56–57, 89–90, 94–96 projected overtaking of the United States, 124 speed of, 23, 65, 67, 85–87 varying performance at different times, 93 education investments, 74 energy sources and utilization, 168, 176, 179–180, 183–185 foreign policy influenced by Confucianism, 101 GDP and GDP per capita, 106–107, 192 geostrategic importance of Taiwan, 39, 193 group sacrifices for long-term benefits, 42 high savings rates in, 85, 183 Huawei ban in the United States, 125, 185 innovation capacity in, 20, 92–94, 162–164, 173–175 labor productivity, 106 lack of desire to export economic and political institutions, 38 lack of soft power of, 129 large public sector in, 173 long-term orientation in, 70

Index market reform rankings, 89–90 materialist vs. postmaterialist orientation in, 9–11, 64–65, 85, 195 nationalism in, 66, 99 negative aspects of rising affluence, 99 overtaking of the United States, 104 political unity and geographic mobility in, 91–93, 122, 168 potential overreach by, 115 previous isolation of, 51 relative constancy of institutions in, 56 relative lack of immigration to, 48, 52 religion importance, 65 rise in power of Formal Bilateral Influence Capacity, 126–128 from economic growth rather than war, 13, 38, 116, 188 gross indicators of, 106 potential coalition-making abilities with, 190 regional focus of, 192 sanctions against, 95 savings rates in, 70 Sino-American relations deterioration of, 192–193, 197 difficulty of rebuilding trust, 198 future evolution of, 156 intensified technology competition in, 185–186 size advantages, 182 skepticism about innovation capacity of, 162–164 social trust in, 71–72, 78, 99, 183 strong political capacity in, 120 subjective well-being in, 73 support for democracy in, 79–80, 82 technological innovation in, 16, 164–165, 173–181, 196 technological stagnation in, 165–168 territorial disputes, 39 thrift emphasis in, 69, 82 trade partnerships with US allies, 131 traditional China agricultural practices, 53 bureaucracy in, 54

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Index century of national humiliation, 109 dietary habits in, 53 fading of initial advantages, 20, 92–94, 105–106 government role in technological innovation, 171 Great Divergence, 170–172 Ming dynasty, 38, 92, 166, 168 political and cultural achievements, 41, 164–168 preeminence in premodern Asia, 93, 123 Qing dynasty, 86, 164, 166, 168 social mobility in, 18–20, 171 stagnation in economic modernization, 18–20, 27, 194 tolerance and diversity in, 50 traditional values in, 77–78, 82 triple package of cultural traits in, 48 unchecked power in, 122–124, 191 utilization of foreign technologies, 162 valuing of order, 78, 82 work ethic, 69, 82 Chinese immigrants high socioeconomic achievement by, 39–41 privileged positions in former homeland, 41 Christensen, Thomas, 118 Chua, Amy, 35–36, 39, 41, 46, 48–50, 52, 57 Chang, Ha-Joon, 24 CINC (Composite Indicator of National Capability), 103–104, 106, 127 Cipolla, Carlo, 51, 132–133, 146–147, 151–152 Clay, Ian, 162, 173–174, 180–181 coalitions. See also alliances against China, 193 among elites, 26 China as potential center of, 190 domestic, 118, 134 particularistic distribution coalitions, 168–170, 183 politics of, 134 war outcomes influenced by, 107–112, 114–115, 154

229 colonialism population density linked to, 37–38 religion as driving force, 38 technological innovation stimulated by, 167 competition, international. See international competition competitiveness, international. See international competitiveness Confucian heritage authoritarian traditions influenced by, 7 contradictory aspects of, 58 education emphasized by, 35, 74 foreign policy influenced by, 101 hierarchy of social order, 19–20 in China, 2, 67–68, 101, 165–166 in East Asian growing economies, 6, 25–27, 69, 84, 94, 98, 193–194 in Vietnam, 32, 193 lack of proselytizing of, 38 parallels with Protestant heritage, 20 potential compatibility with democracy, 73 relationships emphasized by, 26–27 socioeconomic achievement influenced by, 6, 8, 19–20, 84, 97 stereotypes about, 162, 196 consumer sector, competitive advantages for Chinese companies, 176, 178, 182 consumption–investment trade-off, 150–153, See also defense– economic growth trade-off; private consumption; public consumption Costa-Font, Joan, 43–44 Covid-19 pandemic, US handling of, 6–7, 120 creative destruction, 15, 31, 51, 158, 172 Cuba geostrategic importance to the United States, 39 immigrant socioeconomic achievement, 39, 41 culture. See also culture–economic growth reciprocal influences coevolution with institutions and economies, 2–3, 29

