On the Question of Socio-Economic “Sunset” of Big Countries: Praeteritum et Praesens

Abstract

The author deals with the problem of the great nations’ fall. Special attention is paid to critical interpretation of institutional and cultural explanations of socio-economic systems’ degradation. It has been proved that these approaches are unable to completely explain complex processes of big countries decline. The main weakness of institutional hypothesis lies in its focusing mainly on political rights of population and democracy. In particular, institutional approach fails to interpret the relative socio-economic decline of such countries with “excellent” institutions, as the United Kingdom and the Netherlands. In their turn, “cultural determinists” are incapable of giving satisfactory explanation of China’s decline in XIX century as well as China’s economic steep rise in the end of the end of XX and the beginning of XXI centuries. The exogenous interpretation of nations’ fail which is gaining popularity most recently also faces a number of serious objections. The most important is simplified representation of the evolution of the world economy as a result of force-majeure circumstances. The author presents its own concept of leading countries’ economic decline. The main idea is that the key factor determining the decline of great powers is connected with technology progress. Author believes that the change in the balance of forces in the world economy is caused by the difficulties with the transition of dominating power to the new technological paradigm. General algorithm of losing the leadership is as follows: instead of destruction of institutional barriers which prevent launching the next wave of technological and economic development, the country fails to resist the illusion of possibility to maintain the dominant role in the global hierarchy by outsourcing its industrial sector to global periphery and accelerating the growth of service sector. However, service sector is a weak generator of economic growth. Tertiary sector’s overgrowth undermines the stability of the economic system just to external shocks and in the long run is capable to weaken the competitiveness of the state in the global economy. As a result, torn apart by internal contradictions, de-industrialized economy cedes leadership to rapidly copying technological innovations and speedily industrializing catching-up countries. This hypothesis is verified by the cases of Great Britain at the beginning of the XX century and the USA in the beginning of the XXI century. Acknowledgement. The article has been prepared in the framework of youth grant of Astana Club of Nobel prizewinners of 2014.