The Futurist

"We know what we are, but we know not what we may become"

- William Shakespeare

The Lighting Revolution - An Update

On September 5, we had an article titled The Imminent Revolution in Lighting, and Why it is More Important Than You Think, which described the massive change the economics of lighting will experience in the next few years. 

I would like to also add this article from MIT Technology Review, about advances in silicon-based white-light LEDs.  The article explains how the low cost of silicon, combined with the massive infrastructure already in place to process silicon into electronic and solar-cell products, provides a catalyst for this innovation to reach mass-market adoption sooner than others.  These LEDs could potentially use just one tenth the electricity of traditional incandescent bulbs, yet last 50 times longer. 

The point that many miss, however, is not whether this technology supplants compact fluorescent bulbs (CFLs), or whether another form of LED technology wins out.  The point is that there is rapid innovation in many unrelated technologies trying to address the same goal.  This much competition and participation inevitably leads to high-impact innovations that benefit society immensely. 

As stated before, the energy problem will be killed by a thousand cuts, of which this is one. 

October 07, 2006 in Economics, Energy, Technology | Permalink | Comments (1) | TrackBack (0)

Digg This | Save to del.icio.us

The Age of Democracy

We often hear about how the US has no business spreading democracy to other nations by force, or how Islamic societies are not capable of functioning as liberal democracies.  But how well do these conclusions stand up to the historical trends in the evolution of democracy? 

First, consider that economic growth is exponential and accelerating, and the trendline of world economic growth is now close to 5% a year at Purchasing Power Parity. 

Next, consider that conflict between nations drops as freedom and economic growth increases.  No two nations that are both democracies and have per capita incomes greater than $10,000 a year have ever gone to war with each other, and the number of countries meeting these two criteria continues to rise. 

Lastly, let us measure the spread of democracy across the world in recent times.  The map below is the result of research conducted by Freedom House (source : Wikipedia).  Countries in green are free, yellow are partially free, and red are unfree.

350pxfreedom_house_world_map_2005_10

From this, a few observations can be made :

1) The Western Hemisphere has done a much better job of establishing democracy than the Eastern Hemisphere, with 90% of Western Hemisphere residents living in green counties. 

2) India is hugely important to any discussion of increasing democracy in the world, given its size and what it is surrounded by.  The US would do well to cultivate broader ties with India as quickly as possible, and India would do well to cooperate rather than revert back to 'non-aligned' nonsense. 

The next question is, is there a rate at which the nations of the world have evolved towards democracy?  The same research from freedom house shows the growth in green countries at the expense of red countries from 1972 to today. 

800pxfreedom_house_country_rankings_1972 

The march towards democracy appears to be quite solid, and includes such events as the collapse of the USSR and liberation of Eastern Europe.  This chart unfortunately treats all countries equally, regardless of size, and thus does not take into account that Democracy in India is more valuable to the world than democracy in Estonia.  Nonetheless, a population-weighted chart would still show a similarly rapid migration from red to yellow to green - 1 billion people have upgraded at least one level since 1972 alone. 

The question now becomes, have the prospects for democracy saturated, where any nation that had the basic cultural foundations of democracy has already become one, and those without this foundation will take a very long time to adapt?  Or is the trend we see in the chart still alive?  To believe that the evolution of nations towards democracy will continue unabated, two things have to occur : 

1) China will have to move from the red column to the yellow column.  China is rapidly closing in on a GDP per capita greater than $10,000 per year, and this has usually corelated to greater political freedom in most nations.  I believe China will make such reforms by 2015, when they see that their robust economic growth has trouble advancing further without such freedoms.  Such a change in China would move the entire center of gravity of the world's governments significantly towards freedom. 

2) Afghanistan and Iraq will have to become genuine green countries.  There are many reasons to believe that this will be achieved in Iraq by 2008.  Anti-Americans, who are generally opposed to democracy, have attempted to sabotage these efforts, but have exhausted most of the tricks available to them.  Once these two beacons of democracy are established, the rest of the region will have an open flank exposed to the winds of freedom. 

These two events will trigger another wave of the democratic domino effect in countries throughout the continent of Asia.  Many countries like Vietnam, Thailand, Pakistan, Malaysia, and Iran all have GDP growth rates greater than 6%, and in order to continue this growth, political freedom is a necessity that they will have eventually evolve towards.  Catalysts like the two events above could be just the thing to move more reds to yellows and yellows to greens. 

Related :

The Winds of War, the Sands of Time

Economic Growth is Exponential and Accelerating

We Will Decisively Win in Iraq...in 2008

September 30, 2006 in Economics, India, Political Debate, Politics | Permalink | Comments (29) | TrackBack (0)

Digg This | Save to del.icio.us

Google Earth Adding Immersive Travel Content

On August 22, 2006, I wrote an article titled 'Terrorism, Oil, Globalization, and the Impact of Computing', in which I illustrate how four factors are converging to cause radical change in the nature of business travel and tourism.  One paragraph in particular was :

Google Earth and WikiMapia are very limited substitutes for traveling in person to a vacation locale.  However, as these technologies continue to layer more detail onto the simulated Earth, combined with millions of attached photos, movies, and blogs inserted by readers into associated locations, a whole new dimension of tourism emerges. 

Sure enough, today we learn that Google Earth is adding significantly more travelogue content into its application, which can even include individual blogs and video clips.  Users will continuously be contributing new content in a Wikipedia-like manner, as Google Earth and WikiMapia continually force mutual enhancement.  Suddenly, the extent that you can experience a remote, exotic, or dangerous location has just increased substantially.  It still does not replace being there, of course, but this is free of cost and of the hassles of going to an airport, flying, taking taxis, worrying about political correctness compromising airport security, etc.

Go on, and check out a place you are never likely to visit in person.  Then tell us how it felt and if it was more fun than you initially expected.

September 13, 2006 in Accelerating Change, Economics, Technology | Permalink | Comments (4) | TrackBack (0)

Digg This | Save to del.icio.us

The Blogosphere Will Now Save Billions in Taxpayer Money

Porkbusters, a blog founded by Glenn Reynolds and N.Z. Bear to expose wasteful government spending and organize opposition against it, has scored a major victory.  The Senate has unanimously (no Senator would dare oppose this) passed the Federal Funding Accountability and Transparancy Act, allowing itemized information on all federal spending to be publicly available. 

Read the links for full details, but this is nothing short of a great coup for the American people, and for the blogosphere that empowered them.  Many egregiously wasteful projects will be quickly detected, publicized, and effectively thwarted by bloggers from here on. 

How much semi-corrupt wastage of taxpayer money is there?  From here, we can see annual estimates of :

2004 : $22.9 Billion

2005 : $27.3 Billion

2006 : $29 Billion

While all pork will not be eliminated, we can assume that for 2006, the $29 Billion could have been trimmed down to $9 Billion, with $20 Billion in savings. 

Just for fun, let's get carried away for a bit.  I have some crazy ideas on what the federal government could be doing with $20 Billion in taxpayer money per year.

1) Reduce the federal budget deficit.  While I don't think the deficit is a ruinous problem due to it being no greater a percentage of GDP than it has been for most of the last 25 years, it would still be nice to reduce it from $300 billion to $280 billion with this spending reduction, and move closer towards future tax cuts. 

2) An elite, specialized counterterror organization that effectively acts as a 'bodyguard force' for the public at potential terrorist targets.  Rather than mere security guards or police officers, each of these agents would have the combined skills of intelligence officers, investigative agents, interrogation experts, and elite fighters.  They would be trained to watch for suspicious behavior or body language to a greater degree than generic security guards, and be capable of conducting a rapid, penetrative interrogation on the spot. 

To attract the best candidates, we would have to offer attractive compensation.  If the salary, benefits, equipment, transportation, and administrative support of each agent amounted to a total of $250,000 a year, we could use $2 Billion a year to create a force of 8,000 of them.  That would be enough to monitor every airline gate at the time of boarding, every entrance to every stadium during major sporting events, every convention center, every subway station, every skyscraper, every water supply, every nuclear plant, etc. 

Critics would call this a dangerous step towards a police state, while others lament that this is what they had hoped the Department of Homeland Security would become.  I'm sure that if this proposition were put on the ballot for a vote, it would get much more than 50% support.  On a sheer financial basis, the 9/11/01 attacks cost the US economy anywhere from $200 Billion to $1 Trillion.  This counterterror force would be effectively free, funded purely by a fraction of the money saved from pork elimination.

3) We could create a national scholarship program, or enhance existing ones, that create massive incentives for children to pursue study in science, engineering, and business.  The simple approach would be the creation of a new program of $100,000 scholarships awarded to promising high school seniors, to be applied towards four years of tuition, room, and board, for all science, engineering, and business students maintaining a 3.0 GPA at accredited undergraduate degree programs.  Refining the selection critera and process is the easy part.  If 50,000 new students got this annually, it would still cost only $5 Billion.  But we can be far more creative than that. 

One of the reasons that the proportion of high-school students indicating an interest in quantitative fields has declined is the 'nerdy' stigma associated with studying these subjects.  Thus, the best return on investment would be a scholarship that induced cultural change in American teens, in addition to merely alleviating financial burdens.  Hence, the scholarship could be buttressed with a carefully constructed marketing and media campaign to create social prestige associated with the scholarship. 

The day on which scholarship awardees are revealed and notified by mail should be nationally announced to build suspense and chatter.  Television commercials during programs with large teenage audiences indicating 'who will be next leaders of American ingenuity and industry?' would be run.  The commercials would be designed to capture the imagination, such as depicting three high school friends who are awardees, and then jumping ahead to a reunion 30 years later, where one is a top executive, another is a Nobel Laureate scientist, and a third is an astronaut.  Other commercials could show an unnoticed, studious boy suddenly becoming popular upon receiving such a prestigious scholarship.  Such a marketing campaign could easily be run for under $100 million a year. 

If we assume another $100 Million in administrative overhead, this whole program would cost just $5.2 Billion a year. 

