Posts tagged relationships

There is an awesome study completed in late 2010 called “Global Economy’s Shifting Centre of Gravity.” Ok.

Maybe not awesome to some people … but to me? Fascinating reading (I actually read it over my vacation which included some cocktails while reading & making notes).

Here is the net:

-          In 1980 the global economy’s center of gravity was somewhere in the middle of the Atlantic ocean.

-          In 2010 the center of gravity shifted to just east of Helsinki/Bucharest latitude (oddly the longitude doesn’t seem to vary much over time in this modeling).

-          In 2049 the center of gravity will shift almost two-thirds of the earth’s radius from the 1980 center to somewhere say in west Asia.

All that said … I would envision most people wouldn’t be surprised by this.

But there are some nuances to this study that should make people think a bit.

Its ok. I am not going to go into the modeling analytics … but suffice it to say this guy knows his shit and figured out a way to analyze economic power not by clustering (which is an important distinction) but rather center of gravity (it’s kind of like figuring out how to measure the dynamic behavior of spatial economic distribution rather than simplistic clustering).

He created some awesome (to me) cylindrical spatial global maps in which it is almost like viewing an economic holographic image.

I will spare you.

What I won’t spare you is what this means.

The income dynamics of the average location of the planet’s economic activity is shifting.

I think we all knew this in our gut but now we have actual proof.  And its kind of sobering proof for those of us in this hemisphere (I include South America, Latin America and North America into this pot of people).

That global economic activity moves east in this graphic fashion shows the rapid growth in incomes going to the large chunks of humanity who live in India, Africa, China and the rest of East Asia.  (note: population itself changes much more gradually therefore this sharp east-directed rise of the rest is not driven by population growth.)

Overall this shift is a reflection of a lot of good happening in the world. For example 600 million people have been lifted from extreme poverty – a large and rapid improvement in the well-being of humanity that is unprecedented in the history of this planet.

And there is more is to come.

In particular, Africa and China will remain growth areas (albeit each in different ways).

Now.

All of this could be interesting/concerning in a variety of ways.

First.

This isn’t just about money, or income, this is about power. Economic shifts lead to governmental shifts … and intellectual shifts.

Second.

Let’s talk “intellectual shifts.” Eliminating poverty (or limiting poverty) means releasing probably the greatest restraint to education. And mind power is the great equalizer.

Sorry folks … it isn’t democracy (or any real ‘freedom of’ … although some people may debate the cause/effect of that relationship). When economic shift permits an elevation of intellectual power that tends to be the formula for sustained shift in economical gravitational pull. Regardless of the type of government oversight.

I even have a historical example on economic opportunity (and how governmental shift is not enough) … and economic opportunity lost.

We have faced a similar foundational economic re-construct situation before … only to have the economic center of gravity remain skewed toward the western hemisphere.  And although the economic center of gravity was challenged at that time … there wasn’t the intellectual shift attached to the economic shift to sustain the movement.

Let’s look back at the last time we may have faced something like this.

The cold war.  Soviet Union versus United States (actually … the rest of the world).

The reality is that while Russia tried to fill the void (of prosperity … or maybe better said … ‘better than what is’) and sought to increase its empire-like global perspective under the guise of government doctrine … it was actually an economic battle.  Think people labor versus capitalism (simplistic but you get the point).

Russia was certainly good at destroying governments and economic construct.  However because of their economic corruption they were unsuccessful in replacing what they destroyed.

Ultimately that was their failure … not a failure of communism but a failure of economy first and foremost. And, in the end, their failure to sustain an economic shift meant that the intellectual power was never maximized.

I promise you that mistake will not happen again. In fact it is happening all over again … but the economic shift is being sustained.

There are three (to me) primary locations pulling the center of gravity. And I will outline each (and why we in the western hemisphere should sit up and pay attention).

The three? China, Russia, Africa.

China.

They don’t necessarily destroy governments and economies.  In fact they do the opposite.

They simply take less than successful scenarios and through economic success makes each … well … more successful.

Ok. There is a point here.

What most Americans (let’s say ‘outsiders’ in general) fail to see is the “more successful” part. Many people measure success off of what we have (or how high is up).

In fact it is through those eyes that we damn China today.

Take a step back.

As Mao suggested for China … success would be enabling the majority to afford another pair of shoes.

Not a mansion .. heck .. not even a house … just another pair of shoes … for a gazillion people.

And he did it.

And China has continued to grow.

Sure. It becomes more difficult from there. But that’s not the point.

