The Sun Setting on the British Empire

In the previous article we observed that if the concern is that empires last only around 200 years, America is only 71 years into its empire era. To be clear, I personally don’t think that this 200 year observation is anything to rely on as an expectation. It would be absurd to rely on this number as a person investing in the market because you could better state, “Empires last between five years and over a thousand years.” This ain’t exactly a day-trading methodology to go on.

I’ve heard this “empires = 200 years” notion my whole life. The longer I live, the more absurdity I see in it. However, for the time being, let’s assume that this, as in today, is the end of America and try to use the most recent long reigning empire to see how its demise changed its economy.

The most recent long reigning empire was Great Britain. It’s hard to mark when it began and when it ended. At the longest measurement, we could say that began sometime after the Spanish Armada in 1588. Its end has been slow, “the end of the empire” starting around World War I. To many, particularly Prince Charles, the handing over of Hong Kong in 1997 was the end of the empire. Years from now, I imagine historians will still observe some more of the Empire receeding. Notably, some of the implications of Brexit (such as Scotland and Northern Ireland possibly going independent from Great Britain) as part of this sun setting on the British Empire.

However you mark it, the peak of the Empire during this 400 year era was the 100 years between 1815-1914. We have good data on Great Britain’s GDP going back to 1830. This is a graph of their historical GDP going back nearly 200 years:

Source: http://www.bankofengland.co.uk/research/Pages/onebank/threecenturies.aspx

Keep in mind that this graph is logarithmic, so what we are looking at is exponential growth. Visually, the left half of it was during the peak of the Empire. The growth divot in the middle is WWI, the 2nd divot is WWII and the right half is the ending of the Empire. Do you see how much the “ending of the Empire” slowed down Great Britain’s economic growth? Neither do I. This data only goes to 2006 when GDP was 1.1 billion pounds. In 2015 it was 1.8 billion pounds.

It’s striking how steady the long term growth has been. Certainly there have been interruptions along the way, but this is fairly close to a straight line. So far as America is concerned, hypothetically speaking, if today marks the end of our empire (and it doesn’t), the future still may not be all that different from the past. I think this is important to keep in mind as the election is nears. If you side doesn’t win and if America meets its demise a la the British Empire, the future may not look all that different than the past.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.