West's Dominance Wanes as China, India, and Others Emerge as New Powerhouses in Human History
The global economy has undergone significant changes over the past century, with the economic dominance of the United States and Europe gradually giving way to the rising power of China.
The Decline of the US and Europe
In the early 1900s, the economies of the United States and Europe, particularly Germany, were the backbone of the global economy. The U.S., with its robust steel and chemical industries, led the world before World War I. Europe, post-WWII, continued to hold a substantial share of the global economy, with Germany accounting for a significant portion [1].
However, since the late 20th century, the combined share of the U.S. and the European Union has begun to decline slightly, partly due to the rapid rise of emerging economies [3]. This decline is evident in the U.S., where the manufacturing sector, once a major contributor to the economy, has seen its share shrink from 16% in 1990 to 10% today. Despite producing more than three times what it did in 1990 due to automation and efficiency, the number of jobs in the sector has fallen from about 18 million to about 12 million [4].
The United States and Europe are also facing economic challenges. America grew at 2% last year, but is expected to face a recession this year, meaning a contraction in its economy. The UK's GDP grew under 1% in 2023 and 2024, and might grow at 1% this year [5]. Europe's combined GDP grew by less than 1% in the past two years and may grow at 1% this year, but there are no long-term high-growth prospects.
The Rise of China
At the start of the 20th century, China was a primarily agrarian and low-income economy with a very small share of global GDP relative to Western powers. However, over the century, especially since the economic reforms starting in the late 1970s, China’s economic share grew at a remarkable pace. The country transformed from a poor, primarily agricultural economy into the world’s second-largest economy by nominal GDP and often the largest by purchasing power parity (PPP) [3].
China's economic growth has been fueled by industrialization, urbanization, and export-led development, resulting in China dramatically increasing its share of global GDP in recent decades. Today, China's share stands at 17%, up from just 1% in 1990 [6].
A Changing World
The rise of China and the decline of the US and Europe have produced fractures, including the US's actions against China. The US imposes high taxes and bans on Chinese electric cars, citing national security and privacy concerns. The US commerce department justifies the ban by stating that cars have cameras, microphones, GPS tracking, and other technologies that are connected to the Internet, and that the department is taking a necessary step to safeguard US national security and protect Americans' privacy by keeping foreign adversaries from manipulating these technologies to access sensitive or personal information [7].
The dominance of the US and Europe and their influence will continue to decline, as they are forced to share power in the new era of human history. The people in the US, Britain, the European Union, Canada, Australia, and New Zealand together make up 10% of the world's population, while India's per capita GDP is less than $3,000 per person per year, compared to America's likely $90,000 this year [8].
In the face of these changes, the world is witnessing a significant shift in the balance of economic power, with China emerging as a dominant player on the global stage.
References:
- The Economist
- Investopedia
- World Bank
- Federal Reserve Economic Data
- Office for National Statistics
- International Monetary Fund
- Reuters
- International Monetary Fund
- The financial sector is closely monitoring the decline of the US and Europe, as their combined share of the global economy has been diminishing, partly due to the rapid rise of China.
- The political arena, as well as the business world, is engrossed in the ongoing shift of power, with China rising as a global economic force, surpassing many Western powers, including the United States and Europe.
