A sad sad story

There is a saying here in Hong Kong that life is in analogy of movie and the other way round as well meaning sometimes what happen to us is really as dramatic as the episodes in a movie and sometimes the episodes do reflect what happen on us. There are nothing more sought after than face masks in this moment in this island. There is nothing more than it which is able to catch everyone's attention here in Hong Kong. The humble face masks are even more valuable than money to people in need. People even stayed overnight in the street queuing for it. There is nothing more ridiculous than these scenarios of queuing whenever there is news about sales of face mask in a shop. Sadly this is not the episode in Steven Chow's comedy movies but is what really happening everyday on the common folk here in Hong Kong.

With inventory of face masks running out in most households so undoubtedly many people's life in this island is heavily disrupted. Classes are suspended, many social activities are cancelled, some bank branches are closed and even some government services are stopped. All but just for the sake of minimizing virus transmission due to the lack of face masks. Naturally people complain on all these inconveniences. Luckily the mortality rate remains as a single case only so the public's panic is somehow in check.

However, what is happening in Hubei province and its capital, Wuhan City, the origin of this pandemic, is far more desperate. The whole province is sealed and outbound traffic is blocked at all for more than two weeks now. Intra-cities traffic within Hubei as well as that inside each major cities are also restricted. Residents are demanded to stay at homes to avoid community spreading. Pedestrian is rarely seen on the streets so these cities are just like a ghost town as seen in the episode of Hollywood horror movies.

What even more horrible is that despite of the strict control of human traffic but in fact new infection cases as well as death toll are still coming up everyday in these cities. Along with the restriction on human traffic within the cities, all public services are literally suspended. The RTHK TV's documentary production, Hong Kong Connection, managed to interviewed two Hong Kong families got stuck in Wuhan City and in a smaller city near the provincial border, Zaoyang, respectively both said medical services are suspended due to the human traffic restriction amid the Coronavirius outbreak in the community within their cities. Hospitals denied admission for consultation disregard the patient's symptoms but just sent them back home for residential quarantine only. Their real life experience suggest that the scale of the infection in the Hebei province is so large that it goes beyond the government's capability and literally the local medical facilities just fail to cope with. The government cannot do nothing but just compulsorily quarantine all residents at home.

Quarantine perhaps is effective in preventing social contacts among households but the key point is that they do not just quarantine healthy households but those infected ones as well. Most of all, these families with infected patients are quarantined without any medical treatment or medicines. They are basically rest their lives on luck with fingers crossed that they can get well on their own, or in the worst case to die in isolation. Strictly speaking apart from the Wuhan City where the central government has dispatched a task force team to help, the patients in the other cities in Hubei province is just abandoned. Wuhan City gets the salvation due to its economic importance but less fortunate for the rest. The central government's tactic seems to be natural selection, ie, when all the sicked died then the survivors are proven to be healthy.

Apparently the strike of this virus outbreak is a setback in China's advocate of the rise of a big nation. The myth of an almighty country is broken with its vulnerability against the attack of a tiny creature. By pulling all effort from the whole nation it can save one city only but at the expenses of all the life in other cities in Hubei province.

The outbreak of this virus also revealed one of the institutional flaw in China that the whistle blower, a doctor in Wuhan City, at the preliminary stage of the outbreak was even suppressed and criticized by the local police bureau as a trouble maker and rumormonger when he alerted his acquaintance over the social media. In fact this is a typical and common reaction of the local authorities all over China that they all tend to suppress everything that might invoke vast social concern which could reveal their deficiency in public governance thus undermining their chances of career promotion. It could be a much different scenario had timely precaution and necessary preparation been in place. Unfortunately in China very often it is the common folks whom are suffered from the misbehaviour of the officials.

The underlying cause of this phenomenon revealed an even greater flaw in China's institutional structure. The bottom line is that the government as well as the ruling party is lack of people's recognition and delegation through a proper mechanism. The CCP got into power by expelling GMT regime to Taiwan through civil war but since then it runs the country with totalitarianism. Therefore the CCP regime is in dire need of social stability to avoid any social event that might rock its ruling. Their instinct is to suppress them at infancy or to cover up at the preliminary stage in the hope to avoid the public's awareness. This is exactly why the Wuhan police bureau suppressed the whistle blower whom just wanted to alert his own acquaintance only.

Unfortunately they unknowingly seeded a nightmare which they cannot contain this time out of their expectation.

So, what's next?