4) Federal funding for basic and applied scientific research is where the next generation of technology and industry begins.  However, it has a very uncertain return in terms of both timing and magnitude, and since it has few powerful lobbies advocating it, is often the first thing to be trimmed when belt-tightening ensues in Washington. 

Total NSF funding appears to have increased from $4.9 Billion in 1970 to $60 Billion today, but it is actually constant at about 0.5% of GDP throughout this period.   In an increasingly knowledge-based and technology driven world, keeping government research constant as a percentage of GDP is to let other nations close the scientific gap with the US.  Adding $20 Billion to NSF expenditures would increase the total budget by a third, and attract several thousand more students from abroad to pursue PhDs in the US, and stay here upon graduation.  At worst, the additional research will merely not yield large benefits. 

___________________________________________________________

Anyway, dreaming of things that can improve our society is fun, even if they won't happen.  Out of a $2.8 Trillion federal budget in 2006, each of these programs is a pittance, and certainly not contingent on pork removal for financing.  The total price of doing 2), 3), and 4) combined is just $27.2 Billion.  But they haven't happened, or at best, exist in only partial or diluted versions of what they could have been.  Even the most creative country in the world is often not creative enough. 

But it just shows how much can be done with the removal of some of the wasteful spending that was been occurring for so long.  If only....

September 10, 2006 in Economics, Politics | Permalink | Comments (15) | TrackBack (0)

Digg This | Save to del.icio.us

Terrorism, Oil, Globalization, and the Impact of Computing

Three things have happened in the last few years, which are now converging with a fourth inexorable trend to make major changes in consumer behaviour, mostly for the better. 

1) September 11, 2001 showed the world the destruction that a small number of terrorists could cause by hijacking unsuspecting passenger planes.  The subsequent increase in security almost did not stop 10 other UK to US flights from being exploded above the Atlantic by British-born terrorists disguising liquid bomb ingredients in soft-drink containers.  The terrorists will continue to get more and more creative, and will eventually destroy an airliner in an act of terror.  This fear now hangs over all passengers.  At the same time, security at airports is increasing pre-flight periods to up to 3 hours in duration.  Multiply this by the millions of business passengers per year, and the loss of billions of dollars of productivity is apparent. 

2) Oil at $70/barrel is making air travel more expensive for cost-conscious businesses.  I happen to believe that $70/barrel is the optimal price for oil for the US, where the economic drag is not enough to cause a recession, but the price is high enough for innovation in alternative energy technologies to accelerate.  Nonetheless, economic creative destruction always has casualties that have to make way for new businesses, and airlines might bear a large share of that burden. 

3) At the same time, globalization has increased the volume and variety of business conducted between the US and Asia, as well as between other nations.  More jobs involve international interaction, and frequent overseas travel.  This demand directly clashes with the forced realities of items 1) and 2), creating a market demand for something to ease this conflicting pressure, which leads us to...

4) The Impact of Computing, which estimates that the increasing power and number of computing devices effectively leads to a combined gross impact that increases by approximately 78% a year.  One manifestation of the Impact is the development of technologies like Webex, high-definition video conferencing over flat-panel displays, Skype, Google Earth, Wikimapia, etc.  These are not only tools to empower individuals with capabilities that did not even exist a few years ago, but these capabilities are almost free.  Furthermore, they exhibit noticeable improvements every year, rapidly increasing their popularity.

While the life blood of business is the firm handshake, face-to-face meeting, and slick presentation, the quadruple inflection point above might just permanently elevate the bar that determines which meetings warrant the risks, costs, and hassle of business travel when there are technologies that can enable many of the same interactions.  While these technologies are only poor substitutes now, improved display quality, bandwidth, and software capabilities will greatly increase their utility.

The same can even apply to tourism.  Google Earth and WikiMapia are very limited substitutes for traveling in person to a vacation locale.  However, as these technologies continue to layer more detail onto the simulated Earth, combined with millions of attached photos, movies, and blogs inserted by readers into associated locations, a whole new dimension of tourism emerges. 

Imagine if you have a desire to scale Mount Everest, or travel across the Sahara on a camel.  You probably don't have the time, money, or risk tolerance to go and do something this exciting, but you can go to Google Earth or WikiMapia, and click on the numerous videos and blogs by people who actually have done these things.  Choose whichever content suits you, from whichever blogger does the best job. 

See through the eyes of someone kayaking along the coast of British Columbia, walking the length of the Great Wall of China, or spending a summer in Paris as an artist.  The possibilities are endless once blogs, video, and Google Earth/WikiMapia merge.  Will it be the same as being there yourself?  No.  Will it open up possibilities to people who could never manage to be there themselves, or behave in certain capacities if there?  Absolutely.

Related :

The Next Big Thing in Entertainment

100 Mbps Broadband for $40/month by 2010

August 22, 2006 in Accelerating Change, Computing, Economics, Energy, Politics, Technology | Permalink | Comments (7) | TrackBack (0)

Digg This | Save to del.icio.us

Stock Market Capitalization in Developing Countries

Stock_marketAn interesting table in The Economist compared the market capitalizations of stock markets in developing nations.  The first surprise is that the top seven stock markets are so close to each other in size.  The next observation is that stock market capitalization has less to do with the GDP of the country than one would expect.  China, which has the largest economy by far among countries on this list, has a smaller market cap than India or Russia.  That Hong Kong and Taiwan approach China in size despite vastly smaller populations makes China look even more surprising.  The large and wealthy diasporas of India and Han Chinese of Taiwan and Hong Kong are also a reason why these countries have market caps larger than their GDPs would suggest. 

In any event, these numbers are dwarfed by the United States, which has a total stock market capitalization of $20 Trillion, or 30 times greater than that of South Korea, India, or China.  One company, General Electric, if placed on this list, would be between Taiwan and Mexico to take 9th place.  And the US market cap grows at 8% a year (without assuming acceleration), which would bring it to $130 Trillion by 2030.  If China or India want to match the US market cap in size by 2030, that means they have to grow at 25% a year for the next 24 years straight. 

This tells you how far any other country is from surpassing the US as an economic superpower.  This will be worth visiting again when one of the countries above crosses $5 Trillion. 

Related :

The Stock Market is Exponential and Accelerating

Why the US Will Still be the Only Superpower in 2030

July 19, 2006 in China, Economics, India, Politics | Permalink | Comments (11) | TrackBack (0)

Digg This | Save to del.icio.us

The US Job Market is Booming, For Those Who Can Admit It

The US economy continues to glide along in an optimal 'goldilocks' trajectory.  GDP growth, consumer confidence, service sector growth, and unemployment levels continue to proceed at robust, but not overheated levels. 

The June unemployment report confirmed this.  A quick glance at the historical unemployment rate from the Bureau of Labor Statistics shows that the current rate of 4.6% is lower than it has been for 32 of the last 35 years, the only period of lower unemployment being the bubble era of 1998-2000. 

Jobs_2

This also shows something else that is interesting.  Let's examine the average unemployment rates over the last 14 years, during which there were two Presidents.  For simplicity, we shall ignore the notion of inheriting an economy, whether good or bad, from one's predecessor. 

Clinton : 5.3%

George W. Bush : 5.3%

So Clinton and GWB have had the same average unemployment rates during their terms, and only 3 of Clinton's 8 years had a lower rate than the 4.6% it is today.  Imagine that. 

People who suffer from Bush Derangement Syndrome just cannot accept that the economy could possibly be doing well.  Their memorized arguments are :

1) They will say that those who have been unemployed for a long time are no longer collecting benefits and do not get reported in the statistics.  This is untrue, as consumer confidence continues to be high.

2) They will say is that these jobs are all lower-skilled jobs that pay poorly.  This directly contradicts their claims that all the gains of US economic growth gravitate to the top of the income ladder while the rest received no benefit.  It also ignores the basic statistic that average hourly earnings are, in fact, rising.

3) Their final argument will be that 150,000 jobs a month are needed to keep up with labor force growth.  This is untrue, as the US workforce is 140 million people, growing at 1% a year, or 1.4 million new entrants a year.  Divide this by 12, and it comes to 116,600 jobs needed per month to accommodate the new entrants.  Furthermore, the US now has 1 million people who earn a living through entrepreneurial Internet activity, such as eBay trading, blogging, Google Ads, domain investing, etc.  They are not captured in the traditional employment statistics.  Ten years ago, these people would otherwise be working at traditional employers, but have voluntarily left the workforce.  Soon, even video games may provide a viable form of self-employment for some people(see item 6 here).

Behind this lies a deeper observation.  The angry Left has so much cognitive dissonance about the fact that the economy is currently strong, that they are probably inhibiting their own chances of success in this economy.  Their pessimism leads to risk aversion, negativity, and other behaviors that preclude success.  It also leads to a tortured logic that Bush supporters can be incredibly 'dumb' yet unfairly 'rich' at the same time. 

Here is an example of an extremist anti-Bush blogger, someone at least two standard deviations from the middle of political ideology, desperately trying to believe that the economy is doing poorly. 

It is true that jobs continue to be lost at the bottom of the skill ladder (like in manufacturing), while a greater number of jobs are added at the top of the skill ladder.  This is a boon for highly-educated workers, but a problem for workers with lower-level skills.  Those who can upgrade their skills will prosper, and those that cannot will see declines in their standards of living.

This pattern of workforce evolution has been the norm for centuries, ever since Ned Ludd and his 'Luddite' followers destroyed cotton looms that put handweavers out of business.  The accelerating rate of economic growth, however, now means that while a person could once spend their whole life at one skill level, they now have to continuously upgrade their skills every decade or so. 

July 08, 2006 in Economics, Political Debate, Politics | Permalink | Comments (27) | TrackBack (0)

Digg This | Save to del.icio.us

The Demographics of Happiness

I happened to stumble across a report from the Pew Research Center on the demographics of happiness.  The report was interesting, but very little was actually surprising. 

