Keynesianism won't work in the Western world for one major reason. Economic
growth (or recovery in the present case) has always been driven by status
aspirations by the rich and the middle class first -- and there is no new
tranche of suitable consumer goods awaiting their attention at the moment.
We only have embellishments of the consumer goods that were invented in the
1920s and 30s. (Even the one big exception -- "serious" modern art is now
tumbling as a manifestation of high status and worthwhile investment .)
Instead, a great many of the nouveau riche and their financial institutions
have already been disembowelled by the financial crisis. The middle class
generally will not at all be responsive to the idea that if they spend now
they are going to be more heavily taxed later if normal economic throughput
is resumed.
There is already evidence that some sort of world-wide initiative -- such
as a new Bretton Woods agreement on trade -- a sort of super-Doha round by
the WTO -- is not on the cards in the immediate future. What we have seen
so far are attempts at (or discussion about) recovery plans at
regionally-sized chunks only -- in America, the European Union and China --
and these are likely to intensify as protectionist devices -- the devil
take the hindmost -- unless some miracle occurs at an international level.
Government-led infrastructure spending won't succeed in America or the
European Union for the reason given in my first paragraph -- that is, that
the vast majority of their populations is already satiated by the present
tranche of consumer goods and there is nothing new that people are going to
work hard and save hard for. Better railways and roads might help recovery
in China because two-thirds of its population outside of the coastal
provinces still have very little by way of adequate consumer goods. Indeed,
one third of China (around 400 million people) still live in the direst
poverty. However, even in China the prospects are not good. Scores of
millions of factory workers who previously sent back much of their earnings
to their families in the rural interior -- the major redistributive machine
of China's recent recovery -- are now having to return to poverty
conditions themselves as their places of work close down in their thousands.
The only new tranche of consumer goods that I can foresee on the horizon
are not strictly goods but services. These are in health and education. And
these will be motivated by an even more powerful instinct than
status-seeking -- individual survival -- and that of his/her 0.90 child
(the average in the developed world).
Health and education are already being served by the two disciplines that
appeal to the brightest young scientific minds -- genetics and neurology --
just as the consumer goods of the last century were the product of geniuses
in engineering and physics of the preceding century.
But how long will it be before a sufficient number of precise services will
be deliverable? They are likely to be less capital intensive than the
present crop of consumer goods and, because of the Internet, they will be
marketed more efficiently and rapidly than anything heretofore. But we are
still in the early days of these technologies and we simply don't know what
form their goods are going to be and when they are going to be marketable.
However, they will be sold to the rich and the middle class first before
proceeding southwards and it's only in this way that any sort of economy
recovery can proceed.
And will governments have any role in this recovery? Hardly. Governments
always lag behind new developments. Infrastructure spending is always
shaped by the consequences of consumer spending and doesn't precede it.
Besides, a high proportion of research in neurology and genetics is already
being financed by private endowments rather than governments. Once the
first few products start taking shape then business will dive in first to
develop them in order to take advantage of the initially high profit
margins -- and thus re-investment potential -- that will be available.
Goodness knows, business needs this fillip because, apart from the
temporary fling of the now-extinct investment banks, most manufacturing and
commerce were getting by with only the flimsiest of profit margins even
during recent years of "prosperity".
All this is probably a generation away as the present recession grinds on
into a depression, but that's only my guess. I would be delighted if I'm
proved wrong.
Keith Hudson, Bath, England, <www.evolutionary-economics.org>,
<<http://www.amazon.com/dp/1906557020/>http://www.amazon.com/dp/1906557020<http://www.amazon.com/dp/1906557020/>/> _______________________________________________
Futurework mailing list
[email protected]
https://lists.uwaterloo.ca/mailman/listinfo/futurework
