If certain pessimism seems appropriate when considering geopolitical affairs, one would hope for some relief from the economy. Cassandra, unfortunately, is not in a better mood in this regard, for economic globalization is not as tranquil a road that theoretical thinking would have leaded us to believe. The current squeeze in natural resources is but a consequence of another scarcity. The most important by far of all economic resources, i.e. technological innovation, has entered a phase of slow down.
We are so used to technological change that we take it for granted, and we should not. Any technological system is centered on a source of energy. Ours is still the same than in 1875, based on hydrocarbons. Nuclear energy is limiting the problem, yet only to a certain extent. Its dangerous side effects, both environmental and political are well known. With the exception of railroads, it cannot fulfill the growing needs of transportation. Alternative energies are either inefficient (solar) or direct sources of greenhouse effects (biofuel). Moreover, no energy revolution is in the pipes for the visible future.
Biomedical research is increasing the scope of treatable diseases at an increasing cost, when reducing the cost of global public health would be more urgent and useful. Nano-technologies have little to offer for the present, while discovery of new materials is stalling.
The last major technological revolution was the Internet and cellular telecommunications. There is of course still some way to go until it is fully deployed, and its last major elements (eg Wimax or equivalent) are in place. It is however unlikely that it can by itself sustain a durable growth of the world economy for several decades.
As I said in a previous post, growth is dependent on the persistence of waves of technology. Innovating countries increase their own efficiency and fulfill new needs, while transferring to other countries their previous technologies. Developing countries, producing at a lower cost, can export to developed countries which in turn finance their imports with the products of their newer technologies. There may be hiccups, bottle necks, or cycles, but the overall picture remains positive as long as the transfer of mature technologies goes on a par with the constant influx of new ones.
In the event innovation slows down in such a way that all countries en up sharing more or less the same level of technology, their complementarities are turned into a competition for production prices, and all markets retract. Richer countries are bound to adjust their own labor costs, reducing both their own consumption and imports. Their markets start closing themselves to developing countries which in turn start facing the prospects of a recession.
This danger is not the only one we are confronted to.
(to be continued)
