This week I decided to do something slightly different since I am going to write about an interview I found on The Economist's website called "Stephen King talks about scarce resources". Since I am focusing part of my blog on resources I believed that this could be a very interesting interview to watch and report on. As some of you may already know, Stephen King is the group chief economist of HSBC, the Hong Kong and London bank. He has also written a book called "Loosing control: the threat to Western Prosperity", which talks about why emerging markets are posing a new threat to Western prosperity; this is also what he talks about in his interview with The Economist.
http://www.waterstones.com/wat/images/nbd/m/978030/015/9780300154320.jpg
In the interview, Stephen King talks about the negative side effects of globalization such as the threat to western jobs, downward pressure on wages yet he focuses on the competition of scarce resources. Stephen King talks about how the Western society is so used to growing and always having more and how politicians keep promising that output is going to rise, income is going to rise and unemployment will be kept low, yet he believes this "Western" growth will soon end due to the high growth of mainly eastern countries such as China, India and Russia. King explains that the west has already in the past experienced a scarcity of resources during the Industrial Revolution, but that it was easier for the powerful western countries at that time to hunt for resources elsewhere since most countries were extremely poor and could not find a way to use their resources. Now a days though western countries do not have this "monopoly on resources" anymore and the competition is hotting up again.
Oil, metal and food prices are not determined by the Western countries anymore and this is evident when we look at the riding oil prices in the past 2-3 years (oil prices kept rising throughout the financial crisis). People in the West are paying much more for their raw commodities yet their income is staying the same (this was not the case in the 1973 world food crisis when both raw commodity prices and wages rose). Today people are starting to fear the tremendous growth China has been experiencing, and Stephen King says that if things keep going the way they have been for the past 10 years, by 2030 only China will be consuming all of today's world production of oil.
http://www.chrismadden.co.uk/news-cartoons/made-in-china.jpg
What Stephen King says is very interesting but it is nothing new, we all know that China is growing and we all know that emerging economies will play a much larger role in tomorrows economy. When looking at the interview I felt as though Stephen King was trying to scare the Western countries by telling them that they do not have total control over resources anymore, and he said it in a way that made it sound like he was appalled by this idea of "losing the monopoly". I personally believe that we only have ourselves to blame, we wanted globalization, we wanted to outsource our companies to the east to save money, we tried to take advantage of everything poorer countries had to give and now that they have learned to produce their own products and use their natural resources it is obvious that they will somehow try to use this newly acquired power against the western world. It is nothing strange and it is nothing that should surprise us and it was foolish of people to believe that the west would have the the power forever.
http://www.chrismadden.co.uk/news-cartoons/made-in-china.jpg
If the Western countries want to keep playing in the world market they will have to come up with new and improved ideas and find new ways to impress the world again. Nothing is going to change if we keep watching our plasma TV made in China, while eating our tropical fruit from Brazil and thinking of the next car we are going to by which is going to be fueled by Eastern oil.
Have a good week,
The Financialista
The Economist
The Economist Multimedia (2010) "Stephen King on scarce resources" Date Viewed: 16th October, 2010. Available online at:
http://www.economist.com/blogs/multimedia/2010/10/stephen_king_scarce_resources
Images
Chris Madden (2010) Date Viewed: 16th October, 2010. Available online at:
http://www.chrismadden.co.uk/news-cartoons/made-in-china.jpg
Waterstones (2010) Date Viewed: 16th October, 2010. Available online at:
http://www.waterstones.com/wat/images/nbd/m/978030/015/9780300154320.jpg
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