Overview of global economic problems

CillianL

http://www.youtube.com/watch?v=WWgtzwqWh60

A managing partner of Hayman Advisors, Kyle Bass discusses the causes of the major economic problems blighting the world economy in particular the US, Europe and Japan.

It really cuts through the garbage the geniuses in our national media have been serving us the past few years.

andrew

Since the Video is an hour long, is there any chance you could provide a bit of a summary of what is said in it?

Agent Weebley

CillianL wrote: »

. . . really cuts through the garbage . . .

Hi CillianL,

That video, was good but I could only stand watching it for about 10 minutes, as I know all that stuff from surfing the interweb. Kyle was on another video in 2011, which is more current:

YouTube Search [no link from me] "AC2011 Session 1.2 Come Undone - Kyle Bass redux"

The main trust of that 2010 video was support (with graphs, and talking) of Kyle's theory that "massive debt writedown" is coming.

No-one seems to know what "massive debt writedown" will look like, which I find quite odd, as it is quite simple . . . those that cling to existing money will lose, and those that embrace new money will be OK.

Kyle seems to be a calculus wiz, and can only think within the existing "system" for solutions, which is typical for linear or concrete thinkers.
He seems to be comfortable talking about how debt is destroying the system, but not why it is destroying the system.


Therefore, the alternate system will replace the existing system . . . an alternate system that is already running in its infancy. And this new system is quite legal, encouraged, and right under our nose.

Niamh Allan

The international financial crisis of 2008-09 has presented the world economy with a major new challenge, together with several long-standing ones. Despite these challenges, the world economy also shows great promise. Technology has made possible further advances in all fields, from agriculture, to medicine, alternative energy, metallurgy, and transportation. Improved global communications have greatly reduced the costs of international trade, helping the world gain from the international division of labor, raise living standards, and reduce income disparities among nations.

CillianL

Niamh Allan wrote: »

The international financial crisis of 2008-09 has presented the world economy with a major new challenge, together with several long-standing ones. Despite these challenges, the world economy also shows great promise. Technology has made possible further advances in all fields, from agriculture, to medicine, alternative energy, metallurgy, and transportation. Improved global communications have greatly reduced the costs of international trade, helping the world gain from the international division of labor, raise living standards, and reduce income disparities among nations.

Sorry I've been inattentive to this thread.

Fine technology is a key vector in driving further growth and that's often quoted but I think its intellectually lazy to think that technology has a solely beneficial impact on economies.
The narrative is that what mechanisation did to localised industry and agriculture in the 18th and 19th centuries is now being followed by automation in this century but the difference is that the ratio of job creation against job destruction is asymmetric. That's why we're seeing structural rather than cyclical unemployment these days as is highlighted in the video.
Furthermore the knowledge economy will polarise society between the highly skilled and knowledge rich against the unskilled and 'knowledge poor', which doesn't reflect how society works at all.

Finally in reference to your point about 'new challenges' this is a vacuous statement. What we're seeing now is a repeat of what has always occurred as long as money and trade existed i.e debt to income becoming unsustainable and a widespread lack of confidence in the markets. This has always happened however the differences are that the level of debt in the world is at a historical high and in the 1990s to the 2000's banks thought that cyclical economics could be overcome through globalisation and the securitisation of debt.

As well as this globalisation hasn't been questioned enough. In the west income inequalities has grown, and the real winners through globalisation have been corporations which bought the governments that brought through GATT. The southern hemisphere has remained poor as a rule through financial instruments and western backed dictatorships , which suits western corporations as it has allowed resources to remain cheap which is essential for consumerism

andrew

CillianL wrote: »

As well as this globalisation hasn't been questioned enough. In the west income inequalities has grown, and the real winners through globalisation have been corporations which bought the governments that brought through GATT. The southern hemisphere has remained poor as a rule through financial instruments and western backed dictatorships , which suits western corporations as it has allowed resources to remain cheap which is essential for consumerism

Aside from the growing income inequality bit, what evidence is there that globalisation has made people, in general, worse off? Who is getting poorer?

CillianL

Apologies for the delay in getting a reply through, though I wanted to give a considered answer.

The reason I said why globalisation hasn't been questioned enough is for a number of reasons.

1.After WWII in the western hemisphere, the fall of communism in the USSR and with the emerging BRIC economies, globalisation of trade,finance and politics has brought about the consumer society such that consumer spending has been the main vector of economic growth.
For the consumer lifestyle to be feasible corporations that sells products need access to cheap resources to sell at low price but keep profit margins.