HapThe report finds that income corelates to happiness, as having one's basic needs met can remove some of the most common causes of misery.  However, the survey puts all making above $150,000 a year into one bucket, thereby not providing any insight into whether there is incremental probability of happiness upon making $300,000, $500,000, or $1 Million a year.  I believe that it is quite possible that there is virtually no marginal increase in happiness beyond an income of, say, $200,000 a year or so, because nearly all material needs are met at this threshold.  Additional income can bring only more power, prestige, and fame, but material consumption and the resultant gratification saturates as this point.  In other words, if someone making over $200,000 a year is still not happy, it is probably for some reason other than money. 

The next question that arises is that of relative vs. absolute wealth.  If a person earns more than 95% of the members of his society, he is rich in whatever era he lives in, but even a person of average income today has many technological luxuries that were unavailable to the wealthiest person 50 years ago.   This, combined with the rapidly growing ranks of the wealthy as a share of the total population and the tendency of prosperity to move people up the ranks of Maslow's Hierarchy of Needs, could lead to a very slow but steady migration of happiness away from increasingly accessible material consumption and towards more self-actualized forms of human fulfillment. 

Hap_1Beyond wealth, one's worldview has an influence on happiness.  When happiness is categorized by political leanings, Republicans have had a stark advantage over Democrats for the last 35 years.  This is even during the Clinton years, when Democrats had the most reasons to be cheerful than at any other time, and President Clinton himself had a contagious optimism that contributed towards high consumer confidence and a strong economy.  The most obvious explanation for why 'liberals' are perpetually unhappy is that the realities of the real world continue to deliver outcomes contrary to what theoretical 'liberal' beliefs lead them to expect. 

Additionally, one particular strain of 'liberalism' departed from the genuinely liberal goal of improving society, and mutated into a religion of hatred towards those who are happier than they are.  'Tax the Rich' might really be intended to mean 'Tax the Happy, because we are jealous of them'.  Hap2There was a time when the 'left' and 'right' merely disagreed on which approach was more suitable to cause improvements in society, as opposed to today when many on the 'left' have no interest in improving society at all, but merely feign altruism while engaging in a hateful campaign to obstruct or distort the pillars of traditional society from which most non-leftists derive happiness (such as marriage, faith, children, or entrepreneurship).  This causes great conflict between their leftist religion and the natural urge of human decency still faintly present within them, and thus leaves them twisted and tortured in self-contradicting misery.  The same is probably true of suicide bombers, for that matter.

Since happiness is a natural condition, present when natural needs are met, what does it tell us about which belief systems, activities, and behaviours are more 'naturally' suitable for human life?

July 03, 2006 in Economics, Politics | Permalink | Comments (18) | TrackBack (0)

Digg This | Save to del.icio.us

The World Wealth Report, 2005

The annual World Wealth Report from Capgemini, which is a worldwide census of millionaires, was released this week.  The report does not take inflation into account, using the threshold of $1 Million each year.  It also calculates net worth excluding primary residence, which can be misleading, as an American who withdraws $300,000 in home equity from his primary residence would be recorded as immediately seeing a $300,000 jump in net worth by merely this transferral of funds.  However, the report still has many useful data points that present interesting trends. 

Those with a net worth greater than $1 million increased 6.5% in 2005 to reach 8.7 million in number.  Among these, those with a net worth of $30 million or greater increased at an even faster rate - 10% - to reach 85,600. 

The variations in regional growth rates of millionaires match the performances of those particular economies closely.  Within the global average millionaire growth rate of 6.5%, the United States was very close to the mean at 6.7%.  Europe lagged by growing at only 4.5% and is rapidly shrinking its share of the world's millionaires, just as its share of world GDP simultaneously shrinks.  At the other end of the scale, the surge in India is remarkable.  The 19.3% growth of Indian millionaires in 2005 follows a 14% increase in 2004, for a two-year increase of 36%.  South Korea, already as prosperous many European nations, saw a 21.3% increase in millionaires. 

The aggregate wealth of millionaires reached $33.3 trillion in 2005, an 8.5% increase from 2004, which itself was an 8.1% increase over 2003.  That the trendline of annual asset growth appears to be above 8% shows us how economic growth is exponential and accelerating, as such rapid annual increases in wealth would have been unheard of just 50 years ago, let alone 200 years ago. 

Making some modest assumptions for continued acceleration of exponential growth, we can expect the world to contain 18 million millionaires by 2015 and perhaps over 40 million by 2025.  It is true that inflation should be considered as a factor, but the continuance of technology diffusion to the mass market should also be considered.  In other words, many items available to even lower income people today, such as email, cellular phones, realistic video games, Yahoo! Maps, iPods, and Wikipedia, were not available to even the wealthiest person just 30 years ago.  Similarly, even the wealthiest people today do not have many luxuries that the average person will have in 2015 and 2025. 

As millionaire status becomes something achieved by an increasingly larger share of the population, the psychology of wealth will continue to transform the culture of broader society as well.  More people moving up Maslow's hierarchy of needs will make a big difference on crime rates, the variety of recreational activities available, and even the frequency of warfare. 

There is much to look forward to.

Related :

These are the Best of Times.

World GGP Grew by 4.3% in 2005.

The Psychology of Economic Progress.

Economic Growth is Exponential and Accelerating.

June 25, 2006 in Accelerating Change, Economics | Permalink | Comments (14) | TrackBack (1)

Digg This | Save to del.icio.us

Why the US Will Still be the Only Superpower in 2030

125pxflag_of_the_people27s_republic_of_c_2Version 2.0 of this article is posted here. 

One of the most popular dinner party conversation topics is the possibility that the United States will be joined or even surpassed as a superpower by another nation, such as China.  China has some very smart people, a vast land area, and over four times the population of the US, so it should catch up easily, right?  Let's assess the what makes a superpower, and what it would take for China to match the US on each pillar of superpowerdom. 

A genuine superpower does not merely have military and political influence, but also must be at the top of the economic, scientific, and cultural pyramids.  Thus, the Soviet Union was only a partial superpower, and the most recent genuine superpower before the United States was the British Empire. 

To match the US by 2030, China would have to :

300pxnasdaq_times_square_display 1)  Have an economy near the size of the US economy.  If the US grows by 3.5% a year for the next 25 years, it will be $30 trillion in 2006 dollars by then.  Note that this is a modest assumption for the US, given the accelerating nature of economic growth, but also note that world GDP only grows about 4% a year, and this might at most be 5% a year by 2030.  China, with an economy of $2.2 trillion in nominal (not PPP) terms, would have to grow at 12% a year for the next 25 years straight to achieve the same size, which is already faster than its current 9-10% rate, if even that can be sustained for so long (no country, let alone a large one, has grown at more than 8% over such a long period).  In other words, the progress that the US economy would make from 1945 to 2030 (85 years) would have to be achieved by China in just the 25 years from 2005 to 2030.  Even then, this is just the total GDP, not per capita GDP, which would still be merely a fourth of America's. 

150pxcocacola 2)  Create original consumer brands that are household names everywhere in the world (including in America), such as Coca-Cola, Nike, McDonalds, Citigroup, Xerox, Microsoft, or Google.  Europe and Japan have created a few brands in a few select industries, but China currently has none.  Observing how many American brand logos have populated billboards and sporting events in developing nations over just the last 15 years, one might argue that US dominance has even increased by this measure. 

300pxusafb2spirit750pix3)  Have a military capable of waging wars anywhere in the globe (even if it does not actually wage any).  Part of the opposition that anti-Americans have to the US wars in Afghanistan and Iraq is the envy arising from the US being the only country with the means to invade multiple medium-size countries in other continents and still sustain very few casualties.  No other country currently is even near having the ability to project military power with such force and range.  Mere nuclear weapons are no substitute for this.  The inability of the rest of the world to do anything to halt genocide in Darfur is evidence of how such problems can only get addressed if and when America addresses them.

Cardseal1_1 4)  Have major universities that are household names, that many of the worlds top students aspire to attend.  17 of the world's top 20 universities are in the US.  Until top students in Europe, India, and even the US are filling out an application for a Chinese university alongside those of Harvard, Stanford, MIT, or Cambridge, China is not going to match the US in the knowledge economy.  This also represents the obstacles China has to overcome to successfully conduct impactful scientific research. 

5)  Attract the best and brightest to immigrate into China, where they can expect to live a good life in Chinese society.  The US effectively receives a subsidy of $100 to $200 billion a year, as people educated at the expense of another nation immigrate here and promptly participate in the workforce.  As smart as people within China are, unless they can attract non-Chinese talent that is otherwise going to the US, and even talented Americans, they will not have the same intellectual and psychological cross-pollination, and hence miss out on those economic benefits.  The small matter of people not wanting to move into a country that is not a democracy also has to be resolved. 

200pxgoogle_logo_transparent_2 6)  Become the nation that produces the new inventions and corporations that are adopted by the mass market into their daily lives.  From the telephone and airplane over a century ago, America has been the engine of almost all technological progress.  Despite the fears of innovation going overseas, the big new technologies and influential applications continue to emerge from companies headquartered in the United States.  Just in the last two years, Google emerged as the next super-lucrative company (before eBay and Yahoo slightly earlier), and the American-dominated 'blogosphere' emerged as a powerful force of information and media. 

180pxnemotheatrical7)  Be the leader in entertainment and culture.  China's film industry greatly lags India's, let alone America's.  We hear about piracy of American music and films in China, which tells us exactly what the world order is.  When American teenagers are actively pirating music and movies made in China, only then will the US have been surpassed in this area.  Take a moment to think how distant this scenario is from current reality. 

Images_18)  Be the nation that engineers many of the greatest moments of human accomplishment.  The USSR was ahead of the US in the space race at first, until President Kennedy decided in 1961 to put a man on the moon by 1969.  While this mission initially seemed to be unnecessary and expensive, the optimism and pride brought to anti-Communist people worldwide was so inspirational that it accelerated many other forms of technological progress and brought economic growth to free-market countries.  This eventually led to a global exodus from socialism altogether, as the pessimism necessary for socialism to exist became harder to enforce.  People from many nations still feel pride from humanity having set foot on the Moon, something which America made possible. 

