Friday, February 11, 2011

West's Decline & Mr. Gordon Brown's Insights on Recovery

It is always helpful to know what the leaders of nations are thinking during crisis, which may be driven by economics, climate, etc. What is even more interesting is to see the realization of the "what" into the "how", which usually is a bit farther away from the desired.

In his article "How the west can reverse a decade of decline" in the Financial Times here, Mr. Gordon Brown highlights an obvious fact - "Within a decade a richer Asia will be home to a middle-class revolution equivalent to the consumer power of two Americas, becoming the main driver of world growth... This shift can be the most effective exit strategy from the crisis, and help to rebalance the world economy – but only if Europe and America re-equip, and are able to export their superior innovations and global brand name goods to Asia’s new billion-strong middle class. Yet delivering these value-added, technology-driven, custom-built products and services will only be possible with high levels of investment."

Here is a fallacy - Western innovation is not superior, and if it is, for example, internal combustion engine, it is being leapfrogged as China is focusing on electrical vehicles and in a decades time frame will be delivering commoditized electric vehicles and/or their components to the world.

Mr. Brown though highlights a key consideration and this is where his "what" is right on, though the "how" to manage it is already looking like as he predicts - "The descent into trade and currency wars, bans on cross border takeovers, and excessive restrictions on skilled workers are also counterproductive, risking access to the world’s biggest new markets just at the time they could benefit us most. History will judge these newly fashionable orthodoxies as wrong as the false certainties of the 1930s."

Here is an example of how reacting to fear due to lack of knowledge, just like GM not adopting the electric vehicle option, gets popularized, and Mr. Brown's statement above may come to be:

As a senior South Asian diplomat friend of mine says, "But what to do??!!" :)

No comments: