Justus For All

A Baffling Global Economy

Today’s global economy baffles experts — corporate executives, bankers, economists — as much as ordinary people. Countries are growing economically more interdependent and politically more nationalistic. This is a combustible combination. The old global economy had few power centers (the United States, Europe, Japan), was defined mainly by trade and was committed to the dollar as the central currency. Its major countries shared democratic values and alliances. Today’s global economy has many power centers (including China, Saudi Arabia and Russia), is also defined by finance and is exploring alternative currencies to the dollar. Major trading nations now lack common political values and alliances.

I think this is a pretty accurate picture of some of the challenges the economy faces. I expect that a lot of the turmoil we are seeing is based on unanticipated consequences of globalization and technological change. I also expect that since it is likely the technological change will continue to accellerate, we will see a whole lot more unanticipiated consequences from an increasingly inter-related and more complex world.

It is fairly obvious that growth and stability are both desirable, and also inherently antithetical concepts. Generally speaking in human history, their has been a bias towards seeking stability, partially of course because intrenched power structures were obviously the primary beneficially of keeping everything the same, but even more, I expect, was because growth was very difficult to achieve. No one would want to trade stability for a very small amount of growth, and of course it always has been true that if growth leads to too much instability, that growth can easily be whiped out by factors that are not strictly economic (war, revolution etc.).

Recently though, over the past couple hundred years and at an accellerating pace, it seems that the balance has shifted. Dynamic systems produce a lot of growth, and the benefits of growth are large and easily seen. More dynamic political systems, democracies in particular, have been able to take advantage of technological change, although they have also adapted by introducing artificial stability, such as social security/pension systems and in most cases socialized medicine, to combat the uncertainty of an inherently unstable environment.

It is starting to look like the balance has shifted further, with even greater economic growth (and yes, despite recessionary indicators we are still expirience intense growth in the availibity of goods and services, which is what an economy at its most basic is) has come what is perhaps an intolerable degree of instability.

I don’t have any easy answers for this problem. I expect that the old solution of trying to create artificial stability through government redistributive programs will prove insufficient to the speed and scale of technological and hence economic change, quite possibly proving counter productive to stability as well as economic growth. I do think that this is something we need to be deeply considering about.