There seems to be little doubt now that the great engine of the world
economy, the US, is already slowing down and is on a razor edge of an even
steeper dip. If the American consumer decides that his job may be in danger
and decides to spend less and pay off his huge credit card debts, then a
substantial, and perhaps quite lengthy, recession will ensue.
Unfortunately there is no other country or region that can take up the
slack. Japan has been on its back for the past ten years and cannot
possibly revive for at least another five even if it were able to carry out
necessary financial reforms in a normal world. The European economy is
spluttering badly and is so saddled with regulations and high
employer-costs that few entrepreneurs in their right mind would dream of
starting the new sorts of businesses that, in previous times, have pulled
economies out of recession. Indeed, the bulk of European investments and
savings is still going to America, even now.
South-East Asia, totally dependent on America, Japan and Europe, is no
longer the tiger that it was supposed to be some years ago. South America
and the former Soviet Union countries are, of course, in no condition to
contribute anything and will probably collapse further into complete chaos.
China may be the only exception to this tale of woe. It will, of course, be
badly affected by a world recession and its present rate of growth of about
7-8% will probably be much reduced. It may be the only country to maintain
some sort of positive growth in the coming years. But China has other
massive problems, too, such as the migration of millions every year from
the countryside into the coastal cities which lack sufficient housing and
welfare. A savage revolution to dwarf all others so far in human history
could easily occur there in the coming years.
I made a forecast some six years ago on FW that a world recession was
looming then. This was based on the fact that the slope of equity prices in
the US and Europe was going way above the norm with price/earning ratios of
around 20/25 instead of the sensible one of about 12/14. But I was wrong
because the so-called Internet/Telecomms Revolution caused the equity slope
to take off at an even steeper rate with p/e at around 30/35, and much
higher than that in the high-tech companies.
So, in fact, at around the autumn of 2000 there were still two humps in the
investment cycle -- or, should I say, the speculative cycle. It's only the
more recent one that's been neutralised so far. The first one is now only
just beginning to be neutralised. There is no new obvious technology
waiting in the wings to take off as there has been in previous trade cycles
in the last couple of centuries.
There are a couple of major technologies that will be powerful at some
stage in the future, but neither seems capable of imminent development.
Biogenetic technology -- particularly in its aspects of protein synthesis
-- is proving to be far more complex than was envisaged even as recently as
12 months ago and will need at least two or three more decades of intensive
research. Solar technology doesn't seem economically viable yet for
widescale development, though it's possible that super-conducting
transmission cables might alter the picture. But even this development
would take at least a decade or two to take off significantly.
But, altogether, it's economic madness that the future propserity and peace
of the world depends on the development of major new technologies. Each
successive one needs increasingly a higher quantum of investment. What are
needed are socio-economic mechanisms within countries by which populations
can adjust smoothly to the normal swings and roundabouts of economic cycles
and investment euphoria. Perhaps constructive ideas and discussion will
revive on Futurework list in the coming few years.
Keith Hudson
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Keith Hudson, General Editor, Calus <http://www.calus.org>
6 Upper Camden Place, Bath BA1 5HX, England
Tel: +44 1225 312622; Fax: +44 1225 447727;
mailto:[EMAIL PROTECTED]
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