Has the Long Slow Fuse Been Lit?

How long can China maintain its recent growth rate?

I was sitting on a passenger train next to a freight train that was full of containers going to and from China musing on just that question. A quick calculation revealed that, if current growth in port and shipping capacities continue, and if Chinese exports of manufactured goods continue to grow at their present rates, then by 2012 to 2014, every ship in the world will be involved in the China trade and, sadly, there will be insufficient port capacity to land the goods.

If this ridiculous scenario is to be avoided, then more carrying capacity needs to be developed (a possibility), or the Law Of Large Numbers will apply to the Chinese economy (far more likely). The Law Of Large Numbers is easy to comprehend. If we want to increase our income by 10% each year, then it is easier to move from £10 to £11 than it is to move from £100,000 to £110,000. As China weighs heavier in world trade, we would expect the rate of growth in China’s trade to diminish. This is the Long Slow Fuse.

We have seen something similar in the recent past in relation to Japan. In the 1960s, the growth rate of Japanese exports was quite considerable when compared to European and US growth rates. However, the Long Slow Fuse had been lit. It detonated in the 1980s, and consigned the Japanese economy to an unwinding that has taken the best part of a generation to work out. We are of the view that a similar process will occur to the Chinese economy.

Three recent stories support our view. First, there was a story in the Wall Street Journal about the triangulation of Chinese exports to avoid quota restrictions (see article). Second, there was an article in The Business about how the Chinese sovereign wealth fund ($300 billion this year) is being steered away from US T-Bonds, where the weight of Chinese money (currently $1.2 trillion and rising) is forcing down rates for investors, and into Private Equity in a search for higher returns (see article). Finally, there was a report on the BBC about how the Nanjing Automobile Corporation had re-opened a car plant in the UK (see story). This is part of a trend where Chinese companies assemble within the EU as a means of avoiding export quotas to the EU.

What all three of these stories have in common is that they represent actions taken by Chinese companies to avoid the Law Of Large Numbers, and represent, to our view, evidence that the Long Slow Fuse has been lit. If so, we might ask, will it end with a bang or with a whimper? That is, possibly, a more important question.

Youth Irrational Exuberance

This week at the Time Bandits we looked at Youth Irrational Exuberance. It talked about how children all over the world are aiming for goals that are too hard for most of them to achieve. So I asked the Time Bandits what their goals are, a few answers were: move away from England, be a blacksmith, have children that love you, get a good job. But there were some that were quite impossible like take over the world.

The Time Bandits really thought that what the article was saying is all true as none of the Time Bandits had much idea of how to accomplish that goal. But when the Time Bandits started talking about blaming people most of their faces were blank, so who is really to blame?

One subject that we have in school is a lesson called “careers”, which talks to you about your future and your job. The Time Bandits didn’t think this was a good lesson to have as it gives you information about jobs like being a fruit picker on a farm which not many people want to become, also when you ask about a job that you are interested in like being a futurist they can’t come up with an answer. Overall it was unanimous that “careers” were not helping us very much. A Time Bandit told me, also, that when she was in class and was constantly good she is very rarely praised but when someone who is usually bad is good for a lesson they get a ridiculous amount of praise. This could help to pollute young people’s minds to aim for goals that are out of their reach. I think the main way to stop this is for young people to be realistic in what they think about.

23rd May 07

The Revenge Of The Bean Counters

It is hard to get excited about accounting standards. And yet, these small, seemingly inconsequential, things have a great impact on our lives. This was brought to the forefront of my mind this week through an article in The Economist about accounting standards (see article). Apparently, there are two key approaches to accounting standards – the Rules Based Approach and the Principles Based Approach.

The Rules Based Approach is just that – accounts have to be produced to conform to a set of rules that govern the construction of a set of accounts. The problem is, as Enron quite ably showed, that a set of accounts may conform to a set of accounting rules, but paint a misleading picture of the state and performance of a company. This is where the Principles Based Approach has the advantage. Not only must a set of accounts conform to the letter of law, it must also conform to the spirit of the law as well. In this case, the role of the independent auditor becomes far more important, particularly if they have a statutory duty of care to a widely based community.

