We all know that 2016 will be an auspicious date for Ireland. But it will also be an important date for the world. Yesterday, the OECD announced that the Chinese economy is set to overtake the US by 2016. Indeed, by the end of this year, China will have overtaken the eurozone economy.
Bearing this in mind, arguably the more significant power struggle was not the one between Obama and Romney last week, but the handover of power – the coronation, if you will – taking place this weekend in China. In relative terms, even though the US is recovering from the disaster of the Bush/Greenspan years, and despite the fact that Obama won the election because of – not in spite of – the economy, the big issue is now managing the relative decline of the US in tandem with the relative ascendance of China and – not too far behind – India.
Last week, the OECD produced some interesting long-range forecasts that are worth highlighting since, although it’s easy to get bogged down in the ground war of Europe, bank debt, the budget and the immediate next move in the economy, taking a bit of altitude is always necessary. Have a look at the charts.
Last year, the US accounted for 23 per cent of the world’s GDP while the euro area accounted for 17 per cent. China also accounted for 17 per cent. India, with its billion-plus population, was at a mere 7 per cent. However, by 2060, China will achieve 28 per cent of total world GDP while India will account for 18 per cent. In direct contrast, the influence, power and weight of the US and Europe will have progressively diminished. By the time my own children are moving towards pensionable age, the US – formerly the world’s leader, don’t forget – will account for a modest 17 per cent of the world’s economy. Europe, once the master of all she surveyed, will slip to a practically irrelevant 9 per cent of total world income.
These are enormous changes. While not unprecedented (all great empires and powers tend to peak, overreach and fall back in the great Darwinian game of global economic history), these trajectories are significant and quite immediate. By this I mean that, though 2060 seems like a long way away, it is really only 48 years. Perhaps you remember 1965, 1966 or 1967? If you do, it mightn’t seem so long ago either; it was after JFK was assassinated and before the first man on the moon: the era of Mohammed Ali and Martin Luther King; the years of Revolver and Sergeant Pepper; and the glory days of Matt Busby, George Best and, of course, Celtic FC.
Back then, America was the main player and, despite everything, it’s still top dog today. Imagine the coming change: seeing American power diminish to such an extent that it will be smaller than India is today
on the world stage.
If we stick with the economics, we see that three factors affect the long-term growth rate of any economy. The first is the most significant. It has been said that “demography is destiny” and this is true. The countries with the highest population growth tend to dominate in the long run because they have enough people to work and to consume the fruits of their labour. The other factor affecting demography is the education level of those people. The better educated and better trained the population, the more productive they’re likely to be.
The second major factor determining the growth rate of any country is technology or capital. The more capital-intensive the country, the more productive and richer it will be. Look at the enormous productivity of Ireland’s multinational sector. This output per employee has driven the phenomenal capital intensity of the manufacturing bases. We see it all over the world: when you have smart people and lots of capital, growth rates go through the roof.
The final piece of economic alchemy is what economists call total factor productivity. This is how productive the country is when you combine the people and the capital. This is the great chemistry of growth economics; above all, this figure tells you if the economy is doing the right things. It is quite distinctive from the growth rate.
We know in Ireland that, if you throw enough money at an economy, it is easy to get growth rates that seem marvellous but they have as much durability as a blazing, open fire. It’s fired up by reams of paper, which looks great, but gives off no heat and will ultimately burn itself out.
Famously, in the mid-1990s, Paul Krugman spotted something odd about the Asian miracle: there wasn’t one. He noticed total factor productivity in Asia was actually falling. Therefore, the vaunted growth rates were fuelled either by too many people being crammed into the economy, or by too much cash being smart.
But neither the people nor the deployed capital was productive, so he said the boom in the Asian Tigers would come to a sudden stop – which it did.
Getting the total factor productivity usually depends on having the right institutions, laws, rules and infrastructure – which allow people and capital to work together seamlessly. This is the key to why the northern European countries have been able to continue paying themselves well and still keep ahead of the rest: they are well organised and have strong institutions, backed by a strong commercial culture.
As the rest of the world develops, they will need these strong institutions; they will need to import western technology and copy it. The education of their people will be essential. And this is where our
opportunity lies.
