How the Global Boom Might End
Currently, the wider world is undergoing an upswing of a kind perhaps unprecedented, but certainly not enjoyed since the golden age of hard money and classical liberal politics at the end of the nineteenth century. Not only are teeming millions heading for the expanding cities of Asia, but industrial renovation is taking place all across the vast, former wasteland that lies to the east of the rubble that was the Berlin Wall. But how secure is it? How might it end? FULL ARTICLE
Comments (8)
billwald
In the long run, the global boom will end with social and economic conditions the same as before the industrial revolution started. The majority of the population will be serfs or free working class poor people with maybe 15% middle class professionals and 5% very rich.
The difference will be that the infrestructure will be in place and technical products will be available. There will be more "creature comforts" for all classes. The poor people will have access to the same sorts of goods (except medical care) as the rich but at a miuch lower quality.
Published: December 11, 2006 11:41 AM
quasibill
Once again, a fairly opaque monograph from Mr. Corrigan. That's not to say that there isn't valuable knowledge there, just that Corrigan isn't necessarily the best at clearly presenting it. I'm still trying to figure out how this one fits in with his last two.
As far as his ultimate conclusion, I think he is far too cursory:
"So — even if the current cycle is about to turn — it will surely complete the revolution and move upwards once again and possibly faster than we might expect, thanks to the benign self-interest of the millions of new Asian and East European entrants into our complex, highly interconnected, global economy."
There seems to be 2 big problems here. First, that these Asians, East Europeans, and the old-time "first worlders" are all quite capable of acting irrationally during the bust. Just like the boom feeds on irrational exuberance (pace the belief that state managed capitalism can create peace), the bust creates a climate of irrational pessimism (pace the American public's quick accession to FDR's socialism). Hence, a really bad bust, which this *could* be, can create political changes that will, in the end, feed on themselves in a downward spiral that could continue for longer than any of us will be comfortable with.
Second, the discussion of these "millions" and their decisions is a bit short-sighted. For the Chinese, at least, the individual decisions are far less important than those of the Communist party appratchiks who run the state bank and other power centers. While the individuals might be expected to make relatively objectively rational decisions if left to their own devices, it's highly unlikely these islands of socialist calculation will. To ignore this fact makes one's prognostication more of a wish...
Published: December 11, 2006 2:52 PM
Paul Marks
Indeed it is the reaction to the bust that matters.
This is the difference between thec credit money bubble bust of 1921 (when the government did nothing and the econmy was recovering within six months) and the credit money bust of 1929 - where the government (far from being inactive, as the school books claim) tried to "help" with both Congress and Herbert "The Forgotten Progressive" Hoover trying various forms of statism.
Efforts to keep up wages (suicidal at a time of falling output and prices), new spending schemes, higher taxes, and (in 1931) the big import tax increase.
All this turned the bust-crash into the Great Depression.
Certainly a credit-money bust does not have to turn into a Depression - but my guess is that people (both the elite in academia and the media, and the majority of voters) would demand that the government "do something" (i.e. increase statism rather than reduce it - not the reduction of government spending and regulations, but their increase).
This is unfortunate.
Remember most people are rather closer to "billwald"'s opinions than they are to ours. True they would not go down the road with him the whole way - but, as government is already vast in both size and scope, they do not have to go very far to create total collapse.
For many decades organizations like the Foundation for Economic Education have been trying to educate both the public and the (even more statist) elite - but I see little sign that the efforts have made much progess.
Perhaps the Ludwig Von Mises institute (which concentrates on educating the academics of the future) will have better results. However, the Ludwig Von Mises insistute is following a long term policy (quite understandably - given how other polices have failed) - and we may not have very much time.
Published: December 12, 2006 1:05 PM
Sam
Even if there is a some sort of a large bust, so what? Isn't true entrepenuership that abilily not be stopped by failure, get back up, learn some lessons and start again with new strategies? Surely no one is arguing that great wealth can be built on the first try?
Published: December 12, 2006 8:37 PM
averros
Even if there is a some sort of a large bust, so what?
You should try standing in a bread line for a few hours. I had that pleasure, years ago.
Nothing clears one's mind with regard to what's important and what's not better than an empty stomach.
Large busts are not pretty. People go hungry when they happen, you know.
Published: December 12, 2006 10:37 PM
Sam
But averros, what of the saying Rome wasn't built in a day? Haven't other writers commented that in poor nations there's no such thing as long-term unemployment. If you can't find a way to generate income soon, you starve.
I wasn't trying to be mean, cruel or anything. I was simply stating that the work to create wealth in the developing nation won't be a straight road. If one gives up on a goal due to one setback then they'll never successful, er, right?
Indeed, if the bust is bad enough, as in 1929, then it could cause people to question Capitalism and give in to Socialist thoughts. Yet that would be even worse for poor nations. Yes? No?
Published: December 12, 2006 11:00 PM
Vanmind
Definitely worse. The state would supress entrepreneurship and other forms of artistic creativity.
Published: December 13, 2006 12:26 AM
Flying Doctor
I first lived in China in 1999 and the expression at the time was "visit China before China visits you". The undertone was that China would visit the West from a military point of view. I lived in various parts of China on an off until 2000 and in that time the economic growth in China was staggering. Now as the USA economy slides deeper into dept and some of the Western boom is indeed starting to contract, the expression still hold true; China will indeed vist us but it is now likely that their new found wealth will allow them to buy companies and prime real estate in the West...... there goes the neabourhood!!!!!
Boom and bust is indeed cyclical but it is not just 2 dimensional. Regional variations and perturbations make it much more complicated and unpredictable.
Published: December 13, 2006 10:53 AM