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At the 2011 Davos annual economic summit the UN secretary general Ban Ki-Moon described the world’s current economic model an environmental global suicide pact.

He also announced that his focus will shift form direct involvement in international climate change negotiations to promoting clean energy and sustainable development.

Pressure for economic change is building as indicated by the uprisings in Tunisia and now in Egypt as well as demonstrations in Yemen, Algeria, Libya and Jordan. What has been striking about all of them is that they began with educated and jobless young people but have spread across all sectors of their communities and that they have been prompted by unemployment and rising food prices as part of the wider call for a change in their political – and economic – systems.

Frequently protestors have been pictured on camera brandishing loaves of bread, a staple that is a symbol of the basic foods people need.

As the prices of basic commodities, like rice, sugar, wheat, maize and oil continue to climb, fuelled in part by financial speculation, food shortages and scarcity have been growing.

There are other tensions feeding into the mix, such as the competition for land between production of biofuels and food and the buying-up of land by countries like China, to protect their own populations from predicted food shortages.

It is becoming increasingly clear, however, that there is a link between the relentless obsession with economic growth and both climate change and food scarcity and not only in the developing world.

In the UK and France recent scientific studies urged a revolution in food production as well as in its distribution, as well as the reduction of waste, if the projected demand for food from a growing world population is to be met.

The reports suggested that being open to new research and innovative technology, including genetic modification, is needed and that these should be taken out of private sector hands and publicly funded.

India, for example, is already running trials on various GM aubergines, and has had to put approval on hold until 2012 because of public worries about the dangers and unknowns of using GM technology, concerns that are shared by many people around the world, including the UK and Europe, where use of GM crops is currently banned.

But there are other, safer and more natural technologies currently being developed, called low-chem agricultural products. Biopesticides developers in small research and development operations have had some success in producing a range of biopesticides, yield enhancers and biofungicides based on naturally occurring plants and insects in the environment.

The problem is that it can be very expensive and take years to develop these from the lab into widely-available products. This is partly because of the huge costs of funding trials, licensing and regulation in different countries around the world.

It affects the large numbers of small farmers across the world, who need these tools to farm sustainably as well as increasing their yields, but at a price they can afford and with the infrastructure to get their produce to market quickly to minimise waste.

This is where action on climate change and global economic models come together and with them the call for revolutionary overhaul of the current economic model from growth at all costs regardless of the consequences to sustainable growth that also addresses climate change and the unequal distribution of food across the world.

A shift of focus to investment in green technologies would provide the growth in jobs and activity that is so much needed as part of the global economic recovery but in a way that is also sustainable for the planet’s environment.

With an ideal economic model, every industry grows on the backbone of another competing industry and any country only grows not necessarily to the detriment of another country, but its gains are made significantly possible by taking advantage of the lower improvement in development of other countries. The good news is that irrespective of where growth occurs, there is going to be a raise in overall standard of living. The truth is you want to be the first industry or country to have the technological discovery and experience the first growth.

A positive growth in one industry will be accompanied by a negative growth in a substitute industry and likewise for countries. When an industry develops a better technology, the industry’s cost of production decreases. The industry is now capable of selling at a much lower price than its substitute or competing industry. The competing industry faced with higher costs and lower demand is forced to lay off workers. Since technology does not increase so quickly, the substitute industry with the right decisions can quickly invest in research and come up with an equivalent technology thus decreasing its costs. It can now employ more people to meet its demand. What happens to the rival industry now that this industry in now capable of producing at the same production costs As a result of its initial great increase in demand, it had increased labor to meet demand. Now, it faces a higher production cost and is forced to cut production rate and labor. If labor was significantly higher initially, there will be an increase in overall unemployment as many skilled people having learnt that discipline are forced out of work and it is certain these laid off workers will not be all absorbed by the growing rival. As it takes time to learn a new trade to get employed, this unemployment is bound to last for a while. This is similarly applied to countries doing international trade. More succinctly, a recession develops when the rate of lay offs is greater than the absorption of skilled workers in a single country. Poor economic decisions like easily controlled excesses and very inefficient means of production only make the sequence of events worse. Technologically strong countries (with improved skills and services) are bound to go through a recession if other countries comparably improve their technological know how.

The only way to stay constantly out of a recession is to constantly come up with a cutting edge technology that keeps you ahead of other countries or competing industries in other countries. This gives you a bigger and steady international market to sell your goods. Bad news is not far off when that market begins to shrink. Once other countries begin to gain on you in technology, you lose your market size, plunge into job losses and then a recession. This recession is in turn transmitted across the globe as job losses increase. Job losses in the leading country decrease consumption of both home and foreign goods. Since it takes a while to detect the loss in market size, more goods would have been produced that exceeded the once high demand. This results in losses and hence increases production costs. These foreign countries then cut on supply and equally labor thereby causing unemployment. High unemployment and rising cost could lead to a recession in the country trying to attain the maximum production rate. It is important to note that with strong economic policies, the rival faltering country (yet to attain the newly established maximum) could still continue to grow, but at a decreasing rate because it still faces a bigger market compared to its initial state as it is yet to attain the technological know how of its competitor.

