This guest article was written by William Laraque who is the Managing Director of US-International Trade Services.
In 1980, Julian Simon, professor of business and author of The Ultimate Resource, made a bet with three prominent economists, Paul Ehrlich, John Harte and John Holdren, about the price of five metals chosen by the last three. The economists wagered that the price of the three metals would rise whereas Simon bet that the price of the metals would fall. Simon won.
Increasing wealth and technology, Simon wrote, make more resources available; although supplies may be limited physically, they may be viewed as economically indefinite as old resources are recycled and new alternatives are assumed to be developed by the market.
China’s one child policy is a near disastrous vindication of Simon’s thesis. China has the fastest ageing population in the world and the effect of its demographics on the Chinese economy will be felt for years to come. While Japan has instituted reliable safety nets for its ageing population, not so China.
China’s efforts to raise prices for rare earths failed when lanthanum, dysprosium and other rare earths were sourced from Australia and R&D was used to discover other elements and metals which could be substituted for rare earths in batteries, cell phones and in automobiles.
Saudi Arabia et al
Realizing that their dependency on oil and gas is unsustainable and requires diversification, such markets as Saudi Arabia, Kazakhstan, Israel, Malaysia, Qatar, the UAE, Russia, Argentina, Chile, Colombia and Germany are making serious efforts to diversify their economies. Russia and Malaysia have failed to recreate the ‘startup’ dynamism of Silicon Valley. Saudi Arabia has invested in Uber to the tune of $3.5 billion and some of the other countries are making progress.
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China’s efforts at selling internet subscription services are stalling due to counterfeiting, cybersecurity fears, misrepresentation and credit-approval process difficulties.
The US, on the other hand, is succeeding with Amazon, Uber, with selling on Alibaba and with the private enterprise online trading platforms of Walmart and several other mass merchandisers.
The Ultimate Resource
The ultimate resource is brain power as Julian Simon postulated. The human penchant for innovation trumps (hate to use that word) market gambits based on shortages.
There is much work left to be done in education and development so that an all-encompassing platform can facilitate the engagement by SMEs in global trade. The transit of native entrepreneurs and SMEs into micro-multinationals is a sustainable form of diversification.
Marissa Mayer of Yahoo sees her leadership role as chief executive being one of removing the blockages, encumbrances and hurdles to progress. This role in the innovative enterprise is complicated by regulation and regulators who everywhere do all they can to kill the progress of SME engagement in what will soon be $85 trillion in global trade opportunities. No lesser authority than Jeff Immelt of GE, the co-parent of reverse innovation, has said as much.