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lkrubner · 2012-10-25 · Original thread
China will not replace the USA as the central economic power, even if the economy of China exceeds that of the USA. Step back from the details for a moment and think about great economic centers when they are at the peak of the power. Is there any generalization we can make that is true of all civilizations, in all centuries, and for which we have fairly detailed records, even going back thousands of years? Yes, there is at least one generalization that we can make with confidence: each center, when it was at its peak, was a place where foreign merchants felt safe and comfortable. Does that hold true today in China? Do foreign merchants feel they can make deals as equals with the native Chinese merchants? Can foreigners trust that the Chinese courts are fair and neutral and unbiased?

Islam was at it peak in the 800s and 900s, and during that time Jews, Christians, Hindus and other groups, which had been hated in the past and would be hated again in the future, were all welcome.

Venice was at its peak in the 1400s, and muslims merchants felt safe there, despite the strong anti-muslim sentiment in much of Europe at that time. The same holds true of Amsterdam when it was at its peak in the 1600s.

As for England, as it reached its peak in the 1700s, we have Voltaire's famous description:

"Go into the Exchange in London, that place more venerable than many a court, and you will see representatives of all the nations assembled there for the profit of mankind. There the Jew, the Mahometan, and the Christian deal with one another as if they were of the same religion and reserve the name of infidel for those who go bankrupt. There the Presbyterian trusts the Anabaptist, and the Church of England man accepts the promise of the Quaker. On leaving these peaceable and free assemblies, some go to the synagogue, others in search of a drink; this man is on the way to be baptized in a great tub in the name of the Father, by the Son, to the Holy Ghost; that man is having the foreskin of his son cut off, and a Hebraic formula mumbled over the child that he himself can make nothing of; these others are going to their church to await the inspiration of God with their hats on; and all are satisfied."

I am using the phrase "economic center" in the sense that Fernand Braudel uses it in his book "The Perspective Of The World":

He does not use the phrase to mean "the biggest economic power", though often the center is the biggest economic power. But he also applies it to Antwerp in the 1500s, when the religious wars were at their peak, and when, despite the wars, southern Europe and northern Europe needed to find a way to trade with each other, and market and political forces established Antwerp as the center of trade in Europe, because it was a northern city still mostly under Spanish control -- the perfect meeting place of north and south.

I am not saying that the USA will always be the center of the world economy. But I am saying that the next center will be open to the world, in the same way that previous economic centers were. China is not currently open to the world in the same way. It would take a political revolution as big as the one in 1949 to transform China into the kind of open political entity that former economic centers have been.

And can a nation really have the dominant currency if it is not the central economic power? It is reasonable to say that Chinese yuan will become more important over time, but this title implies a larger change: "The yuan is displacing the dollar as a key currency". If the implication is that the yuan will actually replace the dollar as the dominant reserve currency, then that implication is probably false. Politics plays a large role in these shifts, not just economics.

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