The Economic Super-Cycle
March 3, 2011 9:18 PM   Subscribe

We've had 2 economic super-cycles before. One from 1870 to 1913. Another from the end of World War II until 1973. Now we may be in the midst of another, this time the cycle is all about the emerging consumer class in Asia.

The Super-Cycle Report was published in November 10' by Gerard Lyons, chief economist and group head of global research at Standard Chartered Bank.
posted by stbalbach (49 comments total) 15 users marked this as a favorite

 
> This time, the cycle is all about the emerging consumer class in Asia. China's consumer will move ahead of the U.S. by 2018. Chinese growth will average 6.9% over the next two decades, India 9.3%.

"If these trends continue.....A-y-y-y-y!!!"

The article about the new "global super-elite" in the newest issue of The Atlantic has a quote to the effect that the middle class in North America is going to have to take a hit when the lower classes of Asia lift themselves out of poverty.
posted by The Card Cheat at 9:29 PM on March 3, 2011


This is really old news, pedestrian analysis. Americans, mired in their wars, debt and social dissents, haven't had a chance to look over the ramparts and notice that. Australians, stoking the furnaces of China and India, have been aware of this for a long time, this sort of stuff gets reported in the business sections of the papers almost daily.
posted by wilful at 9:44 PM on March 3, 2011 [3 favorites]


So, the answer is 42?
posted by PareidoliaticBoy at 9:46 PM on March 3, 2011


middle class in North America is going to take a hit

Don't worry, there won't be many left in the middle class to feel it.
posted by George_Spiggott at 10:02 PM on March 3, 2011 [4 favorites]


Not having read the report itself, I'm not qualified to criticize it in any substantial way, but this sounds a lot like wishful thinking. It could happen if trends continue the way they're already going, but it seems unlikely. I mean, in the third link there's a quote from the report that projects a world economy worth 308 trillion dollars by 2030 - double the current size. But are there enough resources in the world to support that kind of economic activity? There has to be real value somewhere in the system. I know a lot of value is created, but you can't just make it from nothing. At some point in the next generation or so we're going to run into trouble from shortages and secondary effects like global warming, and world economic growth will slow.
posted by Kevin Street at 10:04 PM on March 3, 2011 [3 favorites]


Um yeah, as for China, last time I checked those dudes still make 50 cents an hour. And we've seen this before, it's called paranoia. As for having commodities, that's dumb. Africa may have silicone, but we buy it from them and make a silicone valley and companies like Google. The middle east may have oil, but we buy it from them and use it to power our economy on the cheap.

The US still dominates the global economy, and it always will. If you believe otherwise, then by all means, move to China and enjoy the fruits of their prosperity there. There will always be someone in second (or third or fourth) place that could "overtake" us and then the sky starts falling and we all lose our jobs. Supposedly it was Russia in the 60s and 70s, Japan in the 80s, and now it's China. Even if someone does surpass us in annual GDP in 2023 or whenever it's supposed to be, we'll too far ahead already for it to really matter.
posted by stevenstevo at 10:05 PM on March 3, 2011 [1 favorite]


This is just paranoia designed to justify wage suppression in the United States. That's all. Just like the "zomg US bankrupt soon" stuff is designed to allow oligarchs to strengthen their grip on the US economy.
posted by wuwei at 10:08 PM on March 3, 2011 [4 favorites]


Sorry, I should have said "wealth" instead of "value."
posted by Kevin Street at 10:25 PM on March 3, 2011


can we point out the unbearably shitty statistics that's going on behind the definition of "supercycle"? I mean, there's no real trend behind some of these, such as the 1913-1946 "cycle," which is actually two periods of major growth interrupted by two crippling economic slowdowns. End it two years earlier, and it's a supercycle. Meanwhile, note that the first supercycle's actual avg growth is lower than the 1973-1999 non-supercycle's. Add that to the whole "if we assume that the economy will be EXACTLY LIKE IT IS NOW FOR THE NEXT 20 YEARS" bullshit, and you get a bunch of meaningless hogwash designed to justify paranoia and reinforce the status quo. In other words, it's an economics paper.
posted by Subcommandante Cheese at 11:14 PM on March 3, 2011 [2 favorites]


The middle east may have oil, but we buy it from them and use it to power our economy on the cheap.

