Taking these arguments a step further, it is not much of a leap to contend that states that excel in key economic and political-military dimensions should also do better in long-run geopolitical competitions. It seems intuitive that states that grow at rapid rates, enjoy easy credit, forge strong alliances, and avoid conflict while winning the wars they do fight will do better than states that do the opposite. In sum, democracies enjoy a built-in advantage in the struggle for global mastery.

The empirical evidence supports this hunch. According to international-relations theorists, the leading state in the international system for the past four hundred years has always been among its most democratic. This list of free leviathans includes the Dutch Republic (1609–1713), Great Britain (1714–1945) and the United States (1945–present). These states may not qualify as full democracies according to contemporary definitions (the Utrecht Sodomy Trials did not quite square with modern conceptions of civil liberty), but they were among the most liberal states of their time. It is hard to argue against an undefeated record of over four centuries.

More systematically, statistical analysis I have conducted on data from 1815 to the present shows a strong correlation between a state’s level of democracy and the increase in its share of world power over the subsequent decade. I also show links between the intervening variables identified above (economic growth, access to international credit, international alliances and performance in foreign wars) and subsequent changes in power.

For example, in 1816, the first year for which data on share of world power are available, the United States possessed about 4 percent of world power, while Russia held 16 percent. By 2007, their positions had nearly reversed (14 percent for Washington and 4 percent for Moscow). China’s recent growth rates seem impressive, but this is only after rebounding from decades of devastating declines. China marshaled 19 percent of global power in 1860, but it fell to a mere 9 percent in the 1950s and, despite a good run in recent years, it still has not recovered to its nineteenth-century levels. Meanwhile, its democratic rival India continues to steadily increase its share of global power. In sum, both theory and evidence suggest that democracies do better in long-run geopolitical competitions.

 

THE DOMINANT-DEMOCRACIES thesis suggests that the United States has a key advantage in its strategic competition with China: its institutions. If the argument above is correct, America’s open political system will continue to provide high long-run rates of economic growth, better access to international financial markets, robust alliances, and superior performance in international crises and wars. In China, on the other hand, political stagnation will result in economic and geopolitical stagnation. Indeed, the CCP’s sclerotic institutions are already impinging upon Beijing’s attempts to enhance its international standing, and things may only be getting worse as President Xi Jinping tightens his stranglehold on power. From this perspective, many of the near-term indicators that pundits consult to assess the state of the competition, such as economic performance and alliance relationships, are themselves the results of domestic political institutions.

America’s economic outlook relative to China remains strong. China recently overtook the United States as the world’s largest economy as measured by purchasing power parity, but this measure is not useful for gauging global clout. Adjusting GDP numbers to assume that haircuts in Beijing are as expensive as in San Francisco is useful for some economic comparisons, but it does not allow China to buy more aircraft carriers. In nominal terms, U.S. GDP is $17 trillion, or 22 percent of global GDP. China is still far behind at $10 trillion and 13 percent, respectively. As noted above, some have predicted that, given current trends, China could surpass the United States as the world’s largest economy as soon as 2021, but this forecast is vulnerable to one’s assumptions. Moreover, arguably more important than GDP for international influence is net wealth and, as the American Enterprise Institute’s Derek Scissors has shown, the U.S. lead over China in this category is a massive $42 trillion—and the gap may be growing.

To be sure, the CCP has been able to achieve remarkable growth rates over the past several decades by moving resources from less to more productive sectors (primarily labor from agriculture to manufacturing) and through massive public investment, but this extractive model of economic growth is bound to run out of steam. Going from a poor country to a middle-income country is one thing, but making the leap to an advanced economy is quite another. It always seemed unlikely that China would be able to sustain double-digit growth rates indefinitely and, indeed, in the words of President Xi, slower growth rates in China have become the “new normal.” China’s current plans, therefore, prioritize economic reforms over growth, but the CCP can only go so far in reforming the system without undermining its own rule. This is why autocracies have a hard time sustaining growth over the longer term. Indeed, the CCP’s distortions to the economy can be seen everywhere, from its unwillingness to undertake needed labor reforms to the continued outsized role of inefficient state-owned enterprises. In short, in the words of Damien Ma, “The curtain is closing on the era of rapid growth” in China.

On the other hand, America’s institutions are primed for expansion, and the economic situation in the United States is looking up. America has enjoyed the best post-2008 economic recovery of any advanced economy, and it hit a 5 percent annual pace of economic growth in the third quarter of 2014. The radical innovation that is characteristic of America’s liberal market economy led to a shale-gas boom, which has made the United States a global energy superpower. Moreover, possible future economic revolutions involving new technologies, such as 3-D printing, loom just over the horizon.

In the realm of global finance, America’s position also looks unassailable. The United States remains the center of the international financial world. It is the global lender of last resort, and the U.S. dollar is still the global reserve currency. America is perceived as the most credible and dynamic economy, and countries feel secure borrowing from the United States. When investors talk about flight to safety, it usually means moving money into U.S. Treasury bills; they certainly are not referring to buying Chinese bonds.

It is true that China sits on huge foreign-exchange reserves and, in a bid to become a regional lender of last resort, it now lends more money than the World Bank. But here, too, the CCP has been reluctant to undertake the market reforms necessary to become a true financial powerhouse. The free flow of capital, currency convertibility, establishment of foreign financial institutions, competition in the banking sector, and ease of investment and doing business all remain problems in China. China lacks a functioning municipal bond market, and, as a result, China’s massive public debt (which stands at a colossal 58 percent of GDP) has become a financial time bomb. Officials in Beijing have called for the dollar to be replaced as the global reserve currency, but short of the creation of an open, deep, liquid financial market and more sustainable and transparent economy, the Chinese renminbi will not dethrone the dollar anytime soon. The Shanghai Free Trade Zone was set up in 2013 to give financial reforms a trial run, but the experiment has been a disappointment. Again, the prioritization of regime survival is stunting the implementation of reforms. In short, Beijing lacks the kind of financial institutions that have propelled and sustained other great powers in the past. Financial markets simply do not flourish in autocratic states.

 

DIPLOMATICALLY, THE United States is the leading state in the system of international institutions that it established after World War II. It possesses a global network of alliances that includes more than thirty of the wealthiest and best-governed democracies on Earth; combined, they make up more than half of world GDP. While somewhat tarnished in recent years, the U.S. model and American culture still provide a significant reservoir of soft power. In contrast, China lacks genuine friends. It is attempting to route around the American-led international order, but its clumsy attempts to buy off the states excluded from the American-led order in Africa, Latin America and elsewhere have stirred nearly as much resentment as influence. Its lone formal ally, North Korea, is an economic basket case led by an erratic dictator. To date, Beijing has eschewed alliances as a matter of policy, but to become a true global power, China will need partners and allies. It is difficult, however, to see China forging robust political friendships abroad in the near future, in part because of its autocratic politics at home. Beijing maintains public support by stoking nationalist sentiment, but its use of military coercion to settle regional disputes has its neighbors rightly worried. More broadly, Chinese soft power also suffers from Beijing’s autocratic politics. The National Bureau of Asian Research reports that “it will be increasingly difficult for the government to prevent its domestic record on political and civil freedoms from affecting China’s international credibility.” The free nations of the world will never trust an autocratic country to lead on the global stage.