Therefore if countries that produce these resources can be kept corrupt and 'favourable' resources can be accessed easily and cheaply.

For example why is it that if you look where oil, diamonds,coltan (material used in mobile phone manufacture) come from democracy is rarely in the equation?

Oil:Nigeria, Saudia Abrabia, Bahrain,
Diamonds: Sierra Leone, DRC,Zimbabwe
Coltan: DRC

2. Historical examples
In the 1950s Ghana was a newly independant country and knew it would have to industrialise to become a modern state. Ghana has huge reserves of Bauxite however America, through the World Bank indebted the country with loans and thus destabilised the government which later became a dictatorship.

In Guatemala in the 1950s a popular government attempted to nationalise the exploitative banana plantations controlled by the United Fruit Company. The land of the free and equal didn't like this and launched a slur campaign claiming that communists in the country were directly threatening the USA to justify a CIA backed change of government

See:
Pandoras Box, Adam Curtis Black Powers

http://www.youtube.com/watch?v=T1S6tSFyQmk
3. Structural Unemployment.
Unemployment cycles in the West are increasingly long term, and so whilst consumer products are ubiquitous the making of them has been sent abroad to export processing zones which has destroyed much of the employment manufacturing provided in the west.

See: http://www.youtube.com/watch?v=4PQrz8F0dBI

andrew

CillianL wrote: »

Apologies for the delay in getting a reply through, though I wanted to give a considered answer.

The reason I said why globalisation hasn't been questioned enough is for a number of reasons.

1.After WWII in the western hemisphere, the fall of communism in the USSR and with the emerging BRIC economies, globalisation of trade,finance and politics has brought about the consumer society such that consumer spending has been the main vector of economic growth.
For the consumer lifestyle to be feasible corporations that sells products need access to cheap resources to sell at low price but keep profit margins.

Therefore if countries that produce these resources can be kept corrupt and 'favourable' resources can be accessed easily and cheaply.

For example why is it that if you look where oil, diamonds,coltan (material used in mobile phone manufacture) come from democracy is rarely in the equation?

Oil:Nigeria, Saudia Abrabia, Bahrain,
Diamonds: Sierra Leone, DRC,Zimbabwe
Coltan: DRC

2. Historical examples
In the 1950s Ghana was a newly independant country and knew it would have to industrialise to become a modern state. Ghana has huge reserves of Bauxite however America, through the World Bank indebted the country with loans and thus destabilised the government which later became a dictatorship.

In Guatemala in the 1950s a popular government attempted to nationalise the exploitative banana plantations controlled by the United Fruit Company. The land of the free and equal didn't like this and launched a slur campaign claiming that communists in the country were directly threatening the USA to justify a CIA backed change of government

See:
Pandoras Box, Adam Curtis Black Powers

http://www.youtube.com/watch?v=T1S6tSFyQmk
3. Structural Unemployment.
Unemployment cycles in the West are increasingly long term, and so whilst consumer products are ubiquitous the making of them has been sent abroad to export processing zones which has destroyed much of the employment manufacturing provided in the west.

See: http://www.youtube.com/watch?v=4PQrz8F0dBI

I think that the problems you mention do exist, but i don't think that they're necessarily caused by globalisation, or are going to be problems in the long run.

The idea that resource rich countries tend to do poorly is called the resource curse. That wiki article explains it more fully than i ever could, but the general idea is that having an exploitable resource sets up a whole host of political and economic incentives which lead to poor outcomes. This isn't caused by globalisation, it's caused by the very fact of having resources in the first place. Globalisation or not, these incentives would still be in place, and bad outcomes would still obtain.

With regard to structural unemployment and your video, it's empirically not the case that Unemployment cycles in the West are increasingly long term. While this recession has been quite long, previous ones havn't; this has been called the great moderation. And to my knowledge, unemployment over the last 30-40 years (as globalisation took hold) has not been unmanageably and chronically high. That said, you're right in saying that globalisation can cause unemployment in countries which lose industries to other countries. I think economists tend to not care about this issue because as a whole, because the benefits of globalistion still outweigh the costs in terms of structural unemployment. Firstly, outsourcing jobs benefits people in the host country a lot. Millions of people in Asia have been pulled out of poverty thanks to their ability to find working for western companies; for many, those companies are the reason they and their families have enough to eat. Ireland has benefited immensely too; the whole celtic tiger thing was based upon foreign companies outsourcing to Ireland. We were one of the poorest countries in europe before foreign companies came in. Goldsmith seems to simply not care about people in these countries at all. Secondly, outsourcing benefits people in the outsourcing country too. They gain from having access to cheaper goods, a gain which goldsmith ignores. Both these benefits tend to outweigh the cost of having higher than average unemployment.

