Global Power from theE 18th to 21st century : Power potential (VIP2), strategic assets & actual power (VIP)

Though Paul Kennedy and other scholars of National Security, Diplomacy and Foreign relations have emphasized the importance of the economy in National Power, not many economists have taken an interest in such issues. The current paper is an attempt to bridge the divide. Economists, including those at ICRIER have worked both on matters of economic growth and on those of international economic relations. The present paper shows how the basic building blocs of growth theory, the aggregate production function, factor productivity and technical change can be used to define a simple index of global ‘power potential’ (VIP2). The index was first presented in an ICRIER working paper in December 2004, but the current paper has refined the concept and spells out the economic logic more clearly.