The New World Economic Order

So I've been doing some light reading, and came across a book which seems eerily prescient. The book is titled Futurecast, and it was published in 2008. The author, Robert T. Shapiro, was the former economic adviser for President Clinton, so you know he is pretty knowledgeable about the world of economics.

In the book, Shapiro discusses how he sees the world in the year 2020, and so far his predictions have all been extremely accurate. To sum it all up, Shapiro predicts the following:

• The decline of Western Europe and Japan.
• The rise of Eastern Europe.
• The continued dominance of the United States.
• Enormous growth in the disparity between rich and poor.
• Social turmoil based around said disparity.
• Environmental crisis makes environmentalism a potent political force.

Some of these things are currently beginning, like the decline of Western Europe and the social turmoil surrounding Wall Street, others have not yet come to pass (damage to the global ecology on an obvious and widespread scale - though we are in the process of crossing that line). What is most interesting about the book is how Shapiro justifies his predictions, as they hint at a new world economic order.

Namely, while countries like China will gain power and wealth through cheap manufacturing, the United States has embraced a new strategy - constant innovation. We may never see cheap manufacturing return to the States (and the cheap jobs that it brings are gone forever), but what we will see is a new emphasis on Blue Ocean strategy, and a rise in research and technology investment. Engineering will become a better college degree to have than business, and America will become a land of scientists and engineers. In some ways, we can already see this happening - the rise of such companies as Apple and Google demonstrate that ideas are now America's new product.

This also ties into why Europe and Japan are on the decline. Not only are those countries burdened with an aging population which they cannot readily fix through immigration (unlike the USA), their business models are still running on the idea that innovation complements a product, but it is not a product in and of itself. A since the older generation has most of those country's power and wealth in their hands (and won't be giving it up to the younger demographics anytime soon), the youth of Japan and Western Europe have no choice but to fall in line with the old fashioned notions or starve.

Well, this thread is starting to get lengthy, so I'll end on that note. But what do you all think of Shapiro's foresight? Is this the new world economic order, or just a passing phase that Shapiro happened to get lucky with?

Catchy name for just normal economic trends. So when was this predicted?

I can see the rise of Eastern Europe, afterall, they have to go through full industrialisation and they already have pretty good incomes (relative to the world), so I'd expect quick growth there.

China I can see rising but whether it bumps into large hiccups or small hiccups I don't know. I'm also unsure if their rise remains peaceful, if one of its enemies starts a war against it to maintain dominance or it starts a war to gain dominance.

I'm not sure why Europe would fall but USA would remain awesome. Other than immigration, I would expect USA/Europe's fortunes to be fairly similar. Europe has high-quality manufacturing with high-quality jobs to go with it to compete with the developing world's low-cost low-quality labour/product market.

^Shapiro really emphasized the "lots of retired people supported by a small working age population" as the main reason Europe and Japan are in trouble. The other cause of Europe's troubles are their unsustainable social programs - he basically predicted Greece's meltdown three years before it happened (and yes, he specifically mentions Greece). Japan's problem goes back to their rigid business practices, such as guaranteed pensions and rewarding people who stick with the company the longest with better positions instead of employees who show competence and skill - a system which cannot be changed so long as the elderly remain in charge of all business.

> The rise of Eastern Europe.

this cannot happen. Eastern Europe have falling demographic, if West Europe and Japan declined because falling population, Eastern Europe will share their fate.

...the only vaguely surprising (and amusingly quaint) thing on this list is that he thinks the US is going to stay economically relevant into 2020.

US will stay relevant for a long time. It might not be number one on GDP, China and India will take the place, but it still major economies. Having high unemployment and poverty did not stop country from successful economically, a lot of corporation still have record profit and high productivity after 2009. USA also have high population (3rd largest now, certainly still top ten in next ten years) and American College System is the world best, this will make USA have very large educated / professional workforce.

I should explain why Eastern Europe is on the rise. Basically, the investments made following the fall of the Soviet sphere are coming to fruition - if you want to see an economic boom, look no further than what is happening in Romania and Poland today. Demographics wise there are still challenges, but the fact of the matter is that because these countries were basically able to start with a clean slate in the early 1990s, they have nowhere to go but up, up, up. Western Europe's markets are saturated, but in Eastern Europe there is still great opportunity for expansion. Eastern Europeans are also willing to tolerate less social spending and lower wages, which makes them very appealing for multinationals. The result is that these countries stand to gain greatly from globalization, even as older markets decline.

Just because other countries are rising in power doesn't diminish the United States. People are so convinced that we are on the decline, but the reality is that there is an enormous difference between a difficult recession and the decline of a nation. The USA still has some huge advantages over our rivals, advantages that will only grow larger in the coming century, despite the doom and gloom.

One example: the Mississippi River. No other country on Earth enjoys such an enormous, easily navigable waterway. Our ancestors knew exactly what they were doing when they built the Eerie canal and purchased Louisiana - opening up vast swathes of land to the benefits of intercontinental trade. Indeed, the United States has been DESIGNED from the beginning with trade routes in mind, something that none of the Old World nations had the benefit of (just try driving in any of the smaller cities in Europe - its a nightmare designing modern roads for medieval castle towns). The same motivation is what drove us to conquer California, and now we have easy access to the world's two largest markets - the Atlantic and Pacific oceans.

Not to mention that no other country has the ability to challenge our supremacy of both of these waterways, both because we rightly spend vast sums of money on our navy (keeping the world's two largest oceans American ponds), and have coastline on both sides. One of the big reasons why the British Empire ultimately collapsed was due to the rise of the importance of trade in the Pacific - Britain couldn't hope to rule those vast waters when they were so far away, but America can and does.