But the biggest problem with Goldsmith's ideas is that it fetishises manufacturing, and is basically an argument for protectionism (as the presenter says). He seems to believe that once a country loses it's comparative advantage in manufacturing, then the people who are and would be employed there stay unemployed indefinitely, and that society in that country is completely destroyed. But western society isn't destroyed, 18 years later. Most western countries have for years now had economies more based upon the service sector than upon manufacturing. As times change and comparative advantages change, countries always have adapted and always will adapt in order to capitalise upon the comparative advantages which they have. People retrain, and young people educate themselves so as to better take advantage of any changes which occur in the economy. Manufacturing simple products is not the only way to create employment.

This is because, contrary to what Goldsmith seems to think, cheap labour is the only important factor in determining where economic activity takes place. Western economies have a comparative advantage in high value added knowledge based products and services; this is where our employment will come from in the future. Yes it will involve transitory unemployment, but ultimately in the long run it's a change which will leave everyone better off. Goldsmith also ignores the role technological change has in creating structural unemployment. He seems to believe that the only source of structural unemployment is outsourcing, when the reality is that technological progress is just as significant a contributor to structural unemployment. Finally, Goldsmith doesn't recognise that low cost countries don't stay low cost countries forever. Just because China is a cheap location for Manufacturing now, doesn't mean this will always be the case.

CillianL

andrew wrote: »

I think that the problems you mention do exist, but i don't think that they're necessarily caused by globalisation, or are going to be problems in the long run.

The idea that resource rich countries tend to do poorly is called the resource curse. That wiki article explains it more fully than i ever could, but the general idea is that having an exploitable resource sets up a whole host of political and economic incentives which lead to poor outcomes. This isn't caused by globalisation, it's caused by the very fact of having resources in the first place. Globalisation or not, these incentives would still be in place, and bad outcomes would still obtain.

With regard to structural unemployment and your video, it's empirically not the case that Unemployment cycles in the West are increasingly long term. While this recession has been quite long, previous ones havn't; this has been called the great moderation. And to my knowledge, unemployment over the last 30-40 years (as globalisation took hold) has not been unmanageably and chronically high. That said, you're right in saying that globalisation can cause unemployment in countries which lose industries to other countries. I think economists tend to not care about this issue because as a whole, because the benefits of globalistion still outweigh the costs in terms of structural unemployment. Firstly, outsourcing jobs benefits people in the host country a lot. Millions of people in Asia have been pulled out of poverty thanks to their ability to find working for western companies; for many, those companies are the reason they and their families have enough to eat. Ireland has benefited immensely too; the whole celtic tiger thing was based upon foreign companies outsourcing to Ireland. We were one of the poorest countries in europe before foreign companies came in. Goldsmith seems to simply not care about people in these countries at all. Secondly, outsourcing benefits people in the outsourcing country too. They gain from having access to cheaper goods, a gain which goldsmith ignores. Both these benefits tend to outweigh the cost of having higher than average unemployment.

But the biggest problem with Goldsmith's ideas is that it fetishises manufacturing, and is basically an argument for protectionism (as the presenter says). He seems to believe that once a country loses it's comparative advantage in manufacturing, then the people who are and would be employed there stay unemployed indefinitely, and that society in that country is completely destroyed. But western society isn't destroyed, 18 years later. Most western countries have for years now had economies more based upon the service sector than upon manufacturing. As times change and comparative advantages change, countries always have adapted and always will adapt in order to capitalise upon the comparative advantages which they have. People retrain, and young people educate themselves so as to better take advantage of any changes which occur in the economy. Manufacturing simple products is not the only way to create employment.

This is because, contrary to what Goldsmith seems to think, cheap labour is the only important factor in determining where economic activity takes place. Western economies have a comparative advantage in high value added knowledge based products and services; this is where our employment will come from in the future. Yes it will involve transitory unemployment, but ultimately in the long run it's a change which will leave everyone better off. Goldsmith also ignores the role technological change has in creating structural unemployment. He seems to believe that the only source of structural unemployment is outsourcing, when the reality is that technological progress is just as significant a contributor to structural unemployment. Finally, Goldsmith doesn't recognise that low cost countries don't stay low cost countries forever. Just because China is a cheap location for Manufacturing now, doesn't mean this will always be the case.