This makes studying market trends, jobs available and perusing every available data important in avoiding a worst case scenario. Data predicting done efficiently greatly limits the losses as people could be quickly advised on the many available growing jobs and the skills they need to quickly learn to assuage the severity of the recession. It is implicit that the inability to quickly adapt and a poor mental attitude aggravate the recession.

The US recession has really not been caused by a credit crisis, not by the housing crisis and certainly not by the declining sales in the auto industry although these played a contributing factor. The recession has been caused by a rapid growth of other countries meeting up with the new technological challenges. To get off this recession the US has no choice, but to invest in technology. Unfortunately, technology itself has its limitations. Credit and housing crises erupt when people do not have money because of unemployment to pay their debts. Spending more money to defrost frozen credits is not going to give people the money to pay the debts. This certainly mitigates the harshness of the crisis, postpones it, but does not wipe it out. For social reasons, it may make sense to give the auto makers money to keep jobs. Is this economically sound No. Reason being that, their only way to improve is to have a boost in technology. Will there be a leap in technology I hope there is otherwise, it is sad to say the tax payer’s money has been dropped in an angry ocean and the auto industry is far from being saved as fewer and fewer people have the money to even buy their inefficient and expensive cars.

Oil prices might have had their toll on the US economy causing an initial freeze in some sectors like the food industries or played a contributing factor to the recession. The fact that the recent decline in oil prices does not seem to have made things better and certainly not worse either gives us good reason that oil prices could not have been the main cause for the current US and world economic crises.

It is equally implicit form this why developing countries should be least affected by the global recession. Whether they do well will depend on their economic plans and their execution of them. A recession in developed countries should be good news for developing countries that rely heavily on expatriates. Unfortunately, some of these countries may not have the flexible rules at play to profit from the recession. Poor decisions in the US financial (real estate and subprime loans) and auto industries might have hastened a recession, a recession was nonetheless inevitable because of rising economies like China, India and many more that produce and sell cheap.

The US can only successfully get out of a recession by heavily investing in new energy technology. A breakthrough energy technology will keep the economy booming again. Thereafter the government should focus on stabilizing that, but a sustainable growth is only possible with a continuous improvement in technology relative to other countries. The US could have a chance if fast growing economies falter in handling the global crises. Without a technological breakthrough, better policy decisions will have a cushioning effect to slow down the recession rate and alleviate great losses, but not completely stop it.

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History teaches us another fundamental truth, predominantly unveiled in social sciences humans are inherently prone to believing in the danger of the unknown, the fear that uncertainty – when present in life – brings an intolerable level of complexity in handling daily activities. Economists, in tandem with the larger group of social scientists, ascribe the word risk to this angst.

Risk lies in everyday life. From birth to death and in between the terrestrial episode called life, humans experience a sophisticated relationship with risk and utilize it as a powerful catalyst to furthering their interests. We fear the unknown not just in temporal terms – e.g. what will tomorrow be – but also in more practical, present-day terms, that is, what will happen today

In assessing the rectitude of our daily decisions, the analysis of the environment we live in becomes of critical importance. There emerges then the need to know, understand and act on a variety of variables that make up our ecosystemic reality. Neighbors are a major part of that reality.

The indubitable observation that humans are ‘sociable animals’ implies a life in community, which in turns posits the sharing of interests, destinies and geography. We share our lives with neighbors, other humans whom we don’t fundamentally know and whom we believe are different from us. Neighbors, in continental philosophy, are the ‘constitutive other’ as opposed to ‘same’. Neighbors are different, and because of that, they must be hazardous to our very existence, hence hell is other people (Jean-Paul Sartre).

Consequently, our desire to know the ‘other’ and what they’re undertaking forces us to constantly be in a question mode ergo, we resort to spying. Espionage is ingrained in basic human instincts from cradle to grave. First, we ape our relatives, then our acquaintances and later our neighbors. In that quest for knowledge, humans recklessly spy on each other in a bid for power. Once they determine with a reasonable degree of comfort the neighbor’s strengths, the overwhelming tendency is to match it, surpass it, annihilate it, keep it at a politically acceptable level, or use a combination of all these options if the socio-historical continuum of events demands it.

Doubtless, the need to control the military and economic standing of neighbors is the quintessential, albeit hidden, dogma of modern geopolitics. Doctrinal differences may abound, but a studious analysis of contemporary events demonstrates clearly that wars and other man-engineered crises have historically proven to be good ways to rebalance powers among neighbors, or more precisely, within geographical zones. Crises, facts have shown, drive innovation and quality of life.

Espionage is not a recent discipline within political science. It has been a staple of human history for the past 2,000 years and even before. Throughout history, nations have risen or fallen based on their ability to collect data from rivals and use that body of knowledge to gain a competitive edge. History also suggests that societies that show a disinclination for ‘outer research’ of their environment, and consequently, a significantly lower number of exogenous interactions – be it cordial or belligerent – with others have been weakened over time. The high frequency of wars between nations in the ‘Old Continent’ explains the relative superiority that Europe had over, say, Amerindians and Africans for the past few centuries, first in slavery and then colonization.

