Chapter 36 Section 5 The Next World Economy

Drucker said, "Everyone is talking about the 'world economy', and the world economy is indeed a new phenomenon, but it is different from what most people—entrepreneurs, economists or politicians—understand the term. There are discrepancies".I talk about the world economy from the perspective of long-term economic growth, because it is the most important to people's well-being. The famous American economist Mancur Olson asked a profound question in his book "The Rise and Fall of Nations": People are often puzzled by the mysterious laws of history: Why do many great and powerful empires gradually decline or be destroyed?Why did many peoples who lived in the wild and unknown rise up and created huge wealth and splendid culture?As we all know, the Roman Empire, which was once powerful in the West, was defeated by scattered barbarian tribes and disappeared from history; perish.There are also similar examples in the Middle East and America: the demise of Indian culture, even before the Aztec Empire in Mexico was conquered by the Spanish task force, it was repeatedly seized the throne by unknown tribes, the original empire in the empire Prosperous cities and magnificent pyramids have long been razed to ruins.The Andes in South America, or Angkor Wat, and other cultures around the world encountered much the same.The great ancient Greek historian Herodotus once pointed out when summarizing the history of the rise and fall of Greek city-states at that time: "The decline of prosperous cities and the rise of weak city-states eloquently illustrate a conclusion: good times never last long."

Mancur Olsen goes on to list several historical facts: Numerous historical facts show that great achievements are often created by the most humble and unknown tribes.It was not the great Egyptian empire that reached the pinnacle of Mediterranean culture, but the inhabitants of the previously unknown Ionian peninsula.The Romans who conquered the glorious Greek city-state empire turned out to be neglected barbarians. The Western Christian countries that dominated the world in the 19th century were born out of the backward and chaotic medieval European society. At that time, they were even unable to resist the invasion of Islamists, Magyars and Vikings.In Western Europe, it was often those remote and backward countries that led the trend of Western progress: the center of European development in the 17th century was in the northern provinces of the Netherlands, which had always been poor and backward, and had long been ruled by Spain; 18 From the 19th century to the beginning of the 19th century, the Industrial Revolution first emerged in England, rather than in France, which was the richest and most luxurious at that time.By the second half of the 19th century, Britain, which had reached the peak of its imperial prosperity, had to transfer its leading position in the deep industrial revolution to Germany and the distant former American colony-the United States, which had been sleeping in the past.

Indeed, world economic history shows that economic growth for a single country or region is by no means smooth sailing, and there are turning points of long-term growth acceleration and deceleration.Strong growth in the economy is followed by stagnation and decline!Even down to the point where there is very little left. Why did China lead the world in economic growth after the founding of the People's Republic of China in 1949, especially after 1978, while it lagged behind in the past hundred years from 1840 to 1948?Why have many countries in Africa experienced slow economic growth for hundreds of years?Why have many countries in Latin America been middle-income countries for a long time, but their economies have been unable to break through the "middle-income trap" in the past 50 years?The agricultural revolution was led by ancient civilizations such as China, India, ancient Egypt, and ancient Babylon. Why did only China and India's agricultural economy survive?The Industrial Revolution first emerged in Britain at the end of the 18th century and the beginning of the 19th century. At that time, the income level of Britain was far higher than that of other countries in the world. The Victorian era was extremely glorious, comparable to the prosperous Tang Dynasty in China.From the early 19th century until 1900, the British economy was the number one in the world.By the second half of the 19th century, Britain, which had reached its apex of prosperity, had to "transfer" its leading position in the in-depth industrial revolution to the then unknown United States.Today, in terms of per capita income, Britain is no longer even among the top 10 richest countries in the world, and it is difficult to regain its former glory in the short term.

