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Changes in the global
economic power structure:
towards a multipolar world?
Sebastián Laffaye
Federico Lavopa
Cecilia Pérez Llana

Abstract
Many of the studies that participate in the debate on the “polarity” characterizing the current
world usually assume that the global power structure has changed significantly or they adopt a
purely conceptual and descriptive approach to the changes that have taken place over the last
years
...
This paper
intends to stand aloof from this eminently conceptual and descriptive—and, in many cases,
prescriptive—debate so as to provide some quantitative elements that serve to contrast, in a
more rigorous way, the proposition that the world is heading towards a multipolar configuration
...
On the basis of the comparison of the performance of these
indicators in the group of countries selected, we will draw some tentative conclusions about the
possible reconfiguration of global economic power
...
Introduction
In 1990, Krauthammer proclaimed in a famous paper that the United States had become the
hegemonic power (Krauthammer, 1990)
...
2009: 4-5)
...

A series of events occurred at global level over the last years seem to have paved the way for this
prediction to become true, at least, in the economic arena
...
For example, a recent work published by OECD has
forecast that the rapid growth of China and India will imply that their GDPs, taken together, will
surpass that of the G7 in the year 2025, and that in 2060 they will surpass that of the OECD (OECD,
2012)
...

Over the last years, much has been written on this topic
...
, 2009; Brooks and Wohlforth,
2008; Jervis, 2009)
...
Thus, new terms such as “nonpolarity” – which intends to reflect
the growing role of non-state actors (Haass, 2008) – or “interpolarity” – which refers to the notion
of multipolarism in the age of interdependence (Grevi, 2009) – were coined
...
Very few research studies have attempted to empirically verify the global power
redistribution process, and those studies which have tried to do so have restricted their analyses
to only very few indicators (in most cases, share in world GDP and military budget) in order to
show trends in a reduced group of countries (in general, China and the United States)
...
In view of the wide range of possible indicators, we will only focus on one of the
aspects of this alleged redistribution of global power – namely, economic power – and we will not
consider other elements, such as military power (which is central in the realist school of thought)
or the so-called “soft power” (Nye, 2005)
...

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Changes in the global economic power structure: towards a multipolar world?

Within this framework, we will seek to pinpoint a series of indicators of economic power and to
assess their performance over the last 30 years for the group of countries having the greatest
share in the world economy during said period
...

This paper is organized in the following way
...
On the basis of this
definition, and after reviewing the literature available on the measurement of economic power,
we will identify a set of indicators with series which are long enough (from 1980 to 2011) and
complete for the whole group of countries selected for our analysis
...
Lastly, we will draw some conclusions on the trends in the
redistribution of global economic power that will derive from our study
...
Power, economic power and indicators of economic power
The study of power has played a central role in the debates within the theory of international
relations
...
Hans Morgenthau, who is considered to be the father of classical
realism, stated that the quest for power is both the engine that drives the state forward and the
essential component of inter-state relations (Morgenthau, 1948: 41-42; see also, in the same
sense, Waltz, 1979)
...

For those authors who advocate this school of thought, the power a state wields can be measured
considering a series of factors or “elements of national power”
...
Morgenthau (1948:
131-198), for example, considered that the elements of national power were: geography, natural
resources (food and raw materials), industrial capacity, military preparedness (technology,
leadership, quantity and quality of the armed forces), population (distribution and trends),
national character, national morale, quality of diplomacy, and quality of government
...
More
recently, Mearsheimer (2001: 55) pointed out that power has two large components: latent power
– which basically includes economic wealth and population – and military power, which is mainly
determined by the size of the army
...

Other authors have proposed a relational definition of power and have stressed the need to take
into account the effects of power when trying to measure it (Baldwin, 2002: 178; Zartman and
Rubin, 2002: 6-7)
...
This definition had a far-reaching impact on other disciplines
...