Espionage is rooted in modern life

After two atrocious global wars, countless medium-size conflicts and a dogmatic cold-war between capitalism and communism, political and military leaders seem to have finally gauged the idiocy of lethal conflicts with planetary implications. The notion of ‘détente’, that is, the easing of strained relations in the political phraseology, gives nations the imaginary assurance that they may all coexist pacifically and a major conflict is preventable once greater cooperation between societies subdues the inherent quest for power that causes hostilities.

Acquiescing that there exists a permanent détente within the current geopolitical landscape is an optical illusion because it goes counter the very human urge to monitor the neighbor in order to know him or dominate him, if not annihilate him. This can be very easily illustrated in instances where spies are caught in so-called ‘friendly’ territories. Take the example of Israel’s Mossad agents being arrested in the United States.

The nuts and bolts of modern state espionage lie in a sophisticated and complex apparatus that all nations, and peculiarly global superpowers, have invented to carry out data-collecting and monitoring activities in peace time. Embassies, with their massive bureaucracies, specialized technocrats and their diplomatic inviolability, are preeminent on that list. They are essential in monitoring the host country’s social dynamics and report to their respective governments. Simply put, an embassy is, de jure, a stranger turned neighbor.

Next are supranational organizations that populate the global political, social and economic sphere. Their local representations and periodically published studies may also serve an intelligence purpose. Finally, aid agencies and so-called ‘humanitarian’ organizations are critical in gauging so-called ‘underdeveloped’ nations’ economic ability and progress in their development. It is no coincidence that major countries in the developed sphere do not customarily accept ‘aid programs’ from their counterparts unless excruciating circumstances dictate that such refusal would be politically unacceptable.

Strategic studies and the modern economic literature are replete with topics referring to Japan’s, and to a lesser extent, Asian dragons’ ability to use economic espionage at the end of the Second World War to gain a competitive edge over erstwhile powers such as the United States and Great Britain. The necessity to monitor and direct the continent’s economic reconstruction, and the panic of a potential dominance by communist Russia, also led the United States to implement the Marshall Plan in Europe from 1948 through 1952.

Businesses thrive from spying more than the military

A noteworthy myth in today’s world is that espionage is principally the province of military strategists and national armies. Evidence from authoritative business intelligence magazines, leading governmental studies and a massive body of knowledge from academia have clearly explained the causal relationship between firm profitability and espionage. Differently stated, governments tend to always transfer intelligence data to their domestic industries, whether they are at war or at peace.

As a result, the military-industrial complex benefits considerably from intelligence and such prerogatives are then disseminated into other firms in the economic fabric. As an illustration, it would be fairly understandable that a firm like Boeing, which derives a substantial portion of its revenues from government’s contracts and sale of military aircrafts, is more attuned to certain developments in US intelligence gathering than a financial services giant like Citibank.

Nevertheless, businesses have also parlayed their gargantuan economic clout into a very successful data-collection enterprise. The plethora of tools available to business executives nowadays is strikingly sophisticated and effective. Even if it is not exhaustive, a good analysis of such tools must look at their source and their degree of macro-economic interconnectedness.

On one hand, external mechanisms allow at the macro-level business enterprises to gather information from competitors and control how such information can be utilized to thwart rivals, increase their own market primacy, or do both. When they share a community of interests vis-à-vis a new market or are in an oligopolistic situation, companies are routinely willing to join hands provided, of course, that the risk-payoff ratio of a single venture is not immensely superior to that of a joint venture. Tacit collusion, that is, the market situation where two firms agree to play a certain strategy without explicitly saying so, is a fine illustration of business intelligence sharing.

In practice, firms engage in economic espionage via economic sections of embassies, chambers of commerce, lobbying groups, industry groups, specific studies from consultants, and monies granted for academic research in particular fields of interest. Concomitantly, they guard against intelligence threats by massively supporting intellectual property laws.

On the other hand, a sophisticated internal approach allows companies to stay abreast of latest developments within their industry. First and foremost, they hire to their corporate boards or for senior positions, experienced former government officials and high-rank military leaders who had been privy to high-value strategic insights during their public tenure.

This is immensely beneficial to the hiring side because a former cabinet member, a congressman or a four-star general, can possess a breadth and depth of experience and knowledge of past, present and future topics that is considerably worth more than countless external consulting reports. Second, economic intelligence departments and government relations departments also fulfill data gathering roles through research, lobbying and interacting with industry groups.

Cyber-warfare, the new cold war

As the planet becomes technologically more intertwined, novel tools and modus operandi are being made available to governments and private interests to collect specific intelligence. These tools and procedures are an intricate combination of old and new procedures which simultaneously penetrate nations’ military, economic and social constructs to extirpate valuable bits of knowledge.

