Friday, April 17, 2009
The Saching of Western Civilisation
These graphics are from the backroom boys in the BRIC lab of Goldman Sachs and were used today by Hamish McRae in the Independent to illustrate his prediction that "this recession will hasten the shift to a new world order". Goldman Sachs is credited with predicting the end of western hegemony, snappily wrapping up the new power bloc as BRIC.
True the data does point to the rise of Brazil, Russia, India and China. Beijing will be especially happy that Wall St's finest have pointed out that the Chinese consumer will contribute more to global consumption (and hence world economic recovery) than the American one for the next two years.
Much as I respect Hamish, having worked in the same office as him a decade ago, I think the jury is still out on this one. These countries will all have to face up to some seriously big changes.
The most obvious is the end of the low-inflationary globe. The printing of money by the bucket load is the most obvious pointer to this. Commodity prices such as oil and foodstuffs are all rising. New technological developments in the west, especially around climate change, will not be allowed to be diffused by shifting production to low cost centres. Last the entrenchment of social programmes and the depression-like features of the downturn may see labour rights restored (as perhaps a quid pro quo for public spending cuts) in many western economies. An more inflationary environment looms.
How the new kids on the block, BRIC and others, fare in this new price-rising world will determine their fate.