In spite of the efforts made by the advocates of the relational view, the elements-of-power
approach is still deeply rooted in the literature on international relations
...
The fact
that researchers have preferred to measure power through its elements can be explained by the
simplicity of this technique for data collection and comparison and by the tautological nature of
the relational definition (Zartman and Rubin, 2002: 8; Mearsheimer, 2001: 60)
...
As a starting point,
we will identify and select a series of elements of economic power
...

This aspect is present, for example, in the conception developed by Max Weber, who considered
power as “any chance to attain one’s will in a social context in spite of resistance” (Weber, 1964)
...
In terms of economic
power – which we particularly explore herein –, Paola Subacchi (2008) states that in the era of
globalization, in which new actors have become part of the global economic wheel, economic
power is not synonymous with exercising influence on others but rather with autonomy, i
...
, the
capacity to act in a world where numerous state and non-state actors coexist
...
For the purposes of this study, from that group of indicators, we have selected those that
were considered to be the most appropriate to measure the two dimensions of economic power
mentioned above: i) the capacity of a state to impose its own will on others through different
means (threats, coercion, seizures, etc
...
After doing that first selection, we have identified those indicators of the group
for which there were publicly available series both for the whole period under study (1980-2011)
and for all the countries and blocs included in the analysis
...
The variables selected are listed below , under the
corresponding category:

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Changes in the global economic power structure: towards a multipolar world?

- Market share and domestic market (3
...
2):
• current account balance
• international reserves
• share in world exports
- Innovation and technology (3
...
4):
• food trade balance
• oil trade balance
Although the literature reviewed herein mentions other variables – such as quality of education,
participation of the knowledge-producing sectors or government spending in research – which are
relevant for a study like this one, the difficulty in gathering complete and consistent series of data
led us to limit our analysis to the abovementioned indicators
...


3
...
1
...
The impact of this variable on the relative power of a state is mainly
related to the size of their domestic market and is channelled through two forms
...
Second, the relative size of the domestic market
makes it possible to assess the level of autonomy a country has to implement policies that limit
the evil effects of foreign shocks, such as those suffered, for example, by Latin American countries
in the eighties and some South-East Asian countries in the late nineties
...
1
...
GDP by Purchasing Power Parity (PPP)
Almost all the literature reviewed in this study highlights the importance of the size of the
economy as a crucial variable when it comes to measuring the economic power
...

As can be observed in Table 1, over the last 20 or 30 years, most developing countries grew faster
than developed countries, which resulted in a change in the relative composition of world GDP
...
In that sense, IMF
forecasts point out that, in 2013, for the first time in modern history, the share of emerging
countries in GDP by PPP will be greater than 50% and it would reach 55% in 2017
...
This share in world GDP would be
capitalized by China and India, which, taken together, would have a share of 46% in the year 2060
...
As a result of these changes in the composition of GDP, the GDP per capita of
different countries will tend to converge: China’s and India’s GDP per capita would increase sevenfold over the next 50 years
...
1
...
Population
Another indicator – closely linked to the size of the domestic market – is the number of
inhabitants, which should be taken into account when measuring a state’s degree of economic
independence
...
As early as 1957, Hans Morgenthau pointed out that, although it is
not correct to consider that a country is powerful only because its population is larger, it is
nonetheless true that no state can become a leading power if it is not one of the most densely
populated in the world (Morgenthau, 1957: 160)
...
Evidence of this is the fact that only three of the 20
countries with larger populations – and which, taken together, account for 70% of the world’s
population – are industrialized countries, namely, the United States, Japan and Germany
...
Even though China ranks first in this
indicator, UNCTAD projections point out that China will be surpassed by India by 2021
...
1
...
GDP per capita
The analysis of the GDP per capita throws some light on domestic demand conditions
...

As can be observed in Table 4, whereas the GDP per capita of developed countries grew above the
world average in the eighties, it went down in the nineties and fell even deeper in the last ten
years
...
As a result of this, China’s GDP per capita increased 30-fold,
leaping from just over USD 200 in 1980 to more than USD 6,000 2 in 2012
...
5% on average, thus
soaring from USD 585 to USD 3,492 over the whole period under study (1980-2011)
...