China currently has plans to put a man on the moon by 2024.  While being only the second country to achieve this would certainly be prestigious, it would still be 55 years after the United States achieved the same thing.  That is not quite the trajectory it would take to approach the superpowerdom of the US by 2030.  If China puts a man on Mars before the US, I may change my opinion on this point, but the odds of that happening are not high. 

9)  Be the nation expected to thanklessly use its own resources to solve many of the world's problems.  If the US donates $15 billion in aid to Africa, the first reaction from critics is that the US did not donate enough.  On the other hand, few even consider asking China to donate aid to Africa.  After the 2004 Indian Ocean tsunami, the fashionable question was why the US did not donate even more and sooner, rather than why China did not donate more, despite being geographically much closer.  Ask yourself this - if an asteroid were on a collision course with the Earth, which country's technology would the world depend on to detect it, and then destroy or divert it?  Until China is relied upon to an equal degree, it is not in the same league. 

300pxtianasquare10)  Adapt to the underappreciated burden of superpowerdom - the huge double standards that a benign superpower must withstand in that role.  America is still condemned for slavery that ended 140 years ago, even by nations that have done far worse things more recently than that.  Is China prepared to apologize for Tianenmen Square, the genocide in Tibet, the 30 million who perished during the Great Leap Forward, and the suppression of news about SARS,every day for the next century?  Is China remotely prepared for being blamed for inaction towards genocide in Darfur while simultaneously being condemned for non-deadly prison abuse in a time of war against opponents who follow no rules of engagement?  The amount of unfairness China would have to withstand to truly achieve political parity with America might be prohibitive given China's history over the last 60 years.  Furthermore, China being held to the superpower standard would simultaneously reduce the burden that the US currently bears alone, allowing the US to operate with less opposition than it experiences today. 

125pxflag_of_the_united_statessvg Of the ten points above, Europe and Japan have tried for decades, and have only achieved parity with the US on maybe two of these dimensions at most.  China will surpass Europe and Japan by 2030 by achieving perhaps two or possibly even three out of these ten points, but attaining all ten is something I am willing to confidently bet against.  The dream of anti-Americans who relish the prospect of any nation, even a non-democratic one, surpassing the US is still a very distant one. 

A point that many bring up is that empires have always risen and fallen throughout history.  This is partly true, but note that the Roman Empire lasted for over 1000 years after its peak.  Also note that the British Empire never actually collapsed since Britain is still one of the the top seven countries in the world today, and the English language is the most widely spoken in the world.  Britain was merely surpassed by its descendant, with whom it shares a symbiotic relationship.  The US can expect the same if it is finally surpassed, at some point much later than 2030 and probably not before the Technological Singularity, which would make the debate moot.   

That writing this article is even worthwhile is a tribute to how far China has come and how much it might achieve, but nonetheless, there is no other country that will be a superpower on par with the US by 2030.  This is one of the safest predictions The Futurist can make. 

May 17, 2006 in Accelerating Change, China, Economics, Political Debate, Politics | Permalink | Comments (209) | TrackBack (4)

Digg This | Save to del.icio.us

We Will Decisively Win in Iraq...in 2008 - Part I

What does it take to win in Iraq?  How do we know when we have won?

The Brookings Institute has the latest Iraq Progress Report, which All Things Conservative has summarized nicely.  Let's look at the data a bit more closely to see where key inflection points may emerge, and where Iraq will be in the next few years.

The first and most important projection is that Iraq's GDP will grow 16.8% in 2006 and 13.6% in 2007, making it the fastest growing economy in the world, and many times faster than the world average of around 4%.  This huge surge will snap Iraq out of its long misery (the US snapped out of the Great Depression in the same way with massive WW2-driven economic growth in 1942-45).  Many Iraqis are set to see their financial situations improve dramatically, and as stated by PR master Bill Clinton, "It's the Economy, Stupid".  Appeal to people's prosperity, and much else works itself out.

By 2010, Iraq will settle into a growth trend of about 7% a year, which is comparable to other developing countries in Asia - a trajectory that exudes the same optimism people have for, say, India or Malaysia due to such a growth rate.  Plus, on the Index of Political Freedom, Iraq has the fourth highest score of the 20 countries in the region, and scores much higher than any of its neighboring countries, with Iran (16th), Saudi Arabia (18th), and Syria (19th) scoring much worse.  How long will the citizens of those nations be quiet about not having the same freedoms as Iraqis? 

As individual Iraqis attain more prosperity, they have more of a vested interest in the stability and health of the socioeconomic system they live in, and simply have more things to enjoy in life.  More non-extremists will contribute towards reporting and fighting the destabilizing extremists in their midst.  There is a strong case to be made that as the prosperity of a society rises, its tolerance for chaotic violence drops greatly, and once nations cross certain thresholds of freedom and prosperity, they almost never engage in wars with other nations of similar caliber. 

On the metric of violence in Iraq, it appears that about 80% of Iraq has a murder rate no higher than in the roughest neighborhoods in Chicago, Los Angeles, or Miami.  This is worthy of being classified as 'violent criminal activity' rather than 'civil war'.  The remaining 20% of Iraq has a higher rate of violence, but no higher than it was two years ago.  Note that life expectancy in Iraq has actually risen. 

Lastly, it appears that 64% of Iraqis believe that Iraq is going in the right direction, and 77% are still glad that Saddam was removed.  If one excludes Sunnis from the polls, the figures above rise to 83% and 96% respectively.  Given that Shiites and Kurds are the ones Saddam had killed millions of, these high approval numbers are a surprise only to anti-American fanatics, who the Iraqis are obviously not listening to.  This shows that Iraqis have learned that a section of the Western public is rooting for them to fail, and that group is to be ignored.  It is only a matter of time until some articulate Iraqi blogger rises up and attacks the anti-American crowd's secret desire for the failure of Iraq, and receives massive visibility for doing so.  Now that will be fun.

So why will victory take all the way until 2008 if things are going so well?  Because victory cannot be declared until their is a perception of victory.  Part of this is President Bush's fault.  If he did a better job of advertising exactly the successes highlighted by the Brookings Inst. and repeated them often, this would uplift American morale, British morale, Iraqi morale, etc., and we would already have created the perception of victory in the world.  Instead, the thresholds of violence prevention, economic prosperity, and functioning government now have been set higher, and these will only be reached in 2008. 

In other words, Iraq can't just be as safe as Germany was by 1949, it has to become safe enough for American tourists to go for vacation in decent numbers (just as they currently go to Israel, Tanzania, or Thailand).  That is a very high bar to attain, but unfortunately one we have to meet in this political climate.  Only then will the fifth column no longer be able to deceive the fashion sheep that the war is a failure, and a broad perception of victory can emerge.  In total, it will have taken 5 years (2003-08) and 3000 US troops lost to hostile fire, but the majority of Americans (and Iraqis) will agree that we have won. 

Be patient, we are two-thirds of the way there.  Continue on to Part II.

Related :

The Winds of War, the Sands of Time

Who Hates America?

Zarqawi and the Anti-American Fifth Column

These are the Best of Times

The Psychology of Economic Progress

An Easy Way to Expose Concealed Anti-Americanism

Update : In the comments section, some have taken extreme offense to the suggestion that 75% of the data from Iraq is trending well, and just 25% is trending badly.  Then again, these same people are opposed to the War in Afghanistan after 9/11, so it is safe to say they are strongly anti-American (even though they are ashamed to admit it).  We will see these fifth-columnists become increasingly shrill and fanatical as Iraq progresses further.

May 10, 2006 in Accelerating Change, Economics, Political Debate, Politics | Permalink | Comments (71) | TrackBack (5)

Digg This | Save to del.icio.us

The Psychology of Economic Progress

The human brain may not have evolved significantly in the last 35,000 years, but the human mind has evolved greatly in just the last 200, in many parts of the world.  This is apparent once we observe the world through Maslow's Hierarchy of Needs. 

Abraham Maslow was an eminent psychologist in the 20th century who realized tthat the spectrum of human needs is more universally straightforward than it might appear, irrespective of culture.  He constructed a hierarchy of human needs based on each level of prosperity and satisfaction, and the Maslow hierarchy became a foundation of modern psychology.  He categorized each bracket of need-driven behavior as follows (sometimes, there are five levels).

  1. Survival : The most basic human urge to survive is one where a person may disregard courtesy, culture, or religion in the pursuit of urgent necessities. An otherwise normal person may become unreasonable or even violent when his survival itself is uncertain. Animalistic behaviors may manifest themselves in the most desperate times.
  2. Belonging : Once a human has progressed to a level where his most fundamental needs are no longer a cause of daily concern, then he seeks to be part of a community, whether it be his place of work or his social community. Harming another person to seize his possessions is no longer tempting or worthwhile.
  3. Esteem : Once a person is secure in his career and community, and has progressed beyond the need to feel accepted by his friends or respected at his workplace, he strives to excel in multiple areas of his life. Building and maintaining an ego become the most important priority. Thinking of new ways to entertain himself is high on the priority list of the person at this level, and surplus money translates into materialism.
  4. Self-Actualization : A person who has reached a level where his means greatly exceed his requirements of material contentment then may choose to focus his energies on activities that permit him to achieve his full potential.  He is no longer concerned with pure material gain or enhancing the quality of his recreation, nor does he feel he needs to impress others beyond the extent that he already has.  He seeks to become everything that he has the potential to become, and any time not spent pursuing this is treated as a waste. He seeks the company of other actualized people, and in such groups respect is gained from intellectual or artistic accomplishment. 

In centuries past, killing another person in order to take his belongings was common.  Today, the downside risk to one's career of even petty theft or minor fraud is enough that most people in the US today don't consider it.  As the world economy accelerated from centuries of slow growth to a period of rapid growth starting from the middle of the 20th century, we have seen a general decline in violence and disorder in developed societies, and also a decline in large-scale warfare in general.  Simply put, when more people have a stake in the stability and health of the system, they are more interested in maintaining and strengthening it, rather than disrupting it or trying to bypass it.

At the same time, a large segment of US society is stuck within the third level, esteem.  The pursuit of fancier cars, bigger homes, and more material status symbols is seen as the ultimate achievement in life, through a belief that quality of life improves in direct proportion to the degree of conspicuous consumption.  Relatively few have broken out of esteem and rise to actualizaton, the level where the great ideas that move humanity forward can emerge. 