Theres a few problems I have with this response so please tell me why I'm wrong.

1. I know about the resource curse theory, but resources are only valuable so long as they're uselful. Therefore given the worldwide increases in trade through globalisation, lots of people championed it as a tide that would lift all boats yet nevertheless many countries that have supplied much of the raw material to make consumerism possible have remained corrupt and backward lifting only yachts. This is a problem.

2. Why is it that manufacturing and industry has always accompanied power in modern times. Why Britain was at its peak in the 19th century it had the largest share of manufactured output in the world, its cheap exports destroyed foreign competitors and it became one of the biggest creditors in the world.Its outputs were real and tangible.

Likewise America at its peak in the 1950's had the most productive industry in the world and was largely self sufficient in raw materials. For example during WWII unemployment in America was as low as 2 percent.

China today has the largest manufacturing economy in the world and is also the worlds largest creditor, and is in fact bankrolling America for access to its markets. So making things is important. Furthermore a lot of jobs in services are as low payed and degraded as the factory jobs we dreamed of escaping from except that they're wealth consuming rather than wealth producing. At least Henry Fords lines were making cars, whereas for example the fast food industry which is a huge employer only costs people in the long run.

3. The problem is that if manufacturing jobs are given away which they have been, the services sector has to fill the void but the problem now is that more and more services jobs can now be outsourced through I.T technology and the idea that export processing zones will only ever make simple products is a fallacy.

4. Finally why is cyclical thinking a religion?
If cyclical economics is a fact than ancient civilisations would never have peaked and declined, and the Egyptians and the Hittites would still be calling the shots today!
The fact is that long term decline is a reality we can't accept as possible in the west. The destructive aspects of modern corporate thinking such as outsourcing of jobs has swung the balance of power in the world, which is why the G7/8 is useless now.

andrew

CillianL wrote: »

Theres a few problems I have with this response so please tell me why I'm wrong.

1. I know about the resource curse theory, but resources are only valuable so long as they're uselful. Therefore given the worldwide increases in trade through globalisation, lots of people championed it as a tide that would lift all boats yet nevertheless many countries that have supplied much of the raw material to make consumerism possible have remained corrupt and backward lifting only yachts. This is a problem.

Still though, while globalisation is a source of demand for resources, it isn't actually the cause of the resource curse. In the same way that if I buy something from you, and you feed your drug habit with that money, I havn't caused you to have a drug habit, and it's not my fault that you have a drug habit

2. Why is it that manufacturing and industry has always accompanied power in modern times. Why Britain was at its peak in the 19th century it had the largest share of manufactured output in the world, its cheap exports destroyed foreign competitors and it became one of the biggest creditors in the world.Its outputs were real and tangible.

Likewise America at its peak in the 1950's had the most productive industry in the world and was largely self sufficient in raw materials. For example during WWII unemployment in America was as low as 2 percent.

China today has the largest manufacturing economy in the world and is also the worlds largest creditor, and is in fact bankrolling America for access to its markets. So making things is important. Furthermore a lot of jobs in services are as low payed and degraded as the factory jobs we dreamed of escaping from except that they're wealth consuming rather than wealth producing. At least Henry Fords lines were making cars, whereas for example the fast food industry which is a huge employer only costs people in the long run.

I think it's a bit simplistic to say that manufacturing is important, because superpowers have traditionally had large manufacturing bases. Perhaps a large manufacturing base is necessary to become a superpower, but that doesn't mean that it's necessary for every country to have an economy based upon making things.

3. The problem is that if manufacturing jobs are given away which they have been, the services sector has to fill the void but the problem now is that more and more services jobs can now be outsourced through I.T technology and the idea that export processing zones will only ever make simple products is a fallacy.

I didn't say that export zones will only ever make simple products. My point is that, in terms of human capital, the 'west' is head an shoulders ahead of the 'east.' This gives the 'west' a comparative advantage in goods which require said human capital.

4. Finally why is cyclical thinking a religion?
If cyclical economics is a fact than ancient civilisations would never have peaked and declined, and the Egyptians and the Hittites would still be calling the shots today!
The fact is that long term decline is a reality we can't accept as possible in the west. The destructive aspects of modern corporate thinking such as outsourcing of jobs has swung the balance of power in the world, which is why the G7/8 is useless now.

