Is the West in permanent economic decline?

Max Hastings, an author whom I greatly respect, writing in the Daily Mail, suggests that it may be. He’s writing for a British audience, but his words most certainly apply to the USA as well.

Britain is one of many Western societies — including the United States — facing grave structural economic, educational and social problems that threaten our prosperity through future decades.

. . .

Many of the West’s current economic problems seem not mere short-term fall-out from the 2008 banking crisis, but reflect deeper woes: the historic transfer of wealth, and perhaps also power, from West to East.

‘Complacency is baked into our species,’ Nathan Myhrvold, the American former chief technologist of Microsoft, wrote this week.

‘Give us a run of good luck and we are apt to turn that into an implicit expectation that our luck will continue — even that we are entitled to it.’

Though Myhrvold was not thinking of the British people, his words apply to us in spades. Yet the latest Merrill Lynch World Wealth report shows that, while 300,000 new Asia-Pacific investors with at least a million dollars of investable assets were created last year — a 9.7 per cent increase — Britain’s percentage increased by only 1.4 per cent.

This country exports more to Ireland’s 4.5 million people than to Brazil, India and China’s combined 2.8 billion population — this, despite a 20 per cent recent devaluation of the pound.

I often disagree with the brilliant but sensationalist historian Niall Ferguson. But he seems absolutely right to argue in his latest book, Civilization: The West And The Rest, that our societies have suffered a disastrous decline of the Protestant work ethic.

‘Europeans today,’ he says, ‘are the idlers of the world.’

We work shorter hours than our Asian counterparts, take more holidays and are readier to strike. Workers in the United States take fewer holidays than us, but the average South Korean puts in 39 per cent more hours than the average American a week.

Neither President Obama nor anybody else has yet produced a credible solution to the problem that Detroit’s car workers — for instance — cost almost ten times as much as their Chinese counterparts to produce the same vehicles.

The young workforce of Singapore is not only more energetic than our own, but increasingly better-educated. Education Secretary Michael Gove is attempting a radical transformation of British schools, but faces bitter resistance from the educational establishment, in stubborn denial about our children’s ignorance.

I was almost lynched by an unsympathetic audience on BBC’s Question Time a few months ago, when I asserted that many British university degrees are not worth the paper they are written on, and that many graduates deserve only Firsts in clubbing.

But Niall Ferguson cites a recent survey which exposes students’ pathetic ignorance even of our own history.

. . .

To assert that today’s young know less than we did is not merely to play the ageing bore, but to state the obvious.

Another related and disturbing trend in Western societies is the widening chasm between the successful minority, who prosper mightily in the new world, and the less-skilled, less successful majority, whose living standards are progressing nowhere much, and seem unlikely in future to do so.

Chief executives, financial engineers, entrepreneurs and top professionals are amassing huge earnings. Over the past 30 years, during which the British economy has doubled in size, the top 10 per cent of earners have seen their incomes quadruple. Meanwhile, low-income earners’ pay increased by only 27 per cent between 1978 and 2008.

. . .

This pattern is even more emphatic in the U.S., where an unprecedented concentration of wealth is emerging, while the mass of workers grow no better-off.

. . .

We have scarcely begun to see the long-term consequences of a world in which China is consuming 80 per cent of the world’s steel, aluminium and copper, together with 70 per cent of Africa’s timber production.

Beijing has gained an armlock on the African continent, where more than two million Chinese now work.

. . .

The magazine Business Week remarked a year or two ago that the three scariest words in American industry’s lexicon are ‘the China price’. This meant that a U.S. company which cannot manufacture a given product as cheaply as its Asian rivals is likely doomed.

. . .

Historian Ian Morris, in a recent book much debated on both sides of the Atlantic entitled Why The West Rules — For Now, described the past rise to global dominance of Europe and the U.S., then discussed the perils we face.

Looking to the vast revolution in genetics, nanotechnology, robotics and multiplying computer power which is on its way, he argues that the coming century will be a race between East and West, to decide who dominates these areas.

‘Either we will soon . . . begin a transformation even more profound than the industrial revolution . . . or we will stagger into a collapse like no other. It is hard to see how any intermediate outcome or compromise — say, in which everyone gets a bit richer, China gradually overtakes the West, and things otherwise go on much as before — can work’. In Morris’s view, we shall either win or lose, with no prizes for merely taking part.

. . .

Today … we are witnessing the end of the age of abundance, the first phase of a savage contest for energy, natural resources including water, and technological dominance. We shall need to work harder to have less, both as individuals and as a country. The divide between the rewards for the skilled and unskilled will continue to widen.

There’s more at the link.

Dear readers, I respectfully suggest to you that Mr. Hastings’ article is one of the clearest and most frank discussions of the present world economic situation that I’ve read in a long time. It’s sobering, but essential reading if you want to understand the mess the entire First World is in today, economically speaking. Very highly recommended.

Peter