Last week at www.kilkenomics.com, two eminent Indian economists and financial market players – PK Basu and Vikas Nath – shared stories about being taught by Irish priests in India in the 1970s. They enthused about how many prominent Indians were bonded by having been educated by Irish orders and how this is a huge unifying brand that Ireland has in the sub-continent. Looking ahead, they urged Ireland to reach out to the children of similar Indians, build on a strong teaching brand and they insisted that, if we opened up our education system to the children of the emerging Indian middle-class, we would have a growth industry to beat any other.
They argued that we could be the host nation for an education revolution that would see thousands of rich Indians come here to learn. They believed, based on their own experiences, that this would be pushing an open door – to another English-speaking country which they had a positive collective impression of, and relationship with: Ireland. Years ago, I spoke of plugging into our diaspora (and it’s nice to see it being acted on, finally). I spoke about leveraging from our history and making the most of our global footprint.
Many assumed this was just talking about reconnecting with the ethnic Irish abroad and, granted, it was the main message. But the Irish experience abroad, the Irish voice – the Irish echo – is far more than the genetically Irish. It lives on as much in the heads and hearts of Hindu Indians as it does in those of Harlem Catholics – and it can be tapped. Look again at the world in 2060 and our place in it. It could well be an evergreen harvest that might well be ‘gathered’, year in, year out.
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Actor Gabriel Byrne dissed the idea of ‘plugging into the diaspora’. It did’t prevent him from claiming 16k€ in expenses in 2011 while acting as ‘honorary cultural ambassador’ whatever the f*** that is. Expenses of almost 4k€ in hotels Shelbourne and Westbury. Niamh/Connolly/Nicola Cooke P3 today’s Sunday Business Post.
Wow, looking at the OECD predictions, the Czech Republic has got a big future!
When I see chinese and indian equivalents (not copies) of boeing, coca cola and ibm I regard these numbers as veritable rubbish. Yes, the GDP numbers may be this large, but who’ll all this work be for? I suspect not the natives. Remember, the US and other owner countries exported their national income. Its going back now. Western institutions took 2 centuries to evolve. Why is it assumed the asians can do similar in a fraction of that time? Robots are getting good now. Do not need cheap labour anymore. Now what? And the childish naive ans that you need… Read more »
Got chopped. The OECD are like NAMA trying to convince the mext bunch of investors where to take a punt. And I suspect the panic of same old same old must be knocking where u see more and more GDP taken up by interest payments. I wonder what that fraction is? 10 or 20 or 30 or 40%?
The growth dog simply does not hunt.
NAMA remark needs explaining. Badically they are trying to keep developers doing what they are doing to try and pay off the huge debts eventually by ringfencing developers interests to ringfence NAMA interests. Organisations like OECD are merely a pawn in a global game doing the same thing. Nighty night :-)
Some would like to base economics and Ireland’s future on “alchemy” referred to in the lead. There is quite a lot of that going around here, which is really Mandeville’s “unknowable processes” “spontaneously emerging” from statistics or gold. His alchemy turns up anywhere the British economics schools have a (sleight of) hand. What is missing, and that is endemic today, is any trace of a scientific principle in the entire discussion. Where does growth comes from, what exactly is growth. How to measure it? How to encourage it? What is suppressing it? “Mission of the 21st Century”? Using GDP figures… Read more »
Machine translator speaks Chinese in your own voice http://pulse.me/s/fhDZp
Who will be influencing who?
Tower of babel collapses Then what?
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For a comprehensive rubbishing of the use of GDP statistics to say anything meaningful of the real world check out
Documentary :”Who’s Counting? Marilyn Waring on Sex Lies and Global Economics”
http://artthreat.net/2011/10/ten-docs-on-capitalism-and-economics/
nb: scroll half-way down the page. The doc has a female-centic analysis with the engaging Marilyn Waring.
The OECD’s predictions don’t factor in Peak Oil. The rise of India and China will hit the brick wall of dwindling oil supplies. To say nothing of critically depleted aquafers under Uttar Pradesh, diminishing fresh water supplies in Arizona and Nevada and all over China, collapsing grain harvests, shortages of rare earth metals, shortages of and hugely expensive nitrogen fertilisers and oil-based pesticides and herbicides.