Another advantage that America enjoys is land - travel abroad and you will see what I mean. In the United States, most families expect to share an entire home amongst their nuclear family, but in most of the world there simply isn't any land left over for new families to settle, and homes are multi-generational affairs. Americans have land, and more land, and land to spare - we haven't even nearly approached the population densities of most countries on the planet. And all that spare land is room to grow, both our population and our economy.

I could go on, but I think you can start to see the picture. I'll end on one final note: Americans are so used to success and wealth, that they consider a lengthy recession "the end of Western civilization". Its just like that one episode of Star Trek Deep Space Nine where Garet was hooked on an endorphin-implant in his brain, so much so that when his endorphins got back down to NORMAL levels he had a seizure. Or a fat kid crying when he gets slightly less potato chips than usual, if you aren't a trekie.

The British Empire collpased because fighting a world war on 3 fronts for 6 years while having the industrial base of the United Kingdom being bombed meant that there wasn't any money and the cheap opition was de-colonastion.

^ And yet it started far more problems than it solved.

Yes I know it was the worst opition Tom but I said it was the cheap opition.

Since then it's become the most expensive option. Given the horrific state of many of those former colonies, you can't even say in hindsight it was the right option.

Tom, what kind did I say it was the right opition to have massive and sudden decolonisation? But you're not looking at it through Clement Atlee's eyes.

TOPIC

WE ARE OFF IT

Europe is just coming off a 400 year golden age, but we will be back baby.

When? When the current world economy has been chugging along for 1000 years and mankind has spread to space and beyond ready to quash a new Earth-based upstart?

I kid. But it raises one key question: What role does Europe play in this new world economy? If it keeps declining, soon it won't be significant.

Sure, Tom, and we'll be right at the bottom with them, since, well, note that particularly large hole in our particular ship...

Which hole? Our inexplicable desire to throw trillions away on a welfare state with nothing to show for it?

We don't have a declining population. Immigration and birth rates here are too high for that to be true.

Mass wealth disparity and low wages while we flit away trillions on a uselessly large military that alternates between sitting pretty and wasting tens of thousands of lives on international adventures.

Do you know what that description also fits: most of the European Great Powers pre-World War One.

So we should follow the route Europe is going, re-distribute our wealth and fade into obscurity like they are?

The days of Europe being the center of world economics are long over. They are fading away as everywhere else remains on top or rises to the top.

Well... not everybody else. More like "the rich get richer, the poor stay the same."

Not quite zero-sum, but not much better...

Explain the rise of India, Korea, Japan, Taiwan, and China as economic powers if "the rich get richer and the poor stay the same". Most of those places were filthy dirt poor not even worth calling them Third World in some cases. Now in some cases like Korea and Taiwan and India they have either First World living standards or are rapidly approaching them.

Explain that huh? How can the rich maintain their status quo and membership while nearly three billion people in those places have pulled themselves out of the days of nothing?

Actually, we should learn from Europe's mistakes and become Europe 2.0. Develop a functional social safety net that can provide for everyone's needs, and allow for a functional market with proper oversight and decalcifying actions to provide for wants and push growth.

Tom, if you actually read up there, you'd realize that Europe redistributing its wealth is not what leads to Europe and Japan's decline, it's a calcified business structure. Inserting a dogmatic position into a discussion and playing it off as settled fact, when at best it's hotly contested (especially by the uneducated; economists are, in fact, in broad agreement that you're wrong) is not helpful.

EDIT: If you think India's living standards are "first world," you have a very liberal definition of "first world."

edited 15th Oct '11 8:43:48 AM by Ramidel

You realize some of those actions are incompatible with that outcome do you? You cannot fund such a welfare state without ridiculously high taxes, and ridiculously high taxes calcifies the economy into a few firms and government run institutions.

Proper oversight is impossible to objectively measure. Legislators will more often than not go too far and further calcify the economy into those few firms long before the time they realize they went too far and try to de-regulate back down.

Were economics as predictable as chemistry, we would have solved everything related to it centuries ago.

Tom

I bet they would have said that after the end of the Western Roman Empire, Europe will rise again. I just dont know if you have to have another round of exploration before hand.

whale@Europe espically Britain raised America to be a mini me then got mad when we rebelled and decided to become our own person plus we can't always be like our suck up little brother Canada.

edited 15th Oct '11 8:53:22 AM by joyflower

• India: poverty rate of between 41-77% (they can't agree)(high-level estimate is 645 million people, or more than double the entire population of the United States of America)(they think India has about one-third the total number of poor people on the entirety of Planet Earth).
• China: poverty rate of at least 36% (468 million, or, once again, more than the entire population of the United States of America)(if one isn't using the absurdly low standards of the World Bank, both India and China have their rates go up a lot).
• Japan: poverty rate of 16.6% (in a nation much smaller overall than the US, and for a total of approximately 20 million).
• (South) Korea: poverty rate of ~15% (again, in a nation much smaller overall than the US, and for a total of approximately 7.5 million).
• (North) Korea: Only God knows how many people in North Korea are poor.
• Taiwan: now this is a good example, as they have a very low poverty rate. They also have very good social welfare programs, however.

@Tom: "You cannot fund such a social safety net without ridiculously high taxes."

Actually, you can, though obviously it depends on what you define as "ridiculously high taxes." We can maintain our nation at '90s tax rates, with a proper and effective safety net that can support those who are unable to work or get jobs (in fact, you can even support those who are unwilling to work if you choose, though I imagine you would object to that on straight moral grounds, whatever we are capable of), so long as the taxes paid are actually the nominal tax rate (tax breaks and shelters will have to be reduced and eliminated; I'd personally prefer to eliminate the capital gains tax and fold it over into income, but that's not strictly necessary). It isn't socialists that are keeping Europe's economy crystallized, but their businessmen.