by Doron Tsur
Changes in the currents of the global economy, far more serious than the debt crisis in Greece and Spain, are afoot. Their impact on Southeast Asia may be much more severe than any damage caused in Europe and North America.
posted June 07, 2012 by Haaretz
One of the most important natural wonders of the world is the oceanic conveyor belt. Though most people aren’t aware of it because it can’t be seen, its impact on our flora and fauna is tremendous.
Without getting into the scientific details, because I am far from an expert, it is the phenomenon in which differences in the temperature and salinity of ocean water affects circulation. This planetary circulatory system creates the fixed pattern of ocean currents that underpins our global weather system.
One of the most serious worries related to global warming is that the oceanic conveyor belt, awesome in its size and proportions, will alter its current pattern of behavior or, even more seriously, stop functioning altogether. That could rapidly and drastically change global weather patterns, with disastrous implications for all forms of life.
As always when dealing with existential fears, a whole genre of books and movies addressing the issue has already emerged. Though not always scientifically accurate, they have identified a good story and honed in on the human drama. The 2004 disaster flick “The Day After Tomorrow,” is best-known among these environmental cautionary tales.
I deal with economics, not climate change. My mention of global weather patterns and ocean currents was merely a means to introduce some equally important economic issues.
Similar to the mighty ocean currents that propel vast volumes of water across great distances, so too the global economy has its mighty flows that propel vast masses of goods and services around the globe.
Moreover, just as one worries that the system of oceanic currents might suddenly change, so too one worries that the massive flows of the global economy are set to undergo drastic structural changes in a way that will alter global economic patterns.
The evolution of economics is a fast-paced thing
Natural change comes from processes that can evolve over the course of many years. Some of these changes can be measured in units of hundreds of years at a time. Other changes in nature can be measured in multi-million-year epochs.
With economics, things move much faster.
The most significant process that has shaped the present economic reality began only a few decades ago, that is, globalization.
To lend some excitement to the economic phenomenon of globalization, we could give globalization an exciting, pseudo-scientific nickname, “the great trans-Pacific conveyor belt.”
What conveyor belts are we talking about? We are referring to the economic pattern of the wealthy citizens of the West purchasing vast oceans of consumer goods manufactured in Southeast Asia.
They pay for these goods with money they don’t really have, by mortgaging their own future and that of their children.
En route, the manufacturing base of the Western economies has shrunken, and is being replaced with a growing services sector that is responsible for maintaining these consumer goods supply chains. Another growth area is the finance sector. After all, somebody has to do the dirty work of mortgaging all of our futures.
For a limited time, the feeling that all is well and wonderful in the world could prevail. The standard of living rose. The employment numbers didn’t suffer because the old manufacturing jobs were replaced by new jobs in other sectors of the economy.
The sun rises on a bright Asian future
Southeast Asia was meanwhile undergoing a different process. The manufacturing base of the region’s economies has expanded significantly. The new manufacturing jobs generated by this industrial growth are replacing manual labor in the traditional agricultural sector, which is primarily characterized by its low productivity.
The wealth of Southeast Asian nations is growing. They are capable of investing in the construction of modern infrastructure and developing their industrial muscle. These countries satisfy their growing demand for raw materials by purchasing them from countries that have them in abundance – like Brazil, Australia, Canada and Russia.
This process is of globalization is a relatively new one. It has occurred only over the last several decades at most, and it has intensified over the past 20 years. It has drastically changed the various economic systems that were in place, under which large swathes of the globe operated as self-contained economic blocs. For example, Europe until the end of the 1980s was divided into two separate blocs, East and West, whose reciprocal social and trade relations were rather weak. So too, Southeast Asia and South America operated as fairly isolated and independent economic units. Global trade relations in that period moved essentially from Western Europe to the United States in a relatively small “trans-Atlantic conveyor belt.”
The main global conveyor belt 50 to 60 years ago was the “colonial-imperialist conveyor belt.” Under this system, the nations of the West fed their own consumption by helping themselves to Third World countries’ natural resources. This conveyor belt had already stopped functioning by the mid-20thcentury as a result of the declining power of most Western states and their inability to take others’ resources by force.
What is the problem with this process?
With the oceanic conveyor belt, the entire circulatory system can take hundreds of years from start to finish. A drop of water from the relatively cold and sweet-tasting ocean near Greenland begins its journey along the great conveyor belt and travels around the globe until it returns to its point of origin. From there, the cycle begins anew.
Our economic conveyor belt, in contrast, lacks that continuity. After the West mortgages off its future to buy the latest consumer goods, what can it offer in return for the next batch of purchases?
On a daily basis, we read the headlines about the situations in Greece, Spain and other Western countries faced with debt crises. During the last round, though they may have appeared less in the headlines, the situation in the U.S. and a sizable portion of its states and cities didn’t differ much from that of Europe. Both in Europe and the U.S., similar pictures are developing that include high-debts, continuing budgetary deficits, and long-term government liabilities, such as social insurance programs, pensions, and health services, without a clear plan to sustain them.
The headlines regarding Greece and Spain are analogous to inclement regional weather. But regional storms aren’t the problem. Their effects are largely temporary. The big story is global climate change, the long-term structural change that is far from being a regional event.
Manufacturing can still make a comeback in the West
The status quo in the global economy isn’t stable. It hasn’t found any equilibrium point to rest on and it cannot continue like this indefinitely. The likelihood that the flows making up the great trans-Pacific conveyor belt will change course or stop entirely grows every day. It is difficult to see how citizens of Western nations, once they discover that their futures have already been mortgaged away, will continue to buy more and more imported consumer goods that for the most part can be given up without impinging upon one’s quality of life.
Let’s use another simple image here: that of a man who understands he has a serious problem saving money for his retirement, who becomes enlightened to the fact that his economic future is far from assured. He will sooner or later stop purchasing clothes, electronic gadgets and other unnecessary consumer purchases.
Contrary to conventional wisdom, if and when this happens, the position of South Asian countries, with China included and chief among them, will be much worse than those of Western countries. If this economic conveyor belt breaks down, the West can return to manufacturing. The West’s shift from the factory to the shopping mall, the economic process supported by the operation of the trans-Pacific conveyor belt, could turn on its head.
It is true that this would mean that consumer goods would become more expensive, like they once were. But who said that a reasonable person needs anywhere near the amount of clothes, shoes and electronic gadgets that we now buy, shopping as if there is no tomorrow?
In this forecast, every pair of shoes will cost more; therefore, we will own less pairs of shoes. It really isn’t the end of the world. We won’t be forced to go around barefoot. Who knows, maybe the now obsolete profession of the cobbler, who lengthens the working life of a pair shoes, will come back in vogue.
In contrast, the shutting down of the trans-Pacific conveyor belt would be much more painful for those living in Southeast Asia. In the West we are talking about returning from the culture of the air-conditioned mall and frantic sale showrooms to the factory. In Southeast Asia we are talking about leaving the factory and heading back to the fields. However, Asia’s present population size cannot be supported indefinitely by the sustenance provided only by its fields.
There isn’t a person alive who can say exactly how this movie will play out and what plot twists we will see along the way. What we do need to pay attention to is the fact that behind every dramatic headline about Greece and Spain, there may be deep subterranean currents at play. They may not be visible to the naked eye when compared to the storms above ground, but the long term effects of these currents could be much more significant for us all.