Defense experts are calling these emerging asymmetric conflict tools ‘cyber-warfare’. Due to the plethoric ramifications they present and the simultaneous dual tasks they may serve to fulfill (attack and defend) when engineered in certain ways, I label this group Modern Cyber-warfare Gear (MOCYG).

MOCYG, as it stands, involves the offensive use of various techniques to derail a nation’s infrastructure, perturb the military and financial systems of a country with the aim of crippling its defense responsiveness and the integrity of economic data, or accomplish other destructive aims based on the attacker’s incentives and strategy. Security specialists and military researchers have classified these techniques into 5 major groups computer forensics, viral internet tactics, assault on computer networks or software, hacking and espionage.

The idiosyncratic power of cyber-crime lies in its ‘stateless’ nature, its capacity to be inexpensively controlled and deployed, and the vast damage it can exert. Given the judicial vacuum created by cyber-warfare techniques, nations are rushing to build up legislative safeguards to prosecute offenders even though criminologists argue such undertakings are largely inefficient at the moment.

A memorable cyber-criminal event occurred in Estonia in 2007 when more than 1 million computers, allegedly from Russian-based servers, were used to simultaneously cripple state, business and media websites in a modus operandi analogous to the shock and awe military tactic. That attack ended up costing Tallinn’s authorities tens of millions of US dollars.

China, a cyber-giant in progress

Upward socioeconomic trends in the People’s Republic of China are well known to international masses and covered profusely in western news media. So are Chinese authorities’ singular understanding of democracy and human rights as well their overt wish to play a bigger geopolitical role in world affairs. However, the quiet revolution China is experiencing lies within the astronomical investment country authorities are making in top notch universities so as to catapult China into the top league of technological giants, along with the United States and Japan. Given the size of such educational outlays, Chinese authorities must believe that a major competitive edge can be gained in the technology field and such advantage can be converted or transferred into other sectors of their mushrooming economy.

Top western sinologists and other think tanks are closely monitoring these academic developments because they understand the basic notion that future geopolitical dynamics will inextricably be tied to how successful Chinese will be at leveraging technology to boost their future ‘global penetration’.

The smart tactic is that, while future chief engineers are being trained at world-class institutions such as University of Science and Technology at Hefei, Harbin Institute of Technology, Beijing University and Tsinghua University, China is concurrently putting a veil of secrecy around its information systems and cyber-infrastructure. The country may be notorious today for its copyright infringement cases or intellectual property violations, but it is inconspicuously gearing up for tomorrow’s technological primacy that its expansionist aspirations may dictate.

China also investigates currently available ways and means to unearth state-of-the art synergy tools that can be leveraged between its major government departments and state agencies as it prepares to enter the ‘knowledge economy’. Authorities view this coordination effort as an indispensable step forward because it adds another layer of centralization to a government structure that is built around the canon of ‘consolidated power’.

More specifically, country leadership has summoned top minds in technology and auxiliary fields to synergistically engineer the future cyber-infrastructure that will solidly mark China’s imprint in the digital landscape. This task is colossal, and the vastness of it effects precludes obviously an analytical granularity. Several hundreds of thousands of Chinese computer engineers, regrouped under ad hoc commissions, think tanks and strategy centers are the backbone of this emerging ‘digital army’.

They work under the aegis of brilliant specialists whose unquestioned patriotism and in-depth expertise are unparalleled at such high seniority levels; this group includes Liang Guanglie, Wan Gang and Li Yizhong. The first is the current minister of defense, who works in conjunction with the People’s Liberation Army and the Central Military Commission to manage the largest military force in the world (ca. 3 million) and oversee its strategic evolvement.

The second is the head of the Ministry of Science Technology and is mechanical engineer and auto expert. The third is the Minister of Industry and Information Technology, a cabinet position pivotal for the country’s information systems development.

Anemic US IT investments

Equipped with this super cyber-security gear, China seems to be winning, or is in a significant position within, the ongoing global cyber-war. In a sense, the country is not an ‘emerging’ superpower as western analysts and social science specialists would like to call it. It is already a superpower in the fullest sense of the concept.

The term ‘emerging superpower’ is presently preferred in academic and business literature as well as in media parlance because it is more politically palatable to the elite and other classes of citizens in traditionally influential economies (G8) who fear the psychological and social implications of welcoming new colossi in the select club of the powerful.

Security experts and top military minds in the United States are truly concerned that the Chinese massive IT investment dwarfs America’s and do not hesitate to point to the geopolitical implications of such a chasm. They note that the countless cyber-attacks from China and Russia are just a start of the new cyber ‘Cold War’ of the 21st century.

It is a fact that many foreign-engineered digital attacks have targeted many industrialized countries’ military systems, power grids, and financial infrastructure in the past few years. Yet governments and military forces at present have limited capacity to detect or infiltrate the attacker, counter the attack, and prevent future assaults.