It would appear that the Principles Based Approach (mainly adopted in Europe and Asia) is driving out the Rules Based Approach (mainly adopted in the US), as the users of accounts (primarily the investment community) demand ‘true and fair’ accounts from companies. This has two important futures points – one trite and the other profound. The trite point is that it gives an example of how ‘Europe’, as argued by Mark Leonard (see our review), will run the Twenty First Century by dominating the cultural infrastructure of globalisation.

This leads to the more profound point. If we accept, as Thomas Barnett argues in ‘The Blueprint For Action’, that globalisation consists of the harmonisation of national rule sets into a single global rule set observed by all of the ‘insiders’ to globalisation, then the harmonisation of accounting rules is central to that process. As it happens, I have recently encountered the XBRL programme (see link) which aims to harmonise the electronic infrastructure of international financial reporting. To conform to an EU Directive, all UK company accounts will have to report in XBRL from 2011.

This will have the effect of binding the process of globalisation even tighter than it is now. The Chinese companies listed on London’s AIM market will have to report in XBRL, as will the Russian energy companies that have sought listings in London. The impact of this change will be to make national differences even less significant than they are now.

I wonder how long it will be before this commercial transparency and accountability feeds into the political arena in both China and Russia?

The Dragon And The Tiger

It is often suggested that, in the longer term (say to 2050), India will have a developmental advantage over China because India is a functioning democracy and China is not. Leaving aside the question of what would constitute a functioning democracy, why India would be included in this category, and why China would be excluded; we are left with an empirical question as to whether or not democracies favour long term development. However, before looking at the facts, it is worth examining an explanatory model.

The causality of the linkage between democracy and development is rarely explained. There has been as association between the two in the past, but we do not know whether this is simply coincidental. When models are propounded, it is along the lines of platitudes rather than reason. For example, in an article in The Futurist, it was stated that ‘the incremental efficiencies of India’s democratic government are likely to overcome the greater short-term efficiencies of China’s command system’ (see abstract of article). We are not told why this should be the case.

The Economist surveyed this question a couple of years ago (see article). It would seem that the evidence suggests that autocracies have an edge over democracies when it comes to development. The causality model is quite simple. As prosperity increases, the democratic process is called into action to share the increase in prosperity more widely. In turn, this slows the process of development as funds that otherwise would have been earmarked for investment are instead used for wealth redistribution.

The Business this week carried an interesting example of this process in action (see article). The article describes how the Indian government, emulating the Chinese government, have attempted to establish special economic zones. This process has been inhibited greatly by protests – both legal and extra-legal challenges – to the detriment of the policy. In India, as the actions of government are subject to democratic review, policy-makers do not have the same freedom for action as the policy-makers in China. Local interests are not so easily swept aside for developmental projects as they are in China.

In the long term, this could develop into a situation where China is the richer country, but India is the nicer place in which to live. Perhaps this is the Asian version of the Atlantic dilemma?

Water Wars?

John Petersen of the Arlington Institute recently brought to our attention an article on Live Science that forecast a future in which nations across the globe would compete for water as a scarce resource (see article). This would result, the authors claim, in a world in which was "even more prone to wars, terrorism and the need for international intervention". Is this something that should worry us?

It would seem that the forecast relies upon two key assumptions. First, that water will become more scarce in the future, and, second, that conflict will be the appropriate response to water shortages. Each of these assumptions deserves further scrutiny.

Much of the argument that has been applied to Peak Oil is curently being applied to water as a resource. If the current rates of growth in demand and the current rates of growth in supply continue, then water will become a very scarce resource. Of course, in reality, this is unlikley to happen in quite this way. The models that predict this future tend to be linear and static, whereas the future is very often better explained by non-lienar and dynamic models. Our future may involve a scarcity of water, but the forecasts of desertification may prove to be a little too exaggerated.

Even if the linear forecasts are correct, does it necessarily follow that violent conflict will result from competition for water as a scarce resource? One the one hand, we could argue that it will. We could point to events of the summer of 2006, when many commentators felt that the Israeli push towards the Litani River was more to do with securing a watershed than anything else. Indeed, we could argue that the Israeli occupation of the Golan Heights is about securing a key water source.

