The changing face of economic activity
By Eddie Cross
I watched a long interview with a Chinese businessman who has in just 7 years created one of the largest companies in the world. He is 52 years old and looked 30, open necked shirt and very relaxed as he described his business model which had created an estimated 30 million new jobs in China and throughout the world. The model is internet based and used new “cloud” technology to enable hundreds of millions of Chinese consumers to buy on line. The company has the decidedly non Chinese name of Alibaba.
He said he left the operational side of the business to the professional managers who ran the main company. His job, he described was to think about the future and to plan how they were to grow in the next 20 years. He felt that what they were doing would overtake global efforts at trade agreements and usher in a new era in which all world citizens would have access to online trade facilities which would be global in character and free of all current constraints. He described the 21st Century as one that would be driven by the service sectors of national economies.
This is already true of many economies – Britain’s GDP is 70 per cent services and shows no sign of slowing momentum. The news today that the fastest growing economy in the world is Singapore’s with growth approaching 10 per cent per annum at the end of 2016 serves, to endorse this new view of how the world economy works today.
The promises of Donald Trump to bring back the rust belt industries of the past are clearly not going to happen – nor is it in any way appropriate to the sort of economy that is emerging in the States. Obama has done remarkably well – but I am not sure he understands how it happened.
Under his leadership the USA has come out of the deepest recession since the 30’s, out of a collapse of the financial system that threatened the wider economy, he has been able to raise average incomes per capita to record levels of nearly $53 000 and has ridden a wave of job creation that has seen the jobless rate in the USA halved in 8 years with the creation of nearly a quarter of a million new jobs every month for nearly 8 years.
When you know how tough it is to get these sorts of results, you can understand and recognise how remarkable an achievement this was in an economy as large as that of the USA. But cast your eyes across the vast swathe of Europe – Germany steams ahead, biggest exporter in the world, highest incomes in Europe, one of the most equal populations on the globe.
Finland, tiny, isolated and half frozen most of the time; its young people spend less time in school than any other group in Europe – yet they consistently perform better that any other country. Sweden, much like Finland – massive social welfare burden, very high tax levels and yet maintaining its strong manufacturing base and competitive edge.
The new Tiger economies of the Far East: Thailand, South Korea, Malaysia, Viet Nam and China and of course the third largest economy in the world, Japan. All have several features in common, they all spend a lot of money on education; they have hundreds of millions of their young people learning English – the language of science and technology and global commerce. They have used global markets for trade goods to grow their basic economy until it can support the next generation of intellect based growth.
As the founder of Alibaba said in his interview, the next generation of economic drivers in China is now leading the way with double digit growth while the “old” industries of manufacturing and exporting trade goods are shrinking.
In this amazing new world order I am not surprised that a new generation of modern luddites has emerged in the form of the people who turned out to vote for Trump. People who do not understand the new world order that is emerging and cannot cope with the changes that it demands of all of us.
This new economy is capable of producing surplus on a scale never seen before in history. So today you can have a country like China which has been able to rise like a dragon from the sea on the back of money borrowed from the old economies – $256 trillion in all. Let me tell you that is a whole pile of money.
I understand that at any one point in time there is $100 trillion in liquid cash sloshing about in world financial markets – looking for safety and a return. That is how countries that find the right mix and take off at a rate that makes the industrial revolution in Britain in the 19th century look like an economic swamp.
So what must we do to prepare our young people for this new world order, one that is clearly going to dominate our lives for a long time to come; success will be rewarded with spectacular growth and rising incomes, a better quality of life and longevity.
We must first accept that the vulture regimes that have become almost the norm in African societies since Independence, have to be removed from power and replaced with Governments that hold limited power and control, manage devolved systems of administration and are both prudent and careful in how they manage public finances.
The news last week that in the past ten years Africa has been losing via financial leakages, over US$40 billion a year and that corruption, in all its many forms, absorbs similar amounts of money which would otherwise be translated into surpluses and investment capital, shows the extent of the problem.
The team of investigators who produced these numbers described many African governments as “looting machines” designed to transfer huge sums of money from private and public sources to connected individuals. The son of one of the poorest States in Africa, lives in Paris and is reported to be occupying a home worth US$120 million. He has a fleet of luxury cars and collects expensive artifacts and trinkets. The French are prosecuting him under anti corruption laws and the outcome will be interesting to watch.
In a country like Zimbabwe, with a Marxist President in power for 37 years, the regime he has created taxes our population at the rate of 25 per cent of GDP, steals another 15 per cent of GDP each year and if you add all forms of other taxes levied on our hapless population (license fees, police fines, levies on employment) it must add another 10 or 15 per cent.
You simply cannot take more than half the total value of all economic transactions out of an economy like ours and expect it to grow. It does not happen and that is why we are one of the poorest countries in the world with no growth to speak of to show for 37 years of “freedom and democracy” after “colonial domination”. The tragedy of countries like Zimbabwe is that many argue that only recolonisation can “fix” the problem.
There is no future for anyone under these parasitic regimes and I now feel that we have to uproot them from our society in order to allow progress. We have to treat them the way the Germany government treated the regime in East Germany, after the wall collapsed. We have to rebuild our society up from the rubble of our recent past, because that is all that is left.
We are fortunate because we have still got the richest natural resource base per capita in the world and an educated minority who are widely recognised as innovative, hard working, well rounded and capable. 90 per cent of this elite is in the Diaspora where they are playing a key role in the modern emerging markets in the countries in which they live. All we have to do is reestablish confidence in our country, its legal and judicial system, and guarantee that the assets people create from their own initiative and drive will not be stolen from them.
Then we need to ensure that our young people get an education that will then enable them to compete in the global markets of the world. We know how to do that – our school system is quite exceptional and despite all the nonsense that has been thrown at them over the past three decades, remains one of the best in Africa. Put more money into this system and the results will be dramatic.