The Idea Curve

In my economics blog, I explained the present (2009) economic distress in terms of economics. I have another explanation of it on a deeper level. This second and deeper explanation is unrelated to economics and has nothing to do with politics.

Plainly and simply, globalization has hit home and has done so with quite a bit of force. The recent economic events that began in the U.S. and spread outward through the western countries are actually a downward correction in the living standards of the west relative to the rest of the world. The truth is that there is no economic justification for people in the western countries to have a vastly higher living standard than the rest of the world.

Let's compare these economic calamities to an earthquake. Two tectonic plates inside the earth are exerting a force on each other as they move in opposite directions. One plate is the Western Plate, representing the living standards of the western countries. The other plate is the Eastern Plate, representing the rest of the world.

The economic shock that has just happened and is continuing represents the Eastern Plate slipping forward while the Western Plate slips backward. The ever-growing popularity of deep discount stores in the west like Wal-Mart and Aldi's represent the inevitable sliding of the standard of living. It is as I described it in my book "The Commoner Syndrome".

Most people in the west work at jobs that could be done anywhere in the world or could at least be done by most anyone from anywhere in the world. So given the laws of supply and demand, there is absolutely no economic justification for the west to have a far higher living standard. Most manufacturing as well as anything that can be done by computer or telephone can be done much more cost-effectively from Asia. Outsourcing reaches further every year and now includes medical operations and legal work done from India.

There is just no way the west is going to go on with it's present standard of living the way things are going. The only way for the west to continue with the present relative standard of living is what I will call the "Idea Curve".

The east can generally do things much more cost-effectively than the west because people are willing to live with less. But the west has something that it does best. The west gives the world virtually all of it's new ideas in the modern age. It is in North America or Europe that virtually all of the technological progress has originated over the past few hundred years.

The reason that the western standard of living is slipping is that we are slowing down on the Idea Curve. This curve is the rate at which the western countries must come up with breakthrough new ideas and technology to keep it's standard of living relative to the rest of the world.

In my opinion, the next major technological step we should be working on is solar power. When a new technology emerges in the west, sooner or later a way will be figured out to manufacture it more cost-effectively in the east. But if the west can keep coming up with breakthrough new technology, by the time those industries move eastward there will be new technology to take it's place. It is only in this way that the western countries can keep their relative standards of living.

The underlying reason why the west is slipping backward is that reading and learning is more valued in many other countries than it is here. If people in other parts of the world are enthusiastically studying while we are watching nonsense on television then this slide will continue. The west needs not just educated people and hard workers because the rest of the world has that too, it needs breakthrough new technologies emerging at a much faster rate than at present. That is one of the reasons for this series of blogs, to promote interest in science and progress.