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230 culture. (cont.) common traits supporting achivement motivation, 41–48, 183 contradictions in, 58 definitions of, 17 dynamic nature of, 4, 52–55, 195 Eastern vs. Western, 35–39, 194 environment interactions with, 47, 52–55 exaggerated differences in, 194 political order influenced by, 7–8, 10, 194 social trust influenced by, 5 technological innovation and stagnation influenced by, 166–167, 183 culture–economic growth reciprocal influences, See also achievement motivation; China, economic growth of context dependence of, 197–198 evidence for, 67–75, 193 in East Asia, 23–27, 57, 69, 183 interactions among variables, 2–3, 5, 62, 195, 197 international position influenced by, 4–5, 13 limits to institutional explanations, 27–35, 84, 98 literature on, 5, 7–8, 18–23 policy reforms as spark for, 56–57, 84, 91–96, 194, 197–198 shift from materialist to postmaterialist values, 9–11, 62–67, 96, 189, 195 currency, potential replacement of US dollar, 130, 199 Dahl, Robert, 125, 127 Dalton, Russell J., 73 de Tocqueville, Alexis, 72 declines in power. See also shifting power balances Britain, 66, 112, 143–153, 157, 159–160, 182 cycles of power concentration and deconcentration, 159–160 defense–economic growth trade-off and, 132–139

Index from cumulative trade-off effects, 102, 143, 155 from energy limitations, 183 from imperial overstretch, 12–13, 15, 101–102, 109–117 from innovation slowdowns, 160 intolerance as factor in, 49–50 political capacity decreased by, 124 primary vs. secondary causes of, 146–147 traditional China, 20, 92–94, 105–106, 109 United States, 66, 124, 143, 187–189, 193, 199 war precipitated by, 160, 193 defense spending costs of collective defense, 137, 147 role in domestic economies, 147 defense–economic growth tradeoff evidence for, 130–139, 154–155 long-term effects of, 189 reverse case in Britain, 144–154 defense–investment trade-off, 136–137, 147, 149–155 defense–welfare trade-off evidence for, 139–143, 154–155 long-term effects of, 189 reverse case in Britain, 144–154 Deger, Saadet, 136, 138 Dehio, Ludwig, 110 delayed gratification, role in achievement motivation, 41–48, 69–70, 97–98 democracy cross-national studies on support for, 79–80, 82 cultural traits promoting, 73–74 in Britain, 144 lack of direct impact on economic growth, 29 mobilization of resources not influenced by, 121–122 normative appeal of, 129 questionable influence on economic growth, 84 selectorate size in, 122 social capital role in, 72 social trust role in, 71 subjective well-being role in, 73 threats to, 169, 187

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Index Democratic Party (US), 59–60, 142 demographic dividends and deficits, 87–88, 172 Deng Xiaoping, 2, 30, 32, 91, 166, 194 developed countries. See also specific countries China’s growth vs., 67 explanations for economic success of, 84 materialist vs. postmaterialist orientation in, 62–64, 96 mercantilist and protectionist policies, 24–25 developing countries. See also specific countries defense–economic growth trade-off, 135–136 explanations for lack of growth, 84 relative success of East Asia, 8–9, 84, 87, 94, 96–97 varying abilities to launch growth, 96 Diamond, Jared, 38, 46, 54, 84, 91–93, 122, 168 dietary habits, influence of ecology on, 52–54 diffusion of technology. See technological diffusion Domke, William, 121, 140 Doucouliagos, Hristos, 84 Durkheim, Emile, 21 Duvall, Raymond, 102, 128 East Asia. See also specific countries achievement motivation in, 67–75 agricultural practices, 53 child-rearing practices, 35–36 Confucian heritage in, 6, 25–27, 69, 84, 94, 98, 193–194 cultural contributions to economic dynamism, 23–27, 57, 69, 183 declining birthrates, 172 demographic dividend in, 87–88 economic bureaucracies in, 25, 120 education investments, 74 institutional vs. cultural explanations for growth, 33–35, 66 long-term orientation in, 70 materialist vs. postmaterialist orientation in, 195 policies promoting growth in, 57 similar values and attitudes in, 11

231 skepticism about innovation capacity of, 162–164 suicide rates, 45 superior economic growth vs. other developing countries, 7–9, 84, 87, 94, 96–97, 193 sustainability of economic growth, 172 varying economic performance over time, 197 Eastern vs. Western cultures, 35–39, See also Confucian heritage; Protestant heritage economic growth, See also China, economic growth of; culture– economic growth reciprocal influences; defense–economic growth trade-off absolute vs. relative, 15 achievement motivation associated with, 5, 21–23, 68, 97 demographic dividend role in, 87–88, 172 dynamic nature of, 4 factors in, 3, 14–15, 135 innovation importance to, 14–16, 156, 176, 196 international position influenced by, 101–102, 132–133 investment influence on, 147, 153 isolation as hindrance to, 51 limits to institutional explanation, 27–35, 84 materialist vs. postmaterialist orientation effects on, 62–64, 96 need for efficiency and productivity gains, 15 policies to promote, 56–57 political capacity importance to, 124 relative power influenced by, 3–5 slowing rates with increasing wealth, 62, 64, 66 economic size. See gross domestic product (GDP) education Confucian heritage emphasis on, 35, 74 economic growth promoted by, 74–75, 197 Protestant vs. Catholic heritages, 21

