History shows that the world goes through cycles that repeat themselves. And from these cycles emerges the next superpower.
The world is in disarray. Several problems—ranging from economic crises and geopolitical disputes to terrorism and conflicts over religion—have come to the fore. The sub-prime mortgage crisis of 2007-08 left the US weakened, and threw the world’s biggest superpower and several countries into a recession that they are all struggling to come out of. The US continues to face serious challenges, some from its own internal economic and social problems. Meanwhile the Middle East is a ticking time bomb threatening to blow up the entire region, which has serious ramifications for the entire world. Africa, especially Nigeria, is now grappling with new kinds of conflicts. The continent is also in sharp focus due to the global struggle for resources.
If Paulo Vicente dos Santos Alves is to be believed, the world goes through several cycles and the current turmoil is also part of that. A professor at Brazil’s Fundação Dom Cabral, Alves believes that the world goes through cycles that he calls ‘Hegemonic Cycles’ and ‘Kondratieff Cycles’, or technological cycles. In each of these cycles, there is one dominant superpower and there are four ‘acts’. The first act is that of a general crisis, the second consists of a technological revolution, the third of a hegemonic transition war and the fourth of the rise of a new hegemonic power.
If you look back at history, Alves’ theory does appear to hold true. At any given point of time, the world has had one dominant superpower and the world appears to have gone through the cycles that he outlines.
In this interview with CKGSB Knowledge, Alves, also the author of The Emerging Markets Report, talks about the state of the world and how we should analyze it, who will be the next superpower and the implications of a multipolar world.
After reading this, you can literally answer the question: what is the world coming to?
Q. Can you walk us through some of the cycles the world goes through?
A. The cycles are the hegemonic cycles and the Kondratieff cycles. Hegemonic cycles have been running for 100-140 years with transition periods of 30 years in which a major power has become hegemonic and dominant of mainly the seas and the sea lanes. The first one was the Habsburg and Genovese (1492-1618), the second one was the Dutch, the third was the UK, and now the fourth one is the US.
Kondratieff cycles have been running since the first Industrial Revolution in the 1770s. They are more or less 50-60 years and they deal mainly with technology and economics. Every 50-60 years we have a major crisis and because of those crises, we have technological recuperation leading to a major technological revolution. We are right now at the 5th cycle and coming to the end of the 5th cycle.
Q. What are the principles at work here, and why does history repeat itself?
A. I am supposing that the past will predict the future, which is not necessarily so. But supposing the causal relationships and the causal models are the same, then I can predict how things will play out. But basically we don’t understand completely why this model does happen in this way. I am assuming that we have a cause and effect relation based on Chaos Theory or Complexity Theory for hegemonic cycles, basically an action and reaction in terms of crisis and breakthroughs in terms of the Kondratieff cycles. But it’s an assumption that this is the real causal model, an assumption that this causal model will continue in the future.
Like any forecast, we cannot be sure. It’s just a possible outcome if the cycles continue. But it poses us several questions and makes us start reflecting if this is true, how can I prepare for that? What are the consequences of that? Where are the threats and where are the opportunities for all countries, for all companies?
Q. Given what you are saying, where exactly are we right now—in which part of the cycle?
A. We are in the middle of the American hegemony. The American hegemony is forecasted to come to an end in the second part of this century. When exactly? We don’t know. But the average year would be 2065.
The Kondratieff cycle, we are marching towards the last part of the fifth Kondratieff cycle, which is a crisis. If the cycles continue, from 2018 to 2030, we will see several regional conflicts and several regional crises, including wars. It will be more or less a replay of the period of 50 years before from 1968 to 1980, with the war in Vietnam, with the wars in the Middle East and with the oil crisis. Not necessarily that the crisis will be in the same places, and not necessarily the crisis will be oil again, but several regional conflicts and crises are forecasted if the cycles continue.
