Apparently, Mr Ferguson puts the West’s current supremacy over the rest down to six factors: greater competition in the economy than in, say, China; science – or is that Western scientists?; property – or the emergence of property ownership and rights in the West; modern science (not sure how that differs from the second factor, presumably the TV series will tell us); consumption; and the work ethic.

Well, the author of this article has not read Ferguson’s books yet, but he has read ‘Why the West rules for now’ by Ian Morris, and ‘Why the West has lost’ by Dambisa Moyo.

Morris is an archaeologist, Moyo an economist, so their perspectives are quite different.

Morris reckons the West’s supremacy lies with geography.

Before we go further, it is important to point out that until the Industrial Revolution, China had been the richest country in the world for a thousand years. But before that, says Morris, the West was more developed.

Now Morris has a curious definition of the West, although it is one yours truly agrees with. Morris defines the West as all civilizations that trace their legacy back to that area we call the Fertile Crescent in North Iraq, southern Turkey and the Levant. That, by the way, means Arab counties are defined as Western by Morris.

He says the West led China for thousands of years because of geography. He says agriculture started in the Fertile Crescent because there was more naturally growing plant matter there that could be farmed, for example wheat and grain, and because there were more large animals that could be tamed and used for their meat. If you are interested, his theory builds on the ideas of Jarod Diamond, in his book ‘Guns, Germs and Steel’; see this link to see a TV documentary based on this book .

Returning to Morris, he says the Mediterranean was more conducive to trade than China’s land-locked region, but that the West lost its lead with the fall of the Roman Empire.

Apparently the West peaked in the first century AD, and China one thousand years later under the Song dynasty. Neither East nor West passed that level again until the Industrial Revolution.

Morris says the key to the industrial revolution was the discovery of the New World, and the West discovered the New World for the simple fact she was closer to it. The sheer size of the Pacific versus the Atlantic meant it was inevitable that the West would be the first to tap the riches that the New World brought.

Morris also suggested that over history, power tends to move to periphery regions. It moved south to the area where farming was first used, to Sumeria. Greece, Rome, Britain and the US were all periphery regions. And today, so is China.

Morris’s book is a fascinating read, but not sure his theory completely aids us. Towards the end he even started to quote Isaac Asimov and his Foundation books which came up with the idea of predicting the future using a mathematical formula created by looking at the past. At that point the book got a tad silly.

Moyo’s book is more disturbing. She took a far more recent look at the history of the West. She looked at the obsession with house prices, suggesting that the housing boom detracted from investment into more productive areas – an idea this column has often advanced. She suggested that declining education standards relative to the rest of the world would hamper the West’s long-term prospects, and cited short-sighted Western politics which has created huge resentment. (This is illustrated perfectly well right now in North Africa as Gadafi turned Western-supplied arms on his people.)

She turned to demographics, and the cost of providing pension and health care for the baby boomers, and suggested that by 2065, the US healthcare budget will be 100 per cent of US GDP unless Uncle Sam starts making some painful decisions. She also looked at how the changing demographics in the US means that while the US will not see her population fall like it will in Europe, the US population that is growing is the bit that is badly educated, gets a small share of Uncle Sam’s cake and contributes little to GDP. In other words, to carry on growing the US has got to learn how to give more opportunities to the economically-deprived.

Ms Moyo predicted that the US will be a social country within half a century.
So there it is. The rise and fall of the West. It will be interesting to see what Mr Ferguson’s TV documentary has to say.

Don’t you hate it when people put you on the spot. Yours truly got put on the spot the other day. If you had to name one British company which is most likely to see its share price go up, which stock would you select? A moment of panic set in. The heart rate sped up. What to say? And then five letters descended upon the brain, like manna from heaven. The first of those letters was a ‘T’.

Anyway, changing the mood slightly, fears of an impending crash in China’s economy are growing. George Magnus is a clever bloke. He is an economist at UBS, a regular on BBC2 Newsnight and author of the book ‘Uprising’. Our George reckons that the combination of an investment bubble (illustrated by shopping centres bereft of people, and roads that go nowhere) and Chinese demographics (why she is still enforcing one child per family is a puzzle) will see China’s extraordinary growth go into sharp decline.
He is not alone. Some say China will go like Japan and is set to enter a lost decade that, just as has been the case in Japan, may last for several decades. Others say it will be worse than that, that China’s economy is set to crash.

Well, what we do know is that China’s export model is not sustainable indefinitely. For China to carry on exporting more and more the rest of the world must, by definition, import more and more. And the rest of the world can’t afford to do this.