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232 Eichenberg, Richard, 134 embedded autonomy, 25, 119–120 energy sources and utilization importance to international position, 16, 160–162, 183–185 in China, 168, 176, 179–180, 183–185 renewable vs. nonrenewable, 184 technological innovation stimulated by, 168, 181 Engelke, Peter, 179 engineering-based innovation, China’s progress in, 177, 179–180 Europe. See also specific countries aspiring hegemons in, 110–111, 143 changes in popular culture, 55 declining tolerance in, 52 frequent warfare in, 54, 93, 114, 122–123 Great Divergence, 170–172 innovation capacity in, 20, 92–94 lack of social mobility in, 171 political diversity in, 50–51, 91–94, 171 postmaterialist values in, 61 relative industrialization rates vs. Britain, 169–170 social trust in, 71 technological innovations in, 165, 167, 170–172 extensive vs. intensive agricultural methods, 18, 36–37 false dichotomization, dangers of, 83 Farrel, Henry, 102 FBIC (Formal Bilateral Influence Capacity), 126–128 Feuerwerker, Albert, 168 Fiorina, Carly, 162 foreign policy cultural influences on, 101 domestic origins of, 118, 191–192 feedback loop with economic performance, 102, 154 relative vs. absolute effectiveness of, 15 Formal Bilateral Influence Capacity (FBIC), 126–128 France attempts at regional hegemony, 110–111

Index defense–investment trade-off, 149–150 defense–welfare trade-off, 141 domestic origins of foreign policy, 118 imperial overstretch, 109–110, 113 mobilization of resources, 121 protests against retirement policy, 10, 59 religion importance, 65 social trust, 71 Fukuyama, Francis, 7 Gates, Henry Louis, Jr., 46 Geertz, Clifford, 17 Genoa as trading state, 114, 156 conveyance of Chinese innovations to Europe, 164 cycles of power concentration and deconcentration, 160, 182 Germany achievement motivation in, 22 attempts at regional hegemony, 110–111, 115, 118 cultural similarities between East and West, 29 defense–investment trade-off, 149–150 domestic origins of foreign policy, 118 economic efficiency in, 180 economic weaknesses during the world wars, 108 GDP and GDP per capita, 107 innovation capacity, 157 involvement in US-led alliances, 130–131 post-World War II economic growth, 114–115 religion importance, 65 reunification of, 95 Gerschenkron, Alexander, 162 Ghana achievement motivation in, 69 work ethic in, 69 Gilpin, Robert, 147, 151–153 Gleditsch, Nils, 138 Gold, David, 136, 138–139 Goldsmith, Benjamin E., 140

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Index Goldstone, Jack A., 51, 161, 164, 168, 180 Great Divergence, 170–172 gross domestic product (GDP) as measure of national power, 14–15, 103–104 China vs. the United States, 106, 192 in assessments of international competitiveness, 178–179 in net indicators of power, 105–109 Guiso, Luigi, 69 Hanushek, Eric, 74 Harris, Marvin, 53–54 Harrison, Lawrence, 20, 28 Harvard University, 59 Herrnstein, Richard J., 43 Hofstede, Geert, 70 Holland. See Netherlands Hollenhorst, Jerry, 141 Hong Kong cultural vs. institutional explanations for growth, 33–35 economic growth rates, 97 export-led growth strategy, 23 lack of strong administrative state, 25 legacy of British colonialism, 34 technological innovations in, 180 Hopewell, Kristin, 24 Hsin, Amy, 45 Huang, Chi, 140 Huawei Technologies, 125, 185 human capital as factor in international competitiveness, 16 defense spending effects on, 135–136 economic growth promoted by, 74–75 human sacrifice, 54 Huntington, Samuel, 7, 29, 49 hydraulic societies, 7, 54 Ikenberry, John, 199 immigrant socioeconomic achievement decline in future generations, 35, 40, 195 in the Unites States, 6, 8, 39–40, 48–52, 84 savings rates and, 43