So far, it’s looking like it is going to repeat itself. The Middle East is becoming more and more complex; Africa is becoming more and more complex; the crisis in Ukraine and Eastern Europe too; and [there are] some flashpoints in Asia. So the world is really looking like it is going to replay the late 1960s and the 1970s again.
Q. If we were to break down the cycle into different phases, can you walk us through how those phases connect with the real world?
A. In Kondratieff cycles, basically we have four phases. Phase One is recovery, recovery from the crisis that has closed the last cycle. Because of the recovery, people start becoming more optimistic and new technologies appear.
This leads to the second phase where we have expansion—very strong and very fast expansion of the economy based on technology advancement. This advancement and expansion stresses the social economic tissue of societies. Societies are also ready to follow this growth in the same way.
This leads to the third phase, which is the exhaustion of growth. In exhaustion of growth, people start to see crisis and start to say, “Well, the growth is no longer here, so we must do something.” What people normally do is protect their own economies and try to make their economies grow by stimulating [them]. But as everybody does that at the same time, the end of that road is a crisis. People were looking for defense and resources. So naturally, regional wars arise , which may become or may not become big wars. Normally they don’t become big wars unless there is a transition in the hegemony together. Because of the crisis, people get desperate and desperate times require desperate measures. People try what they wouldn’t try otherwise. They’ll accept what is not acceptable. Therefore, what happens? They try new technology and invest in new technology. The technology creates a new cycle.
We are at the exhaustion phase of the fifth cycle. So most economies are no longer growing the way they were growing in the 1990s. Everybody’s trying to protect their economies and stimulate their economies. This is happening all around the world. If the cycle continues, there will be a major crisis beginning in 2018 and lasting into 2030. If the cycles are correct, then these periods will be of several large conflicts all around the world but not a global war. Because of those crises, people would start to accept and start to try what they would not have tried otherwise. They will invest in new technologies. Those new technologies will start to change the world.
Q. Who will emerge stronger in this next transition war?
A. A transitional war is later down the road. The forecast points out that the most probable period is 2065-2095. Then we have the 2070s and 2080s as the major decades in which we will have a war. These will be similar to the Thirty Years War, similar to the Napoleon wars, and similar to the World Wars. Basing on the past evidence, whoever becomes the next hegemony is probably someone that doesn’t exist right now.
Why is that? When the Habsburg was hegemonic power, Holland was a colonial land. It wasn’t even independent. It didn’t exist. When the Dutch were hegemonic power, the United Kingdom was the “Dis-united Kingdom”—Wales, England and Scotland fighting against each other. When the United Kingdom was a hegemonic power, the United States was not yet ready. It was expanding to the West Coast. So we have to look at the world and think which are the nations that are forming? What are the nations that can expand and become something else?
I have five candidates.
No. 1: United Europe. Maybe in 50 years it will emerge as a new power.
No. 2: United States of America merged with Canada and Mexico—all the North America becomes one nation, one single society.
No. 3: China and its colonies in Africa. As China is driven by the need for more resources, it is investing more and more in the south of the equator and mostly in Africa. Maybe later down the road, China will carve out its own colonial empire and becomes no longer one nation in Asia, but a global nation with colonies not only in Africa, but in other parts of the world too.
No. 4: India and its colonies in Africa. India has the same problem as China: it needs to look for resources outside India. It’s also investing in Africa and other parts in the south of the equator. Naturally, India and China are heading towards each other. They have conflicting objectives.
No. 5: Brazil. Brazil merged part with the rest of South America. Naturally Brazil is moving towards the Pacific and integrating right now with Bolivia, Paraguay, and later down the road Peru, Ecuador and part of Chile and part of Argentina demographically and economically, and perhaps politically in a way.
So which of those five is it most likely? Well, this is the $1 trillion question. I don’t have a full answer to that Right now.
My perception today is that the US merged the rest of North America is the most likely. But I may be wrong.