Other ‘industrialized’ countries measure them in a different way.

And are being foolish by doing so.

China is being successful (for a number of reasons) but because they have taken what they have done well internally within their own country (helped a segment make the next step up) and go elsewhere and offer the same opportunity.

They are creating an infrastructure within emerging countries, and emerging economies, to ‘be better than what is.’

In Africa it is transportation and communication interface. In southeast Asia its internal infrastructure.

China is becoming an enabler rather than a destroyer.

Russia today.

In 2011 Russia released a list of more than five thousand strategic assets to be turned over to the private sector to operate instead of the government. This quasi-communist country is now privatizing.

And in Africa the picture continues to improve.

Wars have subsided and governments have stabilized and they are also adopting their own quasi capitalist-communist economic attitude, i.e., private subsidized by government.

Their average GDP has consistently grown almost 5% annually (actually 4.9% between 2000-2008).

Over the past 8 years over 80 million households have been elevated above poverty level – to a level where discretionary spending commences in the household. Telecommunications, banking and retailing is flourishing.

This reflects a significant rise in the African urban consumer. In 1980 28% of Africans lived in an urban environment and today 40% do. In countries where infrastructure is isolated, typically in more urban environments, this means that a more significant portion of the population has access to education, skills development and jobs.

In addition, African governments are increasingly adopting policies to maintain the economic growth as they privatize state-owned businesses, open lines of trade (foreign), strengthen legal systems and provide well needed physical & social infrastructure (a byproduct of that last factor is an increased labor force and economic distribution among the population).

So.

Having used those examples maybe I am maybe actually suggesting the bigger thought is a new communist-capitalism attitude shifting the economic center of gravity (I am erring on the side in my point of view that USA isn’t doing something wrong but rather that others are doing something well).

I do find it impressive that traditional & evolving governments have attained this balance of communism embracing capitalism.

Historically, the two are ideologically irreconcilable. Yet even the traditional communist based governments are proving to be quite pragmatic in supporting pro-growth economic policies (by non traditional communist means).

China has unapologetically stuck to communism in every other sense of government policy (and Putin’s Russia certainly leans in that direction as well as a number of more dictator/authoritarian based governments in Africa).  Yet these quickly growing economies are characterized by low, stable business tax rates, responsible government spending, reasonable levels of regulation and incentives for business expansion.

As a result, their economies are expanding, businesses are thriving …. and maybe more importantly … the population is gaining a better way of living.

Once again … in my words … better than what they had.

Yes.

It is interesting to me that it is the economies of communist (or communist like) governments are thriving due to capitalism and responsible pro-growth economic policies.

And because of all that we are seeing a shift in the economic center of gravity.

Anyway.

Sorry. I digress.

Ok.  Getting back to the center of gravity.

This study reflects how we should be looking at things. Millions of millions of people in developing countries are becoming more wealthy.

Exorbitantly? Nope.

Wealthier? Yes.

Simply moving all developing countries (or the majority … call it a ‘large mass’) to non-poverty from poverty is a massive shift. And by doing so it enables that population to be more productive. More healthy.  More educated.  More knowledgeable.

This funny Maslow chart reflects that as additional personal needs are fulfilled it induces new needs (which we, as humans, constantly improve ourselves in order to further attain these ‘self actualization’ activities).  Think about this from a non-funny sustenance perspective in growing from poverty to non poverty (but the dimension perspective will always reside in the human mind).

This is simple shit.

But we in the ‘industrialized world’ get caught up in the wrong issues … we assess success by where we are today .. (silly silly people).

Ok.

Be careful with what I say next.

While USA focuses on government constitutional aspects and “enhancing their constitutional situation” … China is focused on economy.

Now.

I am a HUGE freedom of guy.  But.  If you want to grow and expand your government/country/culture more … a good economy is a really good thing.

But having a realistic point of view on economy is an even better thing.

Maybe if we look at the shifting economic center of gravity here in the western hemisphere we shouldn’t look at it as a loss of stature but rather maybe we should seek to gain some learning.

Is this post a message to our government and regulators? Nope.

This is a message to you & I that we have it pretty good here in the good ole USofA.

Is it as good economically as it was? Nope. Is it good? Yup.

It’s an attitude issue for ‘we the people.’ Because with the right attitude then we can create the right behavior.

But that is my next economic article.

A rant on the everyday American’s economic behavior (because other cultures aren’t as addicted to spending as we are).

Hope you enjoyed.