ACF re principles of people and wealth. Leaving money out of it, which just serves to confuse people, wealth is production and possession of desirable property [chattels, land, building, software and abstractions such as music and love].
So, how much of it do people want and how much effort will the put in to get the stuff?
When one lives on a hippie commune or a Stalin or Mao commune, one soon figures out that the underlying principle is "we pretend to work and they pretend to pay us". Meaning, it's like being a cow in a milking shed or a sheep in a shearing shed - you don't get to keep what you produce, so your calf goes hungry [or more usually is simply killed] and winter is cold when one has been fleeced. People, being people instead of cows and sheep, can more readily choose not to produce. Especially for creative things which take subtlety and brain-power. Donkey work can be forced to some extent by the expedient of flogging, gaol or fear of execution, but even donkey work takes quite a bit of brain-power. Also, the bosses tell you to produce useless stuff, such as marching around carrying a rifle.
Similarly, in places like Rwanda, there's not much point in producing anything because the tribe takes what you produce. It's much better to produce nothing, to avoid attracting theft, envy, jealousy and attack.
Starting from nothing, it's true that it would take a long time to build a society in poverty, with no capital, to become wealthy. But the world is not short of capital. Interest rates are low - capitalists have limited choices and low returns.
So, starting with nothing but the will to work, the talent and cultural basis which enables wealth to be produced, it's a question of how fast wealth can be produced.
Singapore showed what can be done. They allowed outside investment and ran a tight ship - thieves and layabouts weren't admired types. Singapore is Chinese.
But Singapore did it at a time when GNP meant industrial production which took a lot of effort. Nowadays, GNP involves software and more brain-power. A washing machine is a cunning concept rather than a major industrial piece of equipment. The Fisher and Paykel SmartDrive has two moving parts [drive shaft and pump]. Three if you count the lid which opens and shuts. The cost of producing it was mostly in the design phase. In Singapore's context, with a small market, unit costs are higher. Spread across China's population, the design unit costs of nearly anything are near zero. Spread across the 6 billion people of the world, unit costs are even lower. 40 years ago, the world's population was much lower and much poorer and more rurally based. Singapore and Japan burgeoned anyway. Now it's easier.
China could ask Fisher and Paykel to build 100 SmartDrive and two-draw dishwasher factories. Fisher and Paykel could raise $1 billion and the factories could be built. That would take steel, concrete, paint, electricity, conveyor belts, glass, plastics and stuff. China can produce a lot of those already. It's all a matter of cloning existing things and importing the stuff which is not yet available in China.
The $1billion will come from we capitalists who are wondering what the heck to do with our money, earning only 1%.
Capital formation can happen really fast. Learn, work, save, invest, spend = the five factors for financial freedom. Fisher and Paykel and QUALCOMM can teach the processes. Working is a matter of will and ability. Saving is a matter of deferring gratification and keeping the money for investing in more production of capital goods. Spending must be done wisely, not wastefully.
With an external world of 5 billion people, a billion of whom have capital available at 1% and billions with a desire to own more stuff, even China doesn't have to bootstrap itself from nothing. Singapore was tiny compared with the rest of the world, so it could import and sell things and not have a significant effect on the world's GDP. China is big enough that when it calls for capital, it will have a large effect on the world's economic flows.
I'm happy to invest in China and am doing that via QUALCOMM, which has $billions available for the right projects. So does Microsoft.
If China clones a CDMA factory, a SmartDrive factory and so on, they can be away in a short time. Once they've done one, they can do another much easier. It's not a geometric outcome. Cloning isn't like building another dirty great steel mill, which takes time and huge resources. One teacher can teach 50 CDMA or SmartDrive students and they can go gung ho onto teaching others.
First, there's one factory, built by QUALCOMM and Fisher and Paykel. 1000s of apprentices crowd in to see how to do it. They all go back to their cities and show more 1000s there how to do it. Those 1000s show more thousands. Half a dozen iterations and everyone will have a CDMA2000 phragmented photon cyberphone, a SmartDrive washing machine and two draw dishwater [another really clever gadget].
How fast it happens is a matter of China's attitudes and the desires of young people. I think it can be faster than Singapore's.
Since they've been growing at 10%, without being in the WTO and still being reluctant to accept investment in a free economic system, I dare say they could turbo-charge that up to 15% without a problem and maybe 20%.
New broom Hu Jintao and co will determine how poor they stay. The trends are that Maoistic poverty is not all that much fun and they are ditching it quickly.
The USA is no longer a burgeoning economic powerhouse. It's becoming a suffocation-by-government society. Check out QUALCOMM's tax rate for example. Count the dollars the government disposes of in stupid bureaucratic wastefulness - bleeding, fleecing and milking the population. Eurosclerosis is a more advanced case. Same here - about 60% of effort these days is for Big Brother.
China is still lean and hungry, not fat, lazy and entitled with a dole and bludger system.
Anyway, the only way to tell how fast they'll improve is to wait and see. But in perfect conditions, I think annual growth could be more like 20% than 10%. I'm happy for QUALCOMM to bet that they grow very quickly. I dare say Microsoft is counting on it too.
$1.2 trillion, increased at 20% a year, compounding, gives $46 trillion after 20 years. Which isn't a bad economic pie, even for 1.3 billion people. The USA at 3.5% gives $21 trillion. After 22 years, China would be at $66 trillion.
$66 trillion would be $66,000 for 1 billion people. By then, they'll be fat and lazy. They won't be racing around working dawn to dusk. They'll be like me, clicking around in cyberspace, looking for a different way of life involving less production and more investment. Returns on investment will be dropping very fast. A good sleep-in and nice cup of tea in the morning sun will cut production.
Speaking of which...
zzzz....
Mqurice |