On the other hand, we can see that violent conflict will not necessarily result from competition for water as a scarce resource. For example, if we take a nation in water deficit (e.g. the United States) that has a common border with a nation in water surplus (e.g. Canada), then surely it would be absurd to suggest that the water shortage in the US will result in military intervention in Canada to secure water assets? This might provide an interesting wargame, but any serious proposal along these lines is based in a world of fantasy.

It is easy for those who think in linear terms to arrive at a future that is quite undesirable for us all. However, there are feedback loops in the system, such as market based pricing mechanisms, which ensure that the system behaves in a non-linear way. Those golf courses in Arizona may well stay green through the use of Canadian water, but just how expensive will that water be?

Peace In Our Time?

I was attracted to an article in the Economist that reported on a thawing of diplomatic relations between China and Japan (see article). In recent years, relations had not been as cordial as we might have hoped them to be, and the apparent thaw may imply a significant change that will impact upon the future.

In our work, we have come to the conclusion that the relationship between China and the US is highly likely to be the most important relationship for America over the next two decades. This view of the US, however, is not likely to be reciprocated as the most important relationship for China is likely to be that between China and Japan.

Both nations have a contiguous border in the East China Sea and the Yellow Sea. The borders in that area (which has Taiwan at one end and North Korea at the other) are not settled by treaty, and contain islands over which sovereignty is claimed by both nations. A factor that is complicated further by the presence of oil and gas deposits around the disputed territories. In our simulations to 2025, this area is one of the key flashpoints to disrupt the global system.

In recent years, Japan has become a major contributor to the flow of Foreign Direct Investment into China, and China has become an important supplier of manufactured goods to Japan. In our model of globalisation, the development of a harmonious relationship in East Asia is quite an important factor in the further development of the global economy over the next couple of decades.

In our scenarios, the more nationalistic either China or Japan becomes, the more political conflict is likely to prevail. Equally, the more liberal each nation becomes, the more the process of globalisation is strengthened and deepened. If the story does signify a move towards the liberal, this bodes well for us because it diminishes the liklihood of the process of globalisation being derailed.

We shall carefully watch how events unfold in the coming months.

Living In The Age Of Spin

In the book '1984', George Orwell introduced us to the concept of 'Newspeak' - a language where everything was turned around. The Ministry of Peace was the Ministry of War and the Ministry of Truth simply told lies. I reflected this week on how prophetic this book was. In the UK, we now have hospitals that cause rather than treat illness (see Article) and we have a popular party that redistributes wealth away from the poor to the benefit of the rich (see Article). How could this have come about?

In many ways, this is the result of moving towards a post-Information Age society. In a very prescient book, Rolf Jensen of the Copenhagen Institute of Future Studies introduced us to the idea of the Dream Society (we reviewed the book at www.eufo.org/dream.pdf). In the Dream Society, appearance takes precedence over substance. It is not what we are that is important, it is what we appear to be. We prefer the exclusive to the ordinary because of what it says about us as individuals.

In the public services, a consequence of this is that services are now judged not by what they deliver, but by what they appear to deliver. This is why targets and key performance indicators are so important. They create an illusion of achievement and distract us from the unintended consequences of that achievement. For example, we have greater throughput to our hospitals, which creates the illusion of achievement. It is illusory because the cost of greater throughput is the development of strains of disease that medicine cannot cure. Hospitals now cause rather than treat illness.

Of course, there is a reaction against the world of spin. This is the world of 'authenticity' and 'originality'. However, it can be hard, at times, to discern the authentic from the apparently authentic. There is a tide moving against spin, but it has yet to achieve critical mass. When it does, we are likely to see a substantial change in the paradigm of organisations.

It is worth looking out for signs of this change.

Alternative Futures

The BBC have recently run an interesting set of documentary programmes under the label of 'The Trap'. In the programmes, Adam Curtis argues that much of the current malaise in the West is the result of becoming seduced by the Thatcherite (read Reaganite in the US) agenda of the 1980s. It uses this analysis to chart the rise of political extremism throughout the world and the rise of militant Islam inparticular. (See Wiki for an article about the series, which links through to the BBC site, which has clips well worth watching).

