IEE Forecast (13). Investments outside of systemic innovations go "nowhere": on the lot of oil and dollar

We consider, that the factors, which determine the interaction of traditional and innovative economy and the global systemic innovative processes, will limit the economic growth in the medium-term period.

The assumption for the forecast is, that the economy has entered the next phase of global processes. Here our perception of globalization differs from traditional. For we remember the definition by Manuel Kastels "Global economy is something different - it is capable to work as a uniform system in real time regime all over the planet ".

Thus, in our opinion, globalization is a process of organizing the economy into a complete system. US economy, as well as a number of other advanced economies, is one of large national economic systems of the world. So, globalization is an objective process. It is impossible to resist it and not to interrupt with high rates of global economic growth.

We believe, that the first stage of globalization was the period of the Gold Standard. It has led to the uniform tools and balance of payment in the world. The following stage brought the uniform world standards of technological development. It also brought standards of communicational systems. The present stage of globalization is connected with the formation of uniform global innovative process.

If the given hypothesis is true, the period of uncertainty and balancing on the verge of global crisis and sharp rises of separate economies will proceed not for five years and even not for a decade. Its may be at 2030-2050.

During this time the economic opportunities of innovative growth of separate economies will exhaust their potential. The new potential will build with the global resources of a new quality. If global tools of economic policy are absent, the process can go under aegis of one leading country. So the world hegemony of new type may come. Now it is difficult to tell which of the countries or global macroregions can become such a leader. But the determining factors are clear. They are: accumulation of the world intellectual and financial potentials; access and technologies of the information processing. But the most important are the management tools for effective influence on the global economy, and especially, in its crisis periods.

Oil will stimulate the new innovative process. Growth of its price will brake and stabilize the growth of traditional economy. This will force to search for new innovative trends, and innovation will be pushed by depression. If our assumptions are true, new innovative process will demand all world financial resources. Actually, it will provoke a new stage of global processes. The economic rates will increase. Traditional economic sectors have become habitual and "dear". Now they will be destroyed. To a degree, they will promote the braking of changes.

For now it has not taken place, the traditional economy will render constraining and stabilizing effect on growth of the world economy. It will happen through prices rise for traditional resources mainly.

The world prices for oil and dollar exchange rate will be "the valve of constant pressure " for economic growth. Meanwhile, growth of the world prices for oil starts to alarm economists and politicians. Attention to this problem and desire "to cool" the oil market has generated possible scripts of such "cooling". But they are of not strategic and innovative character. They are based rather on technical stimulation of the dollar exchange growth.

The measures for increase of a spread between interest rates in the USA and Europe are promoted. However such measures can strengthen risks to distribute for the benefit of traditional economy and to ignore the innovative developing markets.

These trends are based on traditional understanding of the economy as of an open system. However the new problem influences the world more and more.  The economy is a closed system. And no other economic system exists in our world yet. Accordingly, the situation requires a new reflection. And Meadows and Forrester already described the situation itself in their report to the Roma Club.

IEE 

I. Makarenko

Posted on the website: 2005-04-05