Q. What really makes a hegemonic power?
A. In the past, if you look at the system of exchange or the global system of exchange as it existed from the 1500s, whoever controls the means of exchange controls the system of exchange. At first, it was the oceans of the world. Whoever has the biggest navy could control the economic transit. So, military power was necessary to control economic power. But maintaining a big navy is very expensive so the economic power is necessary to maintain the military power. So they went on together. The control of means of exchange is critical in my perception.
But right now in the 21st century, at least three other means of exchange became important, electromagnetic mean of exchange, airspace and space itself. So whoever wants to become the next hegemonic power will have to get the control of those. We’ll also have to get control of those also by attracting business to them and making [that place] a safe haven and an interesting place to be—bring your business to me, bring your money to me and you will have a safe harbor protected by us. However, it doesn’t give us much of a clue of who in 50-60 years will be capable of doing so. It only gives whoever wants to become such a power a task or four tasks, if you prefer.
Q. At the same time there are also other forces chipping away that power. Two things come to mind, one is the rising wave of terrorism across the world which everyone is struggling with and no one has solutions for. The second thing is that there is an argument that the world is multipolar. If the US is a strong power, then China is a strong power on the other side. To me, it seems that it changes the equations somewhat.
A. That’s where we are assuming that the past is a good predict of the future which is again, not necessarily so. Will terrorism become a major force that destabilizes the system? The answer is: we don’t know. I’d say that it’s not strong enough to destabilize. But we’ll only be sure afterwards.
As of a multipolar world, we actually could say that China is, in a way, part of the system that the US has created since China exports a lot to the US. So these nations are not antagonists, they are partners. The US has a large debt with China, and China gets a lot of money with that. China produces a lot of products for the US. One cannot live without the other. They are not antagonists really.
It differs from what happens in periods of war. Let’s say in the Second World War, Germany was against the US. Japan was against the US. At that moment, we had real antagonism. Right now we don’t have that. Who controls the system? The system of exchange is still mostly done by sea. So despite the fact that China has a very big merchant fleet, the control militarily is still done by the US. It doesn’t help the US to remove the capability of China to export and import. It would destroy the US itself.
Q. Is it even possible to have a multipolar hegemony?
A. Never happened so far. In the period of transition we had two or three poles, but it was unstable. The system looks somehow for stabilization and stabilization comes only when one side is defeated and the other prevails and reestablishes the system of exchange.
In the past, the period of transition has lasted for 30 years, of not just one war, but a series of wars and social, economic, political and religious conflicts. The system needs stabilization. At the end, there emerges one nation that is leading the others but integrating the others into one system.
Q. The Soviet Union would be an example of that?
A. Soviet Union was [made] of many systems. It could never control the seas but it controlled a large chunk of land in the world. But it could not thrive really because it wasn’t capable of establishing major lines of commerce on the sea.
China was the third system but it was closed [to the outside world]during that period. When China opened [up], it began to grow much faster because it could gather resources and establish synergy with the rest of the system. China as a latent nation was a much smaller system than China integrated with the rest of the world.
Q. So now that we know what is likely to happen, that this is how these cycles work, what can we do with this information?
A. This is the tricky part. Do we have an observer effect or not? We don’t know. My perception is that probably this hegemony will last longer because the cost of exchange from one hegemonic power to the other is so huge now, that people will try to avoid this.
So 2065 is not the exact date. All that we can state is that on average, hegemony lasts 120 years. If that is so, 120 years after 1945 is 2065. Therefore, on average, around the year of 2065 there may start a transitional war. It’s really an assumption, a hypothesis.
Q. Have you seen any of the five nations or regions you talked about before already getting ahead in the race to become the next hegemonic power?
A. If I look at technology I would say that the US is ahead. If I look at the resources or insuring the resources for the future, I would say that China is ahead. If we look at this movement of integrating first demographically and then economically, I would say that Brazil is ahead. If we look at the situation where people are trying to be a very strong society and face the brutal reality, I would say that Europe is ahead. It depends on how you see it. It depends on what you consider is the most important [factor to be ahead].