LOL

Sincerely,

Peak Oil
posted by Despondent_Monkey at 11:30 PM on March 3, 2011 [5 favorites]


But how can *I* make money from this.
If there's an emerging consumer class my natural inclination would be to sell them useless crap but all the useless crap is already made there so why would they buy it from me? Unless I'm so smart I don't have to get my hands dirty anymore, I can just sit here and develop brands and tech companies that these new consumers will lust after in their mission to be like me, reaping the rewards of my brain work! Their factories will shudder before the might of our SEO consultancies, mobile advertising networks and really well designed phones!
posted by Damienmce at 11:41 PM on March 3, 2011 [2 favorites]


One way to make money from this is to extend loans to people in Asia so they can buy useless crap for themselves. (Maybe even the same stuff they make.) In other words, invest in financial institutions that invest in Asia.
posted by Kevin Street at 12:01 AM on March 4, 2011 [1 favorite]


> The US still dominates the global economy, and it always will.

Between 2009 and 2010, the US became the world's second largest economic unit, after the EU - that's a peculiar use of the word "dominate", isn't it?

If you want us to take your claims seriously, consider backing them up with facts and reasoning, not just braggadocio.

You might also consider reading a history book. People said that about Britain, they said that about Rome, I'm sure the pre-Columbian societies said that too. It isn't just likely, it's inevitable that the US's "dominance" will end, the only question is whether it's in 10 years or 1000. I'd bet on it being much closer to 10 years, frankly, as the US seems to be doing absolutely everything wrong.

In particular, the destruction of the educational system is the anti-gift that's already reared its ignorant head (perhaps even on this very page) and will increasingly hobble the US as the well-educated boomers retire and are replaced by people with McEducations who have no strong language or mathematical skills.
posted by lupus_yonderboy at 12:49 AM on March 4, 2011 [15 favorites]


As for the article itself, it seems really stupid - biorhythms applied to economics.

It completely ignores the elephant in the room - that the entire expansion of the last hundred years has been fueled by cheap petroleum, and the era of cheap petroleum is rapidly drawing to a close.

When that happens, we'll see a massive global economic collapse which will last for decades. This is why my wife and I are making plans to leave the US, which we believe will be particularly badly hurt, due to the massive, willful ignorance of the country's "leaders" and a large portion of the populace. Australia is looking really good these days...
posted by lupus_yonderboy at 1:01 AM on March 4, 2011 [2 favorites]


Um yeah, as for China, last time I checked those dudes still make 50 cents an hour.

Was the last time you checked, um, never? Because In 1985 average income in China was $293; in 2006 the average income is $2,025. It was 3650 in 2009 (warning pdf on the last link. Source in both cases is the world bank).
posted by smoke at 1:57 AM on March 4, 2011 [2 favorites]


When that happens, we'll see a massive global economic collapse which will last for decades. This is why my wife and I are making plans to leave the US, which we believe will be particularly badly hurt, due to the massive, willful ignorance of the country's "leaders" and a large portion of the populace. Australia is looking really good these days...

Australia itself is quite dependent on petrochemicals for road transportation, although this is of course less true of major cities. Where are you planning to go?
posted by jaduncan at 2:17 AM on March 4, 2011


Does Arthur Brock know about this?!
posted by nickrussell at 2:18 AM on March 4, 2011 [1 favorite]


stevenstevo, that was an awesome comment. Just wish there was some truth to it. The USA is still the biggest economy (and oil burner) but by many quality of life and financial measures the USA is going backwards.
In the 80s the fear was that Japan would cripple the US manufacturing industry (remember that guy smashing SONY boomboxes while standing on a Toyota hood?). Well, they did, admittedly with some help from the Germans and most lately the Chinese.
Now the fear is the Chinese will cease supporting US government debt. Let's see how it pans out.
posted by bystander at 3:14 AM on March 4, 2011


Metafilter: Africa may have silicone, but we buy it from them and make a silicone valley
posted by kcds at 3:26 AM on March 4, 2011 [2 favorites]


The inability to llet loose the american exceptionalism amazes me.
China and India have huge populations. Now many in those nations are getting sufficient wealth to buy lots of goodies. Corporations aim for that huge market. Meanwhile Am wages stagnate and more and more heree can afford less and less.
Yes. There will be a lag for some time but all you need do is look at how Am workers are faring these days and what they can no longer afford. And note that more and more in a number of nations can buy that which a few years ago they were unable to.
And that means corporations don't single out this or that nation but look to largest potential
place of buyers.
posted by Postroad at 3:32 AM on March 4, 2011


America only has Google and Microsoft because Americans start ups got there first, which only happens because rich Americans take more financial risks than their European counterparts.

Europeans want desperately to increase their share of the future Googles by closing this gap. The economically minded right are too often deceived by short term self-interest plus the fools and kleptocrats, ala Merkel, Sarkozy, and Berlusconi. Yet, we're seeing more savvy left wing though now.

