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fransgeraedts (99.69)

Unwarranted pessimism



August 10, 2010 – Comments (0)

Erosion of trust (specially in the political institutions) and unwarranted pessimism (specially with regard to the strength of the economies) haunt the western societies. That is dangerous. They could turn into selffulfilling prophecies.

Donnerv wrote a fine post under the title Goodbye America; it was a great ride.  In the post he expresses his pessimism over the future of the US. He believes that globalization (and the interaction of IT with globalization) has sealed its fate. He is especially worried about the job losses the globalization has produced and will produce. While he is of course right in thinking that many jobs have left the states  -and some will leave in the future- he is wrong about the scale of the problem, about the trend and about the overall consequences. He underestimates the strength of the western economies. I repost here my answer as part of a series.


Dear Donner


Lets try to think this through.

From the bottom up.

(1) Do you see farming disappear to china? And mining in all its forms? And harvesting the sun on the rooftops of the cities and the floor of the american deserts?

Do you see the building of houses and offices disappear? or the building of roads and bridges and railways and ports? of the public buidings and spaces that make a city? of the grid of water and waste and electricity and information?

Do you see retailing disappear to china? The local entertainment? Do you see the care for young and sick and elderly go to the far east? The connected transportindustries? The driving of the bus, the collecting of the garbage, the cleaning of the street? The hairdesigner (grin)?

Do you see education go abroad? The schoolsystem? The universities?Do you see the police go? The justice-system? Social security? Cityplanning? The army?


A very large part of an economy  -the parts that are connected to place and to people cannot be moved. Can we agree on that?

(2)Then you seem somehow to entertain the notion that the US (and i presume Western Europe?) will lose out on all the other parts of the worldeconomy that (theoretically) can be moved. I disagree.

(a)Transportcosts play already a greater role then you think. And because of the rising energycosts that role will grow.

(b)Higher labourcosts are offset by higher productivity. Part of that productivity is the effect of the society as a whole. It cannot easily be reproduced.

(c)Labourcosts of jobs that are knowledge-rich will rise much faster worldwide then you assume. They will quickly reach American levels because of the scarcity of talent and the possibility of that talent moving elsewhere  -grin, to the US for example.

(d) In the informationeconomy it is not the informatization of the industrial-economy but the production distribution and consumption of information itself that will be the most important. Do not think bookkeeping, think books, and films, and music, and histories and art and games etc. The West has a very large moat when it comes to content.

(e) Of evermore importance will be the competition between countries and societies as places to live. The West has the best ordered and the most comfortable and the most just societies. That will attract ever more people.

(f) Modernizing a society is very difficult. One of the most important exportproducts of the West will be exactly that: the knowledge how to go about and creating a working modern society.

So to sum up, place and people based economic activities cannot move.(Agri- and services industries -including the state.) A lot of the industrial economic activities could move  -but certainly not all will  -see above.  The largest part of the informationeconomy (contentproduction) will for a very long time to come be very Western indeed.The modernization of societies will become an important export product.


(3)  You seem to forget that most important effect of gobalization is an unprecedented amount of economic growth. To put it very simple: the productivity of the labor of twothirds of the population of the world is going to grow in leaps and bounds. That "wealth-effect" means that the demand for agri- industrial- services - and  information -products will grow -strongly -for a long time. That tide will lift all boats. So even if some parts of the industrial economy move away, the parts that remain and the parts of the infoeconomy that are here to stay will produce more then the whole of the traditional industrial economy in the US.

Or to put it again differently. Of course China will grow faster ...and rightly so could they ever reach our levels of income if they did not...but the US and Western Europe also will grow  ..slower..but fast enough...grin...

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