What we're talking about here isn't specific countries though is it; i thought we were talking about the 'west' more generally. And while I understand that empires; the egyptians and the british empire and the Roman empire etc. rise and fall, the same can't be said for the general entity that is the 'west.' It's been going strong for at least 1000 years now, and I think it's going to take more than just an abnormally large recession to cause it to decline. The 'west' has been through much much worse before.

Justin1982

I'd summarize the global economic crisis as due to the simple fact that "the system" that is the world economy is way too complicated to be completely understood and controlled.
I really wish that all these muppet economists would give up creating this fake impression that they really know whats going on, where the problems lie and what the solution is.
I reckon that the best economists know only a fraction of the story and consider a fraction of the information available/unavailable when coming to some of their conclusions and making their comments in the media.

The Euro itself is a prime example. The amount of expert economists I have heard in the media predicting the collapse of the euro as we know it is ridiculous. Its the easy prediction using simple facts. But they fail to take into account so much. The ECB does have a number of options at its disposal and there is a complete underestimation of the determination of european states to do whatever is needed to save the Euro. Its a matter of pride for them. Anyone who predicts the imminent fall of the euro is a fool. What they should really be saying is that they think there is a 40% chance of the euro self imploding or whatever they think the chance is.
Its like a game of chess. You cant really predict the moves the players are going to make beyond a certain point and to a certain extent you dont know what moves they are even allowed to make.

CillianL

andrew wrote: »

Still though, while globalisation is a source of demand for resources, it isn't actually the cause of the resource curse. In the same way that if I buy something from you, and you feed your drug habit with that money, I havn't caused you to have a drug habit, and it's not my fault that you have a drug habit



I think it's a bit simplistic to say that manufacturing is important, because superpowers have traditionally had large manufacturing bases. Perhaps a large manufacturing base is necessary to become a superpower, but that doesn't mean that it's necessary for every country to have an economy based upon making things.




I didn't say that export zones will only ever make simple products. My point is that, in terms of human capital, the 'west' is head an shoulders ahead of the 'east.' This gives the 'west' a comparative advantage in goods which require said human capital.




What we're talking about here isn't specific countries though is it; i thought we were talking about the 'west' more generally. And while I understand that empires; the egyptians and the british empire and the Roman empire etc. rise and fall, the same can't be said for the general entity that is the 'west.' It's been going strong for at least 1000 years now, and I think it's going to take more than just an abnormally large recession to cause it to decline. The 'west' has been through much much worse before.

1. On Resources.
I think you're answer is trying to compare apples with oranges.
There's a difference to going to a shop to buy things where the manager is shooting heroin on the sly to a country exporting its wealth and nevertheless remaining poor because the west is complicit with the ruling dictatorship who gets rich at the expense of its people which is a reality in many countries. This point is relevant because the globalisation of trade has been cheerleaded with the promise of a rising of all boats which is clearly nonsense given the structural poverty that remains.

Two recent conflicts illustrate this.
The Iraq war was and is an effort to secure another piece of the middle east under western control considering how its importance is growing inversely to the dwindling native american supply. According to the Lancet as of 2006 the mortality rate in the Iraq war increased from 5.5 per 1000 to 13.3 per thousand, and due to declining infrastructure and excess of over 500,000 deaths occurred. Nevertheless oil production in Iraq now outstrips its pre invasion levels by half a million barrels per day (250 million/day 2002 now 300 million).

When Britain, France and the States knew that Gaddafi was a difficult customer. For example it was Gaddafi who first confronted the oil companies seeking greater share of profit for the Libyan state. When the oppurtunity arose to get rid of him, the airforces went in quick, even though the media portrayed it as a victory for lightly armed rebels in pickups. Now France is cashing in, having organised a 35% cut of oil production for its support.

http://oilprice.com/Energy/Energy-General/Unseemly-Scrabble-For-Libyas-Post-Gaddafi-Oil-Assets-Underway.html

2. The 1000 years of western power?
Where did you get this figure from, or was it because you thought it sounds good?
The middle ages lasted until roughly the 15th century, and most of Europe was a backwater during that time. China and the Middle East where significantly more advanced during this time.

There was no U.S.A until 1776, and even then it was only 13 colonies on the east coast, America didn't take its current form until roughly a century later, and didn't become a major force until the early 20th century, and still remained insular until WWII.

The British and French empires began post 1600 and Africa wasn't exploited until the late 19th century so in reality the West has only 400 to 250 years history of being exceptionally powerful.

3.As regards to the west having been through worse before yes we don't have rubble around us and a lost generation.

