No. 2 The End Of The World

The year 2012 is drawing inexorably to its close and the Mayans have failed in their inadvertent bid to end the world. So far so good.

In a world dominated by talk of climate change, population explosion and sustainability, I want to highlight a few positive counter processes that put such undeniable woes in a broader context. These are, permanently low interest rates, the emerging superabundance of goods and services, population collapse in the advanced industrialised countries, downward pressure on populations in the rest of the world.

Apart from the usual rag-tag-and-bob-tail of fundamentalists, religious and otherwise, for whom sin and retribution in a thousand different forms is an article of faith, there remain the great unwashed masses of humanity for whom climate change, sustainability and population explosion have ascended the throne of moral imperatives.

These are the commandments at the heart of our new covenant with nature.

With sin and retribution safely out of the way we must now grovel before the altar of the scientific method and, if decent manners and polite society are to be preserved at all, sacrifice ourselves upon it.

There is now one and only one acceptable way of thinking, one and only one allowable logic. To believe otherwise is regarded, at best, as simpleminded and at worst as heresy.

In my first blog I mentioned that sea levels are approximately in the middle of their 120 metre range, and could rise or fall, as they have in the past, by around 60 metres. The climate change lobby does not contemplate more than a very tiny proportional change in sea levels over the coming century and says that the expected tiny change is both man made and recoverable.

On the upside, we may be entering a period of permanently low interest rates. Some countries, such as Japan, have been enjoying, or living with, an effective zero official bank rate for over a decade. Australia is heading towards a decade of low interest rates, and the USA and Europe are likewise experiencing low interest rates. Demand for money, for capital, seems to be at an all-time low. That is why its price, the interest rate, is so low.

In the advanced, industrialised countries all around the world, native population numbers are falling as people have children later in life and have fewer children. Where populations are growing in these countries, the increase is largely due to immigration. This is so starkly evident in Japan, that the country’s legislature is becoming alarmed that Japan’s culture may be diluted by foreigners.

In the two countries contributing most to global population increase and to global pollution, China and India, there is evidence that population growth may begin to tail off and may even stop in the next few decades.

This is more evident in China currently than in India, but the causes are the same.  Firstly huge numbers of people are leaving the rural areas and moving to the cities as these countries become more industrialised. If mum and dad are both working long hours to make ends meet, and the kids’ education has to be paid for privately, there is a natural downward pressure on population growth.

Secondly, in both countries there is a large and growing middle class and the middle class is becoming a powerful force for change.

The Russian born, but naturalised American economist, Kuznets, developed the so-called Kuznets curve that describes a trade-off between, variously: industrialisation and flow of population to the cities, increasing city populations and growing middle class and a growing middle class and decreasing environmental pollution.

Right now China and India, amongst the most polluted countries on earth, are experiencing the largest growth in the middle class and the largest shift in employment to the towns from the country. The stage may be set for these emerging middles classes to do their stuff.

There is a second, equally interesting phenomenon emerging all over the world but most strikingly in China and India, and that is superabundance of goods and services.

We saw superabundance in digital form with the emergence of the World Wide Web some twenty or so years ago. Digital recordings of music, books and movies are, in effect, superabundant as they can be copied almost infinitely at minimal cost.

This superabundance is now beginning to emerge in manufactured goods and in services, led by China.

China plans to create two hundred new cities along its Pacific coast. Each of these cities would become a centre for some specialised form of production.  The most famous of these is the popularly named ‘Sock City’ Datang that produces 9 billion socks per year or around 60% of all socks purchased in the industrialised West.

Near to Datang is the ‘Button Capital’ of world, Qiaotou which likewise dominates the global button market.

In the current economic uncertainty China’s plan has been slowed, but we may yet see emerging ‘Jumper’ and ‘Trouser’ cities.

The effect of this is to produce these items in such abundance that their wholesale price per unit becomes increasingly low, tending towards, but never quite reaching, zero.

Consider that in 1909 the USA was still pretty much at the horse and buggy stage, and that a mere sixty years later they put men on the moon.

In Asia, if we look at the meteoric rise of Hong Kong, Indonesia, Japan, Malaysia, Singapore, South Korea, Taiwan, Thailand between 1965 and 1995 and of the Shanghai region of China in less than a decade, it is evident that the shift from large rural population engaging in agriculture to large urban population engaging in manufacturing and services, can now be achieved in a few short years.

Evolutionary stages that we might have once believed mandatory can now be leap-frogged with the latest technology and know-how. In India the HP Company will build a gas powered electricity generation plant next to a new Data or Call Centre so that the very latest technology can be used.

If the population of the industrialised countries is shrinking, and that of the rest of the world may be levelling out, and if superabundance continues to spread, sector by sector, we may one day see a sustainable future driven at this stage by capitalism itself.

Who knew?

Oddly enough it was Karl Marx’s view that superabundance would be achieved under a capitalist economic system and that it would pave the way for communism. Watch this space…

Poppy

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