And don’t fall into the trap of saying “but China’s trade surplus has been shrinking of late”. While that is true, the reason for its decline is because of the rise in the price of goods she must import in order to be able to export, for example oil. Beneath it all, China is still relying on other indebted consumers to buy her wares.

The second letter of this UK company is an ‘E’, by the way, in case you are wondering.
But there are plenty of reasons to think China will get over this problem. First of all, and this is the key point, she still has massive potential to catch up. Capital density in China is a fraction of levels in the West. Labour productivity is a fraction of Western levels, so the potential to improve is vast. That’s the difference with Japan. Surely one of the main reason why Japan’s economy hit the buffers was simply because she caught up with the West. Once an economy matures, she relies on innovation for growth. China is not at that stage yet, not by a long chalk.
Some people say all China does is copy the West’s ideas. But this argument ignores the lesson of history. Two of the important innovations to change the West were copied from China. That’s gunpowder and the printing press. Even the wheelbarrow was invented in China. Those who say China is just copying the West are making the mistake of viewing history through the prism of the last few decades. Churchill once said: “The further back you look, the further forward you see,” and if you were to apply his dictum to China today, you would say China will become an innovator again, just like Japan went from copier to innovator a few decades ago.

Another major problem in China is the massive levels of savings. Just as in the Anglo-Saxon West our economies are out of kilter, and we spend too much and don’t save enough, in China it’s the other way round. Many say the solution is for China to have a stronger welfare state so that the Chinese won’t feel the need to save so much for that rainy day.

But look at this chart:

You can see that while Chinese consumers are saving huge amounts, the trend suggests that actually the problem lies with Chinese government and corporate saving. This means that if China’s wages rose at the expense of corporate and state profits, overall savings would fall and China’s economy will become more balanced.
But this is exactly what is happening. China’s wages are indeed rising, and as this happens, Chinese consumption will rise.

Which is why the third letter in that British company yours truly tipped was an ‘S’.
But there is another point here. It was told here at the end of last year that China is running out of workers to migrate from the countryside to the towns. See: The world’s most populous country is running out of workers – what are the implications?

. And as this happens, China will reach what’s called the Lewis Turning Point, China’s wages will rise, her companies and government will have less money to hoard, and consumption will rise.

Incidentally, this will have implications in the West too, and by the end of this decade we may start seeing wages rise across the world, creating a new era of higher inflation and interest rates.

But as China’s wages rise, China’s consumption will go up.

And that brings us on to a recent report from IGD, which forecast that by 2015, of the world’s five largest grocery markets, four will pertain to the BRICs – Brazil, Russia, India and China.
Which is why the fourth letter of our mystery word is a ‘C’.
But now consider this chart produced by IGD.

Top four global grocery retailers. Turnover in euro (€)m

So, will China’s economy crash? We suspect it will slow next year, and maybe by quite a bit, possibly creating a problem for the global economy. But we doubt it will crash. Rather, we see a gradual switch from investment and saving leading to more consumption. And as this happens, Western grocers will pick up the yuan.

And the retailer that will do especially well is made of five letters, the first four being TESC.

You may have heard this one before, but apparently some countries in the Eurozone are struggling to raise the necessary monies they need. Keep this one quiet, we certainly don’t want to create a panic, but it appears that when Portugal went to the bond markets this week in an attempt to raise some more readies, some feared it wouldn’t be successful.

Then yesterday, Spain and Italy were busy selling bonds, and once again (shhh) one or two investors had their doubts.

But fear not. Just as some feared Spain was on the verge of holding out the begging bowl and asking the IMF/EU/ECB to put their hands in their pockets and lend it money that they couldn’t comfortably afford, along came China and asked: “Can we help?”

Good old China. Out of the kindness of its politicians’ hearts it offered to save Spain from the abyss.

But now an EU politician has only come along and said China may have an ulterior motive.

The cynical politician was Herman Van Rompuy, no less; Europe’s president. He said: “When they buy euros, the euro becomes stronger and their currency a little bit weaker. That is not neutral in regard to their competitive position. But I go no further in this topic. It could be too delicate.”

Shock, scandal! China has a selfish reason for trying to help Spain. And there was silly old us thinking China was just a country of philanthropists.

Anyway, some are now suggesting the offer to Spain is just another attempt by China to prop up the yuan. You see, if the euro collapses, the yuan will look expensive.

