Monday, November 7, 2011

S-Curve Empires

I was reading China’s S-Curve Trajectory: Structural factors will likely slow the growth of China’s economy and comprehensive national power (hat tip: Big Picture).

What I noticed very quickly is that the authors very quickly started talking about how the Chinese S-curve is said to threaten the current U.S. hegemony, but that it also worked to the Chinese own disadvantage:

China is likely to follow an S-Curve-shaped path of slowing growth as key internal and external challenges—including pollution, corruption, chronic diseases, water shortages, growing internal security spending, and an aging population—feed off of one another and exact increasingly large costs.

They then went on to discuss the S-Curve:

What is an S-Curve?

The S-Curve concept comes from a mathematical model that was later applied to other fields including physics, biology, and economics, to show how entities’ growth patterns typically change over time. In his seminal work War and Change in World Politics, Robert Gilpin uses the concept of an S-Curve to describe how great powers rise and decline. He argues that a state must inevitably decline because of an historical tendency for national efficiency to decrease as society ages, thereby creating a downward spiral of increasing consumption and decreasing investment that undermines the economic, military, and political underpinnings of a state’s international position. A society or country experiences slow growth at its inception, then enjoys more rapid growth as more resources flow into the state treasury.

The process continues until the state reaches its maximum growth rate, an inflection point at which various countervailing forces begin to constrain expansion and set the economy onto a slower growth path or even a state of equilibrium. Domestically, social spending and rent seeking behavior may threaten productive investment and economic growth. Internationally, a hegemon tends to ‘overpay’ for influence in the international system because of the tendency for allies to ‘free-ride,’ and the inherent propensity toward technological diffusion may threaten to undermine a hegemon’s economic and technological leadership. But differences in national system and circumstances may have profound implications for the creation and maintenance of national power.

Rather than using Gilpin’s observation and the S-Curve pattern as iron laws, it is more instructive to use them as conceptual lenses with which to examine the potential future trajectory of great powers. Indeed, business authors point out that companies can undergo multiple S-Curve development cycles and there is no reason in theory why a country could not do the same. However, for a nation-state, such a rebirth typically takes decades if it happens at all, especially in one as large and diverse as China.

O.K. this looks like an awful like the law of diminishing returns (in all productive processes, adding more of one factor of production, while holding all others constant, will at some point yield lower per-unit returns) in conglomerated terms.  Various portions of the idea seem to go back to at least the middle of the 19th century and something about the discussion immediately lead me to believe Gilpen was a much more modern author.

Another review of his work brought up the notion that the theory was one of relative power in relation to the other groups and setting in which you find yourself.

Stefano Armandi,

As a study of international political change, this book primarily seeks to provide a general framework for thinking about the linkages between the stability of the international system and the differential growth of power between organized groups (domestic groups, States, coalition of States).

Gilpin’s approach is an economic approach in the sense that it assumes the economic system as one of the main channels through which the natural environment constraints and influences human action (p. 69). The use of different traditions of analysis provides the author with very powerful, nondeterministic theoretical tools to explain how endogenous economic factors can affects the prospect of international political change.

The strength of economic theory (if and when it is used as a theory of change) is that it explains how individuals (groups, collectivities, and other actors) use their power to create social and political institutions in order to advance their interests. At certain critical points, economic, technological, military innovations and developments promise significant relative gains and losses to one or another actor. Consequently, when interests or the relative power of individuals change, pressures for institutional change increase.

