Big Questions On Empires But No Easy Answers

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“Have an amazing day.”

That’s right. Not a “good” day. Or even a “nice stay”… “great afternoon”…or a lifeless, automated “enjoy your coffee”…

No. Have an “amazing” day.

In Paris, one counts himself as lucky if the barista bothers to bring the coffee at all. Here in Canada, it’s delivered promptly…and replete with impossibly kind salutations and difficult-to-live-up-to well wishes. The difference is…amazing.

Your editor is back in Vancouver for the annual Agora Financial Investment Symposium. These things are just swell. Each year, we sit in the back of the room, listening to the speakers, wearing our (invisible) reporter’s cap…and all the while wondering what’s going on…

This year’s theme is Innovate or Die: Empire at a Turning Point. Which Empire, you ask? We don’t know. Could be the US Empire. Could be the Western World Empire. Could be the Global Central Bank Empire…or the Empire of Useless Theories, Dunderhead Policies and Unsustainable, Crackpot Ideas. Maybe all of the above. No doubt each speaker will have his own take on the subject and, we suspect, their own series of questions, calculations and learned hunches.

Take, for example, yesterday’s opening speaker. Niall (pronounced “Neil,” like the astronaut) Ferguson is a filmmaker, bestselling author and renowned economic historian. Like most honest individuals, Mr. Ferguson doesn’t pretend to know what’s going on.

He has hunches, yes. But more than that, he has what nobody in government ever has: Questions. Here are Mr. Ferguson’s “Big 6,” the questions he sees as deserved of our best thought and most careful contemplation, the questions that will help get us thinking about where the world will be five…ten…fifty years from now:

1. Can the US solve the clash of generations?
2. Can Europe avoid a “Jenga moment”?
3. Can the Rule of Law come to China?
4. Can the Muslim world have a reformation?
5. Can Africa overcome Malthus?
6. Can the resource curse become a blessing?

Of course, you could write a book trying to answer any one of these questions. Indeed, many people (including the speaker) already have. But even these big questions focus on small parts of a much larger theme. Broadly, Mr. Ferguson sees a “great re-convergence” underway, where the East is quickly regaining its historical position as a powerful presence on the world stage.

Over the past couple of hundred years, really since the Industrial Revolution, the west has pulled ahead of “the rest.” Standards of living rose drastically in the Anglo Saxon world. Wages shot up in Europe and the US. Life expectancies increased too. Despite their state’s best efforts (wars, financial crises, depressions, etc.) human beings generally thrived in these parts of the world. The East lagged.

Not any more…

The East has, according to Ferguson, “downloaded our six killer apps.” In other words, the Chinese, Indians, Indonesians, etc., have learned (or are fast learning) to emulate those societal attributes that once catapulted the West so far ahead. And they are “downloading” the newest versions…in some aspects superior to the Version 1.0 used by western nations. Mr. Ferguson’s “Six Killer Apps” are:

1. Competition
2. The scientific method
3. The rule of law
4. Modern medicine
5. The consumer society
6. The work ethic

All this won’t happen overnight, of course…but by many measures, the West is already falling behind…or at least coming “back to the pack,” like a group of breakaway cyclists slowly being reeled in by the pursuing peloton.

We’re just 4 years away from China overtaking the US as the world’s largest economy (with an 18% share of global GDP). Moreover, by that time, 2016, the US will move into third place as the most indebted nation on the planet, behind only Japan and Greece. Indeed, according to CBO estimates, by 2050 ALL of federal tax revenue will be required to pay the interest on the US debt.

Obviously, this situation is untenable. So, what happens next? We begin to witness the end of an Empire. Which Empire? It’s hard to say, really. So let’s just go with: one, some or all over those mentioned above…

Regards,

Joel Bowman
for The Daily Reckoning Australia

From the Archives…

China’s Coming Assault on the Western Financial System
20-07-2012 – Greg Canavan

Has Bernanke and the Fed Discovered a New Invention in Wealth Creation?
19-07-2012 – Greg Canavan

Why You Should Watch Your Blind Spot For An Oil War
18-07-2012 – Dan Denning

Flexible Investing to Become a Relaxed Investor
17-07-2012 – Murray Dawes

China’s GDP Figures… Lies… Damned Lies?
16-07-2012 – Dan Denning

Joel Bowman
Joel Bowman is managing editor of The Daily Reckoning. After completing his degree in media communications and journalism in his home country of Australia, Joel moved to Baltimore to join the Agora Financial team. His keen interest in travel and macroeconomics first took him to New York where he regularly reported from Wall Street, and he now writes from and lives all over the world.
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Rick W
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Your comment on Japan being indebted is plain wrong. Japan has a net foreign investment position of USD3.2tr:
http://www.boj.or.jp/en/statistics/br/bop/index.htm/
The most per capita savings of any G20 nation. And Japan is continuing to run current account surpluses. Every person living in Japan could produce absolutely nothing for about 9 months and call in their investments/savings from around the globe.

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