The future will be very dystopian. That said, we should reach out to India alright. I love India and Indians, they will be our allies in Asia, or that I’ve no doubt.
You know, when economists crowd around and surmise the future via the rear view mirror of recent events (last 20 years or so) and then make the cognitive jump to align said results with data several decades before that, you know we are not plugged in. Vikas Nath pointed to a very interesting phenomenon in Africa – their use of cheap mobile telephony (pre-smart phone) to deploy very innovative economic solutions. I know many like to pooh pooh Africa (the so-called 3rd world’s 3rd world) as a non-player, but the level of creativity and innovation out of practically nothing needs… Read more »
At last David is proposing solutions. Let us all start looking for Solutions not problems. We don’t need growth anymore but more efficiency. Yes get inspiration from the Africans, Capitalise on our natural resources and human Resources.The present generation has a new world to conquer before they retire in 2060
“despite the fact that Obama won the election because of — not in spite of — the economy”
Did you reverse ‘because of’ and ‘in spite of’ here David, or that’s the way you meant it?
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Just a word in defence of the much-maligned Euro project: it was the lack of a single currency that destroyed the Asian Tigers.
The London and Wall Street currency speculators picked them off one at a time which ended in a general rush for the door. Capital flew out of Asia overnight resulting in the crash of the Seven Tiger economies.
It was that lesson that inspired the Europeans to craft a single currency. Both London and Wall Street have never forgiven them and are now working might and main to “do an Asia” on the Europeans.
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A warning signal from the bbc : Some Brits beginning to get very nervous about the way things are developing — Unemployment was 30% in Germany when Hitler took power, it is 25.1% and rising in Greece” (Paul Mason Economics editor, BBC Newsnight programme) [Interestingly and probably not unrelated, the Newsnight programme and the BBC in general is under massive attack in the UK at present]. In an economic crisis millions of people suddenly decided to turn to an unconventional leader they thought had “charisma” because he connected with their fears, hopes and latent desire to blame others for their… Read more »
david,im all for the idea of allowing 000s of wealthy indians to be educated here but its a morally bankrupt proposition.as long as the caste system exists in india then we should not prop it up by further enhancing their dominance over lower caste indians.its a bit like the shannon stop overs by american army troop planes.sure bertie said we were against the war in iraq but we stil needed the dollars and the support of the american tech companies…oh the hypocricy of it all.
Age of Aquarius in Allahabad Galbraith in his grey years realised the finity of the Nomics of Eco . An Echo . Some much he said that happened and how it happened and will happen and sometimes did’nt happen but he thought should have happened and could not understand why it did not happen when it should .When it Should! Thats right .But it did’nt. The Why of it all defied him and the repetition anoyed him he finally resorted to a ‘higher level’. Thus Allahabad was born and to India his great thoughts arrived .To the cradle of The… Read more »
Moon Wobble
Sunday was the beginning of the last moon wobble this year and already Venice has flooded .This wobble will peak on the 18th but will not finish until 25th .However scattered energy will prevail until the full moon 28th .
So belt up and experience the veils of Sandy pass over us in these few days .
I’m not too sure that David’s premise of strong institutions being the main reason Northern Europe is doing relatively well. Firstly Northern Europe is slipping back into recession and secondly most of it’s financial institutions are insolvent and are only avoiding bankruptcy by exchanging dodgy securities at full value with the ECB for cash. The ECB is becoming the bad bank for these “strong institutions” and without it they would be bankrupt. Most of them are operating on leverage levels of over 25-1 so it is no surprise that these reckless institutions are in trouble. The Indians would be far… Read more »
Fabulous idea regarding the Indians David, absolutely fabulous. I hope it happens.
“But neither the people nor the deployed capital was productive, so he said the boom in the Asian Tigers would come to a sudden stop — which it did”
As is the norm , David, a credit debt based boom fuel by the cheap and easy credit resulted in the inevitable bust.
It is a simple lesson to learn by just examining the previous happenings all of which became a bust or worse still resulted in a destroyed economy and a broken social order.