The show started me to think about the idea of alternative futures. For example, had both Reagan and Thatcher lost their respective elections, how would the 1980s have developed? How would it have changed what we are now and how we are today? I was tempted to dismiss this as idle daydreaming, but, as I was working on the China chapter of my current book, the whole idea came into focus.

How do we classify the Chinese economy? It is certainly a market economy, but it is hardly a capitalist economy - the means of production are still, largely, owned by 'the people' and controlled by the Communist Party of China. In squaring this circle, I went back to some work from the 1930s undertaken by the Polish economist Oskar Lange, who developed a theory of market based socialism. This was really instructive in understanding how an economy could allocate resources using the markets, whilst organising the ownership and control of the economy as a collective vehicle.

Why is Lange so obscure? He published at about the same time as Keynes published his General Theory. In our interpretation of events, we rather take the view that Keynes saved market capitalism from itself (the Great Depression being a classic example of market failure), and so Lange wasn't needed. It is so interesting that he pops up again 70 years later just as, according to Adam Curtis, the whole system is starting to falter again.

If so have we always been destined towards market socialism? That would please the Marxists! Or do we chart our own unique path into the future? In which case history can't repeat itself.

The European Company

I was recently asked about the structure of the oil company Shell. For those who don't know, Shell is a company that is incorporated in the UK, which has its primary listing in the UK, but which has its head office in the Netherlands. It is increasingly difficult to think of a European company as a 'British' company or a 'Dutch' company. It is increasingly the case that we are thinking in terms of a 'European' company.

This is not entirely unexpected. The primary source of company law in Europe, irrespective of the place of incorporation, derives from the EU. Nations interpret the EU directives to suit local conditions - which is why it is much more dfficult to form a company in Belgium than the UK - and may subject the companies to a local Corporation Tax regime. However, the main trend is towards a corporate harmonisation across Europe.

Another example of this trend came to light this week. Barclays, a UK bank, announced that they were in talks to take over ABN Amro, a Dutch bank. Like Shell, the resulting company would be incorporated in the UK, with a primary listing on the London Stock Exchange, but with its headquarters in Amsterdam and a secondary listing on Euronext. This is a clever move, as it would give the bank a presence in the Eurozone without leaving the Sterling zone. (See article).

In many ways, this provides further evidence that the European Project is becoming less and less reversible. As we are now thinking in terms of European companies, national distinctions within Europe becime less relevant. I suspect that the next contentious issue will be the European taxation of European companies - possibly in the name of the harmonisation of EU-wide corporate tax rates. There is something like that already in place for VAT (an EU-wide Sales Tax), all it needs is to be extended to EU-wide profits as well as EU-wide sales.

In the coming months, we shall be scanning for progress in the field of tax harmonisation - it is the next milestone in European integration.

The Economist's Curse - Part 2

If it is the case that economic forecasting suffers from an inherent flaw (that of ceteris paribus - the future will be the same as the past), the question arises over why it is that this work continues to be produced? Even to the point of it flourishing.

We can start to understand this as part of a model of consumption - the consumption of information about the future. If there were to be no demand for information about the future, then there would be no production of information about the future. In this respect, it is the demand that creates the supply. Information about the future is demanded because we all have to make decisions in the present that have consequences in the future.

A good illustration of this point was provided this week by the decision whether or not the UK ought to act now to secure the option to renew Trident (the UK independent nuclear deterrent) in about 2020. (See article for story). The decision was whether or not to sanction the concept and design work for the Trident replacement, at a very significant cost to the UK Exchequer. Not to go ahead would mean saving the cost, but eliminating the possibility of renewal in 2020. To go ahead does not commit the UK to replacement in 2020, but does enable the possibility of its renewal.

In looking for an answer to this dilemma, an element of foresight was needed by the government. The key areas of foresight were whether or not a deterrent would be needed in the 2020s and under what circumstances a deterrent would be needed. To answer these questions, point forecasts of future deployment options were taken, and the advice was given to government that it could be envisaged that a deterrent could be needed in the 2020s and 2030s.

