Friday, September 10, 2010

The New Economics

Interesting read from Salutin in the Globe.

Once upon a time Europeans and Americans built things, Canadians mined and farmed things, and everyone else bought things. Then free-trade became all the rage. Suddenly Europeans and Americans were still building, but the nuts and bolts manufacturing had been shipped off to China and South America, Canadians kept mining and farming. Free-trade was sold as an evolution of things, yes we (or they, the Americans) were moving away from the dirty work, but they were heading towards the information and knowledge economy, an entire nation based on the creative class, a nation of people that simply came up with stuff for other people to build and then bought it from them.

The theory that all this was good for Americans was sound... as long as the Chinese, Indians, and South Americans stayed poor and uneducated. Well, they aren't anymore. Suddenly the technology and productivity of the poorer countries are sneaking up on, or moving ahead of, that in the United States.

The only way to stay ahead is by becoming more educated, which is near impossible given the speed of knowledge today, or to have value buried in the dirt, Canada's saving grace (though probably not for long given the new Conservative's insistence on selling off every harvesting asset in the country).

So there's the question, what happens when the Western world no longer has anything to offer to the invisible hand?


  1. After a period of instability, the roles are reversed, and India and China outsource their manufacturing to us....

    Or more likely, a massive wave of protectionism takes hold and we'll have rigid trading blocks to protect vested interests.

  2. The first won't happen due to sheer numbers. No matter how wealthy India and China become, there will still be millions of citizens willing to work for nothing.

  3. The worst part is that Salutin's post will be summarily dismissed by the same conservative partisans. The same mild distrust for specific areas of academic scholarship while fully accepting others (like monetarism) has produced a citizenry bereft of historical memory or more precisely, historical memory untouched by cynical revisionism. Population ecologists have been writing about this for years. You probably have heard this statement before: Should those developing countries attain a standard of living akin to that of the Western world, we would need 3 or 4 extra planets to sustain it.

    Sounds hyperbolic, but this is simply a sobering reminder of the limited capacity for the world to provide necessary materials to sustain population growth. Granted some scientists are now predicting a bust in the ensuing years, but i have yet to see an inflection point on the population growth curve.

  4. ... a massive wave of protectionism takes hold...

    Already happening in France. The U.S. is also habitually protectionist whenever key industries are threatened.

    But if and when China and India ever do reach Western productivity levels, the West will likely just turn to other heretofore uncultivated fields of cheap labour. China is already cultivating parts of Africa for that purpose, as the Chinese understand that they'll eventually run out of an impoverished domestic labour force (and the G8 is putting relentless pressure on China to grow its own consumer base).

    There are plenty of people ripe for serfdom in Latin America, the Middle and Far East, and in Africa whom the West and the Chinese/Indians (forming an "industrialised club") can exploit without fears of creating a crippling scarcity. To wit, the U.S. just recently established an African Command in order to project U.S. power into Africa and "ensure security" in the area (i.e. ensure U.S. access to local human and natural resources).

  5. SF has a made a point.

    Canada's dealings in the Congo could not be fully explained without pointing to the increasing corporate mining interests.

    China's foray into Africa has proved just how forward thinking they are. With their seat on the U.N. security council. you can bet that any intervention that will threaten their African policy will be resisted (Darfur being a most recent example).

    You can imagine the strain on global food supply when China's overall diet moves from grains to meats primarily. However, it seems that growing the consumer base will only result in China mirroring the economic challenges that the U.S. is facing. This may explain why the Alberta oil sands has been receiving greater foreign investment from China and Hong Kong, especially by the fortuitously appropriately named investor, Li Kashing.