Knowledge war and global economic stagnation

In these pages we have been stating that the global economy is currently at a crossroads in which three paths are not encouraging: recession, depression or economic stagnation. This situation is caused by the urgent need of the US economy to correct the size of the trade deficit that it presents today and has as a pivot or channel what happens with the Chinese economy. We are witnessing facts that show us how the decisions taken in the two largest economies on the planet will inevitably affect the rest of the world's economies with strength and power that cannot be countered by these nations.

Since, depending on the decisions made by the Chinese government, the trade war will take one course or another. We indicated then that the most sensible position of the Asian planning entities would be to make every effort so that China is not dragged into an economic depression, but that it would be willing to accept some years of economic recession, a phenomenon that would be transmitted to the rest of the world to cause a global economic recession. Understanding that, although recessions are painful processes that involve a high political cost, it is a way to make the necessary adjustments in economic matters to be able to open a new path of global economic growth. This is how a global recession could be the basis for the next decade to culminate with excellent prospects for the performance of the global economy.

However, recent months have shown us that the content of the reports issued by the Chinese authorities reveal that, despite the effects of the trade war, China will create the necessary spending and investment matrices so that economic growth is not halted ; in what is undoubtedly an excessively optimistic strategy that carries high risks for the normal functioning of this economy and that, unfortunately, could lead it, at the end of the next decade, to a pit of consecutive economic contractions of high magnitude. Indeed, the next ten years will show us a break in the behavior of global trade and globalization since, on the one hand, the United States will gradually turn towards economic and political isolation, with high chances of success; while China will do the same as it must also enter into a trend of economic and political isolation, but with high chances of failure.

Within this context, the outlook for the rest of the world is perfectly predictable: although little by little the ghost of the global recession disappears, it is evident that global economic stagnation is the phenomenon that characterizes the economic development of the entire planet, except, of course, to the United States and China; for at least a decade.

Indeed, the basis of globalization lies in the dependence, to a large extent, of the economies of the planet on economic activity that takes place in the United States and, more recently, in China. If these nations are undertaking measures that are oriented to the establishment of economic isolationism, such as the correction of the trade deficit or trade war or the strengthening of China's internal economy; then the main source of growth of most of the planet's economies would be diminishing. That is, from the next few years, the economic growth of each nation will depend excessively on the correct application of measures of internal economic policies of various types.

Global Impact of a Protectionist U.S. Trade Policy - GED Focus Paper - Thieß Petersen

But is not economic independence a necessary condition for prosperity ?, as dependence may be preferable to independence ?. It seems that we are emerging from an era that was characterized, not by economic dependence, but by economic interdependence framed within the globalizing context. If globalization loses strength because the two largest economies in the world want greater autonomy, in the sense of restricting their contacts with the rest of the world and not in the sense of regaining the freedom to make decisions since they have never lost it, then, economic isolation will be the tone that characterizes the economic activity of the future.

For two giant economies, such as the United States and China, increasing the degree of economic isolation is an option, although isolation implies a reduction in efficiency and a cost to society; since this can have as a counterpart the strengthening of indigenous cultural values ​​and a decrease in anxiety that is a consequence of having contact or being surrounded by people with different physical traits and with cultural values ​​that could be different. However, for a small economy, as almost every economy in the world is, economic isolation can mean collapse since none of these nations could bear the immense cost of reducing efficiency and productivity for them. An example of what is pointed out here could be represented by the process called Brexit , which is nothing more than the sharp increase in economic isolation, with lethal consequences for the British economy. Even so, a situation of global stagnation does not lead to a sharp increase in economic isolation but would drag the economies of the planet into a slow process of isolation, but, not for that reason, absent from trauma. In this sense, the fluctuation process in the values ​​of the various national currencies will be of first order importance for the purpose of counteracting this isolation process.

On the other hand, although the situation of stagnation will be reinforced by the gradual increase in economic isolation in each country, the absence of effectiveness of monetary and fiscal policies will be the factor that determines that no nation can leave this unfortunate situation. Given this scenario, we can foresee that it is feasible that those nations whose leaders are dominated by despair and, therefore, are committed to implementing expansive fiscal and monetary policies, will suffer the consequences of such a mistake and could easily lead their country from situation of permanent stagnation to one of permanent recession. In such a way that the International Monetary Fund, as a multilateral agency that contributes to removing national economies from a situation of financial bankruptcy, will be sharply increased by the abundance of cases of national economies that need to be "reflimed" or rescued.

It is evident that in such a terrifying scenario, such as the scenario of permanent global stagnation, with all the social and political problems that this implies; Economic science must enter into a process of self-criticism and conceptual re-ordering that marks the path that guides the new research that will produce the techniques and tools that will allow us to reach, again, the path of global economic growth.

My intuition tells me that the economy will abandon issues related to the application of certain term solutions to get involved in optics that emphasize long-term perspectives. In this way, the object of study of the macro-economy and the mega-economy would be shifting from the search for rapid growth of aggregate demand towards the search for gradual and constant growth of aggregate supply; a growth that goes beyond the simple increase of the population. This means that the role of the economy will no longer be linked to simple tax increases, subsidy increases or interest rate reductions. The economy could be merging with other disciplines to create the theoretical framework that will sustain the schemes adopted to achieve economic growth through careful control of the economic behavior of the inhabitants of a nation. Indeed, citizens will be willing to give up their freedom to the State in order for it to control their lives so that society can get out of the situation of permanent stagnation. ¿ How can it be possible ?.

The new economy should not have many obstacles to establish profitable technological change as the fundamental agent that creates prosperity and that will get any nation out of the situation of permanent stagnation. In this sense, in nations with the capacity to produce technology, a process that would be classified as the "knowledge war" should be unleashed. Certainly, given the uselessness of traditional economic policy measures to revive the economy, the desperate search for new technologies that yield a margin of profitability could become the fundamental task of the new economists.

This war of knowledge does not necessarily imply the emergence of a new industrial revolution but the undertaking of a set of activities that result in the production of technologies superior to that of rivals. These new technologies would create economic gains that, of course, would allow remuneration of productive factors, mainly capital, and address the multiplicity of social problems that derive from a situation of permanent global stagnation.

At this time it is impossible to glimpse what could be the fundamental elements that make up this war of knowledge, but, without a doubt, we can affirm that the platforms that will sustain this confrontation will be the educational systems of the countries involved in this struggle.

The war of knowledge is not a new concept since its origin dates back to the application of technology to war and military industry. However, it is from the end of the 19th century when the company captains, corporate leaders with great power to monopolize the production of numerous goods and services, warn that the production technique is not unique or exclusive but that a fairly large amount can be devised large production techniques aimed at providing identical goods or services and that some of these techniques are superior to others, both in terms of efficiency and in terms of profitability. This is how the North American and European company captains are dedicated to the search for talent that would allow them to devise as many modes of production and marketing as possible, to finance the academic activity of some universities and to finance various scientific projects carried out by researchers from Various branches of knowledge. This war is intensifying more and more, so that at the end of the 60s of the last century, transnational corporations begin to create research and development departments, that is, the search for new profitable technologies is not limited to the financing of some research initiatives but it becomes a constant, continuous and permanent activity. In other words, from that moment on, companies are not limited to producing a certain good or service to satisfy a specific market but also, in parallel, they are dedicated to producing efficient and profitable techniques that allow satisfying the good market. or specific service that it provides under conditions of advantage such that it allows it not to disappear.

Today all global corporations have a research and development department to which they dedicate a budget of colossal magnitude. That the is area that will allow the corporation to survive, achieve new conquests and displace its rivals.