Monday, September 21, 2009

G-20 meeting is about fashioning the "Limits of Growth"

This is one of the simplest NaviMap. A reinforcing loop between Box 1 and Box 2. The story is textbook. More economic growth (box 1) creates more employment opportunities (box 2) which contribute to Box 1. This describes a virtuous cycle.

A basic rule of NaviMap is that no virtuous cycle lasts forever. Eventually a limit will be reached (box 3). This can be quite a few things. In the present financial crisis, it was a massive loss of confidence and the overly unregulated and free market that allowed it to happen.

As the G-20 prepares to meet in Pittsburg, they will have to work on Box 3 so that we achieve an acceptable limits. Each economy will desire a different level or type of Box 3. The Americans the main player will have to listen and accomodate the wishes of the others especially China because the US position is secured through global confidence.

The final limits will be a pull back from pre-crisis. There will be more checks and balances; more regulations; taxes perhaps; aligning pay with performance; more long term and less short term. The result would be a slower rate of economic growth overall but at a more sustainable pace.

The environmental impact aside, most nations will have to balance their population growth with the new limits. The best way to do this would be through comparative advantages among countries.

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