In the US, perhaps 3% still reside in survival, 65% in belonging, 30% in esteem, and just 2% in self-actualization.  There is no country in the world with any more than a tiny minority attaining self-actualization yet, and such a nation would have to emerge in order to surpass the US in global power and influence.  Similarly, some cultures make it difficult for individuals to rise out of survival or belonging at all, ensuring that some nations have systems that cannot reduce poverty or nurture knowledge-based businesses. 

This is why globalization can benefit the world greatly.  While anti-Americans deride the spread of American culture, this also means that people in cultures that inhibit upward psychological advancement are now presented with a guide on how to rise until esteem.  The rapid growth in India and China, despite their cultures being heavily organized along belonging to a family and a community, has featured young people rising to embrace American-style esteem.  Thus, massive reductions in both monetary and intellectual poverty are underway.  At the same time, the complacent Americans stuck in esteem are forced to compete harder with India and China to prosper within globalization, which could induce more Americans to innovate their way to self-actualization. 

As we evolve into an information economy, where more and more people are occupied in knowledge-based careers, self-actualization will be attainable for millions of people. Through actualization arises the greatest examples of social innovation, entrepreneurship, and charity, and these forces will be the key to creating the wondrous new technologies and robust economic growth that we expect in the 21st century. 

This is a vast subject, on which more articles will follow. 

April 30, 2006 in Accelerating Change, Economics, Politics | Permalink | Comments (6) | TrackBack (0)

Digg This | Save to del.icio.us

The US Economy grew 4.8% in Q1

US GDP grew at 4.8% in Q1, clocking the second-highest growth in any quarter in the last 5 years.  This also made up for the weak growth in Q4 2005, and has ensured that the US economy remains on a trajectory of robust growth.

Gdp_8    

What is noteworthy is that this high growth has continued despite high oil prices (where were in the $60s per barrel in Q1), and despite the high trade deficit.  In the late 1990s, despite inexpensive oil and a much smaller trade deficit, GDP growth rates were not much higher than what we have seen over the last 3 years.  This shows of structurally sound the US economy is at the moment, and how it is growing at a rate much, much higher than the EU.  The so-called 'oil-crisis' is a media circus, nothing more. 

Related : The World Economy Grew 4.3% in 2005.

April 28, 2006 in Economics | Permalink | Comments (7) | TrackBack (0)

Digg This | Save to del.icio.us

$70+/Barrel Oil, the Non-Crisis

Humans are not rational beings.  This is evidenced by how much agony there is over having to pay $500 more per year on gasoline than initially expected, against the relatively muted criticism towards real estate agents charging $10,000 to $60,000 for their services, or income tax preparation consuming over 10 hours of time per household per year (is 10 hours worth so much less than $500)? 

I have written before about why $70/barrel oil is good for America, as it will accelerate technological progress in energy.  In fact, it already has begun to do this. 

But yet another interesting thought arises.  Expensive oil affects the price of many things, as it inherently raises the cost of moving an object from one place to another.  Corporations that need to do a lot of this, such as Wal-Mart, Federal Express, or United Airlines, see their costs rise, and have to both raise their prices and trim their staffing levels. 

This seems like bad news for the US economy, until one considers the following :

Other countries also have such industries, and are also hit by higher oil prices.  Countries that many fear will overtake the United States, such as India and China, have economies even more dependent on oil than the US.  Sectors like automobiles, steel, aluminum, airlines, and concrete are actually growth industries in India and China, where the majority of people are yet to become consumers.  If half of the people who have cars today did not have cars five years ago, then the increase in gasoline costs is a much larger percentage of their income than it is for an American.  $500 a year more for gasoline actually is a lot for those who make $10,000 a year and just bought their very first car.  Chinese and Indian consumer spending is much more sensitive to $70 oil than US consumer spending is. 

At the same time, US corporations such as Google, Yahoo, Goldman Sachs, Pixar, Citigroup, or Oracle are much less vulnerable to high oil prices.  Yet, these knowledge-based businesses are the ones that have created most of the new wealth in the US during the last 25 years, and are the industries in which America's dominance over the rest of the world is the largest. 

So in conclusion, high oil prices hurts some of our industries, but it hurts those industries in other countries to the same degree if not more, and the industries which are less affected by high oil prices are already the industries in which America is ridiculously far ahead of the rest of the world. 

So high oil prices actually increase the gap between the US economy and those that would seek to catch up to it.  If oil hits $100/barrel, US GDP growth may drop from 3.5% to 2%, but China's GDP growth may drop from 10% to 4%.

Food for thought...

April 25, 2006 in Economics, Energy | Permalink | Comments (16) | TrackBack (0)

Digg This | Save to del.icio.us

US Wages May Finally Rise, Through Biotechnology

For the last few years, despite robust GDP, productivity growth, and job creation, the average income of US workers has been rising at a very slow rate.  Some of this was attributed to 'outsourcing', but this is not the case, as job creation would also have been weak, rather than just wage growth. 

The reason for low wage growth has been healthcare costs greatly outpacing inflation during 2000-05.  This consumes money that employers would have otherwise distributed towards employee salaries.  Some of the rise in healthcare costs is due to an aging population, and some of this is due to the growing number of illegal immigrants not paying into a system they are using. 

The chart below from the Bureau of Labor Statistics shows how the increased costs of benefits (mostly health insurance) has left little remaining money for salaries to rise.  This is in sharp constrast to the late 1990s, when salaries could rise more rapidly due to subdued increases in healthcare costs. 

Employment_cost

In fact, the perception that the economy is weaker now relative to the late 1990s, despite nearly every economic indicator being comparable between the two periods, could be entirely due to this.  People are getting weaker raises even when employers have increased spending on employees each year. 

But we may be over the hump, as the data is finally trending in a favorable direction.  Michael Mandel's blog has observed a decline in some of the technology-related components of healthcare costs.  The costs of medical labs and imaging centers stopped rising altogether in the last year.  Mandel says this may be due to competition, but I think this is due to technology.  Not only are many advanced instruments subject to The Impact of Computing, and thus improving in power and number every year, but new drugs and gene therapies provide treatment that sometimes avoids hospital stays altogether.  Exponentially improving technologies are pervasively moving into medicine to deliver faster, cheaper, more effective treatments, and this saves money even for people who are not users of them. 

If the moderation in the price of high-tech medical costs continues, US wages may rise as employers can pass more on towards salaries instead of health insurance premiums. 

Related : Are you prepared to live to be 100?

April 20, 2006 in Biotechnology, Economics | Permalink | Comments (3) | TrackBack (0)

Digg This | Save to del.icio.us

The Next Big Thing in Entertainment - Part III

Here is a follow up to the two-part article, the Next Big Thing in Entertainment, where a prediction is made that the video game industry will give rise to something much larger, that transforms many dimensions of entertainment entirely.

I feel one additional detail worth discussing is the performance of stocks that may do well from this phenomenon.  A 5-year chart of four game development companies, Electronic Arts (ERTS), Activision (ATVI), Take-Two Interactive Software (TTWO), and THQ Inc. (THQI), plus retailer Gamestop (GME) provides an interesting picture. 

Z_7   

All 5 companies appear to have greatly outperformed the S&P500 over the last 5 years, despite this being a poor period for technology stocks.  Past performance is no indication of future returns, and it is difficult to predict with competitors will prevail over others, but a basket of stocks in this sector will be very interesting to watch for the next 6 years. 

April 17, 2006 in Accelerating Change, Computing, Economics, Stock Market, Technology | Permalink | Comments (0) | TrackBack (0)

Digg This | Save to del.icio.us

The Housing Bubble - 20-Year Gains May Never be Repeated

There are many reasons to believe that housing is in a bubble in many countries, and that in the US, residential real-estate in certain markets peaked in late 2005, and is now on the brink of a multi-year decline.  This is a vast subject, but to summarize the main reasons to think this is a bubble are :

1)  Interest Rates were at 46-year lows in 2002-04, which reduces mortgage payments for a given house, but inflates home values.  This causes the ratio of home prices to salaries and home prices to rent to rise far above the trendline.  At the same time, when interest rates rise (as they have since early 2005), home prices fall a couple years later as payments for a given home price rise and buyers are forced to adjust downwards. 

2)  Speculation is rampant, because the low interest rates from 2002-04 caused price increases of 15% a year to occur, and lead people to believe this is the normal trajectory of the trendline.  This has tempted people to buy additional homes for investment, and happily accept the fact that rent income is much less than the mortgage payment, under the expectation that equity gains will offset the negative monthly cash flow. 

Now, the bubble of the last 3-4 years was due to low interest rates at the front of the yield curve, which is something that the Federal Reserve controls, and which has given rise to new types of adjustable-rate mortgages that are advantageous only when short-term rates are very low.  The rise of the Fed Funds Rate back to moderate levels guarantees a correction of the recent bubble, and is easily predictable. 

However, there is another unrepeatable phenomenon residing beneath the first bubble, at the other end of the yield curve - the decline in long-term rates over the last 25 years.

Z_3    

The yield of the 10-year bond, which somewhat corelates to 30-year mortgage rates, peaked in the early 1980s and bottomed out in 2003.  This long downward drift in mortgage rates generated upward movement on housing, and permitted housing to rise at a rate greater than nominal per capita GDP over this period.  Even if someone purchased a house in the early 1990s, their mortgage rate was 10%, vs. just 6% in 2001 (before the recent bubble).  This is the reason why the old rule of thumb of prospective homeowners being wise not the purchase a house priced more than 2.5 times their annual income was applicable in the 1970s and 1980s, but somehow gave way to home prices of 5-7 times income being considered normal.  The hypothetical example below may help illustrate this phenomenon.

