FORWARD BASE B

"Pay my troops no mind; they're just on a fact-finding mission."

Review of World 3.0

Venkat Rao’s Review:

http://www.ribbonfarm.com/2011/12/15/how-the-world-works-part-ii/

For Ghemawat, the irreversibility is simply a matter of the sheer scale and momentum of the processes underway. As he notes, by 2050 the world will have doubled in population, and will be attempting (based on the rise of the middle class in the developing world) to create a five-fold increase in average per-capita income.

I hadn’t really thought of the effects of simultaneous population increase (from 6 to 9 billion) and attempts to raise the standard of living (moving a large segment of the global population to the middle class).

To avoid structural collapse along the way, Ghemawat argues, we have no choice but to try and make globalization work. Reversal of globalization processes would be extraordinarily painful for large portions of the world’s population.

I agree with Ghemawat’s point that we don’t have much choice. I am much less optimistic that it is actually possible. A five-fold increase in global output means something like a steady 4.2% global growth rate for the next 38 years (and that’s without adjusting for inflation).

What’s more, much of the population increase will actually happen in the next 15-20 years (i.e., population growth will be front-loaded). If economic growth is not front-loaded as well, we will be left with several decades where growth fails to match the demand.

For the left, he takes a quick look at their pet ideas: highly local, self-sufficient economies built around organic farming, green practices and so forth, and quickly demonstrates that when you attempt to translate those ideas to a 9-billion-person planet, you basically fail. Those models are at best survivalist models for an elite.

But he does manage to convince that increasing global integration and regulation is the only real path forward. Those who hope for innovation-driven growth to deliver all the increase in output necessary vastly overestimate the growth potential of innovation by itself. For Ghemawat’s prescription to work, we need both Schumpeterian and Smithian models of growth to continue. And this is assuming that the increased global regulation will happen. In an era when individual nations are struggling to resist regulatory capture by the business world and regulate even their domestic economies meaningfully, hoping for sufficient international regulation to enable safe global growth seems rather optimistic.

For my part, I don’t think the challenge can be met at all. Instead, we will find growth lagging population growth, a period of demographic fatigue and middle class collapse in many parts of the world (a decline where it already exists, and a stillborn failure to launch in other parts of the world), followed by a very slow recovery through a Dark Age that will probably last at least a half-century beyond 2050. Since I’ll be dead well before then, I can safely make this prediction.

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