As I understand it, the powerful in China and India actually do take risk, suggesting wealth is America's only edge vs. them, but that'll end soon enough.
posted by jeffburdges at 4:21 AM on March 4, 2011


Now many in those nations are getting sufficient wealth to buy lots of goodies. Corporations aim for that huge market. Meanwhile Am wages stagnate and more and more heree can afford less and less....And that means corporations don't single out this or that nation but look to largest potential
place of buyers.


Corporations aren't innocent players. They are, by and large, the very ones who have created the problem of stagnating wages in the US in the first place. They, in fact, DO single-out populations to either bestow their graces upon, or turn their backs on. Corporations both create markets and fund the ability of consumers to partake in those markets.

China and India will learn this lesson, too, whenever Africa gets its shit together and becomes the next great pool of even cheaper labor. Of course, as it stands right now, that might not be until the next century.
posted by Thorzdad at 4:29 AM on March 4, 2011 [1 favorite]


Australia is looking really good these days...

Yeah, they don't drive cars over there... WTF?
posted by Meatbomb at 4:35 AM on March 4, 2011 [1 favorite]


Between 2009 and 2010, the US became the world's second largest economic unit, after the EU - that's a peculiar use of the word "dominate", isn't it?

The EU has yet to achieve the kind of economic and market integration as exists in the Federalist system of the United States. For example how many wall socket, voltage and plug combos are there for Europe?
posted by humanfont at 4:52 AM on March 4, 2011


Africa may have silicone, but we buy it from them and make a silicone valley

I'm personally more interested in the silicone peaks than the valleys.
posted by armage at 4:56 AM on March 4, 2011


Corporations aren't innocent players. They are, by and large, the very ones who have created the problem of stagnating wages in the US in the first place. They, in fact, DO single-out populations to either bestow their graces upon, or turn their backs on. Corporations both create markets and fund the ability of consumers to partake in those markets.

China and India will learn this lesson, too, whenever Africa gets its shit together and becomes the next great pool of even cheaper labor. Of course, as it stands right now, that might not be until the next century.


They lack the unity to do what China did. They haven't insisted on joint ventures etc, so they don't have many cards and are just going to end up working to produce minerals for PRC companies. Remember how beholden PRC companies are to the government; the ruling class is so focussed on social stability that Chinese companies proposing sacking large amounts of Chinese are going to have a really, really bad day.
posted by jaduncan at 5:16 AM on March 4, 2011


lupus_yonderboy: This is why my wife and I are making plans to leave the US, which we believe will be particularly badly hurt, due to the massive, willful ignorance of the country's "leaders" and a large portion of the populace.

Hey yeah? Us too!

lupus_yonderboy: Australia is looking really good these days...

Too much isolated island and desert, not enough trains, IMO.

Lots of sheep should mean loads of delicious lamb and sheep cheeses though, which is a total score.
posted by paisley henosis at 5:23 AM on March 4, 2011


There is effectively only one wall socket and voltage standard in Europe, excluding the ridiculous Britain plugs.
posted by jeffburdges at 5:44 AM on March 4, 2011


Maybe I'm Pollyanna to this thread's Chicken Little, but I just don't see it. China has a whole host of problems to work through before it can really begin to dominate the world economy, not the least of which is their economy's reliance on giving other people things for what amounts to free.

That's not to say we (warning: US-centric) don't have our own problems that must be addressed lest we lose our spot at/near the top, not the least of which is our collective decision to crush the middle class and thus reduce the size of our homegrown market. The only reason the middle and lower classes' standard of living hasn't declined precipitously are the policies of subsidized food and offshoring manufacturing to China and elsewhere. We can buy the same amount of stuff for less because it's made for next to nothing.
posted by wierdo at 6:11 AM on March 4, 2011 [1 favorite]


We're painfully aware that Australia's dependent on petrochemicals... but they do have serious other sources of energy, including nuclear. I have the advantage of an Australian citizenship through my mother, too (though I also hold an EU passport, true).

In particular, I'm sitting in Bali right now, just having taken a midnight dip on Balinese New Year's Eve - er, I don't have a good reason to point that out except that we came here from Melbourne which is a really happening city with decent public transportation (electric trams!) and that seems to be our target city!

The other candidate is probably Berlin but I haven't been there - though my German is pretty good and I have friends there. Europe is marginally less dependent on oil, but I have to say the climate in Australia is really attractive...

It's foolish to attempt to pick a place based only on today's dependence on petrochemicals - because they're all dependent on petrochemicals. All my friends in Europe own cars...

