Since the birth of capitalism in the Italian city states of the 15th century, there have been four cycles of hegemony: Genoese, Dutch, British and American. The history of these Hegemonic Cycles holds several interesting patterns that allow us to gain a deeper understanding of our current geopolitical moment.
In The Long Twentieth Century, Giovanni Arrighi shows that since the birth of capitalism in the Italian city-states of the 15th century, capitalism has unfolded over a 700-year period by producing hegemonic powers that secure control over the global economy (Genoa, Dutch Republic, UK, U.S.). The recurrence of several patterns within these Hegemonic Cycles allows us to gain a deeper understanding of our current geopolitical moment, in which the hegemony of the U.S. is coming to an end.Each Hegemonic Cycle begins with a period of “material expansion”. As competition over capital intensifies, historically, this eventually leads to the concentration of capital accumulation in a leading state. Genoa, Amsterdam, London and New York became “hegemonic” by dominating global capital flows. As the hegemon accumulates more and more capital, it will keep reinvesting its surplus capital in trade and production of material goods, triggering the “material expansion” of the global economy. For U.S. hegemony, the period of material expansion lasted from the 1950s to the early 1970s and has been called the Golden Age of Capitalism, in which global trade and production grew at unprecedented rates.What follows is “financial expansion” and it is triggered by what Arrighi calls a “signal crisis”. It is the moment in which, for the hegemon, it is no longer profitable to reinvest all of its surplus capital in material trade and production, as competition in the global trading system pushes down profits. Instead, financial speculation becomes more profitable. Put simply, the hegemon switches from trade in commodities to trade in money. The switch to finance was made in the 16th century by the Genoese, in the 18th century by the Dutch, in the late 19th century by the British, and in the 1970s by the U.S. By 1979, foreign exchange trading amounted to more than 11 times the value of global trade, and five years later, to almost 20 times the value of global trade.The switch to finance also triggers a “belle époque”. It is what Arrighi calls a “wonderful moment” of renewed wealth and power for the hegemon as the society’s elite benefits from financial expansion. In previous cycles, these were the Italian Renaissance, the Dutch ‘pruikentijd’ (periwig period) and the Edwardian era. In the U.S., the Reagan era is the belle époque that followed financial expansion (“it’s morning again in America”). All of these periods have been called “Gilded Ages” as the rich were not ashamed to live conspicuously. However, the belle époque also symbolizes the deepening of the “signal crisis” of capitalism. For one thing, the belle époque lays the foundation for populism by leaving behind the middle class that benefited from material expansion (e.g. production, trade). Indeed, since the financial expansion of the 1970s, real wages for American workers have stagnated and populism responds to this dissatisfaction.The end of hegemony is marked by the “terminal crisis” as a rival state launches another period of material expansion. However, before this happens, there is a relatively long period of “dualism of power” between the center of finance and the rival center(s). Historically, these periods have escalated into a final climax of 30-year conflicts (the Thirty Years’ War, the Napoleonic Wars, and the World Wars). It is important to note that the rival center (e.g. France, Germany) is not necessarily the next hegemon and the 30-year conflicts are actually wide-ranging conflicts between many different states.At what point in the Hegemonic Cycle have we arrived? Several scenarios are possible. It is often assumed that China is replacing the U.S. Interestingly, previous hegemons have always financed rise of the next hegemon (the Genoese merchant elite financed the Dutch Republic, the Dutch financed the British East India Company, and the British fell heavily into debt to the U.S.). Similarly, the U.S. financed the rise of China through debt, FDI and technology transfers. Another possibility is that, with growing tolerance for debt, protectionist measures and currency war rhetoric, we have entered something akin to the 30-year conflict. However, it is also possible that the history of Hegemonic Cycles has come to an end, either because the U.S. has grown too powerful, capable of integrating rival centers into its network of global capitalism, or because a rival system is emerging in East Asia. All in all, thinking in terms of Hegemonic Cycles shows that if we look at our current geopolitical moment from a longstanding history, we can see that hegemonic shifts occur much differently than is often assumed.