However at no time in the past has the west handed over the keys to its wealth like it has in contemporary times. The chorus of cheerleaders keep reiterating how 'human capital is better in the west so we'll keep on producing wealth through services as the Chinese can only put things together'

This is nonsense. Ok so we've lost jobs through manufacturing, so services have to step in to fill the unemployment vacumn. The problem is when the chinese get into high end manufacturing and start producing exporting services and get into research this will put further strain on the remaining western economies. (The idea that China will never compete with western human capital is nonsense. They can produce more graduates who'll work for lower wages then we can yet we're still always going to be better?) Couple this with job losses through automation and we could be looking at a jobless recovery given the polarizing effect this will have on society similar to that of the 1980's.

Furthermore the problem of debt is at an all time high. From 2000 to 2008 the world economy grew by 3 percent per annum whilst the credit markets grew 12% per annum. The U.S.A's debt stands at over 14 trillion dollars which is unprecedented.All over Europe private, corporate and sovereign debt exceeds the 60% threshold. Either a string of defaults will take place or this debt will frustrate growth for years to come.

andrew

CillianL wrote: »

1. On Resources.
I think you're answer is trying to compare apples with oranges.
There's a difference to going to a shop to buy things where the manager is shooting heroin on the sly to a country exporting its wealth and nevertheless remaining poor because the west is complicit with the ruling dictatorship who gets rich at the expense of its people which is a reality in many countries. This point is relevant because the globalisation of trade has been cheerleaded with the promise of a rising of all boats which is clearly nonsense given the structural poverty that remains.

Two recent conflicts illustrate this.
The Iraq war was and is an effort to secure another piece of the middle east under western control considering how its importance is growing inversely to the dwindling native american supply. According to the Lancet as of 2006 the mortality rate in the Iraq war increased from 5.5 per 1000 to 13.3 per thousand, and due to declining infrastructure and excess of over 500,000 deaths occurred. Nevertheless oil production in Iraq now outstrips its pre invasion levels by half a million barrels per day (250 million/day 2002 now 300 million).

When Britain, France and the States knew that Gaddafi was a difficult customer. For example it was Gaddafi who first confronted the oil companies seeking greater share of profit for the Libyan state. When the oppurtunity arose to get rid of him, the airforces went in quick, even though the media portrayed it as a victory for lightly armed rebels in pickups. Now France is cashing in, having organised a 35% cut of oil production for its support.

http://oilprice.com/Energy/Energy-General/Unseemly-Scrabble-For-Libyas-Post-Gaddafi-Oil-Assets-Underway.html
[/QUOTE]

My point is that globalisation is far too general a process to blame for a specific dictatorship or incident, like the Iraq war or Libyian intervention. When a business fails, you could say that it's capitalism's fault, right? But while that's true in a general sense, it's meaningless. Capitalism is merely the framework within which that business existed in the first place; the business failed for reasons specific to it's own management etc. Similarly, even if the Iraq war was solely to get oil, that oil grab has nothing to do with globalisaiton and everything to do with the general fact that the world needs oil.

2. The 1000 years of western power?
Where did you get this figure from, or was it because you thought it sounds good?
The middle ages lasted until roughly the 15th century, and most of Europe was a backwater during that time. China and the Middle East where significantly more advanced during this time.

There was no U.S.A until 1776, and even then it was only 13 colonies on the east coast, America didn't take its current form until roughly a century later, and didn't become a major force until the early 20th century, and still remained insular until WWII.

The British and French empires began post 1600 and Africa wasn't exploited until the late 19th century so in reality the West has only 400 to 250 years history of being exceptionally powerful.

In a very general sense, since the roman empire, the 'west' has been a pretty significant driver of world commerce, ideas etc. That's not to say that other areas weren't significant at all, or that there hasn't been any foreign influence on the 'west.'
My point, anyway is that saying that the west has gone into secular decline (which i think is part of your general point) is too large a claim to make given the current position of the West on the world stage, a position which is backed by an incredible amount of relative monetary and political power which has come to exist over centuries.

3.As regards to the west having been through worse before yes we don't have rubble around us and a lost generation.

However at no time in the past has the west handed over the keys to its wealth like it has in contemporary times. The chorus of cheerleaders keep reiterating how 'human capital is better in the west so we'll keep on producing wealth through services as the Chinese can only put things together'

This is nonsense. Ok so we've lost jobs through manufacturing, so services have to step in to fill the unemployment vacumn. The problem is when the chinese get into high end manufacturing and start producing exporting services and get into research this will put further strain on the remaining western economies. (The idea that China will never compete with western human capital is nonsense. They can produce more graduates who'll work for lower wages then we can yet we're still always going to be better?) Couple this with job losses through automation and we could be looking at a jobless recovery given the polarizing effect this will have on society similar to that of the 1980's.