Gilpen’s arguments to some extent are similar to Paul Kennedy’s Rise and Fall of The Great Powers:  Economic Change and Military Conflict from 1500 to 2000.  However, whereas Kennedy saw a decline in the United States and the Soviet Union, and a rise both Japan and China, Gilpen was a bit more ambivalent:

Gilpin ends by applying his theory to the contemporary (1980) United States. He finds that while the US is still the dominant power, a disequilibrium has developed, with the USSR the rising challenger, prompting the US to retreat from some commitments and demand more resources from its allies. While a state of declining hegemony exists, no new system has emerged and hegemonic war seems unlikely in the short term. This is due to the stability of the current bipolar system and the superpowers domestically. Importantly, neither side is prey to destabilizing temporal fears since both have ideologies that promise ultimate victory regardless. Ultimately the USSR will also fall victim the law of differential growth rates and need to reduce its commitments. In sum the preconditions for hegemonic war are not wholly present, and while the USSR does challenge the US, the presence of nuclear weapons and development of economic co-operation provide restraints which give grounds for optimism.

So at least according to Ms. Lau,  Gilpin does not appear to have predicted much at all.  But obviously, given all the discussion, he is discussed.  People still like the S-curve of empires.

I am skeptical.  It seems to be one of those ideas that works, except when it does not.  And the “does not” in this case likely comes up frequently.

One of the problems of the theory are very thoughtfully brought out by

In the pre-modern world expansion typically took the form of territorial expansion.  In the modern world, however, expansion has typically encompassed economic and political expansion.  One of the reasons for this is that markets are much more efficient than other forms of human organization.  It could be summarized in the ubiquitous “invisible hand” of the market place.

I would argue, that having the British and Soviet Union physically sitting on a lot of the oil in World War 2, and American submarines sinking much of what the Japanese were sitting on, is pretty strong remedy to the invisible hand.    But it is a good point.  Modern transport and communications certainly extend at least the peace time reach of an Empire.  Starting with more peace time assets is not a guarantee to victory, but it certainly helps.

But there is another problem with the use of “diminishing returns” is that the delimiting factor with Empires.

It is very true that Conquest Empires in particular have a tendency to expand rapidly, reach some apparent limit, and then collapse back upon themselves.  We have commented on at least a few of them ourselves.

The problem is that the delimiting point is often only obvious in retrospect.  If you take Napoleon I and the French Empire.  The delimiting point might have been Trafalgar in 1805.  But after he loses his navy, he takes his Grande Army and wins what is considered his greatest factory at Austerlitz.

Hannibal as he was raging through the Italian peninsula looked and awful lot like Rome’s delimiting factor. But they did not reach thier limits until they lost to the Parthians and could not exploit the bareness of the German forests to make them a profitable conquest.

The lack of Centralized metal rich polities (and eventually the Comanche) limited Spanish success in North America.  It might have limited the British they initially were also looking for gold.  But they switched to cash crops (initially) and the initial lack of large powerful native empires worked to their advantage.

The United States is not an accidental empire.  The Americans new their Old Testament well enough to view North America as the new Canaan, and themselves as the new Israelites.  But land that European powers had spent considerable effort in obtaining was sold to them as  a bargain (Louisiana Territory, Florida, Alaska (pdf)purchases).  In all these cases, the colonies did not  lost their appeal to the owner, and the American (barely in the case of Alaska) wanted them.

And that is where we are now.  Both China and the United States have delimiting factors.  The U.S. has enormous armed forces and military bases scattered all over the globe, the Chinese are limited by this and also by the Russians to their north.  Both countries have require imports of fossil fuels and other necessities of a modern economy.  Both of them have the not only the suspicion of each other to contend with, but much of the rest of the world as well.  These all seem to be serious delimiting factors.

But the factors only look solid after the fact.  At the time that Gilpin wrote his book in the 1980s, many thought Japan was going to be the dominant Oriental power going into the 21st century: just look at the movie Blade Runner.   The Japanese are still there, I guess you could argue that they are in the way of the Chinese.  But if the U.S. Navy did not exist, they would look an awful lot like Belgium sitting next Germany before both World Wars: more of a speed bump than a barrier.

Conglomerated “Diminishing Returns” or “S-curve” are very useful ideas.  But they are simply to simple of concepts to be much more than a trend indicator.
S-Curve: A technology expample in this case.

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