Editorial: From Economic Top Table To… (March 2019)

Political demagogues like Trump and Johnson are an effect, a consequence or perhaps a symptom of a wider, silent and dramatic global economic transformation.  So what characterizes the old world of the 20^th Century and what of the new in the 21^st Century?

Post WWII, while parts of the world were in
recovery mode, and many were in pure poverty (as they still are), the USA forged
ahead with rapid expansion.  In the midst
of a cold war raging with Russia, the global rise of the Amercian
multi-national corporation was a significant symbol of 20^th century financial
power.  Indeed the USA luxuriated in
their power as they had the scope to deter, through protectionism measures,
such as sanctions or tariffs, any ‘rogue nation’ that threatened their
prosperity.  Like the nuclear deterrent
of the 20^th century threat, economic sledgehammers awaited any
economic audacity. 

In a very short period the landscape has
changed in two very significant ways – first the emergence of a globalized
high-bandwidth internet with associated knowledge, information and commerce –
second, and partially as a direct consequence, the emergence of new
economically powerful nations such as China and India.  These two countries account for around 1/3 of
the world’s population and are increasingly equipped through education and
technology enablement to participate in the new economic world.

In the 20^th Century these
countries were content to be ‘feeders’ in the global system, perhaps helpless
to change the global status quo – Japan, Europe and USA tied together trade
deals that circumvented any natural economic pressures for change at that
time.  It is worth noting that the global
economic pie has steadily grown (by cumulative GNPs) but when one or two large
players enter the global economic meal and want their slice, then other countries
meals must get smaller.

Have the G7 or G20 (or perhaps soon G50),
taken their eye off the table or have they become philanthropic?  Consider the example of a US Executive who 30
years ago worked 9 to 5 in New York for $250,000.  Only his politically savvy or equally able
and motivated colleagues in New York were an immediate threat to him, as they
would ‘compete’ for the job at the price of the $250,000 salary (its just
another market).  Today, someone of
similar education and ability lives in Shanghai and would be prepared to
deliver that executive’s responsibilities across an eight hour shift, via the
virtual, interconnected, world.  A third
person, living in New Delhi is prepared to do the same, and what is more these
two applicants may ask no more than $50,000 each to do the job (in fact the
market for that role would clear, the same as any other market, where demand
meets supply globally at a given price, let’s assume that price is $50,000).  So it follows that the Executive role could
be job shared 24 hours a day for a total of $150,000 pa.  What chances the New York Executive keeps his
job, never mind his salary. 

The fact that markets exist in any enabled
space and will clear at the point, with a given price, where demand meets
supply – discovered formerly in the 18^th century – you can fight it
but unless you take away the enabling space, in the example above the internet,
then the market will exist. 
Multi-national corporates, via another market mechanism, are driven to
optimize profit to remain competitive and in so doing meet the needs of owners
(shareholders) in their company.  In
other words, if the corporation ‘protected’ employees from these 21^st
century global economic pressures, they would ultimately go out of business, as
competitors would follow the economic market and make their cost bases fatally
superior.

Yes, when China significantly floods the
USA market with cheap steel, then 20^th century methods may appear to
protect the country but the leaders would, or should, know otherwise.  The reality is that the 20^th
century quality of life enjoyed in the USA and Europe is already looking very
different.  Potentially this will quickly
change in this new 21^st Century digitally connected economic
world.  Perhaps that symbol of power –
the multi-national corporation – will cease to be called “American
Multi-National” (Apple) or “Korean Multi-National” (Samsung) but if economic
conditions prevailed that it made more financial sense to become “global
entities” then they would trade as such. 
Why? If you extrapolate the example of the USA Executive in New York
then every employee from CEO down would be paid what the market would bear and
live practically anywhere in the world – a pure global entity – and be the
ultimate “capitalist dream.” 

Given where the USA and Britain have been,
sitting at the top table for every meal, the consequences don’t bear thinking
about.  Britain had riots on the streets
in 2007 and 1981 when our domestic economic pie shrunk by less than 1%.  We’re so used to it expanding!!  What if it were to go down over a decade by
10%?  Revolution? Upheaval? A
manufactured war to bring us together? 
Would that work in the knowledge saturated, cynical, 21^st
century world?  Like the terrorist threat
of the late 20^th century being labeled ‘asymmetric’ meaning ‘we’re
very big, you’re very small (but dangerous)’ and not conforming to the
previously understood threat of having allegiance to a particular country. Bombing
the living daylights out of some physical space doesn’t work so what does apart
from vigilance?  In a similar way the
economic threat can only realistically be countered through being competitive
(meaning sacrifice – $50,000 not $250,000) or removing the space, in this case
cyber-space.  Perhaps our establishment
may actually even attempt to do it, watch this space! After all the internet is
a vehicle for evil subversives, terrorists, horrible human beings and most of
all fake news soooooo let’s get rid of it. 
The Trump rhetoric has already begun!

from Fine Dining Guide