To deter which threat is something of a moot point, but we are living in an era of great change where we cannot presume that old relationships will last indefinitely, and Trident can target Washington just as easily as it can target Moscow. In undertaking this exercise, the probable futures have been determined. This is good government, but poor futures, as we have not considered a whole range of possible futures that could happen, but now won't because they have been excluded from consideration.

Of course, by excluding a whole range of posibilities, the act of decision making has been made that much easier. Perhaps this is why we live with the Economist's Curse? The Economist's Curse cuts the cost of making decisions about the future.

Perspectives Of Globalisation

An Evening Organised By The Tomorrow Network

The Royal Society, UK

12th March 2007

Participants:

MARTIN ALBROW, Centre for Global Governance, LSE

GEORGE YIP, Director of Research & Innovation, CapGemini

There are few who would argue against Globalisation being a feature of the Post-Modern age. However, when we go beyond the platitudes, there is little agreement about what exactly constitutes Globalisation and whether or not it is a good thing. On the one hand, it is globalisation that is blamed for throwing out of work thousands of workers in the industrialised West. On the other hand, it is the phenomenon that is responsible for 100 million people moving out of poverty in China and India each year. I was attracted to the evening by the prospect of resolving these apparent paradoxes.

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The Clash Of Civilisations

by Samuel Huntington

ISBN 0-7432-3149-X

I came to this book through the recommendation of others. In our research for the America 2025 project, we continually bumped into references to the model laid out in this book. This made it important for us to consider the model, if only to use it as a base line in assessing the work undertaken by others. In turn, the model has been quite influential in the formation of foreign policy in recent years, particularly as it provides a metric whereby we can include the Islamic world. For this reason, it would be inappropriate for us not to consider a work of such influence.

The civilisational approach is a useful start to considering international relations. It can be used to explain a number of conflicts within the contemporary world (e.g. in the Ukraine), but it also has its shortcomings. It is a useful tool for us to use, but not the only one. For this reason, I would recommend the book.

READ the full review.

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Paradise And Power

by Robert Kagan

ISBN 1-84354-177-7

Mr Kagan sets out his stall in the very first sentence of the book. We are told that: “It is time to stop pretending that Europeans and Americans share a common view of the world, or even that they occupy the same world.” I think, more than anything, it was this first sentence that drew me into the book.

We live at a time when many in Europe are seriously questioning the role of the USA in the world. This questioning of US leadership in world affairs has caused many in America to reconsider what the commitment of the US to world affairs ought to be. The rise of a unipolar system of international relations has also seen the increased willingness of the US to act unilaterally in world affairs. In taking up the book, I hoped to gain a deeper insight into this apparent rift that is developing between the US and its key supporters in Europe.

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The Rise Of The Creative Class

By Richard Florida

ISBN 0-465-02477-7

We seem to be living in a world that defies explanation. There are many features of the world in which we are living that we cannot explain from our past experience. We know that we are living in an era of very rapid change, and we do not have a framework that we can use to understand those changes. It is this sense of bewilderment – “Futureshock” as the Tofflers would have it - that attracted me to the book. I felt that it might help me to explain the world in which I find myself. We decided to incorporate the book as part of our Small Business Project, which has a keen interest in the future direction of the UK economy over the next 15 years or so, because it seemed to have something useful to say about small business formation and regional development.

The real test for an academic work such as this lies in its utility. Does the book help us to understand the world in which we live? I feel that it does, and I also feel that it advances our knowledge by a considerable degree. It provides an alternative to the established location theory, which might not be working as effectively as it needs to. By way of conclusion, I am very convinced by the arguments advanced in the book, and I have no hesitation in recommending it to all of those who have an interest in local regeneration, social development, and the Knowledge Economy.

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The Economist's Curse

What are the key attributes of a good piece futures work? In my mind, one of the key attributes is that the futures work does not take the future as a given. If, for example, we are looking out to the year 2050, we ought to acknowledge that there are many permutations of the future that are, at the present time, possible. It would be silly to argue that there is only one fixed and given future on the path to 2050.