Well, call us naive if you wish, but is it not the case that a collapse in the euro, leading to a possible European-wide debt default, will be bad news for a lot more countries besides China? In the long term such a collapse could be a good thing, but in the short term, well, just thinking about the ramifications brings back memories of the collapse of Lehman Brothers.

We kind of thought that China’s rationale for offering to assist Spain was precisely because she felt it was in her interests to avoid a new economic meltdown in what is perhaps her most important export market. Or are we being a tad indelicate? 

PwC reckons that by 2050, what it calls the E7, that’s Brazil, Russia, India, China, Indonesia, Mexico and Turkey, will be 50 per cent larger than the current G7 – US, Japan, Germany, UK, France, Italy and Canada. China is expected to become the world’s largest economy by 2025, and India, says PwC, has the potential to nearly catch up with the US by 2050.

The projected list of fastest growing economies to 2050 is headed by Vietnam, and the top 10 includes Nigeria, Philippines, Egypt and Bangladesh.

As for Blighty, in the league of the world’s largest economies, by 2050 the UK is expected to be in ninth spot, behind China, US, India, Brazil, Japan, Russia, Mexico and Indonesia (Russia, Mexico and Indonesia are all expected to be around the same size). Intriguingly, PwC expects the German, French and British economies to be roughly the same size in 2050.

John Hawksworth, PwC’s chief economist said that: “As far as the destination of UK exports goes, there hasn’t been much of a change in the last 10 years even though there has been a big shift in the global economy. UK growth was based on property speculation and financial speculation, and now that those bubbles have burst, the question is what our areas of competitive advantage are going to be. It is going to be quite a challenge and it is not going to happen overnight. There has been a shift in government thinking towards the need for a more positive industrial strategy, but that is a complete reversal of the way we have been going for the past 30 years.”

But if you think the PWC report paints a worrisome picture, you had better take a deep breath. Dambisa Moyo, a former Goldman Sachs economist, who was born in Zambia but now lives in London, has penned a new book entitled: How the West Was Lost: Fifty Years of Economic Folly – And the Stark Choices Ahead. And it’s strong stuff.

Ms Moyo’s previous book, Dead Aid, argued that aid to Africa was ineffective and was responsible for keeping the continent poor. It was a massively influential and controversial book, and now she has done it again.
The book states: “If nothing else changes it from its current path it is almost certain that America will move from a fully-fledged capitalist society of entrepreneurs to a socialist nation in just a few decades… The trouble is, it won’t be just any socialist welfare state… the US is on a path to creating the worst and most venal form of welfare state – one born of desperation from many years of flawed economic policies and a society that rapaciously feeds on itself.”

What we find quite interesting is this comment. Ms Moyo said: “I hope the book will be picked up by people who are saying: ‘I don’t want to hear all this noise. I just want a clean perspective on what the heck is going on around the world and how is it that we have got to this point.’ ”

She makes a good point. There are so many books out there on the economy at the moment, but many of them are making little more than noise. They get hung up on economic theory, arguing that such and such a theory is dead, and then they launch into a detailed blow-by-blow description of banking folly.
But economists give themselves a heightened sense of importance. The underlying trends – trends such as demographics, technology and the shakeup in global power – are what really count, and what are really shaping the global economy, and economic theory is completely inadequate in describing what’s going on.

However, the switch away from Western dominance doesn’t have to be bad news. The challenge for the West is embracing the change and turning it to our advantage rather than fretting about an uncertain future.

See: The World in 2050, by John Hawksworth and Gordon Cookson And, How the West Was Lost: Fifty Years of Economic Folly – And the Stark Choices Ahead

Back in September, Chinese Premier Wen Jiabao said: “China is committed to creating an open and fair environment for foreign-invested enterprises.” As you know, one of the gripes Western companies have is that China’s rules seem to be skewed against outsiders. China responds by saying that they need to make bigger efforts to understand China’s ways. But Mr Wen seemed to suggest Westerners had a point, saying: “It is not all due to misunderstanding by foreign companies. It’s also because our policies were not clear enough,” and finally the key bit: “I wish to reiterate here that all enterprises registered in China according to Chinese laws are Chinese enterprises. Their products are ‘made in China’ products.”

The truth is, China is an enormously complicated country, and even its premier has less power than is commonly thought. But at least Wen Jiabao is making the right noises.

And yet while it may be hard for Western companies to set up in China, Ford seems to be rather good at it.

Sales of Ford cars in China rose 40 per cent last year, taking total sales to 582,467 vehicles.

Mind you, of the big auto companies operating in China, it is still number three.

