A world of new economic species

The big paradox of our modern times is that, while there has never been such a high rate of discoveries, there haven’t been any uniquely new consumer goods in the past 30 or 40 years or so.  Since then, the typical modern citizen in advanced . . .  countries has all the same status goods and services — no more and no less — albeit in modern guise — as kings and emperors of old always had, though their minions didn’t.

It is this that the modern soothsayers, economists, haven’t been able to grasp yet. This is the reason why advanced governments — deeply, if not completely, reliant on soothsayers as they always are when in peacetime — are at such sixes and sevens.

Because China and one or two more Asian tigers have pretty well mopped up the manufacture of most of our consumer goods (cars and modular homes being about the only exceptions — so far!), it is the reason why the eyes of all of the advanced world’s economists and governments are transfixed on China at the present time in the recent difficulties caused by a sudden lull in Third world demand for its consumer goods exports.

If we are making so many discoveries then what is happening to them?  They are now going into the goods and services that kings and emperors of old never had — or had very little of, anyway — infrastructure (including production methods and expenditure on basic scientific research) and complex personal services.

As for infrastructure, the Romans and the Incas developed extensive roads throughout their empires, and the Chinese a 1,000 mile grand canal linking the north to the south, but that was about the extent of it.  Kings and emperors were not in the slightest bit interested in production methods or basic scientific research, both inconceivable as major activities — if they had any meaning at all apart from being of interest to individual eccentrics — until about 250 years ago.

As for complex personal services — finance, health and education, particularly — kings and emperors had personal chancellors, tutors and doctors for themselves and their children but they were ad hoc appointments each time and were never developed for their citizenries.  Ordinary people had to make do with mainly bartering, folklore remedies and whatever job skills they could individually pass on to their children.

Since the development of the modern bureaucratic nation-state, roughly since Napoleonic times — simultaneously with the industrial revolution — governments have started to dabble in both infrastructure (e.g. roads, railways, water, electricity, etc) and personal services (health care and welfare for the old, handicapped and unemployed, education for citizens’ children, etc) but without any great success, at least in the larger nation-states.

The problem here is that the more populous the nation-state, the more hierarchical and top-down the bureaucratic skeleton that has to support it has to be.  There is nothing wrong with hierarchies as such — rank-ordering is deeply instinctive in all mammalian species such as ourselves — hierarchies work very well in small organisations where personal leaderships are knowable, accessible and easily replaceable — it’s the big ones that are problematical.

In these immense pyramids of power, all the information that is necessary for good decision-taking either becomes filtered and distorted by intermediary power-holders on its way to the top, or some of it is jettisoned and never gets to the decision-makers at all until long after the time when it would have been maximally effective.

One result of all this is that all the over-large advanced nation-state governments — any above about 20 million people I would suggest — are suffering from increasing lack of credibility and respect from their electorates.  This is not a recent development but a phenomenon that has gathered pace ever since nation-states reached their peak of effectiveness, say around the 1950s/’60s.

Another result is that there are now strong devolutionary tendencies in the over-large nation-states pointing towards smaller, more acceptable governments.  But we have two distinctly different varieties of these tendencies.  One of these is of a more cultural nature — such as the Scots in the UK, and the Basques in Spain — which simply want smaller governments.

The other is a by-product of the strong need of intellectuals, specialists and research scientists to meet together in order to discuss and stimulate new ideas.  We have always had cities ever since we left hunter-gathering but it’s only been in the last 50 years or so that we are seeing the emergence of what we can only call city-states or potential city-states — such as Singapore, Hong Kong, Shanghai, London, New York, Los Angeles, etc.

None of the city-states are expressly aiming for self-government (except perhaps Hong Kong so far, and Singapore which already has it) but this will be inevitable in due course.  It is within these city-states that the greatest part of advanced scientific research is now being concentrated. It is these which are now at the forefront in the design of new infrastructure (informational as well as physical) and advanced personal services (financial, health and education particularly) which, in addition to domestic use, can also be traded with China and one or two other Asian tigers in exchange for their physical goods.

So to return to my opening theme, existing governments and their economist soothsayers, ought really to wake up to the major transformation that is now taking place.  Economics based on nation-states don’t cut it any more. Economics text books and academic training courses in economics pivot around the manufacture of money by nation-states which occurred from the 1930s but  ought to incorporate the many profound changes that are taking place in the world’s economy as a whole.  A total re-jigging of what’s conceived to be going on is necessary in order to make sense of it.

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