It's not that China will never get into high end manufacturing of some sort. But to assert that China or other countries will overtake the west, you need to explain why the West will lose it's incredibly huge relative advantage, and explain how China will gain relative to the west even while the west (which China depends upon) goes into relative decline. And even if this were to happen, it's not so much that it's globalisation's 'fault' it's more that globalisation is the framework under which this takes place.

CillianL

To Andrew.

To reduce confusion maybe we need a digression to define what we mean when we say 'globalization' before we continue the sparring match!

To me globalization means that the world has become a giant network where ideas, information, technology, raw materials, people and trade can move around quickly and relatively unrestricted. This is what has made the world small and like a chessboard for corporations and governments.

For me because it represents all of this, I think 'globalization' has made the problems I'm concerned with possible because in world where resources, labour and information could not move around quick it simply wouldn't be feasible or profitable to create those problems.

Furthermore I see globalization as a narrative that didn't come about by magic, it is very much a deliberate opening up of the world that came about through technological advances and the desire of organisations to access markets and influence more people that were formerly inaccessible.

andrew

CillianL wrote: »

To Andrew.

To reduce confusion maybe we need a digression to define what we mean when we say 'globalization' before we continue the sparring match!

To me globalization means that the world has become a giant network where ideas, information, technology, raw materials, people and trade can move around quickly and relatively unrestricted. This is what has made the world small and like a chessboard for corporations and governments.

For me because it represents all of this, I think 'globalization' has made the problems I'm concerned with possible because in world where resources, labour and information could not move around quick it simply wouldn't be feasible or profitable to create those problems.

Furthermore I see globalization as a narrative that didn't come about by magic, it is very much a deliberate opening up of the world that came about through technological advances and the desire of organisations to access markets and influence more people that were formerly inaccessible.

I think I'd broadly agree with your definition of globalisation.

I think we disagree on two points then. Firstly, I don't think globalisaiton has made the problems that you've mentioned possible, not to the extent that you believe it has anyway. I think that globalisation intersects with these problems, but that fundamentally many of them are functions of factors inherent to that country anyway.

Secondly, where globalisation has contributed directly to some problems (such as structural unemployment in the west), I'd say that in general the outcome has still been positive on net. Greater labour mobility, freer trade, cheaper goods for consumers; the list of positives i think vastly outweighs the negatives.

CillianL

andrew wrote: »

I think I'd broadly agree with your definition of globalisation.

I think we disagree on two points then. Firstly, I don't think globalisaiton has made the problems that you've mentioned possible, not to the extent that you believe it has anyway. I think that globalisation intersects with these problems, but that fundamentally many of them are functions of factors inherent to that country anyway.

Secondly, where globalisation has contributed directly to some problems (such as structural unemployment in the west), I'd say that in general the outcome has still been positive on net. Greater labour mobility, freer trade, cheaper goods for consumers; the list of positives i think vastly outweighs the negatives.

So its the effects of globalisation that's the contentious issue.
In the arguments I've made so far I don't mean to suggest that there was once an economic Eden before globalisation that we should long for or that basic human nature has had no role in this mess we're in now.

Furthermore when I said globalisation hasn't been questioned enough I never said that globalisation hasn't had any benefits, of course it has benefited us, ( I wouldn't be typing this right now if we lived in an insular world), but I also believe its had nasty kickbacks as its given the grounds for many of weeds plaguing our society space to put down roots, which I don't think a lot of its cheerleaders will admit., which makes it into a religion rather than a model open to criticism

ScissorPaperRock

CillianL wrote: »

To Andrew.

To reduce confusion maybe we need a digression to define what we mean when we say 'globalization' before we continue the sparring match!

To me globalization means that the world has become a giant network where ideas, information, technology, raw materials, people and trade can move around quickly and relatively unrestricted. This is what has made the world small and like a chessboard for corporations and governments.

For me because it represents all of this, I think 'globalization' has made the problems I'm concerned with possible because in world where resources, labour and information could not move around quick it simply wouldn't be feasible or profitable to create those problems.