It is odd, therefore, that economists do precisely this. We have moved away from the monsters of central planning that dominated life in the 1970s, but we are still plagued by those who feel that the path out to the future is inherently knowable and determined. That the future is nothing more than a set of simultaneous partial derivatives. As an example of this type of thinking, our attention was recently drawn to a piece emanating from the LSE which predicted that, in 2051, there would be 1,735,087 people in the UK living with dementia. (See article).

Even allowing for healthy margins of error - the number could be achieved in 2048, say, or 2053, or whenever, or never - this does sound a curious piece of work. To start with, the precision is so great that the number is not quite believable. A more credible prediction would be 1.7 Britons, which is eactly how the press reported it, rather than 1,735,087 Britons. The precision almost invites us to ask where the numbers came from. A summary of the report is publicly available (see report), but that is missing the point.

The point is the assumptions that the forecast uses. It assumes that the future will be like the past - ceteris paribus, as the economists call it. However, what happens if the future is not like the past? What happens if there is a major pharmaceutical breakthrough in the next 44 years? What happens if the nature of dementia changes? What happens if society changes the way in which it treats dementia? What happens if society doesn't age quite the way it is forecast to change in the report?

This is why economists are so often wrong - their curse is ceteris paribus. The future is rarely like the past. It is the understanding of this point that gives futurists, as a group of professionals, something to add to the debate. Futurists accept that the past can guide the future, but also that the future may not be like the past. It will be diffferent. We try to lift the curse of ceteris paribus.

The Future Of Security

An Evening Organised By The Tomorrow Network

The Royal Society, UK

28th February 2007

Participants:

AUDREY CRONIN, Changing Nature of War Programme, Oxford University

MICHAEL CLARKE, Kings College, London University


A secure future is something that we all hope for. However, our concern about the security of Civil Society is a recent phenomenon. In many ways, it is true to say that our concern started on September 11th 2001, as that was the date that the US engaged with the issue. Since 9/11, security has been an issue that has dominated international affairs. Not that 9/11 touched many nations. It did, however, draw in many nations as the US engaged with the issue.

9/11 has also determined how we define ‘security’. It has come to mean that we are secure from terrorist attack. However, in a wider definition, ‘security’ could have a number of different meanings. It could mean that we – the human race - are secure from hunger. Or poverty. Or disease. There could be a number of manifestations of ‘security’ that we have lost in recent years.

It is with these points in mind that I attended the evening. I did rather expect the programme to reflect the modern usage of the term ‘security’, as Dr Cronin is the Director of Studies at the Changing Nature of War Programme, Oxford University, and Prof. Clarke is part of the Centre for Defence Studies at Kings College, London. However, I was also interested in finding out how they thought the issue of ‘security’ might develop in the future.

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The Breaking Of Nations

by Robert Cooper

ISBN 1-84354-231-5

I was attracted to this book for a number of reasons. To begin with, Robert Cooper is a much respected commentator on International Affairs. He is one of the UK’s most senior diplomats and was formerly a special adviser to Tony Blair on foreign policy. Merely by being at the centre of events at an important point in recent history ensures that we ought to listen to what Mr Cooper has to say. However, Mr Cooper does have much to say that ought to be heeded if we are to understand events in the contemporary world. In the context of our “America 2025” project (see project), his book delivers an important conceptual model, which we will find of great use when undertaking the creation of the scenarios.

I see this as an important book, one that is worth reading. I liked the style of the writing and I found that I could follow the arguments without a great deal of effort on my part. Parts of the book were very illuminating and parts of the book contributed greatly to my understanding of the world. For this reason, I would recommend the book.

READ the full review

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The Russian Upswing

There is one school of thought that believes that much of what happens in the world is the product of cycles. If this theory is correct, then there would be no beginnings and no endings to human affairs - just undulations revisiting territory that we had seen before.

