Back to the future, part 3
On reading parts 1 and 2 of this blog, a friend said to me, "Do you think the world can be changed by a minority of conscious people, when so many are content to remain blinkered?"
I'm going to answer this but I will try and do it as factually as I can. This is straight off the top of my head without the aid of textbooks.
Big changes in our world are on their way. You can either believe that or bury your head in the sand, but big changes will happen anyway. There is nothing we as individuals can do to prevent those. Here I'm going to focus on the economic and political outlook. I know a little about economics and I'll just give you the benefit of my limited education.
Let's say it's correct that soon world production capacity outstrips consumer demand. What happens then? That's simple enough to answer: Prices will fall as companies are forced to compete to protect their market share. As prices fall, profits are put under pressure. As profits come under pressure, markets fall. If markets fall long and hard enough, it's called a recession, or a slump or a crash. When that happens, unemployment increases. As unemployment increases, so does social unrest. So that's one hypothesis that may underpin social change.
Also at present the USA is the dominant political and economic power in the world. It is dominant, not because Americans are nice people or that they make good movies. It is dominant because it is one of the wealthiest nations in the world. It is sheer economic power that underpins the USA's power and influence, nothing else. This may change in the near future.
Despite what some people might say, George Bush is no fool. He has bolstered the American economy by allowing the dollar to devalue against other currencies by approximately 33% over the past five years. What that means effectively is that American goods are a third cheaper than they were five years ago in world markets, if the selling prices have remained the same. There has been some inflation in the USA too but nevertheless, this devaluation is very significant. A country cannot continue to devalue its currency indefinitely. In effect, it's reducing the price of the dollar and ultimately that has the same result as reducing the price of goods.
Let's go another way for a moment. I understand that the price of electrical, leisure and clothing goods have fallen in the UK over the past couple of years. I seem to remember that the price drops have been dramatic, like in double figure percentages. Two factors may be in play here: One is that supply may be outstripping demand in these areas already. The other might be the influence of China and its developing economy with its lower costs coming into play in the new global economy. Certainly we have benefited economically from the exploitation of lower cost labour from countries in Eastern Europe that have recently joined the European Union.
Now let's go to China. China's economy is in a very early stage of capitalist development. Its economic capacity is huge. It's vast and it's many times greater than that of the USA. So what happens if China becomes the new economic super-power of the 21st century? What will happen if China, not the USA, is pulling the strings on the world stage? There's another factor, the costs structures in China are perhaps below 10% of what they are here in the west. What happens to our markets if we reduce the cost of goods by 90%? Could you manage on 10% of your wages? These are rhetorical questions.
We could try and keep the Chinese at bay through tariff barriers and other means of market exclusion, but we left that kind of stuff behind twenty or so years ago. We're living in a global free capitalist economy now. No-one wants to get back high degrees of state regulation again, economically or otherwise. If anything they want the degree of State control reduced still further. That after all is what George Bush is actually doing at present!
There's the other factor too. Our western businesses need access to the Chinese markets to bolster their flagging profits and to realise growth. There is not too much more dramatic economic growth that can be achieved here in the west anymore. We have full supply already.
One last thing: Most of our economic development and most of our technology development in the west over the last sixty years have been caused by wars. It's no wonder that the Germans and the Japanese economies have grown to be so strong. Their countries had the opportunities to rebuild and modernise their economic infrastructures as a result of being completely devastated in the second world war. In the UK, we tried to keep doing the same old thing but then everything changed as international competition in world markets intensified, particularly during the last twenty years of the 20th century.
But think about all that new technology we have now, miniaturised electronics and the like. Most of our brave new world of electronics has been developed as a result of, or at least the pace of its development has been supported by, war. By going out and killing people! There was the cold war too, there were not too many people killed in that one, but it did have that certain feeling that if the cold war had gone hot, then we might reasonably have contemplated the end of the world in a nuclear holocaust.
I'll leave you with that thought again. What happens when and if China displaces the USA as the world's new economic and political superpower? Who becomes the third world then? If you know the answer, then let me know. I'll end with a quote from Napoleon Bonaparte who said, "Let China sleep, for when she awakes the whole world will know."
Well, it's wakey-wakey time in more ways than one!
Footnote: This was written originally in October last year before the collapse of the “sub-prime” mortgage market, the banking crisis – the extent of which is not yet known (and may not be known until after the US presidential elections), and the recent surge in oil prices.
