So, the world economy is in recession, people are losing their jobs left and right, and Economic models are being called into question. So what of the Economic model that has been preached to us all these years ?
Today we are going to talk about the trading economies. We basically have 3 parts to every economy:
What has happened to the world economy, and especially in countries such as Britain which has been almost completely de-industrialized is that Services have come to make a majority of the Economy. The Problem with Services is that they are not a producer of wealth, but rather a distributor of wealth. Someone in industry or agriculture has produced everything, someone working for a Real estate company or a Restraunt is simply distributing it.
And these are the people who will be hit the hardest in this recession. The distributors, traders, the people working in the service industries will all be hit very severely. It is because at the very essence of human commerce and finance is the simple notion of I give you my chicken, you give me your tobacco. We need to produce these two things to be able to trade. But when I trade my chicken for stocks, and you trade your tobacco for government debt, we just go into a swapping cycle of useless assets which spiral in price until they hit a sharp drop, when we have realised that our assets are worth 100 chickens and bags of tobacco.
What I am emphasizing here is a key note: Production, Production, Production. This should be the cornerstone of any economy. Money is useless if it is not used to acquire something being produced. You cannot stimulate an economy by increasing the money supply if no production or increases of productivity are being made. Just look at the Japanese after the asset price bubble.
Now that the real estate agents and the property developers are running with their tails in between their legs, and the holding companies are going bankrupt, it is time that we emphasize a New economy for our country. One of production. Initiatives like Masdar (into renewable energy), further advances into industries, engineering, these are all productive cycles that will generate an economy which is able to trade not on assets, but on goods. This is the future that the UAE should aspire to.