Global Economic Balancing
We must admit that the economic model based on developing transnational markets has exhausted its potential. Macroeconomic postulates do not reflect the nature and dynamics of economic development. Commodity-money exchange effectiveness is declining. The multiplication coefficient has all but ceased to work. The funding developed countries dispense to poor countries to balance the global economic situation vanish in developing economies without providing any visible economic effect or resolving such problems as hunger, poverty, a lack of drinking water, pandemics etc. Therefore, the gap between the level of development of Golden Billion nations and that of the Third World is not finding closure.
History has shown us that Reaganomics has lead to crises in some national economies, international trade relations, the global economy, and, basically, capitalism itself. This is obvious but there are few people brave enough to cry out loud “The emperor has no clothes!”. It is time new models of capitalist relations were developed. However, before, we must try and activate existing resources to make a transition to the Sixth Techno-economic Paradigm and take decisions needed to keep afloat the global economic system. While still in the working condition, this system is already going. To do this, growth areas should be found to renovate consumer society.
In order to formulate these global economic growth areas, let us return to the history of the issue. Originally, globalisation primarily implied area specialisation and the development of transport logistics, which made it possible to deliver goods from any point to any point anywhere in the world. The question only was whose prices were more competitive. It had become clear by the 1970s that cost reduction was business task number one. Consumer pressure had reached such a level that products had to have a solid “pressure resistance capacity”, especially in terms of price, to reach the consumer. Reaching the consumer took a lot of effort. The producer had to find the right consumer for its product, identify sales channels, and set up customer service. Technological cooperation led to the phenomenon of irreducible price and the monopolisation of major markets to meet global pricing competition. Economy took the route of increasing production efficiency through:
Reducing costs by maintaining stable quality and keeping losses at a low level;
Reducing costs through better operation management and business optimisation;
Reducing costs by introducing new technology (e.g., in energy and material efficiency);
Reducing costs through international cooperation (transfer of production to underdeveloped countries and employing cheap immigrant labour);
Developing area specialisation in terms of economic category and type of revenue.
This policy has led to several gridlocks:
Complicated management standards: the need to buy expensive safety certificates has led to market monopolisation driving small business out of the high-tech sectors;
Draining resources from the production to service sectors, which creates over-production crises;
Provoking a technological boom: technological processes started to outpace social ones. Technologies were outdated and replaced faster than people eradicated the effects of applying them, which created huge household and industrial, including hazardous, waste landfills. The regeneration of the biota natural environment, including human environment, cannot cope with pollution, exposure to which often leads to irreparable consequences: we breath poison, eat genetically modified food, and drink “regenerated” water several times a day.
Encouraging monopolisation in developed countries and corruption in developing ones; irresponsible natural resource management; constructing production facilities without required water purification facilities; producing oil without regard to leak-proof technology; industrial intoxication of the environment; and poor living conditions for the most part of humanity. Environmental and humanitarian disasters have no borders.
Energy stratification of nations, with economically developed countries consuming considerably larger amounts of energy than underdeveloped ones. An information revolution creates the desire to close the gap; hence debt, terrorism and corruption. In the economy whose main value is unrestrained profit growth, energy has become a scarce resource. It is certain to be joined by water and food very soon.
However, the main problem, capable of destroying the current world order, is hunger. This is global problem number one, literally a problem of life and death.
Dozens of millions of people die of starvation in the world every year. Around one billion people earn less than two dollars a day, enough just to make ends meet. It may seem that it makes no sense talking about growth areas when such basic human needs as the need for food are not satisfied. Meanwhile, it is these basic needs that could become the main point of economic growth.
In a stagnating economy, new growth areas must satisfy the following criteria:
The availability of mass consumption products
Remoteness from developed civilisation
We refer to a product as a mass consumption product if it has a potential of reducing costs and profit margin. These are not just products of immediate material consumption, but also communications in the broadest possible sense, i.e., everything that is included in the frame of daily consumption. The modern person’s life cannot be imagined without the Internet, travelling between different regions, and pop-culture. The spectre of needs has widened to become a stimulating factor for people to get involved in consumer relations.
The factor of remoteness from civilization is to be understood as an infrastructurally underdeveloped locality, infrastructure being a complex system of communications, and prediction, lobbying, and regulation mechanisms. Infrastructure defines how an area could be developed in a comprehensive way. It is an ability to use local advantages in local and global marketing. Infrastructure is also an ability to manage skillfully through creating synergy effects and using comprehensive approaches. These are not just mere words, infrastructure involves research, knowledge, skills, mathematical management models, and, more importantly, a completely different mentality, a mentality of a person who does not want to stay poor and homeless on this planet.
