and a security challenge. It suffices, that out of the poor masses a tiny fraction grows angry or opportunistic enough to pick up a weapon, for an entire region to sink into anarchy. Nothing is more devastating to stability than the combination of masses of poor and a few greedy warlords. The data in this chapter call for nuance. Believers in progress should not just look back to see how mankind advanced, but take into consideration the flaws and the errors. The chapter is also a scene setter. It introduces important trends before they are explained in detail in the following chapters. These include the weakening of the West, the limits of globalization, the divergence between China and the rest of the developing world, enduring insecurity, and environmental distress.
Table 1.1. Basic indicators of Western power (%)
Sources: WDI, IMF, SIPRI, UNCTAD.
Note: The West is defined as the United States and Western Europe. “Satisfaction about the state of the country” relates to the US only.
| 1990s | 2000s | 2010s | |
|---|---|---|---|
| Global population | 13 | 12 | 11 |
| Gross domestic product | 61 | 54 | 48 |
| Manufacturing | 53 | 47 | 34 |
| Satisfaction about the state of the country | 40 | 38 | 26 |
| Export destination | 35 | 33 | 26 |
| Foreign lending | 61 | 82 | 39 |
| Foreign direct investment | 73 | 71 | 51 |
| Military spending | 68 | 65 | 50 |
The weakening of the West
In the 1990s, the West represented 60 percent of the world’s economic production and 50 percent of its manufacturing, with around 13 percent of the world’s population (see table 1.1). In the subsequent decades, that dominance diminished. It coincided with a decrease of public satisfaction with the state of the country (US only) and of trust in politics.
Economic weakening has important external consequences. The smaller a country’s share in the world economy, the more difficult it becomes to wield influence, because partner countries find alternative customers for their exports, alternative lenders, and alternative investors. In the last decade, table 1.1 shows, an average country still had around 26 percent of exports bound for the West, 39 percent of its loans coming from the West, and 51 percent of its foreign investment. The West remained a crucial economic partner. But its position was clearly eroded. This was also true for its military power. The global preponderance enjoyed in the years after the Cold War drew to an end and this relative weakening inevitably empowered other countries as security actors.
Despite economic decline, Western economies were resilient. Trade grew and so did domestic production. But it is clear that economic growth between 2010 and 2019 remained slower than in the previous 20 years (figure 1.2). The resilience of trade, an important element of globalization, did not always coincide with strong production growth. Western countries participated intensively in globalization, but their economies started to grow more slowly. There was also a large gap between globalization and production on the one hand, and the real disposable income of households on the other. The real disposable income is what households can spend, corrected for inflation. If incomes increase, but products and rent become more expensive, the real disposable income increases much more slowly or might even decrease. Particularly the poorest 40 percent suffered. Their real disposable income has had virtually no growth since 2000. Over the 30 years, their real disposable income growth was just 25 percent.
Figure 1.2 Selected growth indicators for the West (%)
Note: Figures for EU28 and US. All income figures are inflation-adjusted. The income figures for the bottom 40 concern the unweighted average of real disposable incomes for the US, the UK, France, and Germany.
Sources: WDI, BEA, SOEP, INSEE.
Western countries experienced a decline of their power and a growing gap between economic growth and purchasing power. The full impact of this weakening was mitigated by growing external debt. The majority of Western countries imported more than they exported. Later, we will discover that these imports primarily concern fuels from Russia and the Gulf States, consumer goods from China, and cars alongside other machines from Germany. If we accumulate the current account deficit throughout the three decades, it amounts to US$14 trillion, five times the size of the economy of the United Kingdom (figure 1.3). The current account includes trade and investment incomes. Germany and the Netherlands were key exceptions with large surpluses. Large, structural deficits can spark painful adjustment crises in the long run. Think of the tale by Jean de La Fontaine, about the ant and the grasshopper. When the cold winter kicks in and the industrious ant is not willing to help, the vulnerability of the grasshopper becomes visible.
Figure 1.3 The evolution of the net international investment position (US$ bn)
Note: US and EU countries. Germany and the Netherlands are set apart given their exceptionally large surplus.
Source: WDI.
The limits of globalization
The erosion of economic power notwithstanding, the West remained an important consumer market. In the 1990s, a core foreign policy theme was conditional engagement: access to the Western market in exchange for accepting Western rules and values, including free trade, democracy, and the rule of law. Striking, however, was that the countries profiting the most from the age of globalization and the openness of the West were not the democratic countries.
Authoritarian countries, especially China, rapidly expanded their share in Western imports from 15 percent in 1990 to 34 percent in 2012 (figure 1.4). The countries growing their export revenues from the West the most were thus not necessarily free, democratic countries, but often authoritarian
