An uncertain, changing world

Globalization, technology and the financial crisis have wrought a seismic shift in the balance of world power, unprecedented since the industrial revolution. At times of change, the cards are re-dealt and new winners and losers emerge.

Un mundo incierto y cambiante

It’s a cliché to claim that globalization, technology and the financial crisis have changed the world. But the social and political perception of these changes is just a hint of the ones that await us. Among economists, perhaps the best-known factor of this trilogy is globalization. Businessmen and sociologists underline the importance of the revolution in information and communications technologies that we have come to call digitalization, whereas the financial crisis remains a mystery to specialists. But together these three factors have created a real earthquake in the balance of world power, something unprecedented since the Industrial Revolution.

Since that time, world production and consumption grew disproportionately in that geopolitical area we have come to call the West. As little as 40 years ago, some 80% of the world’s GDP was concentrated in those few countries. Today, according to the IMF, more than 60% of world growth is coming from Asia and almost 80% from both shores of the Pacific. The center of gravity of the world is today located near Vanuatu, the South Pacific Ocean island nation, a symbolic territory because at the beginning of the century it decided to change its time zone so as to be in the same solar day as China and one day before the United States. The OECD predicts that in 2030 –the day after tomorrow– 66% of the world’s middle class will be in Asia, 14% in Europe, and 7% in North America.

Let us recall that it is the middle class whose consumption moves the economic world and whose political participation decides governments. In light of this data, it’s not hard to explain the social malaise in the developed countries. The decadence of the West –what the Chinese call a return to normality, in which Western importance in the world can only decline– explains to a large degree the increasing dissatisfaction of its inhabitants with the social and political system. The crisis of the euro is also a consequence of globalization. Eurosclerosis is merely the expression of the loss of technological and scientific leadership that we had enjoyed since the invention of the steam engine. To paraphrase Eichengreen, exorbitant Western privilege has disappeared, and we in the developed countries are starting to note the loss.

Digitalization bears part of the blame. It has eroded the entry barriers that protected us from competition in many economic activities; it has converted information into an almost free resource that can be accessed in real time from anywhere in the world via a mobile antenna; it has destroyed the traditional value chains that explained the verticalization of production in large multinational business conglomerates. And its effects have only begun to be felt. No businessmen are immune to its disruptive effect. Even the classic agglomeration economies that explain the origin of the cities, described in Pirenne’s study of the rise of the Mediterranean, are today partly a relic of the past. Digitalization has brought a new business model where cooperation and competition must go hand-in-hand.

A delocalized world undergoing multipolar change is by definition more unstable. No longer can anyone play the role of the world’s policeman that corresponds to the Empire –neither through economic, demographic, scientific nor military power. Nevertheless it is a more just and egalitarian world.

But making a profit from digital investment is still a challenge for many industries and companies. The time has passed in which a company’s value depended on the number of visits to its webpage and not on its EDITBA, although some adventurers are still not aware of this. The digital world is a mix of clicks and bricks, but always with someone on the other end of virtual space. We shouldn’t forget this.

The financial crisis has finished off the myth of the institutional advantages of the capital markets in the developed countries. Legal certainty, protection for investors and quality regulation have all exploded as we have seen the incapacity to prevent repeated phenomena like asset bubbles, whether financial or real. Carried along by our intellectual pride, we came to believe that we had domesticated economic cycles and discovered the philosopher’s stone of continual growth and full employment. Today, eight years later, we are still swamped by debt and appealing to the central banks not to cut off the emergency liquidity that sustains growth. These are extraordinary circumstances in which saving is penalized. Money has been lent to the German government even while lenders know that when it is returned to them some years later it will be at a loss. That can only reflect fear of the future, a future that seems too uncertain, economically and politically.

A new world is being born, one that is authentically global, multipolar, without an undisputed leadership or even universally shared rules. The multilateral institutions that we so patiently and confidently constructed after the Second World War to bring stability and progress to the world –such as the United Nations, the International Monetary Fund and the World Trade Organization– today lack legitimacy because they represent a power sharing that is no