233 immigration intolerance of, 49 push vs. pull factors, 37 role in fostering prosperity and power, 48–52 imperial overstretch, 12–13, 15, 101–102, 109–117, See also declines in power impulse control, role in achievement motivation, 41–48, 69–70, 97–98 India achievement motivation in, 22, 68–69 declining tolerance in, 52 defense spending, 138 defense–welfare trade-off, 141 economic growth rates, 86, 88 historical, political, and cultural achievements, 41 market reform rankings, 89 net indicators of power, 106 taboo against eating beef, 52 work ethic in, 69 Indian Americans, high socioeconomic achievement by, 39, 41 inflation low-income households affected by, 139–140, 143 war impacts on, 113 Inglehart, Ronald achievement motivation, 67–68 changes in popular culture, 55 cross-national studies, 21, 75 cultural influence on economic development, 97 culture definition, 17 limits to institutional explanation, 2, 29 long-term thinking, 42 materialist vs. postmaterialist orientation, 3, 9, 11, 60–66 prodemocracy culture, 73–74 social trust, 71–73 traditional values, 82 innovation capacity. See also technological innovations as factor in economic growth, 14–16, 156, 176, 196 as factor in international competitiveness, 16, 159, 175

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234 innovation capacity. (cont.) development of new leading sectors, 157–159 historical precedents, 156–162, 181–183 in China, 20, 92–94, 162–164, 173–175 in Europe, 20, 92–94 interaction with energy sources and utilization, 161, 181 next generation of, 157 policies promoting, 57–58 insecurity, role in achievement motivation, 41–48 institutions confidence in, 79–80, 82 embedded autonomy and, 120 fragility of, 199 limits as explanation for economic growth, 27–35, 84, 98 political attitudes influence on, 5 reciprocal influences with economic development, 2–3 relative constancy of, 55 role in power as ability, 121–122 two-way causal relationship with culture, 2, 29 intellectual property protections as factor in international competitiveness, 16 China vs. other countries, 175 intensive vs. extensive agricultural methods, 18, 36–37 international competition defense–economic growth trade-off and, 132–133, 137–139 focus on leading sectors, 158–159, 196–197 international competitiveness China’s progress in, 178–181 economic growth influence on, 101–102 factors in, 16 innovation capacity importance to, 159, 175 international order, questions about resilience of, 199–200 international position. See also national power

Index costs of collective defense and, 137, 147 culture–economic development reciprocal influences and, 4–5, 13 cycles of power concentration and deconcentration, 159–160 diminishing possibility of unipolar world, 198 economic vitality importance to, 109–110, 156, 159–160 importance of energy sources and utilization, 160–162, 183–185 political capacity and, 110–113, 191–192 relative power influence on, 3–4 self-inflicted liabilities in pursuing, 109–111 structural power influenced by, 154 international relations Chinese theory of, 101 disjuncture in scholarship on, 4 effects of economic interdependence, 197 rising tension in, 131–132, 185–186 interpersonal trust. See social trust investment as factor in economic growth, 14–15, 147, 153 consumption–investment trade-off, 150–153 declining returns on, 173 defense–investment trade-off, 136–137, 147, 149–153 thrift and savings linked to, 85 Iran historical, political, and cultural achievements, 41 immigrant socioeconomic achievement, 6, 41 Ireland nationalism in, 66 religion importance, 65 social trust in, 71 Ismay, Hastings, 130 Italy achievement motivation in, 22 overreach by, 115 regional variations in economic performance, 5, 29

https://doi.org/10.1017/9781009465540.008 Published online by Cambridge University Press

Index religion importance, 65 social capital levels, 72 social trust in, 71 Japan achievement motivation in, 22, 68 agricultural practices, 53 attempts at regional hegemony, 115, 118 Confucian heritage in, 20 cultural vs. institutional explanations for growth, 33–35 declining birthrates, 172 defense–investment trade-off, 149–150 democratic institutions in, 73 domestic market, 34 domestic origins of foreign policy, 118 dual economy in, 170, 197 economic efficiency in, 180 economic growth rates, 23–24, 87, 97, 114–115 economic modernization in, 18–20 immigrant socioeconomic achievement, 39 involvement in US-led alliances, 130–131 mobilization of resources, 121 previous isolation of, 51 technological innovations in, 180, 183 territorial ambitions, 112 values and attitudes in, 11, 70–71 Jewish people high socioeconomic achievement by, 40–41 taboo against eating pork, 53 Jones, Eric, 94, 164 Kahn, Herman, 26–27 Kang, David, 54 Kennedy, Paul explanations for economic success, 84 imperial overstretch, 117, 132, 188 shifting power balances, 11, 93–94, 108 short- vs. long-term security, 155 warfare in Europe, 114, 122