My attention was attracted to a piece in the Engish edition of Le Monde Diplomatique that seemed to take the view that we do, indeed, live in a cyclical world. Apart from providing an interesting perspective from the non-English speaking world, the article argues that we are about to see the re-emergence of he Cold War between Russia and 'the West'. (See article) Ignoring who 'the West' are, an interesting spin in the article is that President Putin is increasingly behaving as the Tsars behaved. (See list of characters).

This resonates with a view that we have taken for some while now. Enriched as a petro-economy, there is much evidence to suggest that Russia is likely to enjoy a resurgence in the short to medium term. How profound that resurgence is will depend upon how 'the West' reacts to it. We suspect that this is an issue where the interests of Europe will diverge from the interests of the US. We produced a scenario on this last year, where the US is isolated by a resurgent Russia and Russia wins the Second Cold War by 2018. (See scenario).

Of course, a scenario is not a prediction. It is a vision of what the future could hold. If we wish to avoid this vision (I certainly do), then we need to act in the present to avert this particular future coming to pass. So, when you leave a room, turn off the lights. It will help to lessen our energy dependency.

The Chaos Point

by Ervin Laszlo

ISBN 1-57174-485-1

Some would say that this is not an easy book to read. It throws out so many questions to the reader that, as you read the book, you find that your mind is moving off at a tangent for most of the time. It is, however, a book worth struggling over, as it is quite an important book.

I enjoyed the challenge of the book. It is a hard read – both in terms of style and content – but an important read nonetheless. It is worth the effort to struggle through the book because of the macro-model of the world that it presents. The argument is well reasoned – if obscure at times – and does actually sound a clarion call to action. I was convinced by the future worth creating and I rather hope that others rise to the challenge.

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The Fourth Power

by Gary Hart

ISBN 0-19-517683-9

This book is one of the most important books that I have read in recent years. Additionally, for those whose aims are to supplant the US in global geopolitics, this is an extraordinarily dangerous book. Gary Hart has simply re-stated the fundamentals that made America a great power. In doing so, he has breathed life into the concept of what it is to be American.

I really enjoyed this book. It is well written, the argument flows very well, and, although the topics are quite difficult at points, it is an easy read. The book is not too long, and does not dwell on points, which helps it to avoid being long winded. We can thoroughly recommend the book as it covers an important topic in an informed way, with a style that helps the reader to understand the points being made.

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The European Dream

by Jeremy Rifkin

ISBN 0-74-563425-7

It would be hard to argue against a proposition that something is happening in Europe. There is a force that first emerged after the Second World War that gathered momentum during the final quarter of the Twentieth Century, and is now starting to assert itself on the world stage. Defining exactly what that force is poses a much larger problem. We know that something is there, but we can’t quite say what it is. This lack of clarity on my part drew me to this book. I hoped that it would help me to define the essence of the European Project.

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Where Will It End?

It's always interesting to watch TV with young people. This week I was watching MTV with one of my daughters. We were watching the show 'My Super Sweet 16', which is a programme about the 16th birthday parties of reasonably well off children. (Click here for the Wiki page on the series). To date, all of the shows have been based in the US, but this is mere accident. They could equally apply to youngsters in London, Paris, Tokyo, or wherever there is a class of people with large amounts of money and not too many things to spend it upon.

I managed to catch Episode 23, where Nicole from San Francisco was given a party by her parents that cost $200,000 USD, along with a present of a car costing $49,000 USD. There were about 50 to 60 friends at the party. If the San Franciscans follow what we would see as normal rules of hospitality (if you come to my party, you are obliged to invite me to yours), then, on this level of spend, the group of friends would have had something in the region of $10 million USD to $12 million USD spent just on birthday parties.

Juxtaposed in my mind is this image from Hurricane Katrina (Click here for the image). What concerns me most is the apparent insouciance displayed by the Sweet Sixteeners towards groups such as the victims of Katrina. It appears that, in 'the West', we have great disparities in income, almost unbridled greed, and an indifference towards the less well off.

And perhaps that is where the futures point comes into play. In the past, in societies where there have been great inequalities in wealth, greed, and an indifference to one fellows, things have not ended happily for the well off. We think of France in 1789, which ended with the guillotine. We think of Europe in 1914, which ended on the Western Front. Even the Debbies of the 1920s - their world ended in the crash of 1929.

