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Currently USA is both world largest economy and a global superpower. If China growth continues that will change in near future.

I'm building an imaginary world where global hegemon is NOT an economic superpower. Comparison with our world would be a situation where both China & India have larger economies then USA, while Russia & Brazil have similar GDP per capita as USA. All those countries consider USA+West a rival at best and enemy at worst.

Is that situation possible? And if it is how low could the superpower be in the relative economic ranking.

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  • $\begingroup$ Welcome to Worldbuilding! Have an upvote. The U.S. of A. is most certainly not a global hegemon, in any serious meaning of the word hegemon. She is the world's greatest military power and the world's third largest economy (behind the People's Republic of China and the as yet undiminished E.U.). But global hegemon she isn't -- there are great powers such as Russia and the P.R. of China, and middling powers such as the Islamic Republic of Iran, who don't obey the U.S. of A. in any way. As for "how low", consider Russia; she is a global superpower but her economy is about the size of Italy's. $\endgroup$ – AlexP Jul 21 '18 at 11:46
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    $\begingroup$ This is ludicrously broad and/or opinion based depending on your viewpoint. All countries consider all others rivals economically - they cooperate for mutual advantage, not to be good neighbors. $\endgroup$ – StephenG Jul 21 '18 at 11:59
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TL;DR: the smallest possible hegemonic economy would be one the size of the international economy, because it provides the international currency.

One can consider the possibility that a relatively small country, like Switzerland, might develop the hegemonic currency (the currency in which international trading is done by default). A big part of the hegemonic currency is trust. So if the small country is trusted, it might also be the currency hegemon.

There is a big challenge though. How do you get the currency out to other countries? As the international market increases, it requires more and more currency. How do buyers get the currency in the first place? Traditionally there have been three ways to distribute the currency:

  1. Loan it. Obviously this is only a temporary solution, as repayment of the loan with interest requires even more currency. May work in the short term (decades) and lead to instability in the medium term.

  2. Give it away. International aid can transfer money from the hegemon to other countries. This can cause strain though, as popular (democratic) governments don't like giving away their money.

  3. Trade deficit. If the country runs a trade deficit, it can send out money in exchange for goods.

The United States mostly engages in the last. It runs a trade deficit equal to about 2.5% of GDP per year to fund an ever-increasing pool of its currency that is used in international trade. But this too causes economic strain, as it makes it harder for the US to export. Also, cheap imports compete with domestic production. The trade deficit itself becomes a political problem. For a small country (say a fortieth of the size of the US), the trade deficit could be as large as the whole economy.

Another side effect is that internationally, dollar-denominated investments are favored. So the US has become a debtor nation. Other countries loan their dollars to US borrowers and buy up US stocks and real estate. That sort of works with the US, as the economy is bigger than the international economy. But with a smaller country, the entire country would be owned internationally.

For a small country, there is a limited amount that can be owned. Eventually people would not be able to invest their international currency holdings in the only country that is guaranteed to use that currency.

Loans aren't sustainable. They create a positive feedback loop. To pay off the loan, more money is needed, which can only be obtained by a new loan. So the loans can only grow, never shrink.

A trade deficit is not sustainable. Eventually the country can't reduce domestic production anymore. Its entire economy would be based on imports. All its businesses would be owned by foreigners.

That leaves giving it away, which is unsustainable in a democratic country.

The net result is that the only stable hegemon would be a monarchy. It would import everything and engage in global public aid. Perhaps it would control all the libraries and museums of the world, an Andrew Carnegie government. Its consumption would be determined by the size of the international economy. Or conversely, the size of the international economy would be limited to its consumption.

Of course, you may not want a stable hegemon in your story. Perhaps your story is about how the distribution methods fail over time.

It is possible that the US is too small to maintain the hegemonic currency. It is already feeling economic strain from having a trade deficit of only 2.5% (stable for ten years) that was 6% in 2006.

You might also consider the number one reason why China does not take over currency hegemony from the US: it doesn't want to be consumption driven. China wants to be production driven. But that doesn't work with currency hegemony. Currency hegemony forces a country to be consumption driven with large imports. It's unclear if the European Union's currency area is willing to be consumption driven either. It's dominated by the people who ran the German central bank. Germany was and is production driven.

That's what you have to write into your story: reasons why the larger economies would not take hegemony from the smaller hegemon. Perhaps they prefer to be production driven. Perhaps they can't agree with each other. None of them like the hegemon, but the thought of one of the others in that position is scarier. So the current hegemon stays the hegemon as a compromise. Because the larger economies are capable of breaking the hegemony, you have to explain why they don't.

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Von Clausewitz said:

War is merely the continuation of policy by other means.

Economy is a great way of exerting power without recurring to the force of weapons, and thus a great way of prosecuting a certain policy.

Unless you want to have a bully state, which starts a war for whatever reason, the lack of economic power will result in weak influence on the other actors.

To give you an example related to real world, China, with its market of more than 1 billion consumers, can exercise a large economic influence on anybody interested in trading with it, which a small country like, let's say, San Salvador, can simply dream of. Same holds for a small country like Kuwait, which has the economic influence related to oil extraction.

So, to answer your question, I doubt that a leading role can be achieved and maintained without a strong economic position.

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India and China will indeed soon be "bigger" than US in terms of total GDP.

They are very unlikely to overtake US on GDP per capita (i.e. per person). The size of their economies is driven just by sheer number of people.

Brazil and Russia catching up is extremely unlikely. They have fewer people, more political instability, and the "easy" money in the form of natural resources. In China, making money requires managing cost and quality, which is only possible through better technology or business processes. In Russia, making money requires access to an oilfield, which you get by making friends in politics.

Strong Military is impossible without strong economy. North Korea tried it, and their people are starving. China took the smart step of developing the economy first, and then spending a portion of profits into military.

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