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Changes in the global economic power structure: towards a multipolar world?

3
...
4
...

As from 1990, developing countries have had a greater share in world imports and this tendency
has been reinforced in the last decade
...
In contrast, some developing
countries have gained relevance
...


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Changes in the global economic power structure: towards a multipolar world?

Whereas China is playing an increasingly leading role as world importer, the United States is losing
its relative share
...
In contrast,
the USA was the most important market for 28% of the countries in 1980, while in 2010 it was so
only for 20% of them (see Table 6)
...


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Changes in the global economic power structure: towards a multipolar world?

3
...
Self-financing
Holding foreign currency to finance those imports which are crucial for setting the economy in
motion – such as energy, inputs or capital goods – provides a country with greater freedom of
manoeuvre to implement economic policies
...


3
...
1
...
A
prolonged imbalance throughout time reduces economic authorities’ freedom of manoeuvre,
since it is usually necessary to resort to external financing to bridge the gap
...
The gradual increase in
both household and government indebtedness in deficit economies has financed the increase of
expenditures
...
High levels of indebtedness, such as
those the USA, Japan and most of the Eurozone countries have, restrict the room for manoeuvre
to implement autonomous policies, since part of future revenues is allocated to debt service
payment
...


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Changes in the global economic power structure: towards a multipolar world?

3
...
2
...


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Changes in the global economic power structure: towards a multipolar world?

Over the last four decades there has been a sustained increase in the reserves developing
countries have and, in particular, in those of China, which accounts for 30% of the total of those
reserves (Graph 2)
...


Over the last three decades, protected by its condition as a reserve currency issuer at world level,
the USA has implemented a reserve reduction policy, which led reserves to drop from 15% of GDP
in 1970 to slightly above 1% of GDP in 2011
...
Although this started to be a subject of debate when the euro was launched (and, to a
lesser extent, when the yuan popped up as a result of the Chinese economic boost), it still
constitutes a cornerstone of the US global dominance
...
Yet, the size and the dynamism of the Chinese economy suggest that the
yuan will eventually gain greater relative weight
...


3
...
3
...
On the one
hand, as was mentioned above, a large domestic market makes the economic performance within
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Changes in the global economic power structure: towards a multipolar world?

national boundaries less vulnerable to external shocks, since the domestic market serves to
mitigate the consequences of steep falls in global aggregate demand
...

On the other hand, however, the closure of export markets may work as an important
international instrument of pressure (international embargos constitute the most typical
example)
...
Consequently, having a significant share in world exports may also be a sign of
strength
...
In turn, the USA, which had lost
the leading position in the eighties, gradually reduced its share in world exports to 8% in 2011,
that is, half of the share it had in 1950
...
In this
sense, it is worth highlighting that, after having fallen to 23
...
3% in 2011, implying a growth of 24 percentage
points over the last four decades
...
3
...
) are the most frequently mentioned in the
literature, several authors (Treverton and Jones, 2005; Tellis, 2000, among others) claim that

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Changes in the global economic power structure: towards a multipolar world?

economic power has to be measured not only by taking the market share into account but also the
capacity for innovation
...
This indicator, which is also
usually used in the specialized literature, provides us with data for the whole period under
analysis
...
3
...
Patents granted by the USA
Although, as Table 9 shows, the USA maintains its leading role when it comes to registering
patents according to origin, there has been a sharp increase in Japan’s share – over 20% patents
registered in 2011 – and, to a lesser extent, in South Korean’s share
...
4% of the patents
registered in 2011
...
In any case, it is clear that the
technological gap – at least as measured by this indicator – is still very large in absolute terms
...
4
...
Most of the authors who have paid attention to this aspect of power seem to
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Changes in the global economic power structure: towards a multipolar world?

coincide in the importance of two raw materials: food and oil
...

Over the last decade – especially during the last five years – there was a marked increase in the
prices of raw materials (Graph 3), which has left those countries which depend on imports for
their food supply in a more vulnerable position
...


3
...
1
...