In the history of economic growth in the 20th century, the continuous outbreak of the productivity revolution has brought enormous challenges to any economy.The rise and fall of the economies of many countries has been dramatic, and sometimes lamentable. At the end of the 19th century, Germany rushed to catch up after reunification and quickly approached the level of industrialization of Britain.Since the Meiji Restoration, Japan quickly began to industrialize and became an economic powerhouse in Asia.When the Second World War just ended, the economies of Germany and Japan had completely collapsed. However, an unexpected economic miracle occurred afterwards: the economies of the former West Germany and Japan developed rapidly, and soon returned to the developed countries of the world economy. Among them, Germany has also become the "locomotive" of European economic integration.However, entering the 1990s, the German economy suddenly lost its former glory. After 1991, the Japanese economy fell into long-term stagnation and experienced two "lost decades".

Around 1900, the United States quietly surpassed the United Kingdom and became the number one economy in the world. Around 1950, the US economy accounted for 40% of the world economy and became a veritable world economic and financial center. In the 1970s, "stagflation" has been plagued by the US economy, coupled with Japan's aggressive catching up, exhausting this economic giant that had had unlimited prosperity after World War II.But no one expected that the U.S. economy would take the lead in getting out of the long-term "stagflation", with an average annual growth rate exceeding Japan, the former West Germany and other major competitors, and the relative strength of the U.S. in the global economy has recovered.What is even more unexpected is that in the 1990s, the U.S. economy began to grow strongly for eight years, the fiscal deficit was greatly reduced, inflation and unemployment rates were surprisingly low, and the economy was "too good to be true."In the midst of eager anticipation for the new economy, in 2001, the Internet bubble burst, investment declined, and the U.S. economy had a hard landing. However, U.S. consumption remained the same and real estate prices continued to rise. The US subprime mortgage crisis broke out in 2007, the world financial crisis broke out in 2008, and the world economy fell into recession in 2009.

Before 1997, a commonly used term was "East Asian Miracle".In the past 30 years, East Asia is the only non-developed region in the world whose per capita income has continued to rise.Since around 1980, the so-called "gone era of development" has appeared in most developing countries, such as the debt crisis in Latin America and the difficulties in economic transition in Eastern Europe.But East Asia is an exception. East Asia has maintained a relatively high speed of economic development.However, the Asian financial crisis in 1997 came out of nowhere and swept across East Asian countries and regions with lightning speed.Under the impact of the financial crisis, the exports of East Asian countries and regions have dropped sharply, the economic growth rate has declined, and the unemployment rate has risen sharply.The four Asian tigers, which were once thriving, all fell to the ground within a year.Even after several years of hard work, after the East Asian countries and regions have digested the bank's bad debts, the high investment rate that has achieved the "East Asian Miracle" still cannot be restored, which is puzzling.

The re-emergence of India is one of the remarkable changes in the world economic pattern in the last two decades of the 20th century.As early as before India’s independence in 1947, Nehru expressed India’s positioning of itself in the famous book "The Discovery of India": "With its current status, India cannot play a second-class role in the world. Either become a powerful country, or disappear.” After independence in 1947, under the influence of the Soviet Union, India adopted a system similar to a planned economy, adopted control and planning for the economy, and vigorously promoted industrialization.But this economic system began to have problems in the 1960s. Due to the emergence of a shortage economy, the Indian government began to issue various "permits".In the 44 years from 1947 to 1991, the average annual growth rate of the Indian economy was disappointing, at a low level of around 2% to 3% for a long time, which was called "Indian-style growth".

India has engaged in industrialization for more than 40 years, and the results have been disappointing. In 1991, India had a current account crisis, and its foreign exchange reserves were only enough to support two weeks of imports.The then Finance Minister Manmohan Singh told Prime Minister Rao that the Indian economy is on the verge of collapse, but this is an opportunity to turn the "crisis" into a "turning point", boldly change traditional practices, and create a new of India.Manmohan Singh's reforms were implemented with the support of the prime minister and the consent of the Indian parliament.After the Indian government abolished the taxes on software exports and software company profits in 1991, software exports suddenly "blowout" growth. In 1999, the global panic about computer "Year 2000 Bug" provided a godsend opportunity for the development of India's software industry.India's outsourcing services have spread all over the world, and a considerable number of multinational companies choose India to contract their software business.The information service industry has become a lever to leverage India's economic revival, which has surprised countries in the world that are accustomed to taking the road of industrialization.

