If the 19th century was Britain’s and the 20th was America’s, many assume the 21st would be China’s. Even Nobel Prize-winning economist Joseph Stiglitz wrote a column calling the present century “The Chinese Century”. Interestingly, economist Arvind Subramanian, currently chief economic adviser in the ministry of finance, wrote the highly acclaimed Eclipse: Living in the Shadow of China's Economic Dominance in which he speculated that the US dollar would be increasingly challenged by the Chinese renminbi. While the pound sterling was the dominant currency of the 19th century, and the US dollar of the 20th, Subramanian saw the Chinese RMB emerging as the most widely used currency of the 21st.
In a month when the US dollar is becoming stronger and investors around the world are opting for the dollar, sceptical of the euro and the yuan, not to mention the yen and the rouble, Subramanian’s thesis may appear a bit premature. When in doubt, investors still buy dollars. A currency is not just a means of exchange, but also a store of value. People around the world still trust the managers of the dollar more than those of the RMB.
But global power is not just about a currency’s purchase. The question is, will China be to the 21st century what the US was to the 20th and Britain to the 19th? My simple answer: unlikely. Here is why.
Britain’s dominance of the 19th century was the product of several factors. To begin with, Britain’s emergence as the most powerful maritime power enabled this small island nation to acquire a global empire over which the sun never set. The reach of the empire, combined with the energy of the industrial revolution whose engines were fuelled by the wealth of that empire, enabled Britain to become a global power. In short, a combination of military, economic and technological power along with control over large swathes of land and sea and millions of people who manned Britain’s armies and factories.
The US was a different kind of imperial power. Its size, scale, human capital and economic and military prowess enabled the US to replace Britain as the world’s most prosperous and powerful country. Britain may have had its ‘empire’, but the century’s tragic wars and the decline of European colonial powers enabled the US to acquire ‘allies’ around the world, so that the sun never set on America’s allies. Once again, it is the combination of economic, military, technological and knowledge power of the US that has enabled it to emerge as the 20th century’s dominant power. To be sure, the Soviet Union challenged the US, but then lost the Cold War and withered away, even though President Vladimir Putin is trying valiantly to bring Russia back to the global high table.
China has done well for itself, partly with help from western powers (the Mao-Nixon pact created a China-US alliance that enabled the west to win the Cold War), and China has the scale, size and human potential to become a world power. But, till now, its only ‘allies’ are North Korea and Pakistan!
Moreover, as economist Deepak Nayyar points out in his impressive book Catch-up: Developing Countries in the World Economy, there are many other ‘emerging’ economies in Asia, Africa and Latin America that are rising and contributing to the creation of a new ‘multipolar world’. If Brazil, India, Indonesia, South Korea, Turkey and nine other developing countries—which Nayyar dubs the ‘Next 14’—do reasonably well, global power and prosperity would be more dispersed in the 21st century. Many of these rising economies may be in Asia, so the century could well be called an Asian century. It will certainly not be China’s alone.