Monday, 16 June 2014

"The Course of Empire": How long do Empires last?

Having finally finished Niall Ferguson's "Civilization", I got very amused with his portrayal of the life cycle of an Empire. After writing very interesting and engaging books on the rise and fall of the British Commonwealth ("Empire: How Britain Made the Modern World"), and then a year later the United States hegemony ("Colossus: The Rise and Fall of the American Empire"), "Civilization" represents a summation of his central argument where he lays out a prediction of a possible end to a 500 year era of Western dominance. 

As he states in the final chapter of the book, no one better depicts the life cycle of an Empire than Thomas Cole's five paintings entitled "The Course of Empire".

So here's some fine art for the first time on the blog (it may become a new fad). 
Note: When viewing the paintings, I recommend playing in the background the following melody: R. Strauss: "Also Sprach Zarathustra"

The first one is called the Savage State, depicting the "dawn of man", with an early morning, daybreak theme. 


The second is the Arcadian or Pastoral State, with a somewhat morning pre-noon theme.


The third is the Consummation of an Empire - the Empire at its peak. Time of day: 1-2 pm.


The fourth is Destruction. Time of day: afternoon.


While the final is Desolation. Time of day: evening.


Powerful images indeed.

Will the West be replaced by the Rest anytime soon?

So is the West up for desolation? Usually, or so the story goes, when an Empire reaches its zenith, corruption, greed and cronyism take over, setting a stage for its decay, making the Empire more vulnerable to outside and inside shocks (whether it being wars, diseases, or financial crises).

However even though this constitutes a fascinating historical tale, it need not necessarily hold with respect to Ferguson's scenario predicting the era of Western predominance subject to being replaced by China. He doesn't believe nor predict that the West will fall (after all Britain is still a very wealthy, prosperous country, despite the fact that its international superpower status has ended quite some time ago) - he simply believes that China and the so-called "Rest" will take over sooner rather than later. 

He bases this prediction on the six "killer apps" that made the West powerful and which the Rest are now copying. Essentially these are six institutional features which could all be linked to the initiation and preservation of the legacy of the Industrial Revolution: Competition, Science, Property (Rule of law), Modern medicine, Consumption and Work ethic

Each of these can easily be "downloaded" by the Rest, which are now emulating the success of the West. However, not all apps are being downloaded and applied simultaneously. While competition is certainly there in Asia, as well as science, medicine, a Western-style consumer society, and particularly an amazing work ethic (greater than that of the Western Protestantism, thus denouncing Max Weber's argument), one important thing that's missing is the rule of law. Even though political stability exists, which is an important prerequisite of the rule of law, private property rights - the proper incentives for innovation and progress - still lack in countries like China and disable them from creating a full proof development model. 

Ferguson however cleverly lists and then denounces all the possibilities of what could go wrong and prevent China to achieve its new global superpower status. The first are the similarities with Japan and how it was a matter of time before it would overtake the US (this is the dominant myth of the 90-ies). However ever since its bubble burst and financial crisis followed by a prolonged 20-year stagnation, the Japan prophecy has failed. Japan will recover at one point, but there is no denial that it has been successful in achieving prosperity and high living standards for its people. Failing to kick-start growth for 20 years is not such a big problem if the country is rich. The reason why Ferguson believes China won't succumb to this scenario is its relative independence from the US; something Japan never had, as they became a US military base after the war and started copying the US in almost everything; from culture and consumerism to science and economic policy. 

Other scenarios that may prevent China's ascent are social unrest - based on a rising power of the middle class empowered by technological progress, and an antagonistic relationship with its neighbors. Each is unlikely in any due course of time particularly if living standards in China continue improving, and its wealth keeps rising. 

...Not likely

What is missing are four lines of argumentation: (1) lack of political inclusivness (the Acemoglu-Robinson argument), (2) lack of incentives to produce an open-access society (the North-Wallis-Weingast argument), (3) lack of innovation (the Schumpeterian argument), and (4) lack of the trial-and-error process. The consequences of these shortcomings are mounting problems of inequality, elitism and cronyism. In terms of the North, Wallis and Weingast (2009) theory, they still resemble a natural state society, where political development is constrained, and the civil society is virtually nonexistent.

In addition, as I've pointed out earlier, China is facing a forthcoming financial crisis. It very well may follow the trajectory of Japan, where its reaction to the slump of its shadow banking sector will depend on the response of its consumers. If the Chinese start spending more and boost consumption, the shock may be averted with relatively more ease than in the West. However the same was predicted for Japan whose consumers actually did have some savings, but it still made them reluctant to engage and start spending. 

By examining China more closely it hardly gives the impression of a country ready to overtake world domination. Rather, it resembles an Empire in decay, overtaken by corruption and cronyism, with a worrying scenario over how it will react to its unavoidable financial crisis. Which mix of policies will it apply from its state capitalism system: those of the interventionist state or those of free market capitalism? And more importantly, how will the markets react to this blow and subsequent response of its policymakers? If an improper solution is applied which will put China in more pain, they risk to be yet again marginalized by West in their geopolitical status. Without a doubt China's wobble will represent a shock to the entire global economy (like the Asian crisis of 1997), but it will hardly be of the magnitude of the US financial crisis, meaning that investors will realize that the Western financial system is still the spiritus movens of global capitalism (after all, New York and London are arguably the two financial capitals of the World - cities like Hong Kong, Singapore, Tokyo, Shanghai or Dubai are closing in, but are far from achieving that status). It will shift their attention back to the West. 

Democracy always wins

The true strength of an Empire is measured in its robustness to shocks such as crises or military or terrorist attacks. The US has withheld these shocks quite successfully so far. The Great Depression and the Great Recession have been the biggest threats to the Western model of capitalist democracy. In as much as after the Depression of the 1930s, national-socialism, the greatest enemy of our time, was born. Today we've learned from the lessons of history, and we've learned never again to succumb to such atrocities. This is the reason behind an enduring success of the West: trial and error

Trial and error is a inherent characteristic of a democracy. It helps a failing empire (or society) consolidate and fix itself. The downfall of historical empires has always been the lack of individual freedoms, never too much of it. Looking at the ancient civilizations like Rome (which certainly provided inspiration to Cole's paintings), after the Senate lost power and dictators took over, following a period of even higher military expansion and wealth, corruption, decadence and decay soon took over and Rome was doomed. An outside shock in terms of a foreign enemy only quickened their downfall. Other civilizations were also doomed as they failed to adapt or as they restricted freedom - examples range from the Mayan city-states to Venice to almost all middle-ages pre-Industrial Revolution empires. In that respect Britain hasn't decayed, it has just been replaced by a country where freedom flourished more, combined with the downfall of Britain's military power and the process of decolonization of the modern post-WWII world. Britain's power was always in its colonialism. After the end of that era, Britain's supremacy ended, but this is far from Britain ever declining in wealth or living standards. 

The bottom line is that an authoritarian system, regardless of whether at one point it was ruled by a benevolent dictator, never outperformed a truly democratic one. And it never will.

1 comment:

  1. Excellent post, I agree with you entirely. Particularly with respect to the 4 arguments you list on China

    ReplyDelete