It’s interesting you mention well educated people paying for education but that is fine if you have customers who can afford and are willing to pay a grand or two for a learning experience with concrete returns. You imagine a world where rich people are jetting around the globe to be educated but I see a market of millions who can’t afford an education far less have funds to visit Ireland You could charge €100 for a dvd and sell a few or charge €5 and shift millions. Self education is a natural human instinct and there is an undying… Read more »
Tomorrow’s world Dr Michio Kaku is a well-known futurist and Professor of Theoretical Physics in the City College of New York. He has written several books about physics and has two NY Times best sellers: Physics of the Impossible (2008) and Physics of the Future (2011). Here are some of his thoughts and predictions. Every 18 months, computer power doubles (Moore’s Law), so in eight years, a microchip will cost only a penny. Instead of one chip inside a desktop, we will all have millions of chips in cars, appliances and clothes. By 2020, the word ‘computer’ will have vanished… Read more »
Hamiltonian Banking and Growth Strategy, the only viable form, must be re-instated, and here is a NY Times OpEd on exactly this now. In a strikingly rational analysis printed in the November 11th New York Times op-ed section, penned by the recently deceased Prof. Thomas R. McCraw of Harvard, first Treasury Secretary Alexander Hamilton’s method of “bankruptcy reorganization” for the U.S. economy is laid out in some detail. While reflecting a fundamental weakness in the understanding of the source of economic value, this analysis is the closest yet to that of the LaRouche movement to appear prominently in print. McCraw… Read more »
Glass-Steagall Would Remove the “Fiscal Cliff” Nov. 12 (EIRNS)–Although no one has yet put this in the context of the debate on the “fiscal cliff,” the issue of re-enacting Glass-Steagall has not faded from the debate on “financial reform.” Red Jahncke of Townsend Group, a hedge-fund consulting firm in Greenwich, Connecticut, pens a solid piece in today’s New Hampshire {Sentinel Source}, titled “We Need Clear and Firm Bank Rules.” Jahncke not only notes the simplicity of Glass-Steagall, but demonstrates the current battle over re-enactment, by contrasting (repentant) Sandy Weill with JPMorgan Chase’s William Harrison and “Treasury Secretary Geithner’s surrogate” Steve… Read more »
Someone get Mr. bonbon a valium.
Launch of Direct Democracy Ireland at
Buswells Hotel 2pm tomorrow, Wednesday.
Molesworth St Dublin.
https://peopleforeconomicjustice.com/
http://directdemocracyireland.ie/latest-news/page/2/
Get there to show support if you are able.
GAAP-based reporting means use of generally-accepted-accounting-principles, similar to the accounting used by corporate America. The government’s heavily gimmicked cash-based accounting has shown already an annual deficit of $1.1 trillion for the fiscal-year-ended September 30, 2012. Yet, the still-to-be-published, accrual-based GAAP accounting-including detail of annual deterioration in the net present value (the amount of cash needed in hand to cover the future value) of the government’s unfunded liabilities for programs such as Social Security and Medicare-likely will top $7.0 trillion for the year.
– John Williams, Shadowstats.com
Better to post for the last theme but this is too important to miss
http://directdemocracyireland.ie/latest-news/page/2/
Well worth the read if you want an alternative to the credit based debt based money that ensnares us
A piece of crack for you David. I know it gets lonesome on long haul flights and I imagine you were sincere when you recently let us know that the comments (good and bad) keep you going. Screw economics for a second The sentence referencing Celtic is semantically incorrect and misleading David as you well know. Celtic are mentioned at the end of the sentence as if by way of a grudging courtesy. I think it is deliberate and that you have never recovered from the semi final defeat of 1970 1967 was the year of the Scots. Stop laughing… Read more »
21st Century…my take is very simple. If the US Fiscal cliff can be managed, then maybe China, India and the rest will glide nicely into poll position and we’ll have amazing new places for work and living. If it cannot be managed, then US is whacked…with the biggest arsenal and new public order structures needed, anything can happen. Let’s face it, it is about 1-2 months from d-day on this matter. Nothing seems agreed. Obama has not endorsed latest proposals. So either it’s a genius stroke or bother. Forget about what should or should not be happening, the countdown to… Read more »
In India they have a very ambitious plan for education… http://qz.com/26244/how-a-20-tablet-from-india-could-finish-off-pc-makers-educate-billions-and-transform-computing-as-we-know-it/
David my friend this is for ye. Might give you something to smile at on the long haul home. Don’t be blue
http://www.youtube.com/watch?v=ZYR4xf5MG24&feature=related
Ireland comes across as a half way house for the highest bidder, either a mulitnational clearning house or refuge for the rich. It was once a country with values, ambitions and integrity, a place people fought and died for, a place people aspired to become a Republic, free of the yoke of imperial exploitation.
