Thread by @twt_malaysia

What would you say if I said that by 2050, Indonesia, our neighbouring country, would be the 4th biggest economy in the world? Surpassing Malaysia at 25th, the UK at 10th and Japan at 8th by 2050.

In this thread I will open up discussions on the changes on world economies from a historical perspective. And how the past affects the present, and what are the repercussions we see today.

Ayuh? 😄

I nak bercerita macam mana emerging economies (E7), which was only 35% the size of the world's advanced economies (G7) in 1991, became an equal in 2016 and will likely be twice the size of G7 in 2050.

Okay, so this topic is based on a report "World by 2050" by PwC UK back in 2017. Where you can read it here: google.com/url?sa=t&sourc…

But I would like to touch on why this has happened, when in the 1980s The US, the UK and many European countries were economic powerhouses and moving ahead in 30 years, the tables would turned completely!

So, when I was studying in Uni, I took a History subject that analyses the financial world and economic changes from a historical perspective. This topic is one of the topics that my lecturer discussed with us extensively as it is very relevant and concerning to the modern world.

If we look back in History, the G7 countries ada banyak technological developments during the early 1900s (UK - Industrial reveloution, America - inventions and innovations during the Great Depression), WWI, Interwar period (1918 - early 1940s), WWII and the post-war period.

So, for several decades the G7 countries built their wealth and economy based on their industrial activities, manufacturing activities and the likes of it. During this period of time, there is this such thing called "industrial commons".

"The commons" are traditionally referred to as a plain grounds where animals which are reared by local people in England, would graze and roam about. It's not owned by anyone but owners of the animals can gain from it. Industries have commons too.

Industrial commons are places where people exchange knowledge, concoct new ideas, developments and innovations. It's where new products and opportunities are developed. And usually it would be highly dependent on geographical locations.

For example, The Harvard Business Review (July/August 2009) wrote about this matter on "Restoring American Competitiveness". A scenario best depicted in the article is here:

A Swiss pharmaceutical giant, Novartis, relocated it's HQ in Basel, Swiss to Cambridge, Massachusetts to be close to universities, institutions and biotech corps that would be beneficial for them. The move basically enables them to get easy access to new developments faster

As they are in the same proximity, rather than being in Basel.

In this case:
Cambridge, Massachusetts are "the commons".
The Universities, research institutes and the biotech corps are "the grass".
The pharmaceutical giant are "the cows".

Dia ibaratkan kata pepatah "Di mana ada gula, di situ ada semut".

So, manufacturing and industrialisation brought this forward for the UK and the US for many decades. New cities sprouted because of the industrial commons, like the Silicon Valley in the US during the 1960s, London in the late 1800s became a manufacturing hub for coals and steam

engine vehicles like the steam engine trains and ships during the Industrial Revolution, and give rise other nearby cities like Yorkshire, and Ravenstone in Leicestershire for example.

They created jobs for the people, gave better livelihoods, and most importantly... New technologies and knowledge transfer are constantly occuring in the industrial commons.

Contohnya macam ni:

Everyday you manufacture coals, it gets repetitive. Then you dah tahu how to process it faster, how improve the quality and how to make new inventions out of it.

So that is where they developed new ideas and new products. Kan?

Now, what has this got to do with Indonesia being the 4th biggest economy in the world by 2050?

It has everything to do with that. Let me entertain your mind for a bit with the following revelation...

So, we have understood that for decades the G7 countries have enjoyed their prosperous economic growth and wealth because of their manufacturing and industrial practices have sprouted new cities, creating new jobs and developed inventions. right?

These countries then decided that:

"Oh, we need to develop our economic standpoint even further. Let's venture into more complex industries that can bring us more benefits."

They shifted their focus to services-based industries like Financial Services, Design, Tech start-ups, Social Studies, etc in the 1980s. It benefitted the global society till today. They gave you smartphones, internet, modern banking, & others that made our lives easier.

But in order for them to focus on that, many of the G7 countries shifted their manufacturing & industrial practices to other developing nations like China, India, Indonesia & etc. Where the labour law are weaker, expenses are cheaper, and ethical practices aren't as important.

Seems like a perfect solution at the time, and it WAS a perfect solution in the 1980s.

But they failed to take into account of this one thing:

Once they let go of the manufacturing practices, they are letting go of the industrial commons they used to reap the benefits from.

And the countries I mentioned before (China, India and Indonesia), they're smart. They realised the importance of the industrial commons, so in the 1990s they slowly advanced through and created better innovations than the original manufacturers in the G7 countries.

And... If you perasan, why did our Tun M wanted us to go for 'Dasar Pandang Ke Timur' in the 1980s?

You may love the man, hate the man, and be indifferent about the man.. But back in the 1980s, Tun M sees the potential eastern economies would have become today.

By the time the Western economies realised that the previously regressive economies like China, India, Indonesia etc are keeping the industrial commons in their countries and are making better products and innovations, it has been 30 years too late.

Why did President Trump wanted to bring back coal manufacturing back to the US? Why did he initiated the US-CN Trade War? Because he realised the mistakes his peers did in the 1980s and he's trying to 'bring back the jobs'.

But once you've lost the industrial commons, it's hard to built it back again. Why?

Because the experts of the industry that helped to built it in the 1970s and 1980s are now part of the ageing population.
They are out of work, and the technology today are more advanced.

And they didn't thoroughly pass down the knowledge to their younger generation as they pushed their young ones to pursue education relating to the current needs of their economy; ie. focusing more on the serviced based industries.

Bear in mind, by now, countries like China, India and Indonesia have more expertise in it than the original manufacturing developers in the US and the UK. And they are training their next gen to retain and improve the knowledge.

Now, I'd like to present to you an extract of a list of products that has been the 'gold mine' for the US back in the glorious manufacturing days and they've lost.

[Extracted from: Harvard Business Review July/August 2009, "Restoring American Competitiveness", Pisano and Shih.]

[Extracted from: Harvard Business Review July/August 2009, "Restoring American Competitiveness", by Gary P. Pisano and Willy C. Shih.]

These are parts of it. And many more has yet to come.

But the change in the global economic power play is inevitable.

President Trump and other leaders of the G7 economies might try their best to hinder this change.

But they are 30 years too late.