The US Empire and the US Dollar
While this section primarily focuses on the story of the US since it overtook the British Empire as the dominant
global power during the world wars, we will first take a quick look at the whole arc of its rise and its somewhat
recent relative decline. The chart below shows the eight types of power that make up our overall measure of power.
In it you can see the story behind the US’s rise and decline since 1700. We start in 1700 because that was
just before the emergence of the United States. While the area now occupied by the United States was of
course inhabited by native people for thousands of years, the history of the United States as a nation begins
with the colonists, who revolted against the colonial power of Great Britain to gain independence in 1776. In
the chart you can see the seeds of the US’s rise going back to the early 1800s, starting with rising strengths in
education and then in innovation/technology and competitiveness. These powers and world circumstances allowed
the US to create massive productivity growth during the Second Industrial Revolution, which was from around
1870 to the beginning of World War I and then beyond it. These increased strengths were reflected in the US’s
increasing shares of global economic output and world trade, as well as growing its financial strength, exemplified
in New York becoming the world’s leading financial center, continuing leadership in innovations, and great usage
of its financial products. You can see that these measures of the United States’ powers relative to its own history
reached their peaks in the 1950s immediately after the Allies won World War II. At that time, the gap between the
US and the rest of the world was at its greatest and the US dollar and the US world order became dominant.
Though the United States was clearly the dominant power in the post-World War II period, the Soviet Empire was
a rival, though it was never nearly as strong overall. The Soviets and their communist satellite states vied against
the much stronger US and US allies and satellite states until Soviet power began to fade under the weight of its
growing inefficiency around 1980 and then collapsed in 1989-91. That is about when China began to rise to
become a comparable rival power to the US where it is today.
As you can see, while the United States’ relative strengths of education, competitiveness, trade, and production
have declined significantly and steadily over the last 100 years (to now be around the 50-60th percentile versus
other leading powers), its relative strength in innovation and technology, reserve currency status, financial center