US defense officials and business leaders understand the looming threat but believe its intensity and gravity constitute a hyperbole. However, authoritative statistics from the Government Accountability Office, US Congress reports, and academic studies indicate evidently that the world leader has not shown hitherto the political willpower to tackle the digital gap in its cyber-security infrastructure.

Truth be told, politicians in Washington, Pentagon strategists, and the intelligence community at large have long known of and understood the nature of the menace. Notwithstanding, a series of geopolitical events forced them to transfer certain topics into budgetary oblivion at the credit of more pressing, more ‘visible’ national security threats that are effortlessly noticed by constituents (e.g. terrorist attacks).

A few factors explain Washington’s inability, or budgetary lethargy, in addressing the cyber-warfare threat. First is the geostrategic complacency derived from the fall of communist Soviet Union and the ensuing inertia that global unipolarism usually creates.

Second, America’s military apparatus is currently ‘distracted’ by two ongoing wars and engaged in a host of relatively minor security missions around the world. Adding to those involvements, there is the corollary ‘war on terror’ that has mobilized since 2001 colossal resources to thwart further domestic attacks.

‘Domestic’ in this sense refers to an incredibly enormous geographical area because it encompasses US conventional soil and the related territories, American overseas diplomatic missions, its military bases, transnational organizations where the US holds significant strategic interests (e.g. NATO headquarters and military stations), and the countless aid, religious, and humanitarian outposts around the world.

Third, the diversity and criticality of issues at hand force the US government and congressional leaders to prioritize their budgetary efforts. The current economic despondency bodes ill for any serious endeavor in tackling underinvestment issues in information technology because the country is pecuniarily limited and cannot afford to continuously print money (risk of inflation and currency devaluation) or borrow from… China.

US budding cyber-security grid is solid

Despite the socio-economic gloom, the Obama administration has shown in the past 6 months a strong level of commitment in assuring the integrity of the nation’s information assets. He appointed late December Howard Schmidt, a renowned computer security specialist and former Microsoft security executive, as White House cyber-security czar. Other high-profile nominations have followed in the army ranks and other key departments and government agencies such as Homeland Security, Treasury, the FBI and the CIA.

The efforts appear to be coordinated and effectively reaching their desired goals, from the Pentagon’s launching of a giant cyber-command unit to the CIA’s and FBI’s massive ‘hiring spree’ of computer engineers and cyber-security specialists. International cooperation with other allies is also part of the undertaking; US intelligence agencies are thus partnering with foreign counterparts such as Britain’ MI5 and MI6, Israel’s Mossad, Germany’s Bundesnachrichtendienst (Federal Intelligence Service, BND) and Militärischer Abschirmdienst (Military Counterintelligence Agency, MAD) to address emerging threats.

Private interests are equally gearing up. Businesses are investing massively in IT infrastructure and upgrading computer networks, and working jointly with government agencies. They are also granting rising subsidies to think tanks and academia to help in this effort.

The combination of efforts has to be successful because an absence of effectiveness in cyber-warfare measures can be ‘lethal’ to US global supremacy. Judging by the great havoc cyber attacks had catapulted onto Estonia in 2007, hyperbola ought not to be barred in this topic.

Based on the latest estimations, US nominal GDP is nearly 3 times that of China ($14.5 trillion vs. $4.5 trillion), but the latter’s healthier growth rate is helping bridge that gap gradually. Thus, many forecasters – and the proverbial ‘conventional wisdom’ – assume that it will take Beijing many decades to attain America’s economic clout and level.

That said, in the hypothetical scenario that a cyber-warfare erupts between both countries, a stronger China may only need to considerably crush US economic productivity and therefore its GDP to claim victory and financially surpass its rival. Absent effective security systems, China, or any other foe, may only need to assault vital arteries of the US military-industrial complex power grids, financial transaction systems, Federal Reserve System, US Armed Forces’ computer systems and networks, Congress’ and White House’s IT infrastructures, etc. It’s easy to imagine the massive damage electricity failure can do to a country’s transportation, financial, and military systems.

Judiciously, to allay the fears of skeptics and expedite its strategic investments on the international scene, the Chinese government would have to deal with the political and economic freedom parameters especially corruption which is a real killer of economic growth as outlined in the second part of this article. Meanwhile, it is expected that China’s strategic investment in the developing and underdeveloped part of the world would increase because of its estranged relationship with the western world. Furthermore, with the Chinese government and investors loosing interest in investments in the low interest US treasuries and bond primarily due to the fiscal imbalance (that is massive U.S deficit) and the plummeting of the dollar, Chinese investors may be compelled to pursue a new sense of investment direction. Unfortunately, such a redirection of investment has negative impact on the U.S deficit whose source of funding is substantially through the sale of treasuries and bonds to these investors. As a matter of fact, a greater percentage of United States huge foreign debt is underwritten by China.

