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War or Peace

China’s economy will overtake that of the U.S. in 5 years. “Do dollars equal tanks?” Hancock wonders.

By: /
23 November, 2011
By: John Hancock
Senior Counsellor at the World Trade Organization

Buried in its otherwise dry and business-like global economic forecast last spring, the International Monetary Fund quietly offered this world-changing prediction: China’s economy will overtake America’s in real terms in 2016 – just five years from now. For the first time in over a century, the United States will no longer be the world’s largest economy. For the first time in two centuries, a non-western, non-democratic power will be economically dominant.

Some try to downplay the significance of this coming event. They point out that extrapolating GDP growth to predict future power is an imprecise science. In the mid-1950s, then-Communist-leader Nikita Khrushchev boasted that a fast-growing Soviet Union would “bury” the U.S. – and we know how that worked out. Japan, the rising economic superpower of the 1980s, was on track to become the world’s biggest economy by the late 1990s, according to some forecasters. We are still waiting. And yet, China’s sheer size – and the speed of its industrialization – seems to place it in an entirely different category. In 2000, U.S. economic output was three times that of China. By 2030, even with conservative growth estimates, China’s output will be three times America’s. This will mark a complete reversal of their relative economic importance in just 30 years.

Roland Paris argues that U.S. policy toward China is a “politely-veiled” containment. 

With China arriving on the international scene, Gregory Chin claims, get ready for a new type of leadership.

Others argue that economics is not destiny. They point out that the U.S. military is now bigger than the next dozen powers combined, and more technologically advanced – witness the lethal impact of drones, stealth bombers, and other sci-fi-like weaponry. They also note that that America’s dense network of overseas alliances, as well as its domination of international institutions, allows it to project global influence in a way that China, for all its growth, can only dream of doing.

And yet, if history is any guide, China’s rising economic strength will inexorably translate into military strength. During the Napoleonic Wars, it was fast-industrializing Britain that ultimately triumphed over a militarily stronger, but still agrarian, France. And it was the industrial power of the United States – the “arsenal of democracy” – that decisively tipped the balance in all the great wars of the 20th century. Indeed, as Paul Kennedy famously argued, military overspending – or “imperial overstretch” – far from replacing economic power, actually hastens its decline.

The past six decades have been remarkably peaceful – especially compared to the 35 million dead in the First World War, or the 50 – 70 million dead in the Second. This is in no small part due to the relatively benign hegemony exercised by a dominant United States. What will replace Pax Americana? 

One school of thought – held by the self-styled “realists” – paints a relatively pessimistic picture of the future. While economic power is a positive-sum game (growth in the East creates export opportunities for the West), political power is unfortunately a zero-sum game (one country’s military gain is another’s loss). China’s ascent will inevitably lead to greater competition and conflict with the United States, it is argued, because rising powers seek global supremacy, and declining powers try to resist. In a back-to-the-future world of great power rivalries, the United States’ strategic goals should be to contain China’s expansion, reach out to Asian allies, and establish a new balance of power.

Another school of thought – call it idealist – paints a more optimistic picture of the future on the grounds that world politics is changing in fundamental ways. The globalization of trade and investment has woven economies tightly together – and no two economies more than the U.S. and China. Even if Washington and Beijing wanted military confrontation, deep economic interdependence stands in the way – as the CEOs of Boeing, Caterpillar, or Lenovo never tire of reminding their political leaders.

Even more powerful than the globalization of economies is the globalization of information and ideas via the internet – YouTube, Facebook, fast-multiplying blogs – creating a global audience, and even global public opinion. As Harvard’s Steven Pinker convincingly argues, the modern world’s increasingly educated, informed, and rational citizens are rejecting the irrational appeal of nationalism, chauvinism, and war that so devastated past eras, which explains why international conflict is declining. The strategic goal should not be to isolate China, but to embed it even more deeply in the existing liberal international order, and to encourage China’s own policy of economic openness and integration. According to the idealists, a military confrontation between the U.S. and China will be as unthinkable in the future as another war between France and Germany.

The one certainty is that the world is approaching a turning point, and more quickly than we think. A key question – as Roland Paris brilliantly argued in his last two posts – is how the U.S. will react to a rising China, and vice versa. Another key question: Whose side – if any – is Canada on?

Photo courtesy Reuters.

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