Thursday, August 21, 2008

Paris in the Springtime

One of my friends recently asked this question:

Which country will assume economic leadership fifty years from now: China or India?

I told him the question assumes too much. The short answer: neither India nor China will be able to claim the mantle of economic leadership in 2058.

We need to take into account current and historical trends that many ignore in conducting economic analysis. I would like to be able to say that Canada will lead the world, but I think hard reality will prevent this. The political, economic, and military superpower of the mid-21st century will not be China or the United States or India. Due to political forces very much in the Canadian tradition, economic power fifty years will emanate from central Europe.

Economics is a function of labour, goods, market, and government. It follows that the leading economic system will arise in the milieu that best coordinates interactions between these four entities. If labour, goods, and markets were unaffected by politics, we would be correct in extrapolating long-term trends from a stance independent of social pressures. Models that posit the coming ascendency of China and India do not sufficiently take into account the important effect of government and culture on economic systems. Governments able to move with market and labour trends will generate economic power.

Government has an essential modulating effect on economics. The independence of politics, culture, and markets is an 18th century myth born in the heady Enlightenment days of man's liberation from the political tyranny of hereditary monarchy. The birth of individualism, codified in the North American British colonies' Declaration of Independence in 1776, was was sent to King George in the same year that Adam Smith's economic playbook ("An Inquiry into the Nature and Causes of the Wealth of Nations") was published. The current economic power (the US) continues to bow to Adam Smith. If not for government intervention, however, the US would not have recovered from the Great Depression, and could not have become Europe's manufacturing centre from 1940 to 1970.

The US is politically and economically stuck in the late 18th century. Because of political immaturity, it will not move forward from this position, and will soon be surpassed economically and militarily.

Government is not a mere matter of form, but a matter of participation. And government is changing. The world has moved from no participation in government (Spain, 1480-1650), to weak representative government (Britain, 1650-1914), to strong representative but low-participation government (US, 1914-1970). The obvious next phase in the trend is the movement toward strong representative, high-participation government--almost pure democracy. The leading practitioners are in central Europe.

The European Union will be the world economic leader in 2058. Driving this ascendency will be the high participation of European citizens in their political affairs. Citizens of the US are not nearly as politically involved as Europeans. The most politically active US citizens are beholden to the narrow-sighted, individualistic elements of Enlightenment thought. Individual gun ownership, privatisation of services (even healthcare), and unregulated markets are held as the essential elements of a healthy society, even though these have led to the highest rate of gun violence of death of any country in history, as well as the highest incarceration rates, healthcare costs, and mortality rates of any western country.

The descent of the US has been accelerated by political arrogance abroad, but the unmoving, 240-year-old economic thinking is at the fore of the deterioration of US economic influence. The US, in fifty years, will be a weak player. India, with low citizen involvement in politics (low voter turnout, for example), will also be a weak player. China, with no tradition of democracy, will likewise soon be a minor player. This will be due to the growing importance of participatory government and the gradual worldwide equalisation of labour and markets.

Once India and China achieve economic parity with EU countries, they will stagnate due to political immaturity, while the EU continues to grow in influence. The place to be in 2058 will not be Shanghai or Bombay. No, I'd recommend Paris or Munich. Paris in the springtime, perhaps? And Octoberfest in Munich, of course.

Pearson Moore
18 August 2008

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