Published online by Cambridge University Press: 13 June 2011
The explanation of the rise and fall of the world system's leading powers in terms of uneven economic development tends to overlook the role of the creation and management of public credit and national debts. Prior to 1815, the Netherlands and Great Britain owed a significant proportion of their respective victories over the larger and wealthier states of Spain and France to the development of competitive financial capabilities. Winning, however, leads to higher absolute debt burdens which, prior to 1945, encouraged postwar reductions in governmental expenditures. In this fashion, world leaders have contributed to the erosion of their preponderant capability positions before the emergence of international rivals. These ideas are elaborated within the context of George Modelski's long cycle of world leadership theory and through a brief review of war-related financial problems between 1500 and 1815 and the consequent development of national debts. The longitudinal analysis of British and American public debt data provides collaborating empirical support.
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4 There is really no need to argue that Portugal's term as a world power is fully comparable with those of its successors. From an evolutionary perspective, the Portuguese era can perhaps best be viewed as a transition period in the movement away from the traditional Mediterranean locus of activity and toward the new Atlantic and northwestern European center in the emerging world system. Each successive world power has enjoyed access to a broader resource base than its predecessors, thereby increasing the potential scope and influence of world power leadership.
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14 H. A. Miskimin notes that in 1519, the election of the Holy Roman Emperor required large sums of money for the purpose of bribing the electors. Consequently, the power struggle is said to have degenerated into a test of credit worthiness between Charles V and France's Francis I. See Miskimin, , The Economy of Later Renaissance Europe, 1460–1600 London: Cambridge University Press, 1977), 163–64.Google Scholar
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28 Since controlling for inflation tends to slow the immediate impact of wars on real national debt data, the martial interventions have been lagged one, two, or three years in the equations reported in Tables 4 and 5. Parameters reported as statistically significant, in addition, have been re-estimated after removing insignificant parameters. Finally, the reader is cautioned that the reported parameters are not standardized. Parameter coefficients therefore are not strictly comparable between separate series.
29 The functional form of an abrupt, temporary intervention is
where: ω0 = an estimate of the difference between pre- and post-intervention process levels
δ = an estimate of the impact's rate of decay
B = a backshift operator which may be interpreted as B(Xt) = Xt = 1 during war; 0 otherwise.
30 British GNP data have been taken from Mitchell (fn. 23, 1975); Veverka, J., “The Growth of Government Expenditures in the United Kingdom Since 1790,” Scottish Journal of Political Economy 10 (February 1963), 111–27CrossRefGoogle Scholar; and Peacock and Wiseman (fn. 23). American GNP data are from Berry, Thomas S., Revised Annual Estimates of American Gross National Product: Preliminary Annual Estimates of Four Major Components of Demand, 1789–1889 (Richmond, Va.: Bostwick Press, 1978)Google Scholar, and U.S. Office of the President (fn. 23).
31 Figure 3 also provides some suggestive support for the idea that each successive world power possesses access to a resource base of increasingly greater scope. Despite the higher absolute level of public debt, the relative debt load of the U.S. has remained at lower levels than that experienced by Great Britain. If Dutch debt data were available for the 17th and early 18th centuries, we might expect to find that their relative debt burden peaks exceeded the peaks associated with the British and American financial histories.
32 There is some parallel here to the destruction of industrial plants in Germany and Japan in World War II, and the comparative advantage of their being forced to construct new and more modern equipment in order to compete with the existing industrial infrastructure of the American victor. Until competitive threats alter the incentive structure, winners are confronted with obsolesence at an earlier point than their defeated former foes, or at least those who are able to reemerge as competitors.
33 Along similar lines, Parker, Geoffrey, in “Warfare,” in Burke, Peter, ed., The New Cambridge Modern History: Companion Volume, XIII (London: Cambridge University Press, 1979), 208Google Scholar, points out that the “lack of money to pay for unlimited war was undoubtedly the critical restraint on military developments before 1800.” Thus, the financial restraint, in one way or another, was operative before, during, and after wars.
34 The decline in the number of American aircraft carriers in the post-1945 era provides a contemporary illustration of this continuing phenomenon.