Who Should Lead the Global Economy?

PRINCETON – In terms of global economic leadership, the twentieth century was American, just as the nineteenth century was British and the sixteenth century was Spanish. Some Chinese and Europeans think that they are next. Are they? And should they even want to be?

The most important prerequisite for global economic leadership is size. The bigger an economy, the greater its systemic importance, and the more leverage its political representatives have in international decision-making. The United States is the world’s largest economy, with a GDP of roughly $16.7 trillion. The eurozone’s $12.6 trillion output puts it in second place, and China, with a GDP of around $9 trillion, comes in third. In other words, all three economies are conceivably large enough to serve as global economic leaders.

But an economy’s future prospects are also crucial to its leadership prospects – and serious challenges lie ahead. No one thinks that the eurozone will grow more quickly than the US in the coming years or decades. While China is expected to overtake the US in terms of output by 2020, decades of rigid population-control measures will weaken growth in the longer run, leaving the US economy as the most dynamic of the three.

Another key requirement for global economic leadership is systemic importance in commercial, monetary, and financial terms. Unlike China, a large trade power with underdeveloped monetary and financial capabilities, the eurozone meets the requirement of systemic significance in all three areas.