Last year, GM sold 2.35 million – up 29 per cent on the year before, and Toyota clinched 846,000 sales, up 19 per cent.

The Guardian quoted Abdolreza Abbassian, an economist at the UN’s food and agriculture organisation, as saying: “We are entering a danger territory.” He warned: 2There is still room for prices to go up much higher, if for example the dry conditions in Argentina tend to become a drought, and if we start having problems with winterkill in the northern hemisphere for the wheat crops.”

The Independent said: “As more Chinese enter the middle classes they tend to consume more poultry and meat, just as Westerners did at a similar stage in their economic progress. However, meat and poultry husbandry consumes at least three times the resources that grains do, while the drift towards the cities in China is reducing the yields of its farms.”

Yet, conversely, Capital Economics has argued meat consumption per head in China is already close to the levels seen in the West, and much higher than in Japan. People who warn that the rise in China will lead to a rise in meat consumption overlook this. Okay, as China develops we may see consumption of different meats – at the moment, pork accounts for the majority of China’s meat consumption. But it is hard to see how the development of China will lead to much more meat consumption overall.

As for the argument that the drift from the countryside to the cities is reducing yield from China’s farms, that’s a tricky one. It is true to say that China is running out of workers. As a consequence, we are likely to see wages rise in China over the next few years. But is that a good or a bad thing? If food is going up in price in China because Chinese workers are earning more, then isn’t that the very trend economists have been crying out for?

Some argue that higher food prices in China will lead to social unrest. Well, they might, but just bear in mind that a high proportion of China’s population produces food, so if the prices they receive go up, then they will be better off. Rising food prices in China may actually benefit a huge number of its populace. And for that matter, if food prices across the world are being driven up by demand as some countries get richer, then actually this may be a good thing, because the result will be improved income in countries that rely on farming, and quite often (although not always) these happen to be the world’s poorest countries. In other words, rising food costs could lead to redistribution of income from rich to poor.

It all depends on what’s causing the price rises. Rising demand may be one factor, but there are supply problems, too.

The worry relates to the possibility that there are deeper forces at work here.

You could say food prices have partially been pushed up by bad luck, a series of natural disasters ranging from drought to floods across the world. Bad luck won’t last for ever, so if this explanation is right, food supply should improve, helping to alleviate food inflation. Of course, if it isn’t bad luck, and we are seeing fundamental change in the global weather pattern, then that’s another matter entirely – and far more serious – but it is probably too soon to tell if that is what’s really happening.

But don’t go so fast.

Surely it all depends on what’s causing Chinese food inflation.

Some say it’s demand, and that growing incomes are creating hikes in food prices. But if that is so, this may not be so bad. As Capital Economics pointed out yesterday, much food is produced by the poorest families in China. So if food goes up in price, but farmers are able to produce at maximum capacity, we are in effect seeing a transfer of wealth from the towns to the countryside. For many, this will be a good thing.

If food is going up because of one-off factors – crop failures, droughts, and so on, then expect prices to fall back soon.

It is odd. For some time people have been saying wages need to rise in China, and have been lamenting the lack of wage growth in China over the last few years. They say this lack of balance between rising corporate profits and wages is creating bubbles.

And then when wages do start to rise, they say “Hello, a bubble is forming.”

It seems that for some analysts and commentators, when the question of China comes up they say the answer is “A bubble is forming,” and then ask “What’s the question?”

So put all that together and what do you get? Well, around 15 million spare workers. Capital Economics reckons we could be just three years away from running out of workers to migrate into the towns.

 And that means China could be close to what is known as the Lewis Turning Point. This is a state in economic development, named after former Nobel Memorial Prize in Economics winner Ken Lewis, when industrial wages begin to rise quite rapidly as the surplus labour from the countryside tapers off.

 So what are the implications of that? Well, quite a bit, actually.

 There are some other points, too. First there is the spoilt brat syndrome, or is that a generation who are unwilling to work for little more than slave labour wages. Call it what you will, but it seems that younger Chinese are less enthusiastic about living six months of the year away in dormitory-type accommodation.

Secondly, in any case the Chinese population is ageing. The Chinese baby boomers – typically born in the 1960s and early 1970s – are not getting any younger. The one-child-per-family policy was introduced in 1978, meaning the first of this generation are now 32. In fact, the number of Chinese workers between 15 and 34 is now declining quite rapidly.

 So what will happen?

In part, it seems that some companies will relocate so that they are closer to the supply of labour. This in turn will help make income distribution across China a little more evenly spread.

