What future awaits the world economy?

Author : Bohdan Danylyshyn

Source : 112 Ukraine

Countries of Western capitalism will prove their technological advantage and the most developed countries in Southeast Asia will follow in their footsteps
20:31, 16 August 2016

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112 Agency

In 2009, the influential economist, Mohamed El-Erian stated that "third world is becoming a major factor of not only production (this status quo has been formed for a long time), but also of consumption. As a consequence, to the Third World countries will flow the main financial investment, human resources, technology and innovation. The destiny of Western countries in the foreseeable future - consistently low GDP growth, consistently high rate of unemployment, rising commodity prices, stagnation in the securities market (first of all - common shares) and stagflation (stagnation plus inflation) caused by all of the above factors. " This his statement, for various reasons, has become the most common meme among economists. And El-Erian has become the popular guest of  business channels.

But after the last year slowdown in China, and in general, the sluggish growth in the rest of emerging markets, but the steady growth of US GDP in the region of 2% per year, and slightly higher (2010-2,4% 2011-1,8% 2012-2,3%; 2013-1,5% 2014-2,4% 2015-2,6%) it became clear that the statement of El-Erian, is most likely the PR action to attract attention and does not scientifically justified. And this action justified itself: popularity came to him but also hit the reputation of a former successful manager of РIMCO largest bond fund.

Why Mohamed El-Erian made a mistake? The main reason for his mistake was that he was trying to extrapolate the nature of past successful development of economies of the Third World to the future. Another reason is that as the current economist seems slightly familiar with the work of economic historians, he did not consider the endogenous nature of Western capitalism, and its high ability to restoration.

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We shouldn’t judge too harshly El-Erian. Forecasters had never coped with their tasks, but now it's all very difficult tasks. The point is that now due to the extreme uncertainty of technological development the growth zones can’t be determined even approximately. It is a pity, of course, that El-Erian still does not understand it. Earlier this year he said that we need a new space program to return to growth.

And now we just do not know what will be the next point of growth in the world economy. No one could, for example, to foresee the creation of Apple's products, such as iPod, iPhone, iPad. Rather, they existed in Hollywood films since the late 1960s, as a visionary project, but no one believed that Steve Jobs will and do it. None of the major players could take the commercial risks of creating these revolutionary products. And Jobs has taken these risks and succeeded.

Since the XIX century, since the early stage of industrial revolution, there was no original product or technology, invented in the East, designed as an industrial model, and introduced into world production. All known technology products, which we now know in the world, had been invented in the countries of West. Why it is suddenly occurred to El Eryan that now "everything would be different?"

So, what will happen to the world economy? Countries of Western capitalism will have technological advantage and the most developed countries in Southeast Asia will follow in their footsteps - those who in the future will be able to build up industrial designs developed in the West.

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What should do Ukraine in this regard? Just recognize this fact for granted. In the present historical period (radical social changes are taking place only as a result of centuries of sustainable development), we can’t challenge the West in technological development. What we can do?

We can either turn to the Western technological civilization only a very small part of our society, with the total future archaization the rest of society. Or we can try to suspend our technological degradation - in the framework of the national industrial policy, which will be able in the medium term to solve certain tasks of economic development and to educate new people, for whom the technological development in the future will become a natural way of social life, as it happened at one time in the West. And most importantly, that these new people will be able to initiate the social fluctuations, which in the distant future will form the creative class of technology entrepreneurs and artisans in Ukraine. On them will depend in the future sustainable technological development of our country, and, consequently, economic growth. Despite all that would say to us current and future "economists" like Mohamed El-Erian.

Related: World Bank: Ukraine’s economy contracted by 10%, 1% increase expected in 2016

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