What If We Make It?

Which is to say, is there a way that the west can escape the stagflation that ought to be the result of our systematic, fractal economic mismanagement?

I was thinking about this today when reflecting on the narrative that the mainstream media are now cottoning onto about the return of the wealth of the earth to the Indian Ocean. Europe's rise is in great part attributable to the way in which European empires took advantage of their technological, financial, and industrial innovation to colonise Asia from the late seventeenth century onwards. From the Battle of Plassy through to the Opium wars, British, French and Dutch corralled the area that had hitherto been richer than any other. The extension of European methods into Africa in the latter third of the nineteenth century completed the picture. America largely rose because of its comparative advantage compared to Europe, in that its republican empire, cleared of natives and based in part on Hispanic and Asian labour as well as the sacrifices of its frontiersmen, was of the same European type but a more dynamic part.

Now, the story that journalists are grasping is quite simple. Europe has aged, and dissipated its wealth and social infrastructure. America is running massive, republic-killing government and private debts and a mind-boggling deficit in the budget and in trade. With money based on faith and credit, and not gold, and with the oil running out, it is only in this analysis a matter of time before an irreversible shift of power and influence occurs.

It's quite a simple and seductive story. It is still possible that it may come true. But, what if the west turns its disadvantages around?

This is still, for all our rants about the loss of freedom, a place, this west, that people of independent bent in Asia want to come to. Independence of mind, which is not necessarily related to book smarts, is one of the key qualities of the entrepreneurially minded--and they make wealth when added to the people capable of hard work that we still breed. Indeed, oil going up means that transporting things made by asian slaves around the world may soon be more expensive than making them nearer home anyway.

The fact that the US runs a deficit is bad for all of us; but Asians finance that debt because they need the dollar and because their own currencies are attached to economies decades away from being able to sustain reserve status and to avoid massive internal inflation. China, in fact, runs deficits with Asean, which is by no means in lockstep with it, and is even more dependent on oil and gas than the west is. Indeed, given western advances in 'plug and play' nuclear reactors and the sheer scale of research into alternative power systems and new sources of oil going on at the minute, it is likely to remain so for some time.

It is often claimed that we will soon see the rise of a world currency system based on special drawing rights at the (American owned) International Monetary Fund. These are fictional units based on an index of world trade. You can see airline promises to reimburse you for lost luggage written in them, on your electronic ticket, if you have one. They are about as much use at the minute.

An SDR-based global currency system would have at its heart the pound, Euro and Dollar, which for reasons of convenience and savoir-faire would be there for some time to come, provided that we can escape our present difficulties. Ultimately, too, the west is diverse, and is in a sense--would our stupid political class but realise it--a set of laboratories for different policy experiments that can easily be uploaded by others. There are even signs that we as societies are weaning ourselves from the narcissistic but self-limiting, silly, rush of the green cult. My God, people are even starting to ignore the media openly. I mean, where will it end?

It doesn't have to end in the dustbin of history. Our future is our own.

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