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Wednesday, January 07, 2004

Room For Improvement

I need some time to reflect, relax and work before getting back with longer posts. However, I am definitely looking forward to getting a chance to do more with charts, diagrams and tables when the new format Bonobo finally comes out (!) - Blogger doesn´t work well with them.

Meantime the curious among you you might want to read my three contributions to this thread:

(There are two longish and one short post on helicopter drops by me there). I think I will flesh out those arguments in future posts on Bonobo. BTW, the thread definitely demonstrates how people just don´t "get" it. You can expand the money supply all you want and achieve precisely nothing. There is no way macro could be made to work without looking at the real world and determining where there is "room for improvement" - in economic terms: scarcity to be
eliminated. So we have to go back to the energy issue - which has obviously come to exert a major influence on international politics by now. While the Chinese are rationing gasoline, while Saudi-Arabia´s exploding population starts to use some of the oil being pumped there domestically, the West - but most vehemently the U.S. - insists on ignoring the warning signs.

What we have to deal with is a paradigm shift. It won´t do to concentrate only on the winners - to celebrate the demise of manufacturing and the birth of the knowledge economy and leave it at that. The reason is that we know what kinds of disruption de-growth - the rapid shrinking of agriculture - caused in the past. This century will be dominated by de-growth of the fossil fuel-based economy. Since modern agriculture is essentially a way of using petroleum to convert land into food, the coming transformation concerns not the just the dominant sector of the 20th
century - manufacturing -, but also encompasses the standard bearer of deflation and increasing productivity in the 19th century - the agricultural sector -, whose continuing efficient performance is, of course, somewhat more relevant than the tradability of mp3-files (but unfortunately cannot taken for granted with the same degree of assurance.)

If Indian scientists find a way to make do without oil, your prophecies about India´s rise to power will come true. If neither Indians nor anybody else finds one, then India is the most vulnerable of the big countries. It would be one of the first casualties of a prolonged depression in the West, since that would guarantee a return to protectionism (of
course, the sequence could play out the other way around as well: Edward is pretty much at odds with himself here in neglecting the impact of Smoot-Hawley in the 1930s.)

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