A very strange question indeed

There we have it, thirty years ago the world’s centre of economic activity was in the mid Atlantic, today it is around Turkey, in thirty years time it will have reached India and China. This is the new globalization and I’d like to hear how Western politicians plan on dealing with it.

Why should politicians deal with it? Quite apart from whether politicians can or that we\’d even trust them to deal with matters economic, why on earth should they?

Who gives a shit where the centre of economic activity is ?

All we care about is that we can trade with it.

After all, it\’s not like we\’ve not been here before. China has been the world\’s largest economy in 19 out of the past 20 centuries.

Yes, yes, I know that the question is being asked because Duncan labours under the delusion that politicans can do something about everything and under the even worse one that they should do something about everything but really. Think about what is actually happening here to move this centre. The 1.5 billion or so of South Asia and the further 1.5 billion or so of East Asia are both producing and consuming more (that\’s what economic activity means, see?).

In what way is this a problem that needs something doing about it? Either they produce and consume their own stuff (fine, so what?) or they produce stuff for us to consume and we make stuff for them.

Lovely, where\’s the problem?

6 comments on “A very strange question indeed

  1. Tim,

    Surely it matters if the world’s economic power moves Eastwards? If the rules of the game are set by China rather than the US?

    I don’t think we can stop this happening, but it’s something tha we seem little prepared for.

    Tim adds: The only important “rule of the game” is unilateral free trade. Everything else is simply nonsense.

  2. Tim,

    Fine, on your own terms – what will the shift in relative economic power towards the East do to respect for your desired free trading world regime? Asia is certainly less keen on freely floating currencies than the West.

    Or how about patent rights? Do you think the shift in world ecnomic power will have implications? Possibly big ones?

    You seriously don’t think these things matter? That politicans should just ignore them?

    Tim adds: Managed and dirty floats harm those doing them, not the people who have free floating currencies. The losers from China’s “undervalued yaun” for example are the Chinese people, being poorer than they should be given productivity levels.

    I’ve long argued that one of the very worst parts of the current trading system is TRIPS, the inclusion of patent regimes into trade negotiations. Sure, there’s some marginal revenue lost when poor countries break overseas patents. But it’s marginal. Rich countries have their own IP that they want to protect so voluntary accordance with IP law can be assumed.

    And it isn’t an issue of what politicians should ignore: it’s that we should ignore politicians.

  3. Politicians should “do” something vital – GET OUT OF OUR WAY.

    It will be tough if the UK continues to have a poor balance of trade, for wealth will leave the country. The idea we can import cheap goods only works if we can export enough higher value products and services to counterbalance. That is no certainty.

    While we have restrictions on our labour markets and even, dare I say it, the minimum wage, we are on to a hiding for nothing. Being in Europe will be worse than useless – that will be like chaining ourselves to a plank about to become well and truly waterlogged, dragging us down with it.

    As for the shift in power, the UK needs to maintain Rule of Law and have a smaller, less intrusive and thus less corruptible government. China will buy what it wants and if that means buying the government to get it, it will.

    Look to Africa.

  4. Duncan,

    Not withstanding Tim’s points, did you see the way the USA treated investors in the car bailouts? Giving unions preference over senior lenders against their own bankruptcy rules.

    Then there’s the way they treated BP, hardly even handed, and Tim’s later story about internet gambling being lagalised in such a way as to protect their own companies.

    And as for doing business in the USA I refer you to this week’s Economist (July 24) which has a briefing on what Americans laughingly call their justice system.

    “Many Americans assume that white-collar criminals get off lightly, but many do not. Granted, they may be hard to catch and can often afford good lawyers. But federal prosecutors can file many charges for what is essentially one offence. For example, they can count each e-mail sent by a white-collar criminal in the course of his criminal activity as a separate case of wire fraud, each of which carries a maximum sentence of 20 years. The decades soon add up. Sentences depend partly on the size of the loss and the number of people affected, so if you work for a big, publicly traded company, you break a rule and the share-price drops, watch out. ”

    Read the whole thing and you are unlikely to set foot in America let alone try to do business.

    So, if the center of economic power is shifting it is partly because the political and business risk in doing business there has increased.

  5. Simon:

    I’ve nought with which to disagree insofar as your analysis of the US justice system. They can really add ‘em up (Conrad Black will back me up on this, I dare say.)

    But, in the US, at least there’s a good chance Mr. Black will be freed shortly on appeal or, even failing that, at the end of his sentence.

    Less sanguine outlook in China, where he’d undoubtedly been shot (or whatever they do over there) by now.

  6. “Managed and dirty floats harm those doing them, not the people who have free floating currencies.”

    China must have had a really bad couple of decades then, huh?

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