Accordingly, a reduction in the purchases of the US securities would lead to a rise in interest rates which could partially affect the investment sector in the U.S exacerbating the unemployment situation. Moreover, it appears China is under pressure in the last few years to distance itself from the U.S its main trading partner and pursue its ambitious economic agenda. For example, in 2005, China decided to un-peg its currency the renminbi (whose basic unit is the yuan) from the dollar and to let it float followed by the revaluation of the currency. Also, in the past year China together with the BRIC countries (that is Brazil, Russia, India & China) tried to convince the world about the volatility and incompetency of the US dollar as a world’s reserved currency and the need for a switch to another currency. Supposedly, the dependence of the United States foreign debt on China must be an issue of concern for both countries because of its proclivity towards power transference from United States to China. All these developments are a foreboding of what is in the pipeline.

The next issue of concern is the effect of its population on the sustainability of its economic growth. There is a wide disparity in income distribution and purchasing power between the rural poor and the urban rich in China. Consequently, the urban rich percentage contribution towards domestic demand far exceeds that of the rural poor. These factors coupled with demographic and migration report from the United Nations predicting that by 2015, the percentage of the urban and the rural population would be almost equal ( 50% each) substantiates the need for strategies to bridge the purchasing power disparity.

Thoughtfully, it would require initiating more projects in the rural areas to improve upon their lives so that their contribution towards domestic demand can parallel that of the urban folks. Remember, a prior analysis in the first part of this article revealed that a higher portion of the GDP growth emanates from domestic demand. That supports the notion that if China is to maintain its economic pace in the midst of the global slump in demand for exports then it would have to close the standard of living gap between the urban and rural folks.

Another subject worth deliberating on is the energy needs. Environmental pollution concerns are imminent when one considers China’s growing energy need. As matter of fact currently over 70% of its energy comes from coal and natural gas both non-renewable energy sources and potential contributors to acid-rain formation and global warming. The growing energy needs suggest an increase in dependence on oil and coal. However, the country cannot continue to depend on non-renewable sources energy for it supply and should consider stepping up its investment into the renewable energy source to obviate any future environmental disasters. The growing international pressure on countries to pursue environmental friendly industrial practices encompassing cost effective measures and accountability for carbon emissions should gravitate with the concerns of Chinese authorities.

Truly, in the past environmental cost has been trivial and the contribution of the cost of damage to the environment on operational cost has been negligible. The story is expected to change after the just ended climate change conference in Copenhagen as several nations operational cost would increase due to the active inclusion of environmental cost in the cost of doing business. In the interim some austerity measures may be required from China. For example, the country would have to step up its regulatory framework in order to be able regulate effectively and efficiently its growing industrial and manufacturing sector. Remember, China is second to the US in the industrial and manufacturing sector of the world. Obviously, effective regulatory measures would increase cost but it’s worth it for the Chinese people and the rest of the world. Studies show that pollution cost forms about 7-10% of China’s GDP each year. That means if the country is to effectively pursue the UN regulations agree upon recently, this cost would definitely increase operational cost and reduce expected profits.

Another factor that needs to be considered is the need for human capital the key to higher productivity and sustainability. The lagging behind of human capital can greatly retard productivity as is being experienced by a country like Denmark currently. In actuality, there is a causal relationship between productivity and human capital. Accordingly, if China is to keep up with its pace of economic growth then there is the need for revitalization of its educational sector to augment its human capital. It is true that China is advancing in technology ahead of the world but this is only sustainable with increasing level of human capital which is an integral part of the bedrock of productivity. Also, human capital is paramount to innovation, entrepreneurship, research and development all principal promoters of productivity. Innovation is needful in the energy and infrastructural sectors to meet its growing energy needs and its urbanization programs.

Now, in spite of some negative connotations associated with the economic growth, China should be commended for attainment of this high level of economic growth. Having the highest amount of foreign exchange reserves and recently overtaking Germany as the world’s largest exporter in 2009 is a laudable accomplishment which epitomizes China as an unprecedented economic super power and also an industrious nation. The fact is that no country can achieve such a distinctive status without infringement or petty international violations. Ultimately, much as the western world would want to see China comply with trade laws and the likes, they should also be ready to work with the country to ensure the sustainability of its economic growth. It is an indisputable fact that China is currently the locomotive engine of the world economy with worldwide strategic investments whose tentacles permeate even to the remotest parts of the world. So any expert in how a train operates would tell you what happens to the coaches when the engine derails or fails. In fact, there is a high probability of the coaches also derailing or failing if the engine derails or fails. Thus any failure of the Chinese economic system would spread pervasively to almost every economy of the world sending the world into another era of recession.

By now, the world has learned from experience the repercussions of the failure of the United States economy plunging the world economy into recession and would not want a repeat of such an occurrence with China. Let’s not forget the fact that just as no economy was immune to the impact from the United States case, so be it for no economy in the world should the unexpected happen to China. Therefore, China would need the assistance and cooperation of the world especially the major economies to be able to control its macro-economic and political factors to ensure the sustainability of its economy and prevent economic super heating which is antecedent to an economic bubble burst. There are some who believe that all the pursuits of China have the objective of marginalizing United States and Europe and would want to be pessimistic about the future of the Chinese economy. However, united we stand divided we fall. Passivity is the key.