235 Kennedy, Scott, 162, 180 Keohane, Robert, 102, 125 Kondratieff cycles, 158, 185 Krugman, Paul, 15, 172 Kugler, Jacek, 103, 120–121, 124 Kupchan, Charles, 191 Landes, David, 5, 7, 37, 92, 195 Latin America dependency on foreign investment, 183 long-term orientation in, 70 materialist values in, 70 Lebanon, immigrant socioeconomic achievement, 6, 39, 41 Lebow, Ned, 104 Lee, Kuan Yew, 57, 66, 162–164 Levine, Ross, 85 Levy, Jack, 112 Levy, Marion, 5, 18, 20, 171 Lewis-Beck, Michael S., 29, 84 Lin, Justin, 58 Lindgren, Goran, 136 Lipset, Seymour, 82 Lobell, Steve, 118 long-term orientation economic growth promoted by, 70, 85, 97 in achievement motivation, 42–43 necessity for technological innovations, 168 social trust role in, 71 Make American Great Again movement, 61 Manabe, Kazufumi, 71 Mao Zedong, 92, 118, 123 Mao, Yushi, 98 March, James, 102 marshmallow test, 42 materialist vs. postmaterialist orientation disparagement of discipline by affluent classes, 46 economic growth rates influenced by, 59–64, 96 impacts of affirmative action policies, 59 in China, 9–11, 64–65, 85, 195

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236 materialist vs. postmaterialist orientation (cont.) in the United States, 9–11, 48, 59–62, 65–66, 189 overview, 9–11 post-economic growth shifts in, 62–67 McClelland, David, 3, 5, 21–23, 35, 50, 57, 84 Meloni, Giorgia, 60 Merton, Robert, 69 Mexico economic growth rates, 88 long-term orientation score, 70 religion importance, 65 military expenditures. See defense– economic growth trade-off Minkov, Michael, 70 Mintz, Alex, 140 Miyake, Ichiro, 71 mobilization of resources role in power as ability, 118–125 size advantages, 196 Modelski, George, 157, 159–160, 165, 185 Mokyr, Joel cultural changes in Europe, 5 isolation as hindrance to growth, 51–52 political fragmentation in Europe, 92 Puritan traits, 69 technological innovations, 57, 137, 168, 171 technological innovations in China, 20, 164, 166–167 warfare in Europe, 54 Moretti, Enrico, 49 Mormons, high socioeconomic achievement by, 40–41, 47 Moyer, Jonathan D., 126–128 Murray, Charles, 43 Muslims in the Ottoman Empire, 51 intolerance of, 52 taboo against eating pork, 53 Nakane, Chie, 27 Narizny, Kevin, 118 national power conceptions and measurements of, 102–105

Index indicators of, 14–15 local vs. global capabilities, 104 net indicators of, 106–109 power as ability, 118–125, 153, 191 power as outcome, 125–130 power as resources, 117–118, 127 role of immigration in fostering, 48–52 structural power, 11–12, 102, 128–130, 154 nationalism cross-national studies, 77–78, 82–83, 99 materialist orientation associated with, 66 need to achieve. See achievement motivation Needham, Joseph, 164 Nelson, Joan M., 29 Nelson, Richard, 163 Netherlands as trading state, 111–112, 114, 156 colonialism by, 111–112, 167 cycles of power concentration and deconcentration, 132, 160, 182 economic vitality of, 109–110 energy sources and utilization, 160 role in European balance-of-power, 110 social trust in, 71 tolerance and diversity in, 50–51 Newman, Abraham, 102 Nigeria achievement motivation in, 69 immigrant socioeconomic achievement, 39, 41 religion importance, 65 work ethic in, 69 World Values Survey results, 68 Nogales (United States and Mexico), 28 North, Douglas, 46 Nye, Joseph, 102, 125, 128–129 obedience to authority cross-national studies, 62–68, 75–77, 83, 99 economic growth discouraged by, 68 stereotypes about, 54, 99 Olson, Mancur, 73, 84, 137, 168, 183 Ong, Nhu-Ngoct, 73

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Index Organski, A. F. K., 103, 120 Ottoman Empire changing tolerance and diversity in, 51–52 decline of, 132 role in European balance-of-power, 110 particularistic distribution coalitions, 168–170, 183 patents applications by China vs. the United States, 174–175, 180 protection of, 16, 168, 175 Pericles, 15, 96 Pettis, Michael, 162 phenomenological absolutism, dangers of, 83 Poland achievement motivation in, 22 traditional values in, 61, 65, 99 policies as spark for releasing cultural dispositions, 56–57, 84, 91–96, 194, 197–198 installing pro-growth vs. dismantling growth-retarding, 94, 96 path dependency, 47, 198 regional aspects of, 26 technological innovation and stagnation influenced by, 166–168, 170 political capacity embedded autonomy and, 25, 119–120 importance to economic growth, 124 role in power as ability, 120–121, 124, 191 Portugal as trading state, 111–112, 114, 156 colonialism by, 111–112, 167 conveyance of Chinese innovations to Europe, 164 cycles of power concentration and deconcentration, 160, 182 economic vitality of, 109–110 social trust in, 71 Posen, Barry, 102 postmaterialist vs. materialist orientation. See materialist vs. postmaterialist orientation