Furthermore I see globalization as a narrative that didn't come about by magic, it is very much a deliberate opening up of the world that came about through technological advances and the desire of organisations to access markets and influence more people that were formerly inaccessible.

I think that definition of globalisation lacks consideration of the political-economic dimension of globalisation, which might be more important in terms of identifying a driver for some of the problems you're talking about. Globalisation has seen an intensified push for the spread of neoliberal free market economics emanating from the West. The restructuring of macroeconomic policy in developing countries has been hugely important in creating the incentives for FDI.

CillianL

ScissorPaperRoc wrote: »

I think that definition of globalisation lacks consideration of the political-economic dimension of globalisation, which might be more important in terms of identifying a driver for some of the problems you're talking about. Globalisation has seen an intensified push for the spread of neoliberal free market economics emanating from the West. The restructuring of macroeconomic policy in developing countries has been hugely important in creating the incentives for FDI.

How have I neglected the political and economic aspects of globalization? information, transportation & trade are key foundations of political and economic activity in the first place.

FDI is a double edged sword. It has created jobs across the west but it has also allowed manufacturing jobs to be offshored into export processing zones.
Consider also why the previous and current government were and are spineless in dealing with the Irish banking sector. Ireland is so dependent on Foreign credit to pay for inefficiencies in the economy that they were terrified of a loss of confidence in the Irish Governments credit worthiness, so their logic was nationalize private banking debt so that the markets would be calmed, which shows how they've became too powerful, which a globalized world has allowed to happen. All I'm saying is that there is a kickback from globalization just as much as a benefit. My problem is that its seldom discussed in a constructive manner and too often idolized without question

CillianL

http://kylebassblog.blogspot.ie/ (video posted October 3rd)

A condensed version of the original video posted

krd

andrew wrote: »

It's not that China will never get into high end manufacturing of some sort.

China are already into high end manufacturing. And India are already into high end services like IT, and also customer services.

But to assert that China or other countries will overtake the west, you need to explain why the West will lose it's incredibly huge relative advantage,

Making stuff is actually important. It takes decades to develop the skills, to learn how to make the stuff. This is why developing world countries couldn't just suddenly overnight start producing high end goods. There had to be a technology and skills transfer.

They are making all the high-end stuff already. Those broadband usb sticks - they're made by Huawei - Chinese company. Not just assembled. All the R&D was done between China and India.

We've lost the skills to do things here. Even the people who've trained as IT and electronic engineers, are doing things like customer service websites, or even worse, they're doing customer service.

The service industry is horrible. Watching a documentary on financial services in the UK recently. And every floor they had seemed to be just guys talking on phones.......They're call centres. And it's the same awful ingratiating wankiness for a living as the minimum wage ones.

and explain how China will gain relative to the west even while the west (which China depends upon) goes into relative decline.

China are not as dependent on exports as they were. They have a huge internal economy. They had the skills and technology transfer. They have capital goods. Soon they'll have no need for western products or services. Huawei is a really good example. They're pushing heavily into other non-western markets. Supplying high end telecommunications equipment. They need nothing from the west. While our telecommunications equipment industry is absolutely dependent on chips from China.

In a rush to make a fast buck, the west gutted it's manufacturing capability. We are very heavily dependent on their skills. On their products. Asia is the centre of electronics know how and production.

Our capabilities have degenerated. During the building boom, we built the most low cost (terms of materials and space) housing in the developed world - all this to put more profit in the pockets of the useless. And now they're trying to encourage us to cycle bicycles around. Give up the dream of living in a reasonable sized house, and owing a car. And live like the Chinese used to........All cycling to work on our bicycles.

And even if this were to happen, it's not so much that it's globalisation's 'fault' it's more that globalisation is the framework under which this takes place.

Oh, it's nobody's fault. No one is too blame.

CillianL

Finally a bit of support!

http://www.trueeconomics.blogspot.ie/2012/10/13102012-chinas-property-bubble.html

I find this worrying however. Property should have an auxiliary role in driving economic growth rather than being the biggest vector in the system. That property values in China are starting to deviate significantly from mean incomes will fuel credit demand but could create a ponzi banking scheme like what we had here but obviously on a leviathan scale.

Western commentators often note how China boasts few companies in the Fortune 500 however the fact that Huawei exists as an example shows that China has reached a manufacturing and technological threshold such that it now longer wholly dependent on Western R&D, the one thing the cheerleaders said would help drive western growth after manufacturing. Couple this with lower incomes in China for the educated than in the west, this will pressurize service industry jobs in the west that have became outsourcable due these developments