Can Our Economy Survive Globalization’s Complexity?
By Paul H. Carr www.MirrorOfNature.org
Globalization lifts four people in
In the past 30 years, the increase in income inequality has been accompanied by
increased political polarization (McCarty 2006). The number of moderate
Republican and Democratic senators has decreased significantly.
Historically, income inequality contributed to the French Revolution and the
1917 Communist Revolution in
Billionaires Bill Gates of Microsoft and Mark Zuckerberg of Facebook exemplify the new elite. Both derived their wealth from new global information technologies: Gates from his Windows software which runs personal computers, Zuckermann from his social networking software which connects over 500 million people via the internet. Their wealth was based on the silicon integrated circuit technology which powered the second information-distribution (ID) revolution.
The first ID revolution was
the invention of the printing press which enabled Martin Luther’s Protestant
In 1789, the unconcern of
In the 19th century, the industrial revolution, powered by labor-saving machines, created wealthy capitalists, whose exploitation of the poor prompted Carl Marx to write “Das Kapital.” It concluded with the following call to action, “Workers of the world arise; you have nothing to lose but your chains.” The poor peasants in repressive Czarist Russia responded by joining in the communist revolution of 1917. The goal was “from each according to his abilities, to each according to his needs.” Ironically, implementation led to the repressive regimes of Lenin, Stalin and those of the Cold War.
How did the free Western economies win? It was ultimately because they avoided the above extremes by balancing liberty with laws. These included anti-trust and child labor laws, which together with the labor unions, constrained the power of the rich capitalists. Industrialists like John D. Rockefeller, Andrew Carnegie, and Henry Ford also helped by creating charitable foundations.
contributing to the
The greater freedom to
exchange information between government-funded research labs, private firms and
government-funded universities enabled the
What is the optimum survival strategy for dealing with complex global economy in which we are embedded? Long term predictions are not accurate even though we know the mechanisms and equations. MIT Prof. Edward Lorenz, founder of chaos theory, learned with his super computer that the accuracy of his weather predictions decreased with time because he did not know the initial conditions accurately enough. MIT Prof. Jay Forrester, founder of system dynamics, observed that good intentions can result in the opposite effect. For example, liberals pass rent control laws to get better housing for the poor. If landlords can’t afford to repair their property, rent controls can result in slums. We can learn from nature. Diversity offers the best chances for survival. Free economies offer more diversity than ones that are controlled.
Free economies need some
regulation, however. Thaler & Sunstein (2008) argue that totally free markets can lead to
disasters precisely because autonomous individuals are not good
decision-makers. Too much liberty can degenerate into unaccountable chaos that
followed the French Revolution. Too little liberty contributed to
Peters (2001) and Shermer (2009) built on Adam
Smith's invisible hand and chaos/complexity theory to show how free
markets and banking systems are by their nature continually evolving, emerging
systems that require uncertainty to operate successfully. Let us apply this to
the GDP. Counties with too much regulation, control, and law (such as the
Alan Greenspan, when asked about the financial crisis of 2008, said he had “overestimated the correcting power of free markets.” The delicate balance between law and liberty had been tilted too much toward the latter. The financial collapse of 2008 contributed to the election of Brack Obama and his Democratic Congress, which have passed legislation regulating financial institutions. Has the economic balance shifted towards too much regulation, as claimed by the Republican and the Tea Party
Only one percent of Americans own more than the combined wealth of the bottom
90 percent of American families (Sandel 2009).
Paradoxically, 98 percent of Americans, who would have benefited economically,
did not support proportionally President Obama’s
proposal to repeal the tax cuts for the rich two percent, who earn more than
$250,000. Instead of responding to Karl Marx’s appeal, “workers of all lands arise,
you have nothing to lose but your chains,” they voted for the libertarian
policies of the Republican Tea Party in the November 2010 elections. The Tea
Party wants to cut government regulation spending. If too severe, this could
lead to a second recessionary dip. On the other hand, unless government
spending is reduced, our increasing national debt could become unmanageable.
Recently, however, in
“The lesson of history is that,
in the long run, rich super-elites have two ways to survive: by suppressing
dissent or by sharing their wealth. It is obvious which of these would be the
better outcome for
We urgently need to make compassion a clear, luminous and dynamic force in our polarized world. Rooted in a principled determination to transcend selfishness, compassion can break down political, dogmatic, ideological and religious boundaries. Born of our deep interdependence, compassion is essential to human relationships and to a fulfilled humanity. It is the path to enlightenment, and indispensable to the creation of a just economy and a peaceful global community. www.CharterForCompassion.org
Freeland, Chrystinia, Jan/Feb 2011 The Rise of the New Global Elite http://www.theatlantic.com/magazine/archive/2011/01/the-rise-of-the-new-global-elite/8343/
Lieberman, Robert C. 2011 Why the Rich are Getting Richer. http://www.foreignaffairs.com/articles/67046/robert-c-lieberman/why-the-rich-are-getting-richer?page=show
McCarty, Nolan et al. 2006 Polarized
Sandel, Michel L. 2009 Justice:
What’s the Right Thing to Do? Farrar, Straus and
Shermer, Michael, 2009. The Mind of the Market: How Biology and Psychology Shape Our Economic Lives, Holt Paperbacks.
Thaler, Richard, Sunstein, Cass. 2008. Nudge:Improving Decisions about Health, Wealth, Happiness.
Presently, the value of many
(1) They stop repaying their loan. It takes years for the banks to foreclose and write off the loss. During this time, the residents save money for their next rental residence. It may take 8 to 10 years for the residents to regain enough credit to purchase their own home.
(2) “Short Sale” The residents sell their homes at the market value and the bank or mortgage company writes off the loss, typically $100,000. The residents rent until their credit is restored, typically, one to two years.
When will this cycle end?