237 power. See national power power as ability, 118–125, 153, 191 power as outcome, 125–130 power as resources, 117–118, 127 power transitions. See also declines in power; shifting power balances energy sources and utilization influence on, 160–162 indicators of national power and, 103–105 material resources influence on, 108–109 need to consider GDP per capita in defining, 107 size influence on, 105–106, 182 primogeniture, 18–19 private consumption defense–welfare trade-off and, 147 economic growth influenced by, 150 interactions with decline and military spending, 132–133, 144–145, 149, 151–153 productivity as factor in GDP growth, 14–15 in China, 106, 173, 180 international position influenced by, 156 Protestant Americans, downward economic mobility of, 4, 64, 195 Protestant heritage as driver for economic development, 4–5, 21–23, 64, 195 ethic of, 1, 3–5, 20, 64, 195 parallels with Confucian heritage, 20 social trust and, 71 triple package of cultural traits and, 47 public consumption defense–economic growth trade-off and, 133–134, 154 defense–welfare trade-off and, 139–143, 154 in China, 173 role in domestic economies, 147 punctuated equilibrium, political applications of, 189–190 purchasing power parity (PPP) adjustments, 106–107 Puritan traits, 69 Putnam, Robert, 5, 29, 72–73 Pye, Lucian, 7, 54, 68, 75

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238 Qian, Yingyi, 90 Qin, Yaqing, 17, 101 Rasler, Karen, 134, 136, 141, 146–152, 159–160 Rauch, Carsten, 103–104 Reagan, Ronald, 140–141 Reischauer, Edwin, 27 religion as driving force for colonialism, 38 cross-national studies, 65, 67–68, 77–78, 82 economic growth discouraged by, 68 Renelt, David, 85 renewable energy sources, 184, See also energy sources and utilization rent-seeking in advanced industrial societies, 73 technological innovations hindered by, 168–170 Republican Party (US), 59–60, 142, 187 research and development expenditures, China vs. other countries, 175, 178 Reuveny, Rafael, 11, 157, 159, 178 right-wing political orientation materialist values associated with, 60–62 skepticism of science and education, 46, 61 Robinson, James, 15, 28–33, 46, 84, 172 Roman Empire, factors in decline of, 49, 132 Romein, Jan, 183 Rosecrance, Richard, 114 Rothschild, Kurt, 159 Rubenfeld, Jed, 39, 41, 46, 48, 57 Russett, Bruce, 134, 140 Russia. See also Soviet Union (USSR) attempts at regional hegemony, 111 closer relations with China, 131, 190 imperial overstretch by, 109–110 invasion of Ukraine, 131 mobilization of resources, 121 overtaking by the United States, 104 overtaking of Spain, 104 role in European balance-of-power, 110 sanctions against, 95 stagnation in economy of, 95

Index Sachs, Jeffrey, 84 Sala-i-Martin, Xavier, 69 Saudi Arabia closer relations with China, 190 cooling relations with the United States, 130–131 savings rates. See also thrift capital investment linked to, 85 economic growth promoted by, 97 trade-offs with spending, 96 welfare programs influence on, 43 Schroeder, Paul, 110 Schumpeter, Joseph, 158, 176 Schweller, Randall, 118 science-based innovations, China’s progress in, 178–180 scientific publications, China vs. other countries, 175, 180 selectorates, 122 self-esteem among Asian Americans, 44–45 prevalence in the United States, 41, 44–45 self-interest vs. identity, 59–60 Sen, Amartya, 74, 138 shifting power balances. See also power transitions disorder from, 199 dynamic nature of, 4 economic growth influence on, 4, 11–16 foreign policy effectiveness and, 15 from war, 13, 38, 93–94, 188 importance of energy sources and utilization, 160–162 Kondratieff cycles, 158, 185 Shirk, Susan, 115 Singapore cultural vs. institutional explanations for growth, 33 democratic institutions in, 73 economic growth rates, 97 export-led growth strategy, 23 increased per-capita income in, 66 legacy of British colonialism, 34 materialist vs. postmaterialist orientation, 195 welfare programs in, 43 Sino-American relations deterioration of, 192–193, 197