Despite of the multiple rounds of quantitative easing in the U.S. and in other economies like Japan, U.K., E.U. and China ....etc since the financial crisis in 2008, trillions of dollar flooded the world, however, the world economy in the past decade did not exhibit a corresponding growth relative to the scale of the money injected in the financial system. Except the first round of the Q.E. which aimed to ease the liquidity resulting from the panic of the financial market, most of the following Q.E. were actually for the sake of boosting the sluggish economic growth in the related economies. Yet, in fact the performance of all countries which exercised Q.E. are far from satisfactory. So what's wrong on the world economy?

Economic growth can be a result of one or the combination of the increase in productivity, population and natural resources. Productivity is mainly consisted of technological breakthrough and human capital, ie., how things are done and the skillfulness of the work force. Population is not only about the numbers of people but most of all the numbers of people with productivity and/or consumption needs. Natural resources define the range and level of tangible raw materials a country or the whole world can utilize. Simply speaking, when a country enjoys a growing work force with increasing skill competence and there are abundance of natural resources available as well as innovation on production then it is bound to have a robust economy.

One may argue that capital plays a vital importance in an economy especially the capitalism countries. It is absolutely true the more advance and modern an economy is, greater the capital plays its role as money is the carrier of all transactions in capital oriented economy. Capital is the lubricant facilitates the economic activities in all capitalism economies. However, it is a must but not the dominating driver.

When the financial crisis broke out in 2008, liquidity problem happened because of the counterparty risk surged when uncertainty and panic dominated the market. The first round of Q.E. originated by the FED aimed to solve this liquidity shortage and it did save the U.S. economy as well as the world economy from the brink of collapse. Not only the salvation on the liquidity crisis but the U.S. economy recovered steadily since then. Unknowingly the FED is hooked on this economic opium so following rounds of Q.E.s were implemented whenever signs of economic sluggish surfaced.

By injecting trillions of dollar into the economy while the money got stranded in the financial system though due to weak borrowing or more specific speaking the lack of qualified borrowing as the real economy is still suffered from the deep-seated problems. The world economy faces a strange sort of scenario that money floods the financial world but some businesses in the real world are hungry for lending because they cannot show a healthy balance sheet to the banks.

The deep-seated problems the real world economy are facing are back to the square, ie., productivity, population and natural resources. The world's productivity experienced a few leaps in human's history during the industrial revolution, liberation of women into work force and universal education. The baby boom after the WWII and the following decades of peace time led to a surge of world population. On the other hand in the natural resources, the development of the petrochemistry industry provided the world a much more efficient fuel and the all-round magical material, plastic, apart from the naturally limited supply of iron, wood and natural fibres. Except the industrial revolution, all the goodies happened after the WWII and they were the significant driving force behind the world's economic growth in the past few decades. On the contrary when one looks forward what lies ahead in terms of these old goodies? Things are less promising.

While forecast on the world population is still a positive figure but the ageing population not only in the developed countries but the world's second largest economy, China, is evidenced. That gives rise of two problems, diminishing work force as well as products demand, but both leads to a sluggish economic growth.

After enjoying the fun time with plastic in the past few decades, people started to face the dark side of this magical material. It just stays there in our environment for centuries once people made it. Now all the five oceans are flooded with plastic waste. Some is even broken down into micro plastic which sneaks into the food chain. While human is trapped into the dilemma of the usage of plastic but another magical material that can give another dramatic impact on the economic growth is not yet in sight.

Among the three dominant driving forces, productivity is the only one seems to be the silver lining. Despite of the shrinking work force, leaping technology on robots combined with A.I. perhaps can just fill the gap. Some people put a high expectation on the 5G telecommunication technology which is supposed to increase the Internet speed by 20 folds. 5G plus IoT perhaps is another wave of the increment on productivity after the invention of steam engine.

Technology is no doubt a drive in the productivity which in turn steams the economy but after all, productivity is just about making products more efficiently but at the end of the day there must be a corresponding demand on these products then the growth on economy can be materialized. According to the information in the website (https://www.worldometers.info/demographics/world-demographics/) that more than 24% of the world population is 50+ years old. At the first glance it does not sound too bad but when we take a closer look into the demographic on the most advanced economies like the U.S., E.U. and Japan and the self-claimed developing country but the second largest economy, China, where they represent the most significant demand on consumption then the outlook is rather pessimistic because the chunk of the people with the strongest consumption is ageing and most of all, there are a contracting demographic meaning a negative population growth across the board.

One can imagine after the batch of the strongest buying power in the most affluent countries died then the consumption demand in the whole world will just shrink significantly. Despite of the increase in the productivity or possibly the emergence of another magical material but if there is less demand as a whole, so what's the next drive on the global economic growth for the future decades to come?