Economic Extrapolation

The French are finally starting to show signs of concern that the EU won't be the economic panacea that it has been touted as being. A new study from a French think tank warns that Europe is bound to lose economic clout worldwide over the next 45 years or so.

Which is true. I don't know if the numbers in the study are right (in fact I will take exception with some of them in a minute), but there is no doubt that Europe is in an economic importance decline. As the population of Europe gets older, less productive and shrinks, the Continent will naturally produce less economic value than it does now. Europe has already begun a slide into economic decline.

And with the economic decline, there will be a correspondent political importance decline (which is of primary concern to the French, naturally). The EU, for all its "good intentions", is still a tool of the socialists in Europe. Europe is proving that socialism cannot work in a nation that has a rapidly maturing demographic model. Socialism won't be the cause of the political decline in Europe, but it will exacerbate the situation.

So, if Europe's decline is accelerated, but not caused, by socialism, where would that leave a nation like China or even India? After all, they are both socialist nations also.

I believe that they will have divergent paths in the new world economy. India will play a bigger and bigger role. China on the other hand, will grow some from its current position, but it will generally stagnate. So why the difference?

It is a result of how the populations of each nation are handled. India allows for innovation, initiative, and personal advancement. Maybe not to the degree that we allow it in the West, but the basic concepts are there.

China is absolutely opposed to the concept of individualism. The Communist Party in China wants everyone to think, act, and be the same. The personal is subjugated to the group, at the loss of all that makes an economy truly a powerhouse.

China's absolute economic numbers will grow impressively over the next 50 years as the nation moves forward and grows. But they lack the innovation of the US or India. They don't have the same risk taking mentality of the US. In other words, they don't have the same building blocks of wealth building (as opposed to just growth) that the US has.

So what will end up happening is that even if the Chinese economy grows to become 30% of the world economy, it will at the unimportant end of the economic spectrum. Just providing basic infrastructure to their 1.5 billion people will make their economy larger than virtually everyone else. But their economy will be focused on sustenance, not wealth creation.

The US has been truly focusing on wealth creation since the end of WWI. Most of our economy now is geared towards providing high end, high profit items that truly let us raise our standard of living. It is a result of our risk-taking nature. We want to take a chance to improve our lot in life.

The size of an economy by itself means nothing. What is important is what is created in that economy. In China, most of the economic output is driven towards feeding and providing basic services to the people. In the US, most of our economic output is discretionary. We can spend it on whatever we want.

We can choose to blow our discretionary money on Arab oil for our SUVs. We can choose to spend our discretionary money on new toys for the military. We can choose to use our discretionary money to buy pretty much whatever we want.

China has very little discretionary economic money. They have to spend most of their resources on food. Not a whole lot of choice there.

Getting back to Europe, they will shrink, particularly in political importance. But economically, the situation won't be as bad as the study would suggest. Before hardcore socialism took over in Europe, they were able to establish a level of economic efficiency that is second only to the US. So even as they shrink in absolute terms, Europe will still be better off, standard of living wise, than the boom countries of China and India.

But, the study was written by a French think tank and was more worried about maintaining the economic and political clout of the EU. EU clout will decline, hence the negative tone of the study.