Ratio_1

Now, the 10-year note yields (and mortgage rates) have begun to rise.  While the rise has merely been by 1% so far, and even if rates never get that much higher than they are is now, it is impossible for the drop in yield from 1981 to 2001 to be repeated.  When the 10-year yield is 5% and mortage rates are 6.5%, there is no room for them to drop another 3%.  Theoretical 3% mortgage rates would result in homes being priced at 10 times average salaries nationwide, and even then have no further room for appreciation from that point.  The floor has been hit, and there is nowhere else to go for further rate declines. 

Thus, while the bubble created by low short-term rates from 2002-04 may dissipate in the next two years, after that, the next 20 years will additionally no longer have a tailwind of declining long-term rates behind housing, and the trendline of housing prices will be forced to converge towards mere increases in inflation and per-capita real GDP, or about 5% a year in the US.  This is after the short-term bubble corrects. 

While I do believe that economic growth rates are exponential and accelerating, housing, being a product without a knowledge-based component, is less likely to participate in this accelerating curve.  Increasingly greater returns will be seen in the stock market, and stocks, particularly those of knowledge-based businesses, will continue to draw capital away from real-estate, over the next 20 years. 

April 13, 2006 in Economics | Permalink | Comments (12) | TrackBack (0)

Digg This | Save to del.icio.us

Europe is Giving Up on the Future

Two events on April 10, 2006 pushed continental Europe closer to the irreversible extinction of their civilization. 

In France, a very modest law to let employers terminate underperforming employees before the age of 26 was scrapped after socialists rioted in protest.  This could have been the first step in halting France's slide down the economic and demographic slippery slope they are on, but rioting socialists proved they can intimidate the government.  No business started in France in the last 40 years is among France's 25 largest corporations.  A culture of low birth rates, aspirations of mediocrity, and segregation of angry Islamic immigrants spells disaster for France before 2020. 

In Italy, one of the last staunchly pro-US leaders in Europe, Silvio Berlusconi, may lose his bid for re-election.  Italy, like France, also has a sluggish economy and birth rates far below replacement levels.  His opponent, Romano Prodi, is bound to continue and even increase socialist practices such as 4-day workweeks.

The leftward shifts follow in the footsteps of Spain, which, in reaction to the March 11, 2004 Madrid Train Bombings, chose appeasement over counterattack, and voted out a pro-American government in favor of an anti-American socialist government.  Predictably, Spain also has a sluggish economy, anti-business labor laws, and a severe shortage of new children being produced.

There are still small pockets of hope in Europe.  Germany voted out anti-American Gerhard Schroeder and voted in pro-American reformist Angela Merkel.  Denmark stood firm in the cartoon controversy.  But these events, unless they cascade into much larger movements, are not enough to shift the center of gravity of European culture away from the path to demise.  The hope some had for Europe to fight for their future fell into the abyss on April 10, 2006. 

Remarkably, for the high opinions that many Europeans have of their culture, they have little interest in continuing that culture through producing new Europeans.  When many Europeans are asked about this, they don't even want to think about it.  Try a small experiment the next time you get a chance to ask this of anyone from continental Western Europe.

"In Europe, far fewer children are being produced to replace the existing population of Europeans, even while immigrant Muslims have many children.  How can European civilization continue, under these circumstances?"

Try it, and see what happens.  Notice how their answer will avoid the question posed and somehow deviate into a criticism of America.  Anti-Americanism is not merely their fashion, but now a drug that they use to distract them from their self-inflicted troubles.  The European Union, formed to be an economic couterweight to the US, still produces just half of the new wealth that the US produces, and has a growth rate much lower than the world average.  By 2020, the EU will not even be a counterweight to China or India, let alone the US.   

It is sad when a civilization with a rich history and culture stops making an effort to build a future.  Perhaps, in a Darwinian sense, we are seeing evolution and extinction at work, where societies than can't adapt to new realities are unable to take action to continue their survival. 

Cox and Forkum puts a thousand words in a picture.

060411whinemakingx

April 11, 2006 in Economics, Politics | Permalink | Comments (19) | TrackBack (0)

Digg This | Save to del.icio.us

World GGP Grew by 4.3% in 2005

The World GGP (Gross Global Product) grew by a strong 4.3% in 2005.  While this rate would merely be considered robust today, it is a rate unheard of before the mid-20th century.  In fact, prior to the 16th century, 4.3% growth was what the world economy might have seen in an entire century, rather than just a single year. 

Refer to how Economic Growth is Exponential and Accelerating for a detailed study.

However, this growth, which added $1.8 trillion to the now $44 trillion world economy, was not evenly distributed at all.  In fact, more than one third of the $1.8 trillion was generated in just the US and China.  A breakdown of the wealth creation, by country (in direct currency conversion, not purchase power parity (PPP)) :

United States : 25.0%

EU (a collection of 24 separate countries) : 12.6%

China : 9.5%

Japan : 5.8%

India : 3.0%

Russia : 2.5%

Rest of World : 41.6%

A large economy with a slow growth rate, like that of the EU, produces a similar portion of the pie as a small economy with a high growth rate, like that of China.  This also means that India and China will soon be contributing a much larger percentage of the pie, as their currencies appreciate through increased exports.

Cin203_5In viewing historical World GDP Growth from The Economist, we can not only see that there has not been a year without growth since 1980, but that the difference between nominal and PPP growth rates have been diverging due to India and China. Continued growth will result in currency appreciation for both (China is already forcibly keeping its currency undervalued), and will bring the light-blue nominal line up to the level of the darker PPP line.  The awakening of India and China to supercharge the global economy is effectively the single biggest event of the last 15 years. 

This could push the world GGP growth trendline over 5% by 2020, and would be consistent with the expected continued acceleration of the world's economy in the 21st century. 

March 17, 2006 in Economics | Permalink | Comments (14) | TrackBack (0)

Digg This | Save to del.icio.us

These Are the Best of Times

When we read stories or watch films set in a historical context, it is 250pxwien_stefansdom_fiaker_dsc02643_1 seductive to romanticize about being an Egyptian Pharoah, an English Knight, an Arab Sultan, or an 18th century French Aristocrat.  But how desirable were their daily lives compared to ours today?

First, refer back to the articles on Historical Life Expectancy, and Exponential and Accelerating Economic Growth.  Both show that the improvements in human life over the 20th century dwarf the improvements made in all of human history before then. 

But surely the people at the very top of society, at any time in history, had enviable lives, did they not?  To put this perspective, we need not go back any further than a century. 

Consider John D. Rockefeller, a name nearly synonymous with wealth.  At one point he had a net worth as high as 1/65th of US GDP at that time, a figure that would be the equivalent of $190 Billion today - four times what Bill Gates currently has.  He owned land, employed people, and had political clout that would seem extraordinary at any time in history.  But, having died in 1937 at the age of 98, Rockefeller never had photographs of his childhood, never watched a color film, never flew in a jet engine airplane, and never saw a photograph of the Earth taken from space.  If Rockefeller wished to travel from New York to Chicago, it took him and his entourage more than a day.  If his servant cut him during a morning shave (or even if he did it himself), a cloth bandage was the only kind available. His underwear did not have elastic, and since no cohort of servants could have realistically alleviated that problem for him, he probably spent every day accustomed to irritating hassles that would be unacceptable to even the poorest Americans today.  He couldn’t have even obtained a tube of mint-gel toothpaste or a can of chilled Coca-Cola from a soda machine. 

The same applied to Cornelius Vanderbilt, Andrew Carnegie, and JP Morgan. While they had immense political, purchasing, and hiring power, the diversity of what they could do was limited by our standards, and we might actually have found some portions of their lifestyles to be inconvenient and monotonous.  They, in turn, had electricity, phonographs, railroads, and slow automobiles that may have made them think that the world of Benjamin Franklin and George Washington was deprived, and so on. 

Even as the ability to purchase land and hire the services of others has become increasingly expensive with time (but still at a rate consistent 250pxair_new_zealand_747400_1 with GDP growth), the cost and diversity of goods available to the average person continues to improve remarkably, and, of course, this trend will continue to accelerate. 

While it took electricity, automobiles, and air travel decades to evolve from invention to commoditization in the United States, the process of diffusion is now shortening to years.  One merely needs to internalize The Impact of Computing to grasp this surging pace.  Needless to say, if we can chuckle at the limitations of John D. Rockefeller’s world a century later, by 2030 we may be able to poke fun at out own world of 2006 to the same extent.  A world where there were no hypersonic passenger aircraft, no intelligent robots, no self-driving cars, no virtual reality entertainment, and no easy cure for cancer may seem brutal and boring by then.

Thus, the advance and democratization of technology transcends perceptions about wealth and poverty over the course of time, and it is debatable whether it was better to be a super-wealthy American in 1920, a moderately wealthy American in 1960, or an average American in 2006.  Which would you choose? 

March 11, 2006 in Economics, Technology | Permalink | Comments (46) | TrackBack (1)

Digg This | Save to del.icio.us

The Stock Market is Exponentially Accelerating too

Many still have significant doubts about my article on how economic growth is growing at an accelerating pace.  To this, I offer the basic evidence that the world economy comfortably grows at more than 4% per year, and this rate was unheard of in any part of human history prior to the second half of the 20th century, because if such growth existed from, say, the Roman Era, then the compounding over 2000 years would make everyone alive today a billionaire.

Another place in which to judge the rate of exponential growth is the stock market.  Below is a chart of the S&P500 index from 1950 to today.  I have added the red trendline to show how the market is moving in quite a predictable, exponential trajectory.  The economic malaise of the 1970s, the bubble of the late 1990s, and the bust of 2001-02 all negated each other to invariably move back to the trendline.

Sp500_1

If we see the same image on a logarithmic scale, the exponential trend (which now is a straight line) is clear, and timing the long-term future milestones of the market are semi-predictable.

Sp500log_1

This also shows that current levels are certainly not overvalued, and are in fact almost exactly where the trendline would expect them to be.

And for those who insist that the Nasdaq should be shown instead, I would point out that a) the Nasdaq has been around for a shorter time, and b) the Nasdaq is less a representation of the broader market than the S&P500, as it is technology-heavy.  Nonetheless, a logarithmic Nasdaq chart also shows a similar trendline, and the late 1990s boom and bust revert back to the trendline.

