Changing World Economy

Bryan is posing a question to fellow finance dorks: Why do so many people still insist on saying “what goes up must come down” in reference to the markets? As in, why do people still insist on the idea that the markets are subject to Newtonian physics, when the markets have proven to be a social science?

William:

I personally feel that unending prosperity and growth is not feasible. Too much of the world’s growth over thousands of years depended upon such things as non-renewable mineral and fossil fuel resources, upon conquest and exploitation of less developed civilizations which are now vanishing with modernization. Slave labor and genocide also played a role in expansion and prosperity. Entrepreneurs are more enticed by high risk high yield of very unstable financial instruments which are now more closely controlled and scrutinized. War and reconstruction have played a deceptive role in periods of prosperity and dominance. The tendency towards internationalization of currencies creates situations where the Euro must balance the frugality of nations like Germany with the prodigal nature of nations like Spain and Greece. The US model of private enterprise which seeks to reduce the influence of big government is being overshadowed by the growing success of nations like China where central government control and long term planning dictate the economy.

I have listened to old villagers in China who remember Mao’s revolution of the 1940s speak their stump speeches of “the empty belly now full.” The young generation of China has no memory of such years of hardship. Their great shift is from an agrarian village life with simple needs to an urban manufacturing and service economy where they demand cars over bicycles and increased power consumption. India and China each reach the 1 billion population mark. Gorbachev allowed the Soviet Union and the cold war arms race to dissolve because he finally saw that the underlying agricultural business model of the kalhoz collective commune was no longer competitive. No empire has lasted more than 1000 year if even that. Around the 11th century Ibn Haldune of North Africa realized vast cyclic changes in history and economy which were then forgotten for centuries. Our ecosystem is perhaps irreparably damaged and global warming is irreversible. This means that the wealth of the ocean flora and fauna will not be something that future generations can count on. Conservative political philosophy means literally conservation of wealth, power and status quo. Even the sudden emergence of open source as something superior to proprietary software is a stunning change in business models from older conservative competitive to progressive socialist liberal. Ideological strife between religious right and humanist left among Christians, and between secular vs conservative Muslims with the terrorist element present not just in Islam but in North Korea and among Kurdish nationalists are all dynamics of great instability, whereas business-as-usual conservative speculative models depend upon predictability.

Ecologists estimate that the Earth could support a maximum of 1 billion with a stable ecosystem. But Earth is now approaching 7 billion with an estimated 20 billion by 2030. Unless humanity unites in a world global government that is more secular and humanist in nature then the future and our survival does not seem promising. Unexpected plagues like HIV (and the Bubonic plague of the 13th century) are always possible. And in an ecosystem suddenly stressed by oil spills, nuclear waste, warming, genetic engineering and biological weapons, the chances of a catastrophe are heightened.

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