Finally, I would not want to complete this article without elucidating the fact that the attainment of such an economic status of leadership in manufacturing, technology and possibly the financial sector can be coupled with the attainment of superior military power. In reality, superior military power is primarily a result of the adoption of a superior military technology. Thus, the propensity by an economic super power to adopt and use its technological know-how leadership to create a superior military is inevitable. Another dimension of the technological leadership is the ability to infiltrate other country’s military system or security systems or better still hack the system.

Conclusion

Several economic empires have come and gone and unfortunately the demise of these empires termed economic bubble burst has often sent economic shock waves to the rest of the world. It is in the light of these developments that the world is wondering whether China the reigning economic empire would follow the same fate. Macro-economic factors describing the Chinese economy namely GDP, current account balance, CPI, inflation and foreign exchange reserves are currently favorable. Superficially, it is possible to think that China’s pace of economic growth is sustainable and there is no cause for alarm. However, a critical look at the economy reveals the need for a review of its policies that governs its economic freedom, political freedom and its international deliberations all of which can gravitate towards the initiation of an economic bubble burst. The long term absence of which could wreck the current pace of economic growth with reverberations to the rest of the world. Finally, it must be emphasized that China cannot do it alone and would need the cooperation of the world especially the major economies to ensure the sustainability of its economy and that of the world.

The question of whether economic growth leads to poverty reduction is a subject of major contention today. The neo-liberal view to this issue is that growth is good for the poor, and that poverty can be alleviated through economic growth. In this essay, I argue that unless the poor participate meaningfully in the economy and the constraints that hinder their participation are removed, growth on its own cannot help in poverty reduction. The state should also play a major role in making the poor benefit from growth by pursuing pro-poor policies. In the subsequent paragraphs, I define what pro-poor growth is; spell out the constraints to pro-poor growth and what can be done to make growth benefit the poor.

2. Definition of concept pro-poor growth

According to Ravillion and Datt (199119), pro-poor growth can be defined as ‘growth that involves and benefits the poor’. In other words, pro-poor growth requires the maximum participation of marginalized groups in all sectors. Ravallion and Datt further argue that pro-poor growth is, inter alia, characterized by what they call ‘deliberate transfers to the ultra poor who are not able to lift themselves out of poverty. In essence, the argument that they are advancing is that the poor need help or intervention in order for them to benefit from growth. This means that pro-poor growth is a deliberate intervention to make the poor benefit from growth rather than leaving the poor to the fate of the ‘invisible’ hand of the market. It has to do with setting an enabling environment in which the poor have the opportunity to participate meaningfully in the economy.

According to Kydd et al (200110) pro-growth will occur when the following conditions exist

? Price or productivity increases in tradable products with high average share in the poor’s expenditure.

? Price and productivity increase in tradable products with high labour inputs by the poor.

? Changes in technology or reduced barriers of entry, allowing the poor to engage in production of non-tradables which they could not previously engage in or

? Gains in the significant numbers of non-poor, which lead to expanded demands for goods or services, produced by the poor as a result of upstream or expenditure linkages.

It is important to note that not all growth is pro-poor. Here are some of the characteristics or aspects of growth which are not pro-poor

? Disparities in wealth distribution

? Increases in rural poverty

? Growth that ignores agricultural development despite the role that it plays in poverty alleviation

? Lack of investment in health and education, which play a critical role in poverty alleviation

? Failure to mitigate inequalities and lack of programmes aimed at addressing the needs of the poor (www.seurities.com).

As Acocella (1998162) notes, it is critical to remember that growth does not always lead to human development. Growth may occur without any significant impact on human development, especially with regard to the poor. Acocella further argues that real development or growth occurs when there is improvement in the well being of people. Growth that does not lead to improvement in the welfare of people cannot be said to be developmental in nature. Genuine growth, as Ferro et al (20024) note, should lead to human development, and this entails ‘empowering the poor to contribute to and benefit from this growth’. It is clear that pro-poor growth does not occur automatically without the implementation of the right policies that will be instrumental in facilitating its manifestation. There are polices and practices that may hinder pro-poor growth from taking place. I examine a few in the next section.

3. Constraints to pro-poor growth

For pro-poor growth to occur in any society, it is important to ensure that all the barriers that prevent the poor from reaching their goals are removed. Failure or reluctance to deal with such barriers may frustrate the progress of poor people and may ultimately hinder any poverty reduction strategy from successfully addressing the issue of poverty. Here are some of the constraints that can negatively affect pro-poor growth

3.1 Inequality and lack of access to market

It is difficult to pursue pro-poor policies in countries characterized by inequality. Stewart (1995209) argues that it is difficult to develop pro-poor policies in inegalitarian societies. He gives an example of inegalitarian societies such as Ghana, Mexico and Philippines, where he argues that growth has not made any impact on the poor. These societies are contrasted with Indonesia ‘with a more egalitarian structure to start with and a more pro-poor pattern of growth’. Other examples given are East Asian societies, which due to their effective policies of dealing with inequality were able to reduce the level of poverty in a dramatic way. This means that there is a relationship between poverty and inequality. May (20022) also shows that policies of inequality pursued by the apartheid government in South Africa were not good for poverty reduction as they excluded certain groups from participating in the economy of the country. The propagation of inequality led to ‘loss of assets such as land and livestock and simultaneously the denial of opportunities to develop these assets through limiting access to markets, infrastructure and education.