Of the twenty countries having the largest average food trade surplus, only four of them are
developed countries (namely, the USA, Australia, New Zealand and Norway), and Brazil and
Argentina rank first in this group
...


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Changes in the global economic power structure: towards a multipolar world?

It is worth highlighting that China recorded a food trade surplus until 2008 when, along with a
sharp increase in raw material prices, it recorded a food trade deficit
...


3
...
2
...
Nevertheless, oil continues being of paramount
importance in the current world’s production system
...

Global oil reserves are highly concentrated: 78% of them can be found in only eight countries, of
which seven are located in Asia (Saudi Arabia, Russia, Iran, United Arab States, Qatar, Kuwait and
Iraq), and one in Latin America (Venezuela)
...
The same phenomenon can be observed in some of the most developed countries in the
world: Germany, Japan and the USA have also recorded a growing oil deficit (Table 11)
...
Towards a multipolar world?
Graph 4 intends to schematically present a qualitative synthesis of the behaviour shown by eight
countries and the European Union/Eurozone considering the indicators analysed in the foregoing
sections
...


,

or

point out what the recent trend of each variable is for each

The table reveals that Germany, the USA, Japan and the EU are losing part of their share in all or
almost all the indicators considered
...

In particular, the analysis presented in the foregoing sections shows empirical evidence that China
and, to a lesser extent, India could gain, over the last three decades, a greater market share to the
detriment of developed countries
...


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Changes in the global economic power structure: towards a multipolar world?

Yet, these incipient changes in the distribution of global economic power do not seem to have a
noticeable impact on the decision-making process of international economic institutions
...
In other words, these changes in the distribution of global economic power –
from a unipolar to a multipolar configuration – are not being accompanied by a greater
multilateralization of the global economic decision-making process
...

Thus, one of the major challenges of developing countries in the forthcoming years will be,
precisely, to increasingly allow the post-war economic institutional structure to acquire a greater
weight in the world economy so that it can adjust itself to the new configuration of global
economic power
...
“Power and international relations”
...
Simmons (editors)
...

Brooks, Stephen and William Wohlforth (2008)
...
New Jersey: Princeton University Press
...
“Is economic power a useful and operational concept?”
...
Weatherhead Center for International Affairs
...
(1957)
...
Behavioral Science, 2 (3): 201 -215
...
“When the weak bargain with the strong: negotiations in the World Trade
Organization”
...

Grevi, Giovanni (2009)
...
Occasional Papers, 79
...

Haass, Richard (2008)
...
What will follow US dominance”
...

Hart, Jeffrey (1976)
...

International Organization, 30 (2): 289-305
...
“The lonely superpower”
...

Ikenberry, John (2008)
...
Foreign Affairs, 87 (1): 23-37
...
“Unipolarity, state behavior,
and systemic consequences”
...

Jervis, Robert (2009)
...
A structural perspective”
...

Keohane, Robert and Joseph Nye (1988)
...
Buenos Aires: GEL
...
“The unipolar moment”
...

Mearsheimer, John J
...
“The tragedy of great power politics”
...
W
...

Morgenthau, Hans (1986)
...
La lucha por el poder y la paz
...

Sixth Edition
...

OECD (2012)
...
Paris: OECD
...
“New power centres and new power brokers: are they zapping a new
economic order?”
...

Tellis, Ashley, Janice Bially, Christopher Layne and Melissa Mcpherson (2000)
...
Santa Monica, CA: RAND
...
“Measuring national power”
...

Santa Monica, CA: RAND
...
“Emerging world order? From multipolarity to multilateralism in the G20,
the World Bank and the IMF”
...

Waltz, Kenneth N
...
Theory of International Politics
...

Weber, Max, Johann Winckelmann and José Medina Echavarría (1964)
...
Mexico: FCE
...
“Unipolarity, status competition, and great power war”
...

Zartman, William and Jeffrey Rubin (2002)
...
Ann Arbor: The University of
Michigan Press
...
“A monetary regime for a multipolar world”
...


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