This blog has moved

To provide easier access from within certain large, fast-growing economies, I have moved this blog to

http://DannyQuah.wordpress.com/

Of course, great firewalls continue to shift in their boundaries, but for now at least, this move will have to do.

"We didn't figure you were actually going to use all those cars we sold you"

Obviously scary:

Successful modern technology: Demand trumps supply

Successful technology in economic growth is not just about pushing out the frontier; it’s about bringing everyone along. Put another way, it’s about raising the average, not just the very top of the distribution.

This lesson has been with humanity ever since at least 14th-century China’s epic fail, although admittedly most of the time we are oblivious of it, given scholarly obsession with technology having to do with only supply-side productivity.

Almost exactly a year ago, Apple overtook Microsoft to become the world’s most valuable technology company (and the world’s second most valuable company, period). Last month, Apple overtook Google to become the world’s most valuable brand.

John Ross (30 May 2011) puts in context what is now simultaneously the world’s most valuable technology company and the world’s most valuable brand:

“Apple of course, by most industries’ standards, is a high tech firm. But Apple is not famous for fundamental technological research. It did not create the laser - as did AT&T and the Hughes Aircraft Corporation - or the transistor - as did AT&T and Texas Instruments. It was not a company that produced the world’s first microprocessor, as did Intel - a company continuing to demonstrate technological prowess in the recently announced revolutionary three dimensional Tri-Gate microprocessor.”

Instead,

“Apple’s outstanding skill - shown in its series of world beating products stretching from the Macintosh, through iPod, iPhone to iPad - is to mass produce products which the user can individualize.”

Now, for some observers, that final phrase might come as a bit of a let-down. What, not whizz-bang tech that you might find only in Iron Man’s armor, or some spiffy widget that makes assembly lines run faster? No.

Moreover, the statement is not even correct. For the more technical of the IT crowd, Apple’s products are the exact opposite of customizable. Compared to Linux, say, Apple’s OS is closed; and compared to other computing boxes, Apple’s hardware can be pried open only by simultaneously breaking an explicit legal agreement. Customization of the iPhone via jailbreaking is sanctioned only by the Library of Congress, not by Apple itself.

But there lies the nugget of truth for why technology now is so much more fun and in-your-face for so many: For the average user, Apple products are customizable enough.

Consumer tastes, not the needs of raising industrial productivity, provide the leading force shaping modern technological development. Demand trumps supply.

The Great Shift East

As the East continues to rise, everyone must now be asking out loud not just what is good for the West but what is good for the world. You would think.

Yet, practically without challenge, ever greater policy discussion today turns on the West (or the US) retaining international economic dominance: “Is the West history? What must we do to respond?”

That challenger to continued US hegemony is, of course, China.

Towards the end of 2010 China became the world’s second-largest economy, along the way overtaking Germany, the UK, France, and all the rest of Western Europe. Today, the economic strength of China is exceeded only by that of the US. By some accounts China today already consumes half the world’s output of refined aluminium, coal, and zinc; and uses twice the quantity of crude steel as does the EU, the US, and Japan combined.

India, the only other billion-people nation on the planet, has launched itself onto a similar growth path, after a half-century of moribund quiescence. These two giant economies now grow at a pace previously recorded only in easier-to-ignore, special-cased, tiny Far East Asian island nations. This emergence of the East has, in the last three decades, yanked the world’s economic center of gravity nearly 5000 km out of its 1980 mid-Atlantic location eastwards past Helsinki and Bucharest, onto a trajectory aimed squarely at India and China.

That global economy activity has moved east in this graphic fashion shows the rapid growth in incomes going to the large chunks of humanity who live in China, India, and the rest of East Asia. (Population itself changes much more gradually; this sharp east-directed rise of the rest does not come from just population growth.)

Together with this growth has been the lifting from extreme poverty of over 600 million people—a large and rapid improvement in the well-being of humanity unprecedented in the history of this planet.

But more is to come. Today, the income of the average person in the East is still lower than that of his counterpart in a dozen countries in Africa; his carbon footprint is less than one quarter that of the average American; and he is intent on making not just refrigerators and running shoes, but solar panels, wind turbines, and nano-cars cheaply enough that yet more of humanity can afford them.

What’s not to like?

But many policy-makers and observers in the West fail to share this optimism on the shifting global economy. Instead, they ask: Will emerging Asia now buy up all the West’s assets and use up all the world’s raw materials? Will emerging Asia soon command the entire world’s jobs, absorb the entire world’s investment? This is Rise of the Rest on a massive scale: What must the West do to respond?

Contrary to this alarmist view, there is, of course, always the possibility that this shift towards the East might, in truth, be only beneficial to the West.

