By George we are shifting !!!
Beatrice E. Rangel
In John Michener’s novel “Caribbean” these were the words of Ned Pennyfeather, a young captain of La Giralda, a pirate ship, when he realized they were bordering the East African coast instead of entering the Caribbean. Without noticing the ship and its passengers had left America to enter the sea lanes of Africa. Soon thereafter they left their lofty trade to become respectable merchants. Likewise today the silent but laborious elves of technology and trade have propelled the world economy ship into a new territory without this being perceived by most of its passengers not even those benefiting from the shift.
Indeed, entry into the new century will be recorded in history as the times when the world took a geographical; geopolitical; economic and social shift.
In terms of geography it is now quite clear that the Asian trade corridor is on a expansionary trend in spite of the disruption caused by the US-China trade dispute. Meanwhile transatlantic trade seems to grow at lower. In terms of the supply chain, as the West created a regulatory framework that increased cost structures for manufacturers they decided to transfer entire segments to Asia with great exposure to China. This was the natural turn of events for societies that base their prosperity in the continuing growth of aggregate demand. A vibrant aggregate demand is generated by the middle classes .
And for middle classes to be able to spend, goods and services have to be affordable. China offered the best platform to secure affordability. Covid-19 and the US decisive stand vis-a-vis the lack of compliance by China to the trade rules managed by the WTO has led to an impasse that could prompt a development boom in Asia. To be sure, as clearly put by Andrew Mason, lead economist for East Asia and the Pacific at the World Bank “it will be difficult for countries in developing East Asia and the Pacific to replace China’s role in global value chains in the short term due to inadequate infrastructure and small scales of production”
This largely means that many segments of the value chain currently located in China will move back to the US and to other countries in Asia and the Pacific . This will trigger a construction boom under the investment formula of public private partnerships. And as this happens the Trans Pacific trade corridor will experience even brisker growth.
As Asia rises in economic power its political weight will also rise. Latin America will see its geopolitical weight decline while Africa shares divides its exchanges between Europe and Asia to provide new demand sources for the growing Asian production. The world balance of power will most probably shift to the East while the West will experience a reduction in its relative capability to aggregate interests and resolve conflicts.
From the social point of view this will be the century to return the roots of capitalism. Just as Asia is growing because it has fostered the blooming of millions of small and medium sized enterprises that produce infinite top quality goods to cater to the demand of the Western middle classes, the West will need to arrest its current march of folly towards the creation of modern medieval villas within each nation state.
According to Joel Kotkin, the late period of the Industrial Age brought with it the development of a new stratus within the middle class. This is described by Kotkin as the clerisy “a group that makes its living largely in quasi-public institutions notably universities, media, non-profit world and the upper bureaucracy”.
The clerisy is the enabling class to implement the vision of the mega rich people which he describes as oligarchs. The clerisy and the oligarchs -who hold 50% of worldwide assets- envision a hyper regulated world that quenches innovation and private initiative. A controlled Medieval Village.
Such vision is a death certificate for the small entrepreneur who creates wealth through innovation either in products or services. This segment of the middle class has lost relative power up to now. But as the Asian trade corridor raises Europe and the US will soon realize that to compete they will need this segment described by Thomas Piketty as the “Merchant Right” to reinject vitality to their economies. The Clerisy on the contrary will clearly represent a development burden that needs to be reigned in. And as the Merchant Right sees its relative power raise a renewal of democracy will take place.
Published by laht.com on June 8, 2020
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