The economic downturn over the last few years has created, for many, a difficult and unclear vision about their future and that of their nations economy. In particular, in the western world. The process of globalization as well as the rate at which technology is being developed and commercialized is making it difficult to follow what is going on.
I think of the letter “M” when it comes to a national economy that is attempting to build or rebuild or otherwise sustain their economic position and prosperity. More specifically, does your nation’s economy have all the “M’s”?
- Man Its not technology that gets things done, its people that do. Without the people to carry out various tasks nothing gets done.
- Method The process to build something or carry out some task requires knowledge of how to accomplish the task, by what means. This is the technology.
- Material You need certain basic things to convert them into new things.
- Machine To facilitate the realization of something you need tools to get the job done.
- Market A collection of buyers. Without this nothing that you make can be sold.
- Money Cash is king. You can move the previous “M’s” in most any direction.
This view may be somewhat simple as there are obviously many other parameters involved in building a nation’s economy. These include things like culture aspects, natural resources and the level of a nations educated as well as non-educated population and so on…
Still, the above list does provide some clarity as it asks an essential question about the required elements that relate to a nations economic strength and potential. Today, countries like China and India meet these requirements. They have all the “M’s”. But so do many other countries around the world. Yet, while most countries will qualify, the quantification of each of these “M’s” may differ, differ greatly. And, this sets countries apart.
“While the process of globalization may be considered the merging of economies, capitalism is largely based on the exploitation of the differences between economies”[B.J. Rao]
Capitalism, is an “ism”, a belief/concept, which seems to be in strong alignment with human nature. China and India both have very large populations. And, although there is a large community of very wealthy businesses and people most of the population is not. This difference greatly sustains their economies and allows it to grow by the exploitation of this difference.
China appears to have all the “M’s” in an even bigger way. Especially the last two, “Money” and “Market” which have grown very rapidly. India is somewhat similar but lacks in “Machine” and, yet, seems stronger in “Method” due to its large highly educated population segment. This may actually lead to a more sustainable economy in the future. In order for China to progress it will need to focus much more on “Method”.
The US of the 60′s had all the “M’s” and in a very big way like that of China today. But today’s America is slowly lacking “Method” and “Machine”. They don’t have the machines to produce and the “brain drain” and long time outsourcing is weakening their method to understanding about how to produce things. Just as it takes a community to raise a child so does it take companies and people of various expertise to sustain an industry, develop technology, trade relation and build an economy. This is especially important for nations that lack important natural resources. Within the western world the only country which has minimized the outsourcing of its important production and retained much of its “Method” as well as have all the other “M’s” is Germany. The German economy remains healthy.
While globalization is largely a collective process, the Dutch may be considered to have contributed to some of the most important recent milestones in this process. In fact they are still one of the wealthiest nations in the world due to this. However, other than that, The Netherlands, has an abundance of only dirty water and sand. No real natural resources, at least none that have significant value. As such, the Dutch must rely on Technology and Trade to sustain their economy. Yet, much of the industry, in particular heavy industry, in The Netherlands has vanished. The Dutch used to produce cars, trucks, boats and aircraft. Apart from water works, the Netherlands does however still retain one of the most prestigious technological companies in the world. One that is on the forefront of industrial technology. Most of the integrated circuits, the chips that you are now using in your computer, phone or tablet were produced using machines developed and produced in The Netherlands.
But that is not enough. The idea in Holland as well as several other countries in the western world is that they will be able to sustain their technological position by becoming a “Knowledge Economy”. They will focus on and perform only fundamental research and sell this to sustain their economy. This provides a vision and “perception” to believe in. It provides relief to many.
But, in my view, this idea is utterly naive and arrogant.
Focusing on just one “M” won’t work without the focus on the others as well. Temporarily yes, due to historic reasons. But not in the long-term.