EU Socialism is Dead

I posted an item about Mark Steyn's "Sovereign Citizen" last night. In this piece Steyn finds portentous signals in globalization. Not the Jose Bove, college kids' concerns but whether new opportunities in formerly un-entreprising nations will stem the flow of human capital required by Western Europe and Canada. (Canada is a Western European Nation anymore, that last phrase may be redundant.)

Today the WSJ Ed Page features a Guest Editorial about rapprochement between China and India.

No doubt, China and India are competitors. China has already become the factory of the world, while India is gradually becoming the world's laboratory and back-office. China is seeking to emulate India's remarkable surge in software and IT-enabled services, while India is aiming to match China's stunning success in manufacturing. Both China and India are aggressively seeking hydrocarbon concessions in Central and East Asia, West Asia, Russia, Latin America and Africa -- in Sudan, they are joint-venture partners. Both countries are modernizing and expanding their military capabilities. But what Mr. Wen's visit demonstrates is that competition need not necessarily mean confrontation and conflict, and that areas of cooperation and engagement can indeed be worked out.

Clearly, trade is one such niche of mutual advantage. The two have decided to study the possibility of a Free Trade Agreement. In 2005, the volume of bilateral trade will cross $15 billion, a minuscule proportion of China's global trade but 7%-8% of India's. Contrary to Indian fears, the trade balance is in India's favor and the Indian steel industry has had an unusual degree of success in Chinese markets. The two countries have set a target of $20 billion by 2008; but going by present trends, this level will be reached next year. Investment is also taking place: Chinese companies are busy establishing their presence in areas like telecom and consumer durables while Indian companies have set up shop in pharmaceuticals, engineering and IT. Most importantly, while China is the leading target of anti-dumping action by India, Indian businessmen have shed their fears of China and have a degree of self-confidence missing five years ago when trade doors were opened fully.

You can add these two stories together in your head and see that our children will face a very different competitive picture than we have.

Many fear for the US. And seeing our education system, I should not be so sanguine. But I think we will be able to parlay current advantages for another half a century.

But "Old Europe" is toast. New economies in former Soviet republics, India and China -- these are the new trading partners. The German, French and Scandinavian economies can just wither away, new nations will take their place.

The real question is whether the US will elect to go down the socialist path, and follow these high-tax, centralized command-and-control nations down. Or will we wise up and compete with these emerging economies before it is too late? To compete we will need a new tax system and we will need privatization of pensions.

Are our legislators serious about these? It's not about the trust fund in 2042 -- it's about a company deciding where to build a new engineering center in 2008.

Economics and Markets Posted by jk at April 18, 2005 12:16 PM