You hafta understand it's the sustainability I worry about. Although the systems are great at reinventing themselves, it's the bloodshed on the way that bothers me. I just wish we could leave you kids something better, maybe you're better off making it up as you go along, building your own system. Still you have come to see the world as able to provide you with something, I would like to think that will be true, hate to see your hopes dashed. Especially those poor bloody young conservatives, wed to something that just wont be there for the long haul.
Because you see it aint sustainable in its own right. The economics, dear God, that is what we are talking about here, the model. Not the beast the way we know it. It constantly needs stimulus. The stmulus gives you growth, which drives the profit drives share price model that we all live by now. The money these days is made through investments, the value of investments is spurred by growth, but how does it grow? O.k. growing populations are a key, read expanding the consumer base, although that does nothing to reflect per capita wealth, or raising standards of living, or increasing profits. You get more people, more people need things, more people spend money, you've got growth in it's simplest form. Well population growth is going to slow and stop, I think the U.N. suggests about 2050, whatever, it will come.
Then you can get growth from technological turnover, although that at this point just helps to maintain the status quo, we've become so used to trading in the old for the new. But for true growth you need new products, more than just trading the worn out or obsolete for the new. That was the beauty of the IT revolution, a completely new product line was required. That is a rarer beast than trading LCDs for vacumn tubes. A lot of people think the end of the oil age will create this same sort of boost through the adoption of green technologies. Problem there is that it will always equal an actual economic cost. Reason being nothing is on the horizon that will give the same sort of energy versus cost that oil has, and this will get worse as less people use oil. Simple supply and demand there. You can mandate the use of green energies, people may want them, it is the right thing to do, but dont kid yourself that it will make money. Wall Street knows how to make money, and they see this.
Then the biggy of late, turn poor people into consumers, or use em to make goods cheaper for the consumers of the world so they can buy more. In the process they make money and start buying all the crap themselves, the bankers, the corporations, and the investors in the developed economies make money, it gets shoved around and you have growth. Problem there is that believe it or not Malthus was right. People like to say that he has been disproved so many times it doesn't count. But technology cant save your ass all the time. There is only so much potable water, only so much copper, only so much arable land. Before the great recession we saw the spiking of commodity prices due to rampant demand. As developing economies move along that will only get worse. We could see a situation where the smallest amounts of global growth create smothering price spikes in resources.
Wars sure can stimulate an economy. You get all that debt spending, all that government growth, pumping up those leaches in Eisenhower's famous military industrial complex, I sure as hell hope that isn't the stimulus we're relying on though.
You can stimulate things through other government spending. But its bloody hard to control the waste, which winds up being a drain. It's not that government spending is bad it's that it breeds such inefficiencies. If anyone could control the waste then everyones economic problems would be solved.
You see what is the system without the stimulus? Look at how the global markets shudder when it looks like the money to fund mergers gets threatened, why? Because the mergers stimulate profits. Look at how everyone wants labor markets liberalised, why? Because it stimulates the economy. Look at how everyone calls for tax cuts, why? Because it stimulates the economy.
Oh so many options, the stimulus occurs naturally, always. Ah what short memories. Sweet cheeks, a bit ago advanced economies were stagnating. Getting drug down by corporate uncompetiveness, high taxes, and luxurious labor agreements. Then came along the mantra of cutting taxes in the U.S., globalisation, and let's not forget the IT revolution. Europe wasn't far behind. There was also the benefits of increased immigration. Things were revitalized. Profits went through the roof. And like sorry wealth junkies we became so used to them that we built a model to them. The profit drives share price model. And who needs wages anymore? Wages represent a drag, a negative to the process, that is as is said, old school.
But it isn't going to last, you can only stimulate so much. Taxes have to find a level of sustainability, where needs are paid for but they don't suck the system dry. Labor markets can be liberalised until the poor saps in the developing economies start wanting their piece of the pie. Exploiting new markets runs into the wall of limited resources. Then that old spectre returns. No growth, low profits, poor productivity, high social costs. Old Europe, before the recent charms of globalisation is the future of the world economy. There is the concept that the old closed system, the Albanian system, the Mao system, where everything is produced internally without trade doesn't work. Well you know what, ultimately the Earth is a closed system. O.k. we are talking decades hence here, but I may live another 40 or 50 years, God willing, my children will be here far longer, I think it is simply prudent to try to figure a model that will last that long.
And you know what? It's o.k. We do, however, need to adjust our expectations. We do need to make sure the waste of entrenched interests doesn't eat us alive. We do need to make sure that corruption doesn't control the flow of resources and suck the life out of making the most of what we have. We do need to recognize that if globalisation is going to be an equalizer of standards of living that doesn't mean that the rampant consumerism of the U.S. will be the norm. The new model can work, but it wont have much to do with the current model. Hopefully we just don't need to burn down the neighborhood to build a house.