Outlines for the future—A wish or a cruel truth?

2. Outlines for the future—A wish or a cruel truth?

In Finland, the representatives of economic life sketched 4 possible types of a future world and published them in March 2009 (The Delegation of the Economic Association Scenarios (EVA), 2009). These scenarios are interesting and give clear development pathways to assess the future.

These scenarios start from 4 basic alternatives. In the first one, the West will moult, there will be a rise soon and that the western countries would get over this by just doing some small improvement measures. The USA will succeed in her recovery procedures and in pulling up with her also other large countries. This was also the goal in the G20 countries’ meeting in London in April. The president of the USA did manage rather well in his first so called maiden flight to ensure other partaking countries of the importance of the recovery measures. Incentive for

a success is the fact that everyone has so much at stake and to lose so that nobody can afford to miss this train. At the moment, we just have to wait and see how the measures are taken work. In order to back up these measures, some manipulation seems to be going on in the USA to make the results of the banks to look more positive than they actually are in order to get the halted sleigh back into movement.

This first model supposes that this present crisis is just a transient nightmare. There is certain doubt over the development and activities in the Asian countries, but in general world economy will recover. To survive, this crisis demands re-examination of international financial structures. This will still take place on western command, but now also other countries will have their say, above all China. Co-operation will widely exist between the different countries of the world. The meaning of the EURO will grow as the second world currency alongside with the dollar. This alternative is based on a positive 1 to 3 per cent growth.

In the further vision reaching the year 2020, it is supposed that the West will regain its leading position in the management of the world, and international institutions will be renewed under western leadership. The economy in the USA will improve and the status of Europe will strengthen. Technological reforms and innovations will improve the effectiveness and productivity of the production. Curbing the climate change will increase due to the application of innovations. Productivity in the western countries will improve. The wellbeing of the individuals and the society increases, and social responsibility will be emphasized. It is believed that along with social responsibility, demands of sustainable development grow. The life span of a wealth society is extended and there is a belief in the growth of the individual good in which leisure is appreciated. It is also believed that co-operation and coexistence of the various religions will increase. Multiculturalism in several countries will also facilitate resolving international conflicts.

I would characterize this vision as a bad dream after which one will wake up in the morning fresh and ready to continue from where things were left. This model is a very opportunistic one in regard with the present consensus thinking. It seems that one has not learnt anything from a complete incorrect estimate preceding the recession. The same ultra-reckless positive line of thinking is carried on. To the importance of the Asian countries is given too little attention, and they still believe in the supremacy of the wealthy west. One does not think either that there would be very radical changes in the ownership base such as China, for instance, would buy important shares of western companies (Juntunen, 2009, p. 182).

In the second alternative, the vision is that China will recover from the economic crisis sooner than the western countries. It has probably not invested in investments involved with big risks, but rather in US government bond loans. The risk in this lies only in the fact that the USA does not let its currency devaluate by, for instance, printing too much paper money to fund its current account deficit. This is how it pays its debt to

The world after financial crisis

China with pieces of cellulose (EVA, 2009). This alternative assumes that China and India will not dive as deep in the crisis as the western countries in the wealth society. It is expected that China will go business shopping to the world market. Large structural arrangements will emerge between different countries and different branches of business. The importance of dollar as currency decreases. The weight of the West in the world economy fades. Asian countries start to communicate with each other and integrate their markets. Gradually, Asia would become the generator of the world economy. This would mean a return to the height of the Chinese dynasties when China was the centre of the world and the most important state. This alternative assumes that the growth of the gross national product would lie between +2 and +4 per cent (Juntunen, 2009, p. 183).

In a longer run, this alternative sees that the area of focus of economic innovations will more and more change over to Asia and the OPEC countries. Tough capitalism would get a Chinese touch. The stage of brutal capitalism would continue its course and perhaps become a little harder, because the hunt for getting the costs down would soon continue.

It will be rather easy for China to make her production grow, because the funds over there are mainly in government’s hands. China can make even important decisions easily and quickly, such as making investments in the development of the infrastructure. China needs to build infrastructure all over the country. Investments are not artificial, but they are an investment into the future and to an even faster growth.

With rising China and Asian countries, the IMF, the World Bank and others will lose some of their significance. The importance of China in the centre of the world will grow fast in particular if India and Russia turn to the Chinese markets actively. Environmental and democratic values would suffer a hard blow in this alternative. Production and productivity would probably play a central role. This alternative resembles Porter’s investment centred stage to a great extent, a stage where competitive advantage is sought by size of series and state ownership. In Sharkar’s way of thinking, this would mean the stage of warriors (Juntunen, 2009, p. 184).

The fight for the blocks scenario assumes that economic crisis will become deeper and drag on. Recovery measures will not bring the desired result, but an even deeper crisis will emerge when recovery measures have burdened the states with debts. The freedom of action of the societies is even narrower than before. Economic areas will group more and more behind their own barriers and take part in the discussion, fight trade war and co-operate behind these barriers. All protectionist measures are allowed and in use. By using devaluation, tariffs and various fees countries try to keep the production of the own country and area in a preferential position. Governments are powerful actors in this model. This model resembles investment and warrior stages.

In the stimulus and collapse scenario alternative, Keynesian recovery measures are not successful and states get into deeper debts. This alternative displays the depth of the real problems of the US financial crisis. In the long run it could have a healthy purifying effect. The wealth society should peel off its extra fat. China will get fed up with the poor management of the US economy and withdraws its bonds from the dollars.

In case of a weakening economic situation, consumer demand would fade to a minimum which would cause further unemployment and this again would have an impact on consumer demand. This would bring about a self-deepening spiral which will drain with it also plenty of successful and good things. A bath tub effect would emerge when the plug is unplugged.

At this stage, extreme movements will take over the power. Religious wars and crusades may take place. New leaders want to reallocate the balance of terror on the globe. This stage would resemble the fall of a wealth society in Porter’s models of nations. In Sharkar’s model, this would equal an anarchistic and uncontrolled stage

The world after financial crisis

which resembles the stages of the warriors’ and workers’ society. Of the future alternatives, the most probable models are alternatives 2 and 3. The world is slowly recovering from depression. When the period of depression stretches, the governments want to take protectionist measures or use currency value changes to help competitive situation. Asia will recover from the economic crisis sooner than the West which will accelerate the redistribution of global ownership in which the ownership may pass on to China and the OPEC countries in the Middle East. Asian countries seek for additional power for growth by means of integration. This scenario resembles the structural economic change of old economies where the fields of low added value will disappear from the western countries as once did clothing and textile industries. This follows naturally the development path of the life span model.