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Index difficulty of rebuilding trust, 198 future evolution of, 156 intensified technology competition in, 185–186 Smith, Ron, 136–137, 147, 151–152 Snyder, Jack, 118 social trust cross-national studies, 78, 99 culture influence on, 5, 183 democracy and, 71–72 in the United States, 7, 71–73, 78, 99 long-term orientation and, 71 soft power, 102, 128–129 Solingen, Etel, 26 Solomon, Richard, 7, 68, 75 South Africa BRICS involvement, 190, 199 religion importance, 65, 68 South Korea achievement motivation in, 68 agricultural practices, 53 cultural similarity with China, 29 cultural vs. institutional explanations for growth, 33–35 declining birthrates, 172 defense–welfare trade-off, 141 democratic institutions in, 73 domestic market, 34 economic disparity with North Korea, 28 economic growth rates, 97 effective utilization of resources, 119 export-led growth strategy, 23 legacy of Japanese colonialism, 34 long-term orientation in, 70 values and attitudes in, 11 Soviet Union (USSR). See also Russia attempts at regional hegemony, 115 China’s political and economic situation vs., 33 collapse of, 102 economic weaknesses during the world wars, 108 imperial overstretch by, 109–111 unsustainable economic growth in, 15, 172–173 Spain attempts at regional hegemony, 110–111 decline of, 50, 109–110, 113, 132

239 intolerance in, 50–51 overtaking by Russia, 104 social trust in, 71 Sprout, Harold, 133, 144–147, 149, 151–152 Sprout, Margaret, 133, 144–147, 149, 151–152 Stalin, Joseph, 15 Starrs, Sean, 102 state capacity. See political capacity Strange, Susan, 102 strategic states costs borne by, 112, 116 imperial overstretch by, 115 qualities of, 115 threat posed by, 111–112 United States as, 188–189 structural power. See also national power bargaining vs., 102 conceptions of, 128–130, 154 of the United States, 11–12, 102, 129–130, 189, 192–193, 199 sources of, 11–12 Su, Dong, 98 suicide rates, cross-national differences in, 21, 45 superiority complex, role in achievement motivation, 41–48 Supple, Barry, 182 Szekelyi, Maria, 42 Taiwan child-rearing practices, 75–77 confidence in political institutions, 79–80 cultural similarity with China, 29 cultural vs. institutional explanations for growth, 33–35 declining birthrates, 172 democratic institutions in, 73 economic growth rates, 97 export-led growth strategy, 23, 138 geostrategic importance to China, 39, 193 lack of evidence for defense–welfare trade-off, 140 legacy of Japanese colonialism, 34 long-term orientation in, 70

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240 Taiwan (cont.) materialist vs. postmaterialist orientation in, 195 social trust in, 71, 78 support for democracy, 79–80 traditional values in, 77–78 Tammen, Ronald L., 107, 121 Tardos, Robert, 42 technological diffusion, 158, 163, 183 technological innovations. See also innovation capacity advantage of being backward, 15, 162 defense–economic growth trade-off and, 137–139 ephemeral nature of leads in, 168–170 Great Divergence, 170–172 historical, spatial, and temporal concentration of, 163 importance to economic growth, 14–16, 156, 176, 196 in China, 16, 164–165, 173–181, 196 productivity gains from, 57 serendipity in, 198 transnational nature of, 163 types of, 176 Tellis, Ashley, 102, 117, 125 Terhal, P., 138 Thompson, William barriers to further growth, 183 cycles of power concentration and deconcentration, 159–160, 185 defense–economic growth trade-off, 134, 136 diminishing possibility of unipolar world, 198 domestic decline, 124 energy sources and utilization, 160, 180–181 financing of war, 141 international competitiveness, 178 international relations scholarship, 4 isolation as hindrance to growth, 51 land- vs. sea-based power, 112 leading economic sectors, 157, 159 policy drift, 113 preventive wars, 193 relative decline of Britain, 146–152, 182

Index technological innovations in China, 164–165, 168 US power, 11, 188, 192 thrift. See also savings rates capital investment linked to, 85 cross-national studies, 67–68, 75–77, 82 economic growth promoted by, 68–69, 97 Thucydides’s Trap, 1–2, 188 Tilly, Charles, 54, 93, 114, 168 trading states China as, 188 economic resilience of, 113–115 lesser threat posed by, 111–112 qualities of, 114 traditional values, cross-national studies, 77–78, 82, 99 triple package of cultural traits, 41–48 Trubowitz, Peter, 191 Truman, Harry, 118 Trump, Donald, 61, 187, 191 trust. See social trust Turkey achievement motivation in, 22 economic growth rates, 88 traditional values in, 61, 65, 99 Ukraine, invasion by Russia, 131 Ulubasoglu, Mehmet Ali, 84 United Kingdom. See Britain United States achievement motivation in, 22, 35–36, 68 affirmative action policies in, 59 agricultural practices, 36–37, 53 as outlier on cultural values, 61, 82–83 as strategic state, 188–189 changes in popular culture, 55 checks and balances in political system, 123–124 child-rearing practices, 75–77, 82 confidence in political institutions, 79–80, 82 consumption–investment trade-off, 150–151 Covid-19 impacts, 6–7 cycles of power concentration and deconcentration, 159–160, 182 declining power of, 66, 124, 143, 187–189, 193, 199

