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While reading the transcript of the Gordon Brown's FT interview I had an idea; there is probably nothing new about it as I am an economic illiterate but I would like to hear what people have to say The paragraph that motivated this post is : " Now, the great thing about the new world economy is that if you have a product to sell or a service to sell that is highly valued, you can sell it all over the world now, not just in your own country. The good thing to look forward to is that there are going to be millions of new middle class consumers developing in Asia and elsewhere over the next few years, wanting these new high quality products as they become not just producers of their own goods, but consumers of our goods.And the great thing that Britain’s got to offer is if you look at these high technology and creative industries, we are well placed. So the question is, which party or which government has the right policies for taking our economy forward to the next stage? Who is able to invest in the education talents and creative potential of our country? And who has a sense of how we can actually be successful in this new age?"So my interpretation of this is that while emerging markets are getting more competitive and richer, their citizens will demand and need progressively higher and higher conditions, higher quality of life and reach a situation similar to nowadays conditions of life in northern occidental countries. The point that G.Brown then makes is to say that while "we" may not be as industrialy efficient then those countries we do have "high technology and" the creativeness to further develop those.This is quite striking for me because I used to live in the quite unhappy and a tad xenophobic morose feeling that in the long run countries like China, India, Russia (etc...) would one day get a major economic dominance of occident : which should be the way things work as we can see in history great empires fall and are replaced by other even greater ones !But now, this is not so clear to me !This know-how "we" have in Europe and US is not so easy to develop : for instance producing a good engineer follows from an education that is not so easy to reproduce in a different cultural/society ambient and furthermore those education systems have taken centuries to reach the level we have today.Once the global economy reaches an equilibrium, once say the citizens of China (for example, and no I am not biased against China) get the same life's condition as say the people in UK : which of those two countries will be better armed to fight for economic dominance ?The transcript can be found here : http://www.ft.com/cms/s/0/17676ef6-9669 ... abdc0.html

I do not believe in the global economy reaching an equilibrium in forseeable future. Some nations will fall while others will rise till last differences between them disappear completely (I do not believe this might happen any time soon despite all globalization we see).

A brief version might be: "Develop new things and sell it to someone!" Among lying, one main task of politicans is to give hope and confidence. What "high technology" is not said and whom to sell doesnt matter. If you want to start a risky tech biz it might be the right time b coz the biz of the older tech is struggling. thus risky as well.

Gordon Brown certainly achieved a positive and motivating answer : I agree this is job as UK "manager"On further thoughts I also think it will take a lot of time to reach equilibrium. In my opinion the main issue being the scientifical/technical originality/knowledge advance Europe/US on which it barely holds: thing is in the past 30 years we have been selling those in return of being able to invest in emerging countries, they learnt from us and are on a good way to surpass us.As an example, I remember from a few years ago, Airbus getting a huge contract with China over Boeing : one of the conditions was to develop a plant in China to manufacture motor (parts?) and to give access to the corresponding technologies. At the short term it was really good deal, in the longer range I am not so sure !

You might consider the tech-copy issue to be a trade theory which is rarely touched by economists, and even worse, ignored by firms. Firms have to be very quick in market penetration and in killing their own products. That isnt really the culture of european firms. In case of china the best firms taking their piece of cake without giving their guns away are from taiwan and s'pore. It s a different thinking to tech and competition.

It is true that the Know how takes a while to develop in other countries. But that is assuming other countries want to develop exactly the same know how.When Rome fell, the empires that replaced it had different ways of working and functioning as is evident in the US and UK now. Perhaps the new world order, especially after the recent crisis, does not require duplicating the same standard of living, but adapting them to newer ways. Adapting and improvising are but second nature to the denizens of China and India.

The more important thing he said would appear to be that Chinese and EM demand will arrive and on the other side of the rainbow we'll export to China as much as they export to OECD nations. Fast big brush: Globalization is by definition "rebalancing," not of trade balances but of relative price levels.China wakes up and becomes an export economy. Wage labor arbitrage becomes rampant and price levels naturally want to adjust -- upward price pressures on China and downward on the US (we might also say EM and OECD...). The lending was also part in part FX sterilization and manipulation, keeping prices from rising in China as much as they should want to by keeping a cheap yuan. OECD ability to borrow from the Chinese and Chinese desire to lend in part to keep wages and prices low there, often via a weak yuan, masked the moves toward equilibrium.Brown, initially speaking of the wonders of globalization, apparently sees this as the downside and possibly as a major part of the crisis we've had. But, he tells his interlocutor, when China is developed, they'll want Gucci bags and Starbucks coffee and all the rest of it, in addition to London investment management (more to his point) and so on. So this thought basically keeps his love for globalization alive... Better to have a smaller piece of a larger pie -- EM growth should be good for all.I also love globalization. But it will face new stresses as oil again becomes a strong headwind. My rant: new oil demand is coming from China and the Mideast and other EM areas, but oil production is stagnant and new supply is expensive. Hard to see if this will have a gradual or sudden impact, as always, but brace yourselves. Much EM oil demand may be even more inelastic than OECD demand. Oil could also have a role in puncturing a Chinese credit bubble, and since Chinese oil prices can be set by mandate, the Party will have a strong incentive to keep local gasoline prices low. I see liquid fuel prices as the greatest threat to the world economy at this point, a threat which far too many dismiss. Hard for a country to spend more than 5% of GDP on liquid fuels without triggering broader problems.Thus spracht Dayfurnacht

I don't think different countries will be equal in all industries. But I do believe different countries may do better in certain industries. This is why trading may make many people better off. As it stands currently, I don't believe China will be a leader in advanced technology any time sooner. However I think it is leading in many consumer oriented industries. (Believe me, Chinese consumers are much more picky than their western counterparties. And the competition there is far more fierce.)Many Chinese, especially those living in coastal areas, are rich by western standards. Net worth of USD1M+ is not uncommon among 30-40 year old office clerks. Some more successful (or lucky) people and those in the "privileged" circle are far richer. Even though percentage of such people in China's population is small, but the absolute number is big (easier surpass the total population of a small-to-medium European country) and they live very concentrated. So the question for western companies is how to make money from them? Therefore, I think G. Brown does have a point. But he does not really answer "how". You need to find something that your "customers" want, not what you think they want. It is quite different and many western companies that do very well in their domestic markets clearly failed in China due to this.

I am VERY sceptical about the ability of the West to continue exchanging "high technologies" for the goods produced with these technologies. The early warning here is the percentage of PhD students of Chinese and Indian origin in physics, math and engineering: as far as I know, it's already very high and continue growing.

Here is how I see things.China and India are developing their technological abilities at a fast clip, chiefly through funding education.Europe and USA have a wealth of existing technological ability and historically have had (and continue to have) the edge in innovation.But in the USA, this innovative capacity has come from poaching creative folks from Europe and Asia and having the capital to invest. As the economic prospects for creative Asians become greater at home, the USA's ability to innovate will suffer. Europe, on the other hand will continue to sustain their innovative capacity as long as they can keep creative people from moving to the USA by maintaining a high level of investment in their home-grown talent. Historically, they have not done well in that regard and the USA has benefited. Whether or not it continues to do so will depend on the USA maintaining its position as the richest country in the world. This will become more and more problematic with the rise of India and China.