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What about to redistribute the wealth?

31/03/2012

What about to redistribute the wealth?

‘China has to take global economic responsibility.’

Assuming that the advanced nations economies will probably shrink rather than grow in the next five years and the Chinese economy grow at an average rate of about 8-10%, China will be the greatest world economy in less than 10 years. That means within 6 to 10 years China’s GNP (PPP) will be about US$ 15 trillion (compared to about 80 trillion US$ of the world economy).

To be able to create this additional production, additional demand of the same size has to come from someplace. The question is from where it will come? Very probably the advanced nations have no capacity to increase their demand. On the contrary, i expect a decrease of consumption and imports in USA and probably in Europe and Japan too. The source of this additional demand can come only from the emerging economies, which are trying to catch up with the advanced nations. (Wasn’t this the declared aim of the world institutions, to diminish poverty and redistribute worldwide the economic wealth?)

China of course is the leader amongst these emerging economic regions, which include India (with more than 1.4 billion people), Latin America (about 700 million people) and the South-East Asian countries (about 600 million people). The total population of these regions is about 4 billion people, compared to about 1 billion people in the advanced nations. These regions with emerging economies, with young and growing populations (in contrast to the ageing and stagnating populations of the developed nations), are about to take over the leading role in the world economy within few years. The question is to what direction those emerging economies are going to take their economic and social development. Most probably they will try to copy the economic and social policy of the advanced nations, where the driving force of the economy is profit and over-consumption. It seems, our planet is having difficulties carrying on with the today’s existing appetite for consumption in the advanced nations and it will be almost impossible for the world to cope with an additional 4 billion “over-consuming” people. It seems inevitable, that any attempts by the emerging economies to achieve the similar levels of consumption as in the advanced nations, will create competition for raw materials and energy sources, and will have a severely detrimental impact on the natural environmental. We actually started to see this scenario in the years before 2008, when the commodity and energy prices skyrocket and we can see the same process starting again. It seems that in today’s technologies, the world level of consumption is close to its upper limits, and any attempt to increase it in one region will have to come on account of another region.

The current economic crisis, started to solve the problem of the uneven distribution of the consumption in the world, since it had hit primarily the most developed regions, and less so the emerging economic regions. The economic stimulus made by advanced nations governments, is actually an attempt to forestall a reduction of consumption in the advanced nations and it had temporarily moderated such a shift of resource use. On the other hand it prevented sudden deep economic crisis, that could have catastrophic political consequences (let us not forget the consequences of 1929 s’ crisis). Yet the economic stimulus can slow down the process of more evenly redistribution of the economic wealth, but can’t stop it.

China’s economic policy, actively supported by US economic policy, in the last thirty years, was to develop its economy on exports. This policy was addictive for both sides, and when prolonged and exaggerated very damaging to their and world economy. An increase of consumption level of a nation is politically and socially easy, its decrease is almost unacceptable. USA is still in the grasp of its addiction to cheap products from China, as contrary to China, that can easily change this unbalance in the world economy. With its current size of economy, China can not make any longer such macro-economic mistakes without causing a major disruption in the world economy. This brings us back to my words at the beginning of this comment, “China has to take global economic responsibility”.

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