Politicians don't get it. Government bureaucrats don't get it. Central
banks don't get it. Most economists don't get it either.
Nation-states are spinning. No, they're not spinning round like tops.
They're spinning in the same way as silkworm cocoons are spun. As they are
becoming boiled (governments now going irretrievably into debt) the
political-credibility gum is melting in each cocoon and the shell is
softening. Fine strands are breaking through, and are being drawn to
intertwine with others from other cocoons to form threads around the world.
Depending on how many cocoons are being boiled concurrently, so is the
thickness of each thread.
That's the Western world anyway. Previously (and this is where the metaphor
breaks down!), the hard-shelled, territorially-defined nation-states either
fought one another or, between times, allowed their businesses to trade
with those from other countries. Previously (about a century ago), the
goods transferred between nations were either raw materials or they were
finished goods -- mostly consumer goods. Goods were traded by nation-bound,
nationally-taxed, nationally-recruited businesses within each country using
national currencies. Politicians, bureaucrats, central banks (and most
economists) thought of economics as a summation, or a balancing-up, of
these "national" economies with one another. That's how they thought.
National economies and national currencies is what they thought they were
controlling (in the case of politicians, bureaucrats and central banks), or
talking about (in the case of most economists).
It's different now. The businesses are no longer nation-bound but thread
themselves around the world, increasingly having only nostalgic allegiance
to their countries of origin. They will locate their operations wherever it
suits them. Their production units will go to where labour is either the
cheapest or the most educated in the skills they need. In the case of
production units requiring high-skill, well-educated personnel, businesses
will go to the sunniest and pleasantest places. In the case of the
headquarters of these business, they will go to where corporate taxes are
most benign and where there is plenty of access to banks, talented
individuals for recruitment, restaurants and a wide band of sexual and
cultural entertainment. Most of their trade is now raw materials and
part-goods, the finished goods of yesteryear being only the last segments
of the freight chains which now criss-cross one another.
But the flexible, yet stronger-than steel, silky threads now encircling the
earth are not just production businesses but also vast retailing
businesses. Also, there are many other international threads -- investment
banks, hedge funds, scientific networks within each discipline, habitations
of the super-rich, urbanization, elite artists and entertainers (soccer
almost deserving a thread of its own!), special interest groups, innovative
ideas. There are even attempts by senior bureaucrats and overly-ambitious
politicians to turn the clock back and form supra-national organizations
such as the IMF, OECD, EU, EMU, NAFTA, G7. G8, G20, ASEAN, SCO, IPCC, etc
(the UN being the most obvious so far to show the failure of such attempts).
What is different about the threads, compared with nation-states? There are
many differences -- including the lack of standing armies which are not
necessary to back up the threadies' power -- but two stand out. The new
threads are lateral and they are efficient. They accumulate wastage, of
course. All organizations do. But unlike pyramidal, highly centralized
multi-layered nation-states, they are self-culling or they don't last for
long. Being lateral, they allow for younger, more innovative individuals to
come to the fore and disturb their (much reduced) rank orders more frequently.
The one universal feature that all the new threads need, but governments,
so far, are denying them, is a rock-solid currency to which national
currencies would have to anchor themselves instead of swishing about as
they do now (this month Chile being the latest country to devalue in
self-defence against the dollar). This is something -- it was rumoured --
that President Hu Jintao of China was going to discuss with President
Barack Obama at a meeting last June. I had a lot of naive hope for that as
I mentioned in a previous posting. But this fell through.
They're meeting again now, one learns. They'll certainly be discussing
currency. That's the tinder-box issue above everything else. But whether
they'll make any serious attempt at agreeing on a universal trading
currency is quite another. Perhaps they'll pay attention to the President
of the World Bank, Robert Zoellick, in calling for a currency with
gold-referencing. Perhaps they won't. Perhaps Obama and his coterie still
want to saturate the world with even cheaper dollar bank-notes. If so, then
America had better watch out. Many of the largest banks in the world are
now pushing the Chinese renminbi as a prototype world trading
currency. This could grow enormously during 2011. Be warned, Obama,
Geithner and Bernanke.
Keith
Keith Hudson, Saltford, England
<http://allisstatus.wordpress.com/2010/12/>http://allisstatus.wordpress.com/2011/01<http://allisstatus.wordpress.com/2010/12/>/
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