power, and military have remained at or near the top. At the same time, as we will see when we delve into China’s
picture, China has gained on the US in all these areas, has become comparable in many ways, and is advancing
considerably faster than the US.
Let’s now drop down from the 40,000-foot level to the 20,000-foot level and pick up our story in 1930 so we can
see how the United States evolved to become the dominant world power. While we focus predominantly on the US
story, the linkages between economic conditions and political conditions within the United States and between the
United States and other countries—most importantly with the UK, Germany, and Japan in the 1930s, with the
Soviet Union and Japan from around 1950 until 1990, and with China from around 1980 until now—must be
understood because economics and geopolitics within and between countries were and always are intertwined.
1930 to 1939/41: The Economic War
As a principle:
Before there is a shooting war there is usually an economic war.
And:
Severe economic downturns with large wealth gaps, large debts, and ineffective monetary policies make a
combustible combination that typically leads to significant conflicts and revolutionary changes within
countries.
And:
During periods of great conflict there is a strong tendency to move to more autocratic leadership to bring order
to the chaos.
In 1929 the Roaring ’20s bubble burst and the global depression followed. It led to virtually all countries having
significant internal conflicts over wealth that led them to turn to more populist, autocratic, nationalistic, and
militaristic leaders and policies. These moves were either to the right or to the left and occurred in varying degrees.
The extremities of these degrees varied by country, according to their circumstances and the lengths and depths of
their democratic or autocratic traditions. In Germany, Japan, Italy, and Spain, their extremely bad circumstances
and their less well-established democratic traditions led to extreme internal conflicts and a turn to populist-
autocratic leaders of the right (i.e., fascists), just as at different points in time the leaders of the Soviet Union and
China, which also endured extreme circumstances and had no experience with democracy, became populist,
autocratic leaders of the left (i.e., communists). The US and the UK had less severe conditions and much stronger
democratic traditions, so they became more populist and autocratic than they were, but not nearly as extreme as
other nations.
In addition to these economically motivated conflicts within countries and the political shifts that arose from them,
all of these countries faced increased external economic conflicts as they fought for greater shares of a shrinking
economic pie. Because power rather than law rules international relations, there was a sequence of intensifying
tests of power that led to war and then to peace and the new world order in 1945.
To help to convey the picture in the 1930s, I will quickly run though some geopolitical highlights of what
happened from 1930 until the official start of the war in Europe in 1939 and the bombing of Pearl Harbor in 1941.
Then I will quickly move through the war and come to 1945 when the new world order began. I will then look at
where this world order has brought us up until now. While these stories are interesting in and of themselves, they
are most important to understand because of the lessons they provide for thinking about what is now happening
and what’s ahead.
Because the United States and China are now in an economic war that could conceivably evolve into a shooting
war, and I’ve never experienced an economic war, I studied a number of past ones to learn what they are like. That
taught me a bit about economic warfare, helped me better understand what is happening now, and made me aware
of possibilities that I hadn’t previously considered. Comparisons between the 1930s leading to World War II and
today, especially with regard to economic sanctions, are especially interesting and helpful in considering what
might be ahead. For that reason, I delve into the story of this period in a bit more detail than you might care to
read. If you find that to be the case, just read the bold for the highlights.