All that is in the dustbin of history and we are a mere cog in the neoliberal wheel. With the crowd running this country any wealth created will never trickle down, it is choked off at source while those same people give the lash.
The Case for gold by Dr Ron Paul.
http://lfb.org/today/theres-still-a-case-for-gold/
Freedom and sound money are inseparable. Money must be returned to the people to manage and be taken away from the government and its planning apparatus at the central bank. Socialism works in no area of life. Freedom works in every area.
Ron Paul
Words of wisdom from Dr Ron Paul’s final speech in congress.
It is a wonderful discription of the problems ans solutions of the cris generated over the last 100 years
http://rtr.org/vid/5446/congressman-ron-paul-s-farewell-speech-to-congress
HYPERINFLATION: THE MINUTES OF THE FEDERAL RESERVE OPEN MARKET COMMITTEE OCTOBER MEETING, released Nov. 14, say that a majority of members of the Committee thought that the Fed would {further increase} the money printing volume of “QEIII”, above the current $80 billion a month, early next year, due to lagging economic conditions.
Back to 21st Century Mission I would like to see if there is a metric for the level of soft power in the world today. Too often we rely on GNP/GNP productivity numbers, but it says little about influence. Face it, “Coke is it”, Jazz, Pop and indeed so much of western taste continues to the aped. OK, we can all go Indie and be eclectic in our own ways, but brand loyalty should not always be dismissed as marketing chicanery and maybe the wisdom of crowds reflects a price/demand curve that depicts true quality and trustworthiness. Why to VWs… Read more »
In this issue The truth about the Lehman collapse. Why Europe is far far worse. Bernanke scared stiff. More! November 15, 2012 What Really Happened When Lehman Failed… And Why Spain Will Be Much Worse Countless pages have been written about why Lehman caused the system to almost implode. However, the reality is that Lehman nearly took down the entire financial system for two reasons: 1) Lehman’s $155 billion worth of bonds were used as collateral in hundreds of billions of Dollars’ worth of trades. 2) Lehman’s 8,000 clients who were all using Lehman to make trades saw the collateral… Read more »
http://youtu.be/4lHUWzDryRY
Small section of Direct Democracy Ireland launch.
http://www.youtube.com/watch?v=Odpwc6h5Cos
Governemnt losing control. When you turn the poice on your own citizens the end is nigh
Look at the mentality we face when real economics is the issue : Bloomberg Dismisses Quinn Emergency Plan for New York, Whines “I Don’t Know Where the Money Would Come From” In the wake of devastation from Superstorm Sandy, New York City council speaker Christine Quinn proposed a … plan to protect New Yorkers from future storms. Mayor Michael Bloomberg, however, was quick to shut the plan down. The New York Daily News reports on the plan that Quinn outlined on Tuesday while speaking before the Association for a Better New York. The $20 billion plan, which Quinn wants to… Read more »
I wonder if our Indian visitors are aware that Jawaharlal Nehru later said that his policy for Indian independence of swodeshi (boycott of British goods and development of Indian production) was based on his observation of Sinn Fein when Nehru lived in London as a graduate student.
The current global economic situation creates an inevitably of war……
http://www.scribd.com/embeds/113621307/content?start_page=1&view_mode=&access_key=key-11v6eigpyerwnsdswgqs
cheers kenlee2409 …very interesting !
ive posted here a few times about Kyle Bass ..if you haven’t youtube him…
if you havent seen kyle bass speaking that is