 But what is clear is that Chinese wages will rise. The process has already begun, and one assumes that for the next few years Chinese wage growth will be faster than the growth in China’s GDP.

 This change is a good thing. It is good for the Chinese themselves, of course, but it is also good for the global economy.

As wages rise, consumer demand will go up, imports will increase, global imbalances will, theoretically at least, start to ease.

 But does this mean inflation, not only in China, but across the world?

Well, if cheap Chinese labour over the last decade or so led to cheaper products in the West, then the obvious answer to that question is that higher Chinese labour will indeed lead to more expensive products, and that globally prices will go up.

 But you need to bear in mind that much of the pressure on commodity prices, especially oil and metals, has come from Chinese investment. If consumption takes over from investment as the driver of Chinese growth, then some commodity prices may well fall.

The Chinese are already great meat eaters, so rises in wages are not likely to lead to a significant increase in demand for meat.

So maybe we will see a reversal of the patterns seen in recent years: manufactured goods will increase in price, and commodities fall.

But two other factors may help to stop global inflation from getting out of control.

First of all, just because China is running out of labour, it does not mean she is running out of capacity to increase productivity. In fact, Chinese productivity per head is still very low relative to the West, meaning there is lots of potential to improve productivity. So, for as long as the increase in wages per hour does not rise faster than the increase in productivity per hour, inflationary pressures will be minimal.

But secondly, we forget China is not the only developing country in the world. There are plenty of workers across the developed world who could yet migrate from their countryside into towns, from farms into factories. The truth is, the global economy has lots of surplus labour.

It does seem, however, that the underlying factors that created the credit boom and then the crunch in the West are unwinding. Chinese consumption is set to rise, investment growth will slow down, meaning China’s trade surpluses with the US and Europe will surely fall.

But put these changes in China in the context of a shift in the global economy away from the great savings glut that built up over the last 30 years: see yesterday’s piece: Interest rates set to rise as economic tectonic plates shift – is this good or bad news?

Right now there are four major factors at work. There’s the shift in China. There’s the global shift towards investment and away from savings as the developed world beyond China starts to catch up with the West. There’s the retirement of the baby boomers. And finally there’s technology, as growing computing power and the Internet in turn lead to remarkable advances elsewhere, such as in genetic science.

The next decade or so will probably see more changes in the global economy than any other decade for a very long time indeed.

And yet other news suggests that China is re-balancing nicely.

Inflation on the other side of the Great Wall was 5.1 per cent in November. Markets weren’t surprised, they had expected bad news, but even so, it is all rather worrying.

Hikes in China’s interest rates seem set to follow.

And yet, as ever with China, there are contradictions aplenty.

Some fear that China is falling victim to a carry trade, in which investors borrow abroad at rock bottom interest rates and lend to China at a higher rate. This hot money flowing in may be charging the boom in China’s asset prices. So paradoxically, higher interest rates could arguably make the economy overheat by even more.

A part of the problem is that while the central government has got many of the right ideas, local governments seem hell bent on spending every renminbi they can get their hands on and throwing it at yet more capital projects. Success in China on a local level seems to be measured by how much is spent. It’s a form of machismo: “My capital project is bigger than yours.”

Then there’s food prices. Some economists argue that it is food prices that are driving up inflation. But, as was told here last week, it is by no means certain that this will continue. Indeed, food, along with other commodity prices, may start falling soon. See: Are commodities the next bubble?

Another snag with China is that just about all agree that she needs to become more consumer focused. Setting aside the argument about hot money, even if higher interest rates do curb the craziness of the investment boom in China that creates sparkling new shopping centres with one missing ingredient – shoppers, won’t higher interest rates also lead to falls in consumption?

And yet, the trade figures are looking promising. Sure, China’s exports surged again, up 34.9 per cent in November; but imports did even better, rising 37.7 per cent. This is becoming a regular occurrence. It seems that with increasing regularity this column is reporting import growth exceeding export growth. Of all the bits of data coming out from statistics compilers cross the world, the fact that Chinese imports are growing faster than exports could be just about the best bit of news in a very long time.

Steven Spielberg may have shown remarkable prescience with his famous 1975 film, apparently prophesying the events of Sharm el Sheikh, but not even he could have produced a film fit enough to tell the story of the protectionist attack that could be pending.

In China, it seems bubbles are inflating faster than you can say DA DUM.

In the US, the wall of protectionism is homing in: DA DUM DA DUM
There is even talk of yet another round of quantitative easing: DODODO.

