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Thursday, September 06, 2007

Civilizational Milestone Reached

Big trends are often unseen. One of civilization's greatest milestones happened within the last year or so without any real fanfare. For the first time in 10,000 years, farming is not the dominating industry in the world. Interestingly enough, this happened at the exact same time when China ended its 2,600 year old agriculture tax.

I think this is huge news and it says a great deal about where the world is heading. I believe that one of the most important changes happening today is the creation of a gigantic global middle class. I also think that this will have a huge impact on the global economy, creating massive amounts of wealth worldwide and also increasing the speed and volatility of change.

The ratios are changing rapidly. Industry, which is now extremely productive hasn't absorbed all the people because there's only so much room for people to work there. Instead, the global masses are moving directly into the services sector.
Worldwide, in 1996 agriculture employed 42%, industry 21%, and services 37%. In 2006, the numbers are 36%, 22%, and 42%. So in the period, services has overtaken farming on a global scale.
In most of the West, we've long since increased agricultural productivity so much that only about 3% of our population works in farming. A hundred years ago, that was more like 30%. During the 20th Century, the big shift in the US was all those farmers moving into industry. Today, the farmers are skipping industry and moving directly into the services (UPDATE: or perhaps they're moving into industry while those in industry move into services).

What happens as that trend hits in China, India, Bangladesh, Indonesia, etc.? Small-time unproductive farmers are part of Nassim Nicholas Taleb's "Mediocristan" (from the book The Black Swan). When those people join the services sector, they move into "Extremistan". When they were farmers, their activities and output didn't change very much, except over very long time frames. When they become service workers, their activities can shift unpredictably into new areas at a relatively rapid pace. And when you have a gigantic middle class, things can scale up to unprecedented levels. For instance, a breakthrough in cellphone technology scales up to billions instead of millions. This sort of massive scaling potential produces "Black Swans". And that means interesting things for the investment world.

UPDATE Oct 9, 2007:
A Wall Street Journal editorial notes that a new UN report says that:
"People around the world are becoming healthier, wealthier, better educated, more peaceful, more connected, and they are living longer."
The editorial adds:
It also turns out that the Malthusians (who worried that we would overpopulate the planet) got the story wrong. Human beings aren't reproducing like Norwegian field mice. Demographers now say that in the second half of this century, the human population will stabilize and then fall. If we use the same absurd extrapolation techniques demographers used in the 1970s, Japan, with its current low birth rate, will have only a few thousand citizens left in 300 years.
Amazingly enough, the UN admits to the cause of a massive improvement in the human condition:
To what do we owe this improvement? Capitalism, according to the U.N. Free trade is rightly recognized as the engine of global prosperity in recent years. In 1981, 40% of the world's population lived on less than $1 a day. Now that percentage is only 25%, adjusted for inflation. And at current rates of growth, "world poverty will be cut in half between 2000 and 2015" -- which is arguably one of the greatest triumphs in human history. Trade and technology are closing the global "digital divide," and the report notes hopefully that soon laptop computers will cost $100 and almost every schoolchild will be a mouse click away from the Internet (and, regrettably, those interminable computer games).
Back in the 1960s, I clearly remember the gloom and doom. The population explosion. All the horrible ways the world was going to end by the year 2000. Lots of people really believed it!

I recall at one point, Lake Erie was declared dead: with all fish and water critters gone. The US today is FAR less polluted than it was in the 1960s. And there's every reason to believe the rest of the world will clean itself up as soon as it can afford to.

So why do we seem to constantly live in a doomed world? Perhaps someone has been lying to us: the top 101 media frauds.

Hey Bruce,

Just found your blog. Nice site. I'll be visiting more.Take care.

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