What's important to us is how well the country deals with disasters, how good the safety net is, how "liberal" they are. Australia isn't perfect but it has a lot going for it, I could move there without issues, I have family there, and it's an energy- and resource-rich country overall. I perceive that they will do better than most places.
posted by lupus_yonderboy at 6:17 AM on March 4, 2011 [1 favorite]


In particular, the destruction of the educational system is the anti-gift that's already reared its ignorant head (perhaps even on this very page) and will increasingly hobble the US as the well-educated boomers retire and are replaced by people with McEducations who have no strong language or mathematical skills.

Any country you pick has plausible reasons that it could implode. Europe has plenty of its own problems, in particular its non-governance. German citizens will tire of subsidizing Greece and Spain, and Italy's budgetary collapse could sink the Euro-zone. The higher educational systems in the most populous EU countries could still use a lot of work. Anyone who hires newly-minted engineers will tell you that US and UK graduates are the most reliably competent in the world. The Chinese academy has gotten quite a bit better, but still suffers outside of its top-few institutions. China also has its own problems; it has multiple urgent environmental crises and huge social division. Its growth is built on paper holdings and the cooperation of the west. People in the US see China as an inevitable juggernaut, but many people in China are worried that the whole system they have could collapse any day.
posted by a robot made out of meat at 6:22 AM on March 4, 2011 [2 favorites]


Australia is looking really good these days...

print "$risk_joke";
posted by a robot made out of meat at 6:23 AM on March 4, 2011 [1 favorite]


Every time you link to a Business Insider article, God kills a kitten. Please, think of the kittens.
posted by kdar at 6:44 AM on March 4, 2011


jeffburdges writes "There is effectively only one wall socket and voltage standard in Europe, excluding the ridiculous Britain plugs."

That plug is only good for 2.5A. Even at 230V that is not nearly enough power for stuff like hair dryers, toaster ovens and microwaves. What sort of plugs are used on heavy draw kitchen appliances or power tools like skilsaws.
posted by Mitheral at 7:06 AM on March 4, 2011


Australia isn't perfect but it has a lot going for it, I could move there without issues, I have family there, and it's an energy- and resource-rich country overall.

Very fortunate for you that you have family there. Australia's immigration policy isn't exactly a shining beacon of welcome for those who don't.
posted by blucevalo at 7:34 AM on March 4, 2011


There was an amazing case about American exceptionalism that I read in business school and have never been able to find since...

"Driving my Hummer to the city on the hill" was the title and basically developed the core concepts of identity that created and drive American exceptionalism.

I would give a barrel of oil to find that article...
posted by nickrussell at 7:35 AM on March 4, 2011


The Chinese academy has gotten quite a bit better, but still suffers outside of its top-few institutions.

Walk around any college campus and see how many Asian students are there. Many/most of those students will return to China/India/Korea/etc and become the next generation of engineering and scientific talent, as well as the next generation of entrepreneurs. Some of those people will go directly into academia, others will get there eventually. There may well come a time when the educational institutions in India and China generally equal or surpass the US.

Meanwhile, the well that feeds our educational system is drying up...
posted by CosmicRayCharles at 8:44 AM on March 4, 2011


China has a LOOOOONG way to go before it reaches our standards. And, since all the country does it sell shit to the west, they can only continue growing IF WE CONTINUE TO DO WELL. So, it just ain't happening by 2018.

And India? Has anyone actually seen the conditions there? Sure, they may have some successful 'middle' class people there, but 80% of the country is still a slum.

I'm not saying the gap won't close, but it will be a long time before more immigrants try to migrate to those countries instead of the US.
posted by eas98 at 8:56 AM on March 4, 2011


Walk around any college campus and see how many Asian students are there. Many/most of those students will return to China

Fewer than you might think: 70% don't return. China's made some progress on this, but it's still pretty bad. A new student in my department noted that 2/3 of her undergraduate statistics classmates at Peking University (one of China's top) went to the US after graduation, and many want to stay. It was easier to have a class reunion in Seattle than Beijing. If the social problems mentioned above lead to political uncertainty or a crackdown on inconvenient intelligentsia, they'll definitely stay.
posted by a robot made out of meat at 9:04 AM on March 4, 2011


"And India? Has anyone actually seen the conditions there? Sure, they may have some successful 'middle' class people there, but 80% of the country is still a slum."

One point made in the Lyons report (and it's a good one) is that even marginal shifts in the economic fortunes of China and India will lead to huge economic growth overall. So in twenty years those countries might still be "poorer" on a per capita basis then western countries, but the improvements they do achieve will expand the global economy by hundreds of trillions of dollars. More and more they will become the economic engine that drives the world, and the rest of us will be focused around servicing (and profiting from) their needs.