India's self-confidence is getting stronger and stronger.Nandan Nilekani, CEO of Infosys, a well-known IT company in India, who has the reputation of "India's Bill Gates", said: "We can do almost everything faster and cheaper than them. Better." On August 15, 2005, in his Independence Day speech delivered at the Red Fort in New Delhi, Prime Minister Manmohan Singh said: "In the history of a country, an era has come, and this is an era that can make history. The era. We are at the starting point of such an era, the world expects us to make a difference and show our talents on the global stage. Our development has no external constraints. If there are still some obstacles, it is all from our country.” On the morning of January 15, 2008, Manmohan Singh said in a speech titled “China and India in the Global Economy” delivered by the Chinese Academy of Social Sciences: “In the past 20 years, China’s industry, especially It is the restructuring of large and medium-sized industries to become globally competitive, and this process continues. In recent years, we have created an atmosphere conducive to the development of creativity and entrepreneurial spirit, and our information technology industry has a strong presence in the international market The success of the Internet is a good example of this. There are also emerging industries, such as manufacturing and auto parts, which are quite competitive. Emerging Indian multinationals are also investing overseas.” On May 22, 2009, Manmohan Singh was officially sworn in in New Delhi, the capital, and once again served as the prime minister of the new government of India.Singh said that the current government will speed up the pace of reform, further promote the economic reform measures of the previous government, and focus on issues of general concern to Indian citizens such as agricultural development and employment, and strive to increase the economic growth rate to 9%. .

The world financial crisis and recession declared the crisis of neoclassical economics.The demand side is important, but the most fundamental economic contradiction in human society is still on the supply side, and further, the effective supply is insufficient.Marx introduced scientists into economics. In the world of Marx-Kuhn, the productivity revolution is inevitable, it is also a black swan event, and it is an eternal economic challenge for mankind.No one can predict the content and form of the future productivity revolution, and the supply curve will shift substantially to the right.In the face of the productivity revolution, the lifespan of industries and enterprises is getting shorter and shorter, and the "good days" of an economy may also be getting shorter and shorter.Opportunities are equal for any country or economy. Whoever can seize the opportunity of the productivity revolution and who can persist in economic system reform will catch up from behind.Therefore, it is difficult to predict the long-term changes in the future international economic pattern.

Nonetheless, with both my fear and my longing for a productivity revolution, I try to make some guesses about the reemergence of India and China, the two economic giants that fell during the Industrial Revolution.Nandan Nilekani said: "In 1830, the combined economies of India and China were about half of the world's. Both India and China missed the boat of industrialization at the same time. Now both countries see a new boat, that It is informatization. Part of the phenomenon is just catching up.” In 2009, the GDP of the United States accounted for about 25% of the world’s total, while the combined GDP of China and India was less than 8%. China and India are unable to bring the world economy out of recession.As shown in Figure 4-13, from the last 20 years of the 20th century, the per capita income of both China and India began to grow rapidly.If my predictions are correct, the rise of China and India is one of the leading forces changing the international economic landscape from 2009 to 2049. On January 15, 2008, Manmohan Singh said in a speech delivered at the Chinese Academy of Social Sciences: "Today India and China are in a period of rapid change, and the central task of our two societies is development. Our social system Although they are different, it is the common aspiration of the two peoples to create a better future. When China and India, a big country with a combined population of 2.5 billion, break free from shackles and unleash their creativity, its impact is bound to be worldwide. The world knows this, We are also paying close attention." It can be said with confidence that "Dragon and Elephant Fly Together" will be a major spectacle of human economic development in the 21st century.