Saturday, February 2, 2008

The Market and Knowledge are Key

“The problem America now faces is that activity space is moving from the protected niche of our physical space to become entangled with the stresses accompanying a global competition for resources. Whether the legacy political system will be able to adapt with a minimum of disruption is still an empirical question”, that is a quote from a friend I have met over the internet.

I can understand his concerns for his country, the USA about intensified competition for natural resources as countries like China, India have rapid economic development, however the concerns are misplaced, America has a great ideological tradition in allowing the market to do its job. The market operates in every society, the past ideological debates is how free the market should be. Wherever there is exchange of goods and services the market is operating, be it in Stalinist Soviet Union or in probably the most free market Hong Kong, exchange takes place therefore the market is present.

When prices rise, it is a signal that there is a shortage compared to before the prices rose. America has two options to take with the increased competition, the first option is the political and military option to secure resources from other societies, a traditional route by humans in less civilized times. America can try to create unfavorable political situations for countries that it feels are threatening its flow of resources, this route has happened as in the case of imposing the Shah on the Iranian people. However this route is risky as it can backfire, the Shah was a mean and despotic being, he was overthrown by people who knew he was imposed by the Americans, and today America has no diplomatic relations with Iran, yet if the Americans had supported the enemies of the Shah justified by the Shah’s evil tendencies, America would have been a hero of Iran.

The political and military route of securing risk has risks, less riskier is the economic route, allow the market to signal and appropriate action is taken. Rising prices means a shortage, measures needed to be taken to counter this shortage. Energy costs are rising, President Bush was right to announce a US$1.2 billion hydrogen energy initiative, Bush's Hydrogen Initiative. There is hydrogen everywhere, and we know how to take it out of the water, three quarters of the earth is covered by water. However this support from Bush was merely placing hydrogen in the mainstream arena, research into alternative energy has long being taking place even by the large oil corporations, one can say especially by the large oil corporations in Europe particularly BP and Shell. Exxon has not entered the fray just yet but it will enter, it is after all making enormous profits from high oil prices.

Rising prices of resources has meant auto manufactures have used available knowledge to create for example hybrid vehicles, with little loss of power but increased efficiency.

Take for example fiber optics replacing copper, who would have thought of this thirty years ago. The market has an answer, people will research and find ways of doing things better because of the rising prices of natural resources. Look around, lighter and stronger materials have been invented by man meaning we need less of them to create a unit of a product, though of course we are creating more units.

America is a society that is innovative enough to survive the competition of resources, as long as America continues to respect knowledge there will be no problem for the American society, with the respect of knowledge there will be no problem for earthlings as a whole, there is enough resources for everybody, knowledge being the primarily resource. To be alive means to explore knowledge, a society that has no respect for knowledge is already dead and probably having shortages of everything imaginable, look at North Korea.

Bhekuzulu Khumalo

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Bhekuzulu Khumalo

I write about knowledge economics, information, liberty, and freedom