Nasdaq

Part of the reason we don't see an increase in the rate of increase in this logarithmic chart (which would make even this line curve upwards gently) is because some of the surplus growth is occuring in overseas markets.  A composite chart of the full world's stock markets over the last 55 years would be interesting.  If I find a good one, I will add it. 

February 16, 2006 in Accelerating Change, Economics | Permalink | Comments (23) | TrackBack (0)

Digg This | Save to del.icio.us

Economic Growth is Exponential and Accelerating -Part II

The first part of this article discusses how economic growth has been on a smoothly accelerating trendline, from the start of human civilization through the present.  Now, in the second part, we will envision the future.

The first chart, also shown in Part I, displays global per capita GGP (Gross Global Product), starting from the year 2000 and going backwards on a logarithmic scale.  It is apparent how the economic gains of the 20th century dwarf those of all prior millenia of human civilization.  Put another way, world GGP growth of 4% a year seems normal today, but was under 1% in the 18th century.

                                      Historical World Per Capita GGP until 2000

Ggp

Now, it gets interesting.  As this growth is not just exponential, but exponential even in the second derivative i.e. the rate of increase also increases at ever-faster rates, the best way to extrapolate the future would be to change the x-axis to take, say, 2050 as a starting point, and see what a trendline plot of the same approximate shape would amount to in per capita GGP on the y-axis.

This gets us what we have in the chart below. 

                                      Historical World Per Capita GGP until 2050

2050ggp

This method predicts that the GGP per capita in 2050 will be $36,000 per year in today's dollars, or about 6 times what it was in 2000. The gains made from 1950 to 2000 are dwarfed by the gains made from 2000 to 2050..

Imagine, for a moment, what this means for society. All the glorious technological innovations discussed in other articles here will allow the costs of health care, education, transportation, energy, and entertainment to plummet and allow poorer nations to rapidly creep up the ladder of prosperity and Maslow's hierarchy. If we project even further into the future, the exponential curve continues to steepen and the wealth that awaits is so vast that perhaps even the grandest visions of science fictions might be quite economically feasible.

Additionally, this makes economic dimension of the Technological Singularity quite tantalizing to speculate.

February 14, 2006 in Accelerating Change, Economics, The Singularity | Permalink | Comments (28) | TrackBack (0)

Digg This | Save to del.icio.us

The Biggest Event of the Last 15 Years : The Stunning Defeat of Socialism

What is the biggest transitionary world event of the last 15 years?  The dot-com boom and bust?  The War on Terror?  Nope, even those don't get the grand prize.

The most profound event of our time has been the transition of three of largest non-capitalist countries of the world, Russia, China, and India, away from communism and/or socialism and towards free markets and capitalism.

Russia was part of the communist USSR.  China is still run by a communist party, but is pursuing capitalistic wealth creation with great zeal, even using slogans like 'To get rich is glorious' to motivate the acquisition of wealth.  India, while a democracy through the last 50 years, still used draconic, Soviet-style central planning measures that choked economic growth for four decades.  In India in the 1970s, it used to take 6 years to purchase a scooter or get a telephone line.

These three nations are home to 2.5 billion people, and possess three of the world's four largest militaries and two-thirds of the world's nuclear weapons.  All have moved towards free markets, and as a result, all now have economies growing at greater than 6% a year, and all three now have better relations with the US than they did 15 years ago.  The decline in global warfare over this period is also a very good side benefit of this.

The number of people benefiting from this is so immense, that it amounts to no less than the center of gravity of world economic thought moving decisively away from socialism and towards free markets.  There truly cannot be a bigger defeat for socialism than this. 

One could argue that this would have happened anyway, particularly since the growth rate of the world economy is accelerating, and the huge populations of these countries would have to participate in rapid growth just to keep the world economy going on the exponential growth trendline.  If that is true, then it means the trend is truly irreversible, and new countries would also get pulled into the train of higher economic growth.  Afghanistan and Iraq are likely candidates.   

Communists, socialists, and anti-US leftists are now only left with a few pockets of validation in North Korea and Cuba.  They cheer the coverage of Hugo Chavez in the media, but Venezuela has about as much chance of moving the world back towards socialism as Jimmy Carter has of being regarded as a great President.  They scream about the need to 'fairly' distribute wealth, never admitting that wealth has to be created first.  They have been exposed as being consumed by little more than juvenile envy of the most productive and enterprising members of society, and their ideology has been rejected by 2.5 billion more people. 

The world has chosen the path of enterprise and meritocracy.  Period. 

Update (6/1/07) : There more socialist the country, the more smart people choose to go elsewhere. 

February 12, 2006 in Economics, Politics | Permalink | Comments (22) | TrackBack (0)

Digg This | Save to del.icio.us

The Economy is a lot Stronger than People Think

The cover story of BusinessWeek has one of the most fascinating articles I have seen in a long time.  The article makes a case that the very measurements of our economy are no longer capable of capturing the most accurate picture of strength or weakness. 

For example, if a leading US corporation opens a software design center in India, the knowledge of how to run design centers efficiently, and how to monetize the R&D produced, also flows to India as an export from the US.  This intangible knowledge is not captured in any data, but is critical to achieving a high return on the investment of the design center, and is not something India could have produced indiginously.

Or, if an engineer with a bachelor's degree immigrates to the US, the US has essentially received an engineer for free.  The cost of educating this engineer through school and college in the US might have been $200,000 or more, yet these costs are not incurred by the US, even as this engineer come in ready to contribute to the economy right away. 

These intangibles partly explain why the trade deficit and low savings rate have not managed to drag the US economy into recession all even after these years, and why knowledge creation is valued so highly by the stock market.  The combined revenue of Google, eBay, and Yahoo! is only $16 Billion, yet their combined market cap is $220 Billion, even in these cautious post-bubble times. 

People who suffer from Bush Derangement Syndrome are utterly convinced that the economy is in terrible shape, insisting that unemployment is underreported, that twin deficits will sink us, that only low-paying jobs are being created, while only the rich get richer.  However, while even the traditional data shows the current economy to be one that is moderately strong, this new paradigm portrays the current economy on even stronger footing than previously recorded.  Irrationally pessimistic people are subconsciously preventing their own success in this economy, by failing to take risks or pursue the opportunities that surround them.

February 06, 2006 in Economics | Permalink | Comments (14) | TrackBack (0)

Digg This | Save to del.icio.us

The US Job Market is Very Strong, for those who admit it

After years of weakness, resulting in almost no net gain in jobs from 2001-2004, the US labor market is finally booming.  This is the strongest labor market in 5 years, and stronger than it has been for 80% of the last 50 years.

Let's look at today's employment report.  The unemployment rate of 4.7% is lower today than all but a 3.5-year period from 1997-2000, in the last 35 years.  One has to go all the way back to the 1960s to find the next most recent period of high job growth.

Unemp_2   

The first thing that irrational pessimists will say is that people who are unemployed for too long stop collecting unemployment benefits and are no longer recorded in the unemployment rate.  This is untrue, as consumer confidence is also high, and hourly wages are rising and productivity is dropping.  The second thing they will say is that these jobs are all lower-skilled jobs that pay poorly.  This directly contradicts their claims that all the gains of US economic growth gravitate to the top of the income latter while the rest received no benefit. 

In fact, the angry left has so much cognitive dissonance about the fact that the economy is currently strong, that they are probably inhibiting their own chances of success in this economy.  Their pessimism leads to risk aversion, negativity, and other behaviors that preclude success. 

It is true that jobs continue to be lost at the bottom of the skill ladder (like in manufacturing), while a greater number of jobs are added at the top of the skill ladder.  This is a boon for highly-educated workers, but a problem for workers with lower-level skills.  Those who can upgrade their skills will prosper, and those that cannot will see declines in their standards of living.

This pattern of workforce evolution has been the norm for centuries, ever since Ned Ludd and his 'Luddite' followers destroyed cotton looms that put handweavers out of business.  The accelerating rate of economic growth, however, now means that while a person could once spend their whole life at one skill level, they now have to continuously upgrade their skills every decade or so. 

February 03, 2006 in Economics | Permalink | Comments (32) | TrackBack (0)

Digg This | Save to del.icio.us

Why $70/barrel Oil is Good for America

After President Bush's SOTU address last night, his Energy Initiative may not be what gets the mainstream excited.  After all, every President since Nixon has announced a desire to free America from dependence on foreign oil, and while there have been tiny steps of progress towards this, it has taken so long that few will believe that it will be any different this time.

However, I will come out and say that the next 10 years will, in fact, be different.  Here's why.

When oil spiked in 1973 after the Yom Kippur War to a price that would be the equivalent of $90/barrel today, this caused a world-wide recession, including a very deep recession in the US.  Most of the US economy was still dependent on manufacturing, with information technology being a miniscule sector.

However, at $67/barrel today, we are only seeing a slight economic slowdown, and even if prices were to rise to $90/barrel today, we still would not dip into recession through that alone, as the US economy has evolved to the extent of being only about one-third as intrinsically bound to oil consumption as 32 years ago.

The US economy produces 2.5 times as much economic output per barrel of oil, as in 1973.

We are already evolving towards making our vulnerability to oil prices an asymptotically dwindling problem.  This is accelerating as advances in information technology accelerate.  This is why world economic growth is accelerating at ever-increasing speeds.

High oil prices today are not triggering one solution to the problem, but many.  At a sustained $70/barrel, numerous alternatives, like ethanol, Canadian tar sands, Colorado oil shale, solar power, etc. become much closer to cost-competitiveness.  They were not options in 1973. 

In addition, this market force has caused the stagnant innovation we have seen in automobile technology during the era of cheap gasoline to awake from its slumber.  The real story behind all the buzz behind hybird vehicles is that the cost delta between a hybrid and traditional vehicle is now under 15% of the vehicle's price, and dropping.  In about 10 years, the term 'hybrid' will not exist at all, as that technology will merely be a standard feature in all cars. 

Credit goes to President Bush for increasing funding for basic research in energy technology.  While this will not deliver benefits during his remaining time in office, it will bring us large dividends by 2015.

