Growth, Trade, and Systemic Leadership

2. Leading Sectors, Lead Economies, and Economic Growth

2. Leading Sectors, Lead Economies, and Economic Growth Conventional economic growth models tend to be restricted by national boundaries. External inputs are certainly conceivable (trade, foreign aid, technology transfers, remittances, and so forth), but otherwise the primary ingredients for growth are found domestically and are typically conceived in such generic terms as population growth, capital accumulation, labor, education, human capital, technological progress, infrastructure, investments , and savings. In contrast, some nonmainstream models assume that the prospects for national economic growth trajectories are affected by the larger international system in which national economies are embedded. In these models, the internal ingredients for growth are not dismissed, but they are unlikely to be suf‹cient for growth in the absence of a favorable systemic context. Moreover, the favorable systemic context hinges to some extent on the system’s political hierarchy. Innovative systemic leadership (in both economics and politics) is required to ensure sustained growth. In the absence of systemic leadership, the systemic context is likely to be less favorable to economic growth. However, global political leadership is unlikely unless it can draw on an economic resource foundation established by radical innovations in commerce and leading sectors. This fundamental interdependency makes it extremely dif‹cult to separate “economics” from “politics” at the global level. It makes more sense, therefore, to view systemic leadership from a political economy perspective. The preconditions for leadership are simply too intertwined to treat the processes as distinct. Nevertheless, models that make use of concepts such as leading sectors and economic leadership are anything but monolithic. Analysts disagree about the signi‹cance and meaning of capitalism, how long a world system has been operating, whether long waves of growth and/or prices exist and 33 what drives them, and the relative importance of core-periphery divisions of labor. They also disagree about epistemology and the necessity or even the possibility of theory construction. Yet there are four arguments on which analysts working in this area increasingly converge: (1) economic leadership in new commercial activities and new industries is a precondition for politicomilitary leadership; (2) these same innovations drive the aggregate growth of the most advanced economies; (3) these leading sectors are monopolized initially by the lead economy in which they are pioneered before being diffused to other receptive economies; and, most importantly, (4) the growth of the lead economy is a major propellant of the growth of the world economy and, less directly, a mainstay of the global political system.1 Reciprocal effects of the lead economy’s growth on leading sector growth and the world economy’s growth on the lead economy are also possible but are typically not emphasized. One problem with these generalizations, though, is that the arguments are usually assumed instead of being put to the empirical test. We challenge that tendency by testing the two generalizations that have so far received the least empirical attention. Strong empirical linkages between leading sector growth and economic preeminence in holding the largest world shares of these sectors, and between these two to naval concentration, military mobilization, and global war for the nineteenth-century British era and the American twentieth century have already been established (Rasler and Thompson 1994; Modelski and Thompson 1996; and see chap. 3). The argument that innovations ‹rst appear in a single lead economy and then are diffused to other receptive economies may well be the least controversial of the four generalizations. This proposition, in any event, has already been corroborated.2 It is quite another matter to insist that the new innovations drive national aggregate economic growth in the other technologically advanced economies, and that the growth of the lead economy in the development of these innovations drives world economic growth. To our knowledge, these propositions have yet to be tested. We test these propositions over the last 120 years in the context of U.S. leading sector growth and gross domestic product (GDP) growth and world GDP growth. We ‹rst inspect plots of our time-series, then examine cross-correlations between all the variable pairs that can be formed among them. Next, we perform causality tests, always keeping in mind that causality is a contested term. We follow Granger (1969) and assume that the statement “x causes y” minimally means that changes in x tempoGrowth , Trade, and Systemic Leadership 34 rally precede changes in y. It is also possible that x and y will be coterminous in time, which implies that...