Time-over for the West to dominate

A few years ago, I saw in The Economist a diagram that illustrated how the relative economic power, and therefore, political power of regions in the world had evolved over the last 1,000 years.

It was clear that Asia had led the world in the share of economic might, up to the 1820’s. This was based on the greater number of people in Asia compared to the rest of the world, as all countries had approximately the same capabilities to generate economic wealth per capita.


Source: The Economist

Then, something happened in Europe. First came the Age of Enlightenment, then the Industrial Revolution. By the late 18th century, the European societies had changed the ways in which their wealth was generated. New technologies were introduced that allowed the more advanced societies in Europe to generate wealth at a faster rate with fewer resources.

This new wealth based on innovative ways on how societies work, allowed England, then France to establish a strong industrial base, political system and finally military power to project their new found capabilities.

The development of powerful navies would allow European countries, particularly England after the defeat of Napoleon in 1815 to embark on dominating the world. In parallel, the USA had begun developing their own economy in the early 1820’s, but would remain self-centered until the later part of the 19th century.

british-fleetBritish fleet offshore. Source: National Maritime Museum, Greenwich, London

England, with its view of a world free of political constraints, would force free trade on countries that were not willing to cooperate. At times, England simply took over the control of a country to get its ways. This was the high period of imperialism, which lasted till after World War II.

The graph from The Economist clearly illustrates the increased relative power of the West at the expense of Asia. At its peak in the 1950’s, the West generated more than 50% of the world economic wealth, from a population base of approximately 25% of the world. Asia, with a population base of 50%, was generating less than 20% of the world wealth, down from 60% before the Industrial Revolution. Therefore, a person in Asia was 5 times poorer than a Westerner.

By the 1950’s, when the shackles of colonialism had been removed in Asia, the realignment began. Asia began importing technologies (i.e. finally benefiting from the fruits of the Industrial Revolution) and changing the ways their societies were operating. China took the lead with this realignment, particularly since the 1980’s.

Over the coming decades, we will see the relative economic might of Asia continue to grow. It will probably not reach the 60 to 70% it had historically been before the 1820’s, but might very well reach the 50% mark. This will create a greater wealth per person in Asia, and a standard of living progressively approaching the one experienced in the West.

One question remains: how will each country in Asia organize their society, as it is the structure of their institutions and the characteristics of their culture that determine the level at which an economy will plateau.

Ref.: “The balance of economic power – East or famine”, The Economist, Feb. 25, 2010.