Prediction : Despite several scares in the next 2-4 years, by 2015, oil prices will not worry people nearly as much anymore, whatever the price of oil at the time.  A much smaller portion of the US economy will be tied to oil prices.  This new reality will be visible in many places, such as the typical 2015-model family car yielding 60 MPG (highway) despite having a 240 hp engine. 

Gas at $4/gallon is not so bad, if you only need 5 gallons a week. 

Turn that frown upside down. :)

February 01, 2006 in Economics, Energy, Technology | Permalink | Comments (22) | TrackBack (0)

Digg This | Save to del.icio.us

India's Economy grew at 7.5% last year

India's economy is now the second-fastest growing of any large country in the world, albeit still much slower than the 9.9% that China recorded in 2005.  What is interesting is how quickly the mainstream media went from having a blind spot on India to speaking of it in the same sentence as China.

As recently as 1998, most of the mainstream press was spoke of China as an emerging superpower, while India was still spoken of merely in the context of its nuclear tests, rivalty with Pakistan and its poverty.  Most articles spoke of India and Pakistan under a suggestion that they were equals. 

Now, almost all articles about China being a rising economic superpower also include India.  India has, in just eight short years, changed its entire 'brand' from being one of austere poverty and an intractable, stalemated dispute with Pakistan, to being one of the two rising superpowers in this world, a place with an endless supply of knowledge workers promises to reshape the global economy. 

That there are even articles like this, which compare India and China to see which has more promise, is telling.  Such comparisons were nearly unheard of in the late 1990s. 

What has enabled a country as large as India to revamp its entire 'brand', its perception in the eyes of the world, so completely, in such a short time?

I attribute this to four factors :

1) The rise of Internet usage and bandwidth speeds, permitting more business collaboration between India and the United States.

2) The War on Terror, where a stable, thriving democracy, containing 150 million Muslims, is seen as a model and positive influence on nascent democracies in Afghanistan and Iraq, thus receiving indirect moral support from the US, UK, and Japan.

3) The Indian community in the US reaching critical mass.  Their numbers have more than doubled from 1990 to 2000, and continue to grow.  They are also the highest-income ethnic group in the US, and are developing many business ventures between the US and India. 

4) The gradual, ongoing replacement of older generation Indians with a new generation that is globally aware, tech-savvy, better educated, less xenophobic, and has higher self-esteem.  Older generation Indians kept India under socialist stagnation for decades, and kept Indian society at a lower level of Maslow's hierarchy for far too long.  They were, frankly, an embarassment in many aspects of human existence, and their passing on can only lead to massive progress. 

Prediction : India becomes the foremost economic and political 'fad' of 2006, with at least five cover stories on India in major magazines, in 2006.

January 31, 2006 in Economics, India, Politics | Permalink | Comments (7) | TrackBack (0)

Digg This | Save to del.icio.us

Economic Growth is Exponential and Accelerating - Part I

(Please see Version 2.0 of this article here).

It never ceases to amaze me how so few people truly understand that the world is progressing at an exponential and accelerating rate.  This is the most critical and fundamental aspect of making any attempt to understand and predict the future.  Without a deep appreciation for this, no predictions of the intermediate and distant future are credible.

Read Ray Kurzweil's essay on this topic for an introduction.

One dimension of accelerating, exponential progress can be seen in the economy.  Today, the US economy grows at a median rate of 3.5% per year, and the world economy at around 4.5% per year.  This is a growth rate that we have come to take for granted and expect.

But such annual growth rates were unheard of in the 19th century, or the 18th century (when the world economy grew less than 1% per year).  Things changed very little over the span of 10 or 20 years.  People expected their children to have the same living standards, and be surrounded by the same technology, as they were. 

Let's look at a graph of per-capita GGP (Gross Global Product), when viewed from the year 2000, looking backwards. 

                                                   

                                            Historical World Per Capita GGP

Ggp_3

The accelerating rate of economic growth is apparent from the chart.  Thousands of years of human civilization before the 20th century produced modest wealth compared to what was produced in th emuch shorter interval of the 20th century.  Even with the 20th century, growth was more in the latter half than in the first 50 years. 

Now, in 2006, 4% a year is assumed, and taken for granted.  In fact, 3 billion people in the world are living in economies growing at greater than 6% a year (China, India, Russia, Vietnam, Pakistan, Thailand, Malaysia, and others).   

This would have been considered amazing, at any other time in history.  But is this just an aberration, or has the trendline itself shifted into higher gear, and can we expect this to continue, or even accelerate, in the future?  Continue on to Part II for the answer..

January 29, 2006 in Accelerating Change, Economics, The Singularity | Permalink | Comments (5)

Digg This | Save to del.icio.us

US GDP Grew at 1.1% in Q405

The US economy posted a growth rate of 1.1% in the final quarter of 2005, substantially below expectations of 3.0%.  While this is the lowest growth rate in the last 12 quarters, it is still above the levels where fears of a recession become legitimate.  The economic disruptions caused by Hurricane Katrina and high oil prices shaved off the majority of fourth-quarter growth, and the first quarter of 2006 may very well be higher than average in order to revert back to the economy's mean trendline. 

Here is a chart of the quarterly GDP growth rates for the US economy for the last 10 years, with the red quarter being the most recent one.  The current interruption does seem out of place within the solid growth trend we were on up till this point.

Gdp_3   

Prediction : The US economy will grow at greater than 3% in 2006, even as oil remains above $50/barrel.  We will have adapted to the new reality, and will be permanently able to withstand oil prices as high as $70/barrel without a problem. 

January 27, 2006 in Economics | Permalink | Comments (1)

Digg This | Save to del.icio.us

China's Economy grew 9.9% in 2005

China was once again the fastest-growing large country in the world, with 9.9% growth in 2005 on top of 10.1% growth in 2004.

This incredible surge, which began in 1979 or 1991, depending on how you look at it, has lifted over 400 million Chinese out of poverty, helped China rise greatly in almost all meaures of human development, and kept the world economy growing at a higher rate than that of the United States.  At the current rate, China will become a developed country (a country with a Human Development Index score greater than 0.800) by 2010, putting China roughly at the level of human development the United States had in 1960. 

However, I also submit that China will have to evolve into a genuine democracy to advance their society beyond that level in the decade following 2010.  I submit that to truly become a wealthy nation, China will have to foster innovation, creativity, and self-determination at the grassroots level, and cannot achieve this as long as the Chinese Communist Party controls Chinese society this tightly. 

China thus cannot become a superpower without evolving into a Democracy, contrary to what the fashionably anti-American crowd would have the world believe. 

A bit of perspective is in order. 

Consider that America is still condemned heavily for slavery that ended in the 1860s (sometimes even from countries that had slavery until well past that period), yet China is criticized relatively less than that for their invasion of Tibet during the 1950s and their Tiananmen Square massacre of 1989, just 17 years ago. 

Consider that when there is a tsunami in the Indian Ocean or an earthquake in Pakistan, America is criticized for not providing enough aid soon enough.  Few voices are even asking the supposedly emerging superpower on the same continent for aid.

America is criticized for not proving enough humanitarian aid to Africa, despite the billions already provided.  How often do you hear anyone suggest that China should also donate aid to Africa?

As the world's lone superpower, America carries a heavy burden.  Being held to a standard that no other country is held to, and being criticized for solving only a few, rather than all of the problems in the world, is something Americans have grown accustomed to.  Those who are so quick to conclude that China will achieve parity with or even surpass America have to consider just how many burdens China has to be prepared to carry before it can occupy the same echelon.

Prediction : China evolves (perhaps with several painful incidents) to a democratic model by 2015, or its growth rate slows down dramatically after 2015, to a rate not much faster than that of the US.  The two are mutually exclusive, so one of the two must occur. 

January 25, 2006 in China, Economics, Politics | Permalink | Comments (5)

Digg This | Save to del.icio.us

UN Human Development Index

The UN publishes an annual report on human development each year, which produces a composite score for almost all nations in the world, based on indicators like per capita income, life expectancy, literacy, higher education, diffusion of technology, patents generated, etc. 

The world map below displays the approximate development level of the world's nations, with the greener nations being more developed, and the redder nations being less developed (source : Wikipedia). 

800pxhdimap_current_2

Wealth and poverty can be measured in both relative and absolute terms.  In absolute terms, the progress in human development that has been made since 1975 is stunning.  See the table of Human Development Index progress here. 

In 1975, only about 20 nations had acheived a score of 0.800 or greater (the level that corresponds to being a 'developed' country).  By 2003, approximately 57 countries have achieved 'developed' status.

This can be linked entirely to the diffusion of technology, spread of globalization, and the emergence of the United States as the dominant economic model in the world, creating win-win trade arrangements with many other countries.

January 24, 2006 in Economics | Permalink | Comments (2)

Digg This | Save to del.icio.us

«

Search

Ads

Categories

  • Accelerating Change
  • Biotechnology
  • China
  • Comedy
  • Computing
  • Core Articles
  • Economics
  • Energy
  • India
  • Nanotechnology
  • Political Debate
  • Politics
  • Science
  • Space Exploration
  • Stock Market
  • Technology
  • The Misandry Bubble
  • The Singularity

Recent Posts

  • Why Baby Boomers Will Have a Troubled Retirement
  • Recessions vs. Depressions
  • US Recession Has Begun
  • The End of Petrotyranny
  • It is Time to Expose Misandry
  • Why Republicans Will Not Shrink Government
  • Carbonara
  • Taxation and Recession
  • The TechnoSponge
  • The Carnival of Creative Destruction
Subscribe to this blog's feed

Site Meter


Resources

  • The Economist
  • Instapundit
  • KurzweilAI
  • NextBigFuture
  • MIT Technology Review
  • Thomas Friedman
Add me to your TypePad People list

Archives

  • March 2012
  • December 2011
  • November 2011
  • July 2011
  • January 2011
  • November 2010
  • September 2010
  • July 2010
  • June 2010
  • January 2010

More...

FeedBlitz

  • FeedBlitz
    Enter your Email


    Powered by FeedBlitz