The problem with inequality is that it results in social exclusion where certain groups are denied opportunities or services. The exclusion of the poor from participating meaningfully in the economy can negatively affect their well being. In an economy where inequality is low, the poor will tend to get a higher share of the benefits from growth as compared to an economy which is characterized by a high degree of inequality. As Ravallion and Datt (19977) show, ‘inequality in the ownership of physical and human assets are likely to influence the prospects of poor people to participate in economic growth’. Policies that are pro-poor will ensure that the poor have access to markets and infrastructure. It is clear that in cases where there is no equality amongst the different socio-economic classes, reliance on market forces and the invisible hand of Adam Smith to meet basic needs is merely wishful thinking.

3.2 Fiscal constraints

Governments, especially in the developing countries are finding it hard to pursue pro-poor growth policies and approaches for poverty alleviation due to fiscal constraints. Structural Adjustment programmes are in most instances making matters worse. The reality is that governments are usually faced with the challenge of having to reduce expenditure in social services, which are supposed to benefit the poor. This means that less money is spent on important services such as health, education and other basic services. Cuts in government expenditure directly affect the poor (Howard 200157). However, it is important to note that the state is faced with global challenges and constraints in its attempt to pursue policies that are good for poverty alleviation. There is global pressure for the state to take a less ‘directive’ role in the economy.

3.3 Reducing the role of the state

The liberalization of markets which goes with globalization is among other things advocating for the rolling back of the state, the repeal of restrictions on prices and on quantities moved and stored. As Howard (200157) rightly notes, the ‘liberalization of financial markets increases poverty and inequality’. As part of globalization, governments are forced to liberalize their markets. However, the critical question is whether liberalization of markets benefit the poor. There are mixed reactions to this. There are those who view globalization as beneficial to the poor, especially with regard to opportunities it offers for trade and new markets. On the other hand there are those who view it as harmful.

As Levinson (200111) shows, globalization ‘benefits the poor in some countries and harm those in other countries’. Although there is a general call for ‘rolling back the state’, in order to give way to the markets to work (if ever they work), the state has a role to play especially pertaining to things that individuals cannot do for themselves. It is common especially among the poor to find people who cannot participate in the labour market due to old age, infirmity, chronic illness or otherwise incapacitated, socially excluded or discriminated. The poverty of such people according to Streeten (1995253) cannot be removed or alleviated by relying on the market, but by deliberate ‘pressure for social services and transfer payments and elimination of discrimination’. The emphasis on reducing the role of the state in the economy can have negative impact on pro-poor growth.

For pro-poor growth to take place, the state should play a crucial role in the redistribution of resources and opportunities through the transfer of assets, prioritization of the poor in public spending and in managing market liberalization to protect the livelihoods of vulnerable people. As Ferro et al (200219) point out, ‘government is an instrument of the people in the development process’. Hence government can play a crucial role in pro-poor growth by developing the right policies for addressing poverty.

4. What can be done to benefit the poor

The following are some of the things that can be done to benefit the poor

? There is need to focus on development of human capital, especially among the poor in order to prepare them to participate meaningfully in the economy.

? The poor must have better access to markets, especially with regard to credit

? There is need to correct biases against the poor in public spending, taxation trade and regulatory environment.

5. Conclusion

Pro-poor growth policies are essential for the meaningful reduction of poverty. The 2015 target of halving income poverty can only be achieved if countries can adopt pro-poor growth strategies. It would be difficult to attain the 2015 target without ‘pro-poor shift in distributional patterns’ (Mutume 2000). Something must be done to improve the position of the poor by providing opportunities that will make access to markets easier for them. Worth noting is that even in cases where markets work, they may not always work in favour of the poor given the constraints discussed above.

If these constraints are not dealt with or removed, growth will have no meaningful impact on the lives of the poor. There is need to learn from past failures regarding the relationship between growth and poverty alleviation. Sen (1986, cited in Sachs 1991292) illustrate this clearly ‘country after country has learned the hard way that the so called trickle down theory is fallacious, that growth can be immiserizing, that famines also happen in periods of boom when people’s entitlement does not allow them to buy andor produce the food necessary to keep them alive’

Given the level of poverty in the world today, there is therefore need for change in strategy or approach in dealing with poverty reduction by making growth pro-poor. This entails, inter alia, an understanding that growth on its own cannot address poverty. The Director of the World Bank, Ian Goldin indicated the importance of pro-poor growth ‘we have come to understand that economic growth, though necessary, is not enough to deal with poverty’ (Sunday Times, 1 September 2002 15).