How do countries become economic superpowers? Why has the United States dominated the global economy for the past 100 years?
In simple terms, countries become superpowers by using the latest technology to connect people, goods, and markets.
Wheels
The wheel changed trade.
Not the potter’s wheel.
The wheel under a wagon.
Suddenly, humans were no longer limited by what they, or their animals, could carry. Goods could move farther, faster, and in larger quantities.
Trade expanded.
Prosperity followed.
Shipping: the first technology of globalization
Shipping was the first technology that truly enabled globalization.
Portugal (15th century): Portugal pioneered shipbuilding technology such as the caravel, which could sail against the wind and survive Atlantic storms. Under Prince Henry the Navigator, maritime knowledge became a strategic advantage.
Spain (16th century): Spain developed large carracks and galleons designed for long-distance trade, resource extraction, and the defense of Atlantic trade routes.
The Dutch Republic (17th century): The Dutch were the leading innovators of the 1600s. Using wind-powered sawmills, they achieved industrial-scale ship production. Their fluyt was cost-effective, required smaller crews, and revolutionized global merchant shipping.
Britain (17th–18th century): Britain improved ship design, naval gunnery, and manoeuvrability. Over time, it gained superiority over Spanish and French rivals and turned maritime strength into economic strength.
Not surprisingly, a country with economic might often imposes its currency on trade, eventually earning reserve currency status.
The Industrial Revolution
The Industrial Revolution began in Europe, but the United States has dominated the global economy for the past 100 years.
The global economy and financial markets have changed dramatically since 1900. What was once a relatively balanced global equity market is now dominated by the United States, which accounts for around 62% of total world equity market value, despite its lower share of global GDP compared with its post-war peak.
This reflects not only strong stock market returns, but also America’s ability to produce new companies, attract capital, and renew itself through innovation.
The evolution of technology
The US stock market of 1900 looked nothing like it does today.
Around 80% of the value of US listed firms in 1900 came from industries that are now small, transformed, or extinct: railroads, textiles, iron, coal, and steel.
Meanwhile, around 70% of today’s US market comes from industries that were small or non-existent in 1900. Technology and healthcare were almost absent from stock markets back then.
Investors often associate new technologies with bubbles and later disappointment. But history is more complicated. Railroads, for example, declined massively as a share of the US market over time, yet still outperformed both the broader US stock market and many of their newer technology competitors over the full period.
The chart illustrates the shift in superpower status from the UK to the US over the last century. In the early 1900s, when railroads represented the cutting edge of technology, the industrial weightings of both nations were nearly identical. Today, as technology leaps forward, the UK has largely been left behind
Why has the United States dominated?
The United States has dominated for the past century because it has repeatedly stayed at the frontier of new technology.
It has also benefited from deep capital markets, a large domestic market, strong institutions, and the ability to adapt as old industries fade and new ones emerge.
What are the lessons?
It is impossible to predict the technology of the future.
Do not fool yourself into thinking you can reliably pick the winning technology, stock, or nation.Your investments should be broadly diversified.
Own exposure across countries and industries.Time in the market matters more than timing the market.
Compounding rewards patience.Always maintain liquidity.
Staying power matters.
Economic superpowers rise by mastering the defining technology of their age.
Investors would do well to remember the same lesson.
Take it easy until next time.
Blogging is something I enjoy, and I share my thoughts on my blog most weekends. Explore all my blogs at https://lnkd.in/ejq7CWaQ
Views are my own.
Blogging is something I enjoy, and I share my thoughts on my blog most weekends.
Read all my “Notes to Self” at view all blogs.