If this is a model that has relevance today, then are we close to an epoch ending event? If so, how will it all end?

Cold Winters Ahead?

A couple of articles on the BBC web site caught my attention this week. The first reported a survey from Scottish Widows (an investment company) that only about a third of self-employed people are saving enough for old age (see article). The survey is riddled with holes (for example, it only discusses the acquisition of financial instruments, which have been out of favour in recent years, and not property, which has been in favour). However, despite the reservations, the article sat well with a piece on the inability of UK pensioners to stay warm his winter (see article). We have just experienced a cold snap and this is something of a topical issue in the UK at the moment.

The articles describe the situation in the present. It becomes more interesting if we flesh the trends outwards into the future. If we add an overlay of climate change on top of the diminshed purchasing power of retirement incomes we start to see a point where our behaviour may change. For example, two people can enjoy the warmth of a room as much as one person. And so on until the capacity of the room is reached. I wonder if, in an environment of acute cold snaps, of soaring energy prices, diminishing purchasing power of pensions, we might see a move towards a form of communal living?

In many ways, we are. Many retirement facilities include a communal 'day-room' of some sorts. Churches are starting to place emphasis upon parish visitor groups. And, as the costs of elder-care soar, we are also seeing the reconnection of the extended family. It is now more common to see three or more generations living in the same house.

Perhaps we have reached a high water mark for the atomistic family. Perhaps financial circumstances will re-connect the family as a unit?

Made In Britain?

We often buy goods and services that have a stamp for their country of origin - Made in Britain, Made in China, and so on - but how often do we think about exactly what this means? There was an interesting note on the Interactive Investor web site this week that poses this question from the perspective of an investor (See Article).

The main tenor of the article was to argue that an investment in the largest of companies (e.g. the FTSE 100 in the UK) is, actually, an investment in the world economy, only from a peculiarly British slant, as British companies bring all of the baggage of the British commercial heritage.

In many ways, this is quite a natural development. As globalisation progresses, we would naturally expect there to be a larger incidence of inter-connected companies. What is, perhaps, most interesting is the degree to which non-European countries (especially Australia and South Africa) are integrating with UK companies. The integration of European companies with UK companies is to be expected as the process of European Integration gathers pace at the commercial, if not the political, level. We can expect this process to continue more rapidly.

From what we can see so far, this distinguishes Globalisation 2 (G2 - which ended in 1914) from Globalisation 3 (G3). G2 involved a dramatic increase in world trade, but without the financial integration that is accompanying G3. This has to be a good thing, because it reduces the chances of G3 ending as unhappily as G2. Certainly, there are still many factors that could blow G3 off course, but most people reading this post will have an interest in keeping G3 on track. This is something that continues to underwrite our prosperity.

In the end, does the country of origin matter? In many ways, this is a litmus test for how we view the future. If it does matter, then we are unlikely to progress that far from the nationalistic divisions that blighted most of the twentieth century. If it doesn't matter, there is a chance that we may have moved on from that point.

Counter-Trade In Rubbish

I came across an interesting story in the Independent this week. Just before Christmas, the world's largest container ship - the MS Emma Maersk - docked in the UK, laden with our Christmas presents. The boat has now turned around and is back on its way to China. (See article).

An important part of International Trade is the concept of counter-trade. It isn't efficient for a boat to sail half way around the world full of goods, and then to sail half way around the world again empty. If so, then an interesting question arises of what it is carrying. With the demise of manufacturing in the UK, what is it that we can export to China?

The answer is our rubbish. The UK has a real problem with waste disposal - there just isn't enough land for landfill sites and the relative cost of recycling rubbish is just prohibitive. Equally, China has a large demand for recyclable plastics, paper, steel and electrical goods. It is now cheaper to send plastic waste from London by sea to China than it is to send it by road to Manchester.

Of course, the cynics would argue that as most of what we import from China is rubbish anyway, the trade simply redistibutes it from one part of the world to another. On a more positive note, the trade is providing a much needed facility for the UK. I wonder if the Chinese would be interested in importing our nuclear waste?