The Power of Nations

Michael Beckley Article

Many scholars and analysts measure power in terms of resources. Unfortunately, most of them measure resources in gross rather than net terms. As noted, gross indicators systematically overstate the power of populous countries, because they count the benefits of having a big population, but not the costs…

To rank among the most powerful nations in the world, a state needs to amass a large stock of resources, and to do that a state must be big and efficient. It must produce high output at low costs. It must not only mobilize vast inputs, but also produce significant output per unit of input. In short, a nation’s power stems not from its gross resources, but from its net resources—the resources left over after subtracting costs.

In military affairs, production costs refer to the number of assets needed to generate a given level of force and are mainly a function of skill and technology—a military with skillful military personnel and superior technology will use fewer resources to accomplish a mission than a military with low skill and outdated technology…

Security costs are the price a government pays to police and protect its citizens. The logic of deducting assets tied up in domestic law enforcement and homeland security is simple: police and military units that are bogged down chasing criminals, quelling rebellions, or defending borders against foreign invasions cannot project power abroad or create wealth at home. Measuring security costs thus accounts for the fact that two nations with identical sets of gross resources may, nevertheless, wield vastly different levels of power if one country is surrounded by enemies and wracked by internal strife whereas the other is stable and surrounded by allies…

The most popular indicator is GDP, which records the value of all goods and services produced within a country over a fixed period of time… Despite the widespread use of GDP, however, few people know what it actually measures or recognize that it does not deduct costs… GDP counts security spending as economic output. GDP does not distinguish between guns and butter. It counts a 100 million gulag the same as a $100 million innovation center. Hence, GDP fails to account fully for the economic costs of domestic instability and international conflict. In fact, GDP usually rises when a country mobilizes for war…

Academics, too, typically measure the power of nations in terms of war potential. As noted, more than 1,000 peer-reviewed studies have used CINC, which combines data on military spending, troops, population, urban population, iron and steel production, and energy consumption. Measures of war potential, however, suffer from the same problem as GDP: they are gross measures that do not deduct production, welfare, or security costs. They count military units the same, regardless of their level of skill or technology, the welfare costs of supporting those units, or whether they are projecting power abroad or imposing order at home. They also treat military spending and other inputs, such as energy consumption or R&D spending, as if they were outputs, so a country could substantially increase its CINC score by making enemies and then raising a huge, oil-guzzling army to attack them.

How can scholars address the shortcomings of the standard indicators of national power discussed above? The ideal solution would be to deduct costs… The obvious problem with such an approach, however, is that compiling balance sheets for every country is a painstaking process that requires substantial data and time… [S]cholars need a proxy for net resources that has data covering many countries going back many decades. Does such an indicator exist?

In an oft-cited statistical reference, the historian Paul Bairoch suggested that the ‘strength of a nation could be found in a formula combining per capita and total GDP.’ Bairoch did not elaborate on this point, but subsequent research supports his intuition: as noted, scholars already believe that GDP represents the gross size of a state’s economic and military output, and there is a large literature showing that GDP per capita serves as a reliable proxy for economic and military efficiency….

To create a rough proxy for net resources, I follow Bairoch’s advice by simply multiplying GDP by GDP per capita, creating an index that gives equal weight to a nation’s gross output and its output per person. This two-variable index obviously does not measure net resources directly, nor does it resolve all of the shortcomings of GDP and CINC. By penalizing population, however, it provides a better sense of a nation’s net resources than GDP, CINC, or other gross indicators alone…

UK and China

By standard indicators, China looked like a superpower in the nineteenth and early twentieth centuries. It had the largest GDP and military in the world until the 1890s, and the second largest GDP and military until the 1930s. During this time, however, China suffered a “century of humiliation” in which it lost significant territory and most of its sovereign rights, fighting at least a dozen wars on its home soil — and losing every single one of them…

Clearly, Britain was more powerful than China during the Opium Wars. This fact, however, is not captured by standard gross metrics: China’s GDP and defense budget were more than twice the size of Britain’s, and China’s army of 800,000 troops dwarfed the 7,000-troop force that Britain sent to China to fight the wars.

China’s weakness is apparent only when costs are taken into account… China suffered from greater production, welfare, and security costs than Britain and thus had fewer resources to draw on in their many disputes. Whereas Britain comes out far ahead of China when power is measured by my proxy for net resources (GDP x GDP per capita), Britain never overtook China in terms of GDP. Moreover, CINC suggests, nonsensically, that China and Britain were equally matched in the mid-nineteenth century and that China surpassed Britain in power in 1907, five years before the Chinese government collapsed.

China and Japan

China’s misery did not end with the Opium Wars. In the latter half of the nineteenth century, Japan became determined not to suffer the same fate as China, so it revamped its government, economy, and military and began seizing territory and resources in East Asia. When China tried to stand in the way of Japan’s imperialist plans, Japan went on a rampage and quickly defeated China militarily in 1894 and forced it to sign the Treaty of Shimonoseki, which ceded the Liaodong Peninsula, Formosa, and the Pescadores to Japan. China also was forced to recognize Korea’s independence—which effectively meant that Korea would become a vassal of Japan, no longer of China—and to give Japan commercial rights in China and a massive indemnity.

After pocketing these gains, Japan annexed Korea in 1910, and when World War I broke out in 1914, Japan entered the war on the Allies’ side and seized the German-controlled city of Qingdao on China’s Shandong Peninsula. Japan then presented China with the infamous “Twenty-One Demands,” which basically called for China to become a Japanese ward. The United States forced Japan to abandon its most punishing demands, but Japan still extracted substantial territorial and economic concessions from China.

A little more than a decade later, Japan expanded its presence in northeast China, establishing a colony there called Manchukuo in 1932, and bringing the Chinese provinces of Jehol and Hebei under Japanese control in 1933. In 1934, the Japanese government declared that East Asia was Japan’s sphere of influence and warned other great powers not to defend China. Then in 1937, Japan launched a full-scale invasion. By the time World War II began in Europe in 1939, Japan controlled most of eastern China plus Taiwan and its outlying islands. Japanese expansion stopped only when it ran afoul of the United States, which decisively defeated Japan in 1945.

Obviously Japan was more powerful than China during their rivalry. Yet by standard metrics, China appeared to have far greater power resources. China’s population, GDP, and military were several times larger than Japan’s, but Japan had greater net resources because it was much more efficient than China …