Infrastructure investment is recovered through payments companies, which are members of the infrastructure, pay to promote their products and use local resources to do business. Infrastructure products include services designed to create local marketing trends and deliver trend-related products to the consumer. They also include trend monitoring that helps to identify the best time to replace a product or target group. Infrastructure stimulates marketing and markets and encourages regulation of the flows of information, finances, goods and human resources in the area. Therefore, infrastructure includes: recruiting of volunteers and lobbyists; information sources and information monitoring systems; personnel training for local organisations; a system of transit regulation through forecasting and informing, in cooperation with local authorities; a system designed to develop business and attract products to fill the trends, in cooperation with local business; trend building and support, in cooperation with local NGOs; and public awareness and promotion campaigns related to identified and designed trends, in cooperation with local media.
The main thing here, as was previously said, is the availability of three structures: forecasting, lobbying and regulation. Infrastructural costs will be fully covered if there is proper financial, physical and legal investment management in place.
Let us consider the problem of hunger as a factor of economic growth. Where is the solution to this problem? It is a combination of two things: work and food. Under work we mean food production, including working in agriculture and rural infrastructure (construction and maintenance of houses, schools, hospitals, roads, warehouses, irrigation facilities, water pipelines etc).
There are several goals:
increasing food production for own needs;
selling surplus food on the market (using available infrastructure);
tie population to jobs (eliminating migration due to hunger, homelessness and lack of jobs);
increase the standard of living to the level when people become consumers of industrial production.
There can be several ways for countries to achieve these goals:
Supporting the UN Food and Agriculture Organisation (FAO) programmes of developing local agriculture and reducing the number of starving people in the poorest countries.
Participating in infrastructural projects, following the example of China, which builds infrastructure (ports, roads, housing and schools) in the poorest countries in Africa. By doing it, China seeks to import future surplus food from these countries (according to FAO estimates up to 200 million people are starving in China), or transport it to India (150 million starving people). It plans to pay for this food with its manufacturing products including clothes, shoes and agricultural tools.
Launching targeted investment projects designed to solve food shortages in the poorest regions and find markets for their own products. This is the most complicated route as such regions as North America and Europe do not produce “products for the poor” because of their low profitability and specialise in “products for the rich”. This is the reason western funds do not finance irrigation and agricultural projects in poor countries: these project do not promise funding recovery.
Each of the paths has its advantages and drawbacks. The choice depends on many factors. The basic principle is creating a new local market integrated into a world goods exchange and taking control of this market both by economic means and through the so-called “disciplinary doctrine”. The latter means the conversion of an evaporating value of paper and electronic money into real estate, infrastructure and production facilities.
With changing economic conditions, there has been a change in the type of approach to be applied to locating a growth area. Heuristic methods and filter systems applied in the past to choosing investment sites and designing scenarios of taking control of these sites based primarily on monetary gain have been replaced by a cognitive approach, with psychographic and behavioral segmentation used in risk group assessment.
Let us return to the problem of hunger. It usually derives from a trade disbalance causing economic disparities between countries. If we do not do anything to eradicated hunger we will damage the world economy, because problem areas do not only fall out of goods exchange, but become a source of humanitarian, virus, terrorist and other threats. To reduce the disbalance it will take ten to fifteen percent of developed countries’ resources. It is much more viable to convert donations to investment and include starving areas into the global goods exchange under the investor’s regulation.
Let us consider the problem of hunger from an attractive point of view of economic growth:
The strategic goal is to eradicate hunger as the cause of death.
The tactical goals are: to give jobs to people to make them consumers of manufactured products; reduce immigration; expand manufactured goods markets. This will provide new resources for the next stage of the manufacturing industry in the world.
The economic goals are to take control of infrastructural decisions regarding local market operation.
The execution period is unlimited, because population growth will go hand in hand with investment project expansion, which will affect urban and industrial development.
Funding will be calculated on a case by case basis depending on investment strategy. Only major players, such as China, the Middle East or international funds, can pull off large infrastructural investment projects, e.g., ports, roads, and security systems. Smaller projects can be carried out by smaller players ranging from small charitable or educational funds to large companies that need agricultural resources.
The capacity of resource markets and sales markets. The minimum goal is to organise the production of agricultural raw materials and consumption of basic industrial products worth of five to six trillion dollars a year in the next seven to ten years.
The main problem is an energy one. At the first stage, it can be solved using physical force. At the next stages, by employing internal resources (burning waste and easily accessible local fuels) and renewable energy (solar and wind power, recycling power including biogas and hydro energy). At the later stages, through the optimal use of non-renewable energy, e.g., coal, natural gas and oil.
There is one condition under which the global balancing of planetary economy could take place. It is removing global misbalance embodies by acute global problems. This could be the first step in the direction towards balancing countries and world regions in terms of the global division of labour.
However, the need for a comprehensive way to resolve global problems does not preclude concrete projects designed to balance off the world economy and pilot programmes to test and implement an integrated planetary economy model.