And yet there is no need for the scar-comparing Richard Dreyfuss and Robert Shaw to save us. On this occasion, common sense can save the day.

Look across the surface of the Chinese economy, and the shark fin that is a property bubble glides into sight.

According to Ambrose Evans Pritchard, writing in the Telegraph: property “prices are 22 times disposable income in Beijing, and 18 times in Shenzen, compared to eight in Tokyo. The US bubble peaked at 6.4 and has since dropped 4.7. The price-to-rent ratio in China’s eastern cities has risen by over 200pc since 2004.”

No wonder some are drawing parallels with Japan twenty years ago. The Japanese government deliberately kept the yen cheap against the dollar, creating a massive backlash amongst US politicians. But when Japan finally acceded to Washington’s demands and the yen rose, property prices in Japan crashed, and nigh on twenty years of economic growth were lost.

Then there’s Uncle Sam. The last few days have seen three bits of news to scare the willies out of you. First, Uncle Ben has been making noises suggesting he is considering yet another round of quantitative easing. Secondly, the latest report on US jobs was a big disappointment. Payrolls rose by a tiny 39,000 after a 172,000 jump the month before, and unemployment rose from 9.6 to 9.8 per cent. And finally, the third bit of news revealed that Barack Obama has elected to extend George Dubya’s tax credits by another two years.
Why is it all so scary? Well, it seems that Uncle Sam is all over the place. The US fiscal debt is rising to horrendous levels. Democrats won’t agree to spending cuts, Republicans won’t agree to tax rises. We end up with a kind of horse trading creating even more debt. President Obama has agreed to extend the tax credits for high income earners in exchange for Republicans agreeing to extend federal unemployment insurance.

You could say that US economic policy making is in a mess, but then you could say the Amity Island mayor, and now the Egyptian tourist industry, made a mistake by saying the waters were safe. In fact, Spielberg’s fictional character, and the Egyptian minister who seems to have chosen to mimic him, made errors on a catastrophic scale, and so it is in the US.

Meanwhile, the money created by the Fed is pumping yet more dollars into China, and in order to maintain the exchange rate with the yuan, the Chinese central bank is forced to create money. And so it is that the Chinese money supply expands. According to Bloomberg, analysts reckon China’s money supply expanded by 19 per cent in November on the year before.

China is being forced to react. Interest rates are set to rise. But whether China is capable of deflating its bubbles without letting the yuan appreciate, is another matter.

The fear is growing that as Uncle Sam sees how hopeless its attempts to kick start the economy are becoming, he will instead opt for protectionism, pushing up tariffs on its imports from China.

Bizarrely, Capital Economics thinks the threat of this could be a good thing, and that Chinese authorities will react to this growing danger by finally acceding to US demands and allowing its currency to rise.

The parallels between China today, and Japan 20 years ago, are obvious. No wonder many are predicting the bursting of China’s bubble.

But we are not so sure.

There is a deep and fundamental difference between China today and Japan twenty years ago. Look at it this way. It could be said there are two types of growth. Growth that occurs during a period of catch up, when an economy is closing the productivity gap with mature economies. Then there is the growth that occurs once an economy matures. At this point, growth is reliant on innovation.

Japan’s problem from 20 years ago is that it caught up, even raced ahead, and then the potential for growth fell. It was similar in Europe and the US in the early 1970s, when productive potential defined by past innovation had just about been fully used up. In the 1970s growth slowed, but demand kept rising, so in Europe and the US we got inflation. In Japan, as the growth slowed, property prices kept rising, and then we got the deflation of Japan’s asset prices.

It is not like that in China. She is still years away, maybe decades, from catching up with the West and Japan to become a mature economy.

Sure, the Chinese property bubble will probably burst. But this will not be the calamity it was in Japan in the late 1980s.

But we now know that not even the US and European consumers combined have sufficient resources to soak up the extra production that comes with Chinese development. The potential for China’s growth to continue is still huge, because there is still massive untapped potential. But this growth can only occur if demand rises in tandem, and China, it appears, is the only country in the world big enough to provide this extra demand.

And that’s the great irony. The US threatens China, but actually, both US and Chinese interests are the same.

Who knows why the shark attacked swimmers off Amity Island. But it appears the causes of the attacks off Sharm el Sheikh may well have been manmade – with the tipping of animal carcases the most likely culprit; Mossad involvement, surely the least likely.

But in the Chinese–US row, the ones who are most guilty are the politicians, and maybe it is them we should have harpooned.