But, independent of the eventual outcome, if now the East is indeed viewed as challenging the West, the correct question should not be what is good for the West or indeed for the East, but instead what is good for the planet. And if one side loses while the other side gains, compromise is needed: What contours frame that bargain?

In the alarmist scenario the West is overtaken in the next 10 years: So, how much would people in the West be willing to pay people in the East to prevent that? How much would the East have to be compensated to keep the West ascendant? How much of a disruption in the East’s development trajectory would the West consider justified for the West to remain Best?

The tradeoff, unfortunately, seems far from favourable.

China today faces possible trade reprisal even though its average citizen remains poorer than his counterpart in Belarus, El Salvador, and Jamaica, or for that matter, across 9 countries in Africa. If China kept its current average income but had the same population as, say, Namibia and were located on the African continent, China would today be a candidate for US foreign aid, not a potential rival for global hegemony. In the last 30 years China has lifted over 600 million people from extreme poverty: this is double the population of the US or the EU, ten times the population of the UK. In the last three global economic downturns, China has provided a growth boost to the world economy multiple times what the US failed to do. What good does it do the world if the West disrupted so successful a poverty-reducing machine, so effective a stabilizing influence for the global economy?

No one yet knows answers to the difficult questions on what is best for the world. But I suspect that considering them seriously will lead to optimism and hope for the changes given in the Figure. That shifting global economy has improved the well-being of humanity for the last 30 years: to overturn or even slow these changes now for short-term domestic gain can reveal only a tragic failure of global political vision.

A terrifyingly hostile place to be born a girl

When I wrote "How can hundreds of millions...", many readers, of course, quickly linked in their minds that gender imbalance to the many horrific tales one hears emerging from China's one-child policy. If 119 boys are born for every 100 girls - as usually reported for China - then that works out to 840 girls to 1000 boys. Given China's population of 1.3 billion, this means 24 million Chinese men of marrying age without spouses by 2020.

It is instructive if grim to note this gender bias is seen as well in the very differently-governed India where the 0-6 age group now has 914 girls to 1000 boys (down from 927/1000 in 2001), confirming how the country has become "a terrifyingly hostile place to be conceived or born a girl", pointed out to me by Vinayak @kayaniv.

How can hundreds of millions of something - anything - be scarce?

I sat next to Jim Rogers on a panel once (so you don't think I'm just making this up), and he told me that right up there with all the other unstoppable so-unbelievably-massive-you-don't-think-it's-possible changes sweeping the world is how China's gender imbalance will soon make young Chinese women among the world's rarest commodities. Yes, all hundreds of millions of young Chinese women will be relatively scarce.

[Today I read about quality on top of the quantity effect. To be clear, this is a parody of Amy Chua - so this part in brackets at least is in jest).]

Hand in hand with this increase in the market's shadow price - economic power - will be a steep escalation in the real power of women, both personal and political. This is not to deny the harrowing experiences documented in Leslie Chang's Factory Girls but there is, at the same time, no question that there has been a dramatic upgrading of the position of women throughout Asian society, and therefore of women worldwide.

No legislation was involved. No protest movement occupied a city square. All this occurred simply through the power of economic growth, the balance between demand and supply, and the force of market equilibration. If you don't yet see this, just come take a look at the confidence, poise, and ambition of the tens of thousands of young Mainland Chinese women studying in secondary schools, junior colleges, and universities in Singapore, elsewhere in Southeast Asia, or in the West. Come take a look at LSE, for that matter.

Perhaps once again China's headlong rush for economic growth and the staggering power of markets adjusting to demand and supply in the hundreds of millions will quietly, brilliantly do what the rest of the world has found so difficult. China lifted over 600 million people out of extreme poverty over the last quarter of a century, when no one else was looking - and therefore when no one was giving China foreign aid or telling it how to run its schools.

This time, for elevating yet another disadvantaged community will China, once again, quietly using just growth and markets achieve more than all other efforts micro-managing around the edges of global poverty?

PS Many readers, of course, quickly link in their mind this gender imbalance to the many horrific tales one hears emerging from China's one-child policy. If 119 boys are born for every 100 girls - as usually reported for China - then that works out to 840 girls to 1000 boys. Given China's population of 1.3 billion, this means 24 million Chinese men of marrying age without spouses by 2020.

It is instructive if grim to note this gender bias is seen as well in the very differently-governed India where the 0-6 age group now has 914 girls to 1000 boys (down from 927/1000 in 2001), confirming how the country has become "a terrifyingly hostile place to be conceived or born a girl", pointed out to me by Vinayak @kayaniv.

"I knew that would not work. Agent Texas [well..., she] is a bit of a badass."

If you play Halo, you'll get the many inside jokes in this. But regardless of the vintage on your XBox Gamertag, the martial arts choreography here is simply amazing.




(fight scene starts at 0:40).

"Oh man, forget this. I need to get a bigger weapon."