Summary:
Peter Day interviews Robert Reich (Berkeley) and Gabor Steingart (Der Spiegel). Reich believes we've entered an era of super-capitalism. Technology incubated during the cold war. Lowered cost of transporting goods and communication. Container ships and satellite communication. Led to globalization. Consumers and investors doing very well. No more job security due to this globalization and technological advances. Generates huge instability and upheaval, not seen since late 19th century. People need to understand the costs. We need to pay attention to how governments regulate and design markets and try to do a better job. Gabor Steingart believes our way of life and stability are under threat from the rise of Asia. Not a flat world because China and India are competing with our blue collar workers under a very different set of rules. E.g. child labour, no trade unions, environment. Free trade is not the answer for up to 1/3 of our workforce. Need political actions. Not tariffs and quotas, but heavy investment in education, trade agreements, informing consumers and pooling resources between Western countries. (Published: 02/09/08)
Notes:
Robert Reich
- democracy (in the sense of caring for many citizens) under threat in an age of big business
- capitalism in its modern form began in late 19th century
- huge consolidation of industry
- created some social problems
- social inequality
- terrible industrial towns and cities
- health and safety problems
- struggled with those problems for decades
- not completely overcome
- but: factories moved away
- capitalism in 1940-1950s
- in every industry 3 or for 4 major producers
- generated huge economies of scale
- we assumed that they were natural
- that inevitably there would only be room for 3 or 4 major producers per industry
- gave America big advantage
- in a big country the economies of scale are thought to occur more radically
- compared to Europe split up into national champions into different countries
- allowed in industrial unions
- hadn't seen before in the US
- could negotiate with an entire industry because there were only 3 or 4 major producers
- producers were willing to give unions pretty much what they wanted because they could pass on the additional cost to consumers or it was compensated by productivity gains
- very stable for a long time
- consumers and investors didn't do very well
- not much choice
- not huge returns for investors
- mid 1970s
- everything began to change
- lot of the technologies that had been incubated during the cold war began to be available; technologies even that came about through the Vietnam war
- new transportation and communication technologies
- container ships, satellite communication
- whole idea of a container ship was designed, developed and subsidized by the US military
- those technologies began to knit the world together
- in ways that nobody had foreseen
- globalization is the result
- became practical
- cost of getting stuff from overseas to the US plummets
- companies in the US could contract out, to outsource abroad, to become supply chains
- something else happened
- the technologies themselves undermined the vast economies of scale
- became possible for smaller producers to tailor their goods and services exactly to the taste of smaller groups of consumers
- two sides of a coin
- consumers and investors doing very well
- instability means our entire job structure is thrown to the winds
- we're seeing the replacement of industrial capitalism with the tail that used to be its servant, financial capitalism
- bankers used to lend money for productive purposes
- new companies or old companies, goods and service producers
- now financial part of the economy has become a very predominant thing in lots of countries
- super-capitalism
- in almost every industry, the parts that are most dynamic, most inventive, are parts that are basically small businesses, that are highly disruptive, where people have no job security at all, where tomorrow the new business may move out and go someplace else
- is putting pressures on the old businesses to be more dynamic as well
- hence we are seeing not only in bad times but also in good times huge numbers of people being fired permanently
- the entire old high-volume standardized mass-production type of employment is gone
- cost pressure on everyone in the system
- driving business to cut everything
- in super-capitalism, we're seeing increasingly a huge increase in consumer choice, investor choice, dynamism, and also the other side of that coin, huge instability, huge upheaval, we haven't seen since late 19th century
- solution
- understanding the choices
- consumers love the choices, investors love it when the stock prices go up
- but if you say to them there's a Faustian bargain, are you willing to understand and accept all of the instability that comes with it?
- maybe not
- maybe we need more regulation again
- pendulum is swinging back
- need to understand that the dynamism that we have is wonderful
- but there are social costs to it
- need to pay attention to how governments regulate and design markets and try to do a better job
- trouble with regulating: law of unintended consequences kicks in?
- process of trial and error
- FDR in 1932: "we're going to try things, may not always work, but we have to try them; worst thing we can do is stand back and do nothing"
Gabor Steingart
- way of life of the rich world is under threat from the rise of Asia
- far from unifying the world, globalization is a diversifying force
- takes issue with the view that globalization has made the world flat for everyone
- if world is flat, then it is heavily tilted towards Asia and the East
- world was flat maybe 20 years ago
- competing only between the Western countries
- 500m people competing under nearly the same rules and regulations
- China, India, Eastern Europe
- 1.5bn people joined the world labour market
- were competing against our mostly blue collar workers under a completely different set of rules and regulations
- formerly flat world became rocky road for them
- if you're the owner of capital it is a flat world
- you can invest wherever you want to invest
- not the same for ordinary workers
- strenght and reach shrinking
- free trade doesn't mean the same anymore because the terms of trade have changed
- free trade requires both partners to believe in a free market economy
- China/India not a free market economy; they're guided economies
- not protectionism
- calling for political action
- trade is not a law of nature
- need to frame it, shape it
- need to level the playing field
- free trade is not the answer for maybe 1/3 of our workforce
- they cannot compete under these conditions
- they have nothing to offer in this world labour market
- we have to take care of them
- heavy investment in education
- also means trade agreements with the low wage countries
- fight for the ban of child labour
- 30 year ago we were fighting against child labour because it was a moral issue
- 130m children are fighting against our blue collar workers
- isn't this just a snapshot of how it is now? aren't higher wages and more education going to come along in China? West better get used to this competition?
- could be naive
- 20 years people were saying China would be a democracy
- no progress on environmental issues
- ask for 50 years exemption
- solution
- education
- blue collar workers need to be given huge upgrade
- more information to consumers
- consumers can make their own decisions if they have the information
- e.g. red/green dot on products; red not member of Kyoto protocol, or trade unions forbidden
- Western cooperation
- only 10% of population
- need to pool our resources, interests
- every citizens to rethink globalization
- real change needs more than politicians saying it
- need educated citizens about globalization
- globalization is a complex process, not simple