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Index defense–economic growth trade-off, 130–132, 137–139 defense–investment trade-off, 136, 149–151, 154 defense–welfare trade-off, 141–142 desire to export economic and political institutions, 38 disparagement of discipline by affluent classes, 46 domestic divisions in, 10, 59–62, 142, 191–192, 194 domestic origins of foreign policy, 118, 191–192 downward economic mobility of Protestants, 4, 64, 195 economic vitality of, 11–12, 108–110, 173–175, 180 educational declines, 75 energy sources and utilization, 160, 183–185 family importance, 81–82 Formal Bilateral Influence Capacity, 126–128 future growth prospects vs. China, 85, 104, 124, 192 GDP and GDP per capita, 106–107, 192 high-achieving groups in, 39–48 Huawei ban, 125, 185 immigrant socioeconomic achievement, 6, 8, 39–41, 48–52, 84 increased debt and reduced savings in, 43 individualism and self-reliance in, 36–37, 194 innovation capacity, 157–158 labor productivity, 106 limitations on political capacity, 120, 122, 188 long-term orientation score, 70 loss of technical and economic dominance, 137–138, 163 materialist vs. postmaterialist orientation in, 9–11, 48, 59–62, 65–66, 189 military power of, 188–189 national debt, 122 nationalism in, 66, 99 obedience to authority in, 99

241 overtaking of Britain, 148, 157, 168 overtaking of Russia, 104 potential imperial overstretch by, 117 religion importance, 65, 82 research and development expenditures, 178 Sino-American relations deterioration of, 192–193, 197 difficulty of rebuilding trust, 198 future evolution of, 156 intensified technology competition in, 185–186 social trust in, 7, 71–73, 78, 99 state-funded research projects, 24 structural power of enduring nature of, 102, 189, 192–193, 199 soft power role in, 102, 129–130 sources of, 11–12 suicide rates, 45 support for democracy, 79–80, 82 technology competition with China, 185–186 territorial acquisitions, 39 tolerance decreasing in, 52 traditional values in, 60, 65–66, 77–78, 82, 99 trends in federal spending, 140 triple package of cultural traits in, 48 Western culture in, 35–39 US Supreme Court, 59 USSR. See Soviet Union (USSR) Valentino, Benjamin, 104 Venice as trading state, 114, 156 conveyance of Chinese innovations to Europe, 164 cycles of power concentration and deconcentration, 160, 182 venture capital, China vs. the United States, 181 Verba, Sidney, 5 Vietnam Confucian heritage in, 32, 193 cultural vs. institutional explanations for growth, 32–35 economic growth rates, 97, 193 export-led growth strategy, 23

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242 war coalitions in, 114, 154 costs of, 115–116 financing of, 113, 141 importance of material resources in outcomes of, 11 increased aversion to, 115–116 innovation as indirect factor in, 159 outcomes influenced by power as ability, 121 shifting power balances from, 13, 38, 93–94, 188 with declines in power, 160, 193 Weber, Max, 1, 3–5, 19–23, 50, 84 Weinstein, Emily, 179 welfare spending. See defense–welfare trade-off Wendt, Alexander, 17 West Indies, immigrant socioeconomic achievement, 39, 41 Western vs. Eastern cultures, 35–39 Wittfogel, Karl, 7, 54, 75 Woessmann, Ludger, 74 Woetzel, Jonathan, 174–175, 179 work ethic as factor in achievement motivation, 45, 69–70 cross-national studies, 75–77, 82 in the Confucian heritage, 6, 25, 69–70, 97 in the Protestant heritage, 20, 69 World Values Survey achievement values, 67–75, 97 children’s education, 75–77, 82 confidence in political institutions, 79–80, 83, 99

Index interpersonal trust, 71, 78, 83, 99 materialist vs. postmaterialist orientation, 63 traditional values, 65–66, 77–78, 82, 99 Xie, Yu, 45 Yale University, 59 Yoshida doctrine, 131 Young, Alwyn, 15 Zakaria, Fareed, 118, 162, 164 Zakhirova, Leila, 4, 51, 160, 168, 180–183 Zhao, Quansheng, 101 Zhu, Tian child-rearing practices, 44 cultural influence on economic development, 97 demographic dividends, 87–88 education rates and economic growth, 74 explanations for China’s growth, 31, 67, 69, 90 export growth in China, 88 historical economic growth rates, 86–87 innovation capacity in China, 174 long-term orientation benefits, 70 productivity gains in China, 15 savings rates in China, 85 social trust, 71 varying economic performance in Chinese cities, 29 Zuk, Gary, 113

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