But that's if the current trends continue.
posted by Kevin Street at 9:59 AM on March 4, 2011


Maybe I'm Pollyanna to this thread's Chicken Little, but I just don't see it. China has a whole host of problems to work through before it can really begin to dominate the world economy, not the least of which is their economy's reliance on giving other people things for what amounts to free.

But that doesn't sell books. People want to hear either China will dominte the US or collapse. Truth is probably somewhere in the middle. They have problems (just like India or the US) but will be a player no matter what.

America only has Google and Microsoft because Americans start ups got there first, which only happens because rich Americans take more financial risks than their European counterparts.
...

As I understand it, the powerful in China and India actually do take risk, suggesting wealth is America's only edge vs. them, but that'll end soon enough.


And this is why generally you want to accept immigrants: anyone who has the drive and is willing to take the risks to have a chance to improve their life is a plus for the economy. They have already proved they have the two characteristics which historically lead to success. Now whether the conditions still exist for a person to move from poor to rich purely with drive and guts is another question...

From my experience in China, I noticed a few things: First, they see opportunity everywhere and are willing to take chances. Second, they think Americans work way too hard. This goes hand-in-hand with the first, the impression that I get is that they don't think Americans are lazy workers, just that Americans are lazy in risk taking and work too hard to get nowhere. Third, there is no animosity towards the US. The competition aspect seems to largely be a Western idea.
posted by roquetuen at 10:27 AM on March 4, 2011


Yeah I wouldn't get to excited about China. The recent freaking about dunked of political protests shows that there's quite a big problem there.
posted by humanfont at 11:47 AM on March 4, 2011


Australia is looking really good these days...

I'm tempted to move back there, too. I do worry a bit about its political security over the next couple of decades, though. It's always depended on Britain and then US geopolitical power to support its interests, and if US power wanes along with US economic fortunes, it's not clear how Australia is going to compensate for that...
posted by Coventry at 1:46 PM on March 4, 2011


> and if US power wanes along with US economic fortunes, it's not clear how Australia is going to compensate for that...

Are you anticipating that Australia will be invaded?! If so, by whom? China is a fairly long way away, you know...
posted by lupus_yonderboy at 5:35 PM on March 4, 2011


Are you anticipating that Australia will be invaded?! If so, by whom? China is a fairly long way away, you know...

About the same as Japan.
posted by a robot made out of meat at 5:47 PM on March 4, 2011


And in WWII the Japanese didn't invade.
Sydney has a large and growing Chinese population, over 120,000 people, and China is Australia's largest trading partner. Australia is working hard to make China rich (and vice versa). I don't think there is any appetite for military conflict to derail that, except in the fevered imaginations of some conservatives.
posted by bystander at 6:56 PM on March 4, 2011


Mitereal: Euro power plugs are available that support higher amps, but they aren't fully compatible across all countries, but covers France and Germany. See wikipedia.
posted by bystander at 7:04 PM on March 4, 2011


All the hair dryers and toaster ovens I've seen used the euro plug, but I can't speak for microwaves. And the real high amp stuff like ovens might vary considerably. I doubt the slight minor differences in amperage and plus imposes much more restraint of trade than language barriers.

I'm sure the Europeans don't want all their internal trade barriers taken down straight away however. Germans may happily subsidize the Belgium's world dominance of high end non-local beer, well frankly the German's could never compete on taste anyways, but that doesn't mean they'll tolerate Belgian beer in Germany itself.
posted by jeffburdges at 6:51 AM on March 6, 2011


the entire expansion of the last hundred years has been fueled by cheap petroleum, and the era of cheap petroleum is rapidly drawing to a close.

Forgetting not cheap money, which has been an adrenaline shot over the centuries since John Law.

Australia has its attractions, but it is a commodity driven economy and the commodity thing is not going to last forever any more than the real estate thing lasted forever. Which gets us to construction, one of the driving economic forces in China. Much of it is crony capitalism (the party of Mao is still in charge, remember) and job creation measure. It makes for headlines and lots of activity, but when it stops, well, you know the rest. Just be aware that Australia is a commodity provider to China. Live by, die by.

Then there are the consequences of the one child policy of the last century. Also, they are not just raking in silver and gold as they did before the opium wars. They have debt percentages comparable to the US, and it isn't all going to infrastructure by any means.

I'm guessing that there's lots and lots of other stuff going on in China we know nothing of, and how that plays out is anyone's guess. Frankly, the kind of growth they are experiencing these past years looks pretty bubblicious to me. Whether they can weather a shock will be interesting to see, but I'm old enough to remember when Japan was supposed to rule the economic roost, and look at them now.

(And why no mention of Kondratieff waves?)
posted by IndigoJones at 11:47 AM on March 6, 2011


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