I'm going to answer this but I will try and do it as factually as I can. This is straight off the top of my head without the aid of textbooks.
Big changes in our world are on their way. You can either believe that or bury your head in the sand, but big changes will happen anyway. There is nothing we as individuals can do to prevent those. Here I'm going to focus on the economic and political outlook. I know a little about economics and I'll just give you the benefit of my limited education.
Let's say it's correct that soon world production capacity outstrips consumer demand. What happens then? That's simple enough to answer: Prices will fall as companies are forced to compete to protect their market share. As prices fall, profits are put under pressure. As profits come under pressure, markets fall. If markets fall long and hard enough, it's called a recession, or a slump or a crash. When that happens, unemployment increases. As unemployment increases, so does social unrest. So that's one hypothesis that may underpin social change.
Also at present the USA is the dominant political and economic power in the world. It is dominant, not because Americans are nice people or that they make good movies. It is dominant because it is one of the wealthiest nations in the world. It is sheer economic power that underpins the USA's power and influence, nothing else. This may change in the near future.
Despite what some people might say, George Bush is no fool. He has bolstered the American economy by allowing the dollar to devalue against other currencies by approximately 33% over the past five years. What that means effectively is that American goods are a third cheaper than they were five years ago in world markets, if the selling prices have remained the same. There has been some inflation in the USA too but nevertheless, this devaluation is very significant. A country cannot continue to devalue its currency indefinitely. In effect, it's reducing the price of the dollar and ultimately that has the same result as reducing the price of goods.
Let's go another way for a moment. I understand that the price of electrical, leisure and clothing goods have fallen in the UK over the past couple of years. I seem to remember that the price drops have been dramatic, like in double figure percentages. Two factors may be in play here: One is that supply may be outstripping demand in these areas already. The other might be the influence of China and its developing economy with its lower costs coming into play in the new global economy. Certainly we have benefited economically from the exploitation of lower cost labour from countries in Eastern Europe that have recently joined the European Union.
Now let's go to China. China's economy is in a very early stage of capitalist development. Its economic capacity is huge. It's vast and it's many times greater than that of the USA. So what happens if China becomes the new economic super-power of the 21st century? What will happen if China, not the USA, is pulling the strings on the world stage? There's another factor, the costs structures in China are perhaps below 10% of what they are here in the west. What happens to our markets if we reduce the cost of goods by 90%? Could you manage on 10% of your wages? These are rhetorical questions.
We could try and keep the Chinese at bay through tariff barriers and other means of market exclusion, but we left that kind of stuff behind twenty or so years ago. We're living in a global free capitalist economy now. No-one wants to get back high degrees of state regulation again, economically or otherwise. If anything they want the degree of State control reduced still further. That after all is what George Bush is actually doing at present!
There's the other factor too. Our western businesses need access to the Chinese markets to bolster their flagging profits and to realise growth. There is not too much more dramatic economic growth that can be achieved here in the west anymore. We have full supply already.
One last thing: Most of our economic development and most of our technology development in the west over the last sixty years have been caused by wars. It's no wonder that the Germans and the Japanese economies have grown to be so strong. Their countries had the opportunities to rebuild and modernise their economic infrastructures as a result of being completely devastated in the second world war. In the UK, we tried to keep doing the same old thing but then everything changed as international competition in world markets intensified, particularly during the last twenty years of the 20th century.
But think about all that new technology we have now, miniaturised electronics and the like. Most of our brave new world of electronics has been developed as a result of, or at least the pace of its development has been supported by, war. By going out and killing people! There was the cold war too, there were not too many people killed in that one, but it did have that certain feeling that if the cold war had gone hot, then we might reasonably have contemplated the end of the world in a nuclear holocaust.
I'll leave you with that thought again. What happens when and if China displaces the USA as the world's new economic and political superpower? Who becomes the third world then? If you know the answer, then let me know. I'll end with a quote from Napoleon Bonaparte who said, "Let China sleep, for when she awakes the whole world will know."
Well, it's wakey-wakey time in more ways than one!
Footnote: This was written originally in October last year before the collapse of the “sub-prime” mortgage market, the banking crisis – the extent of which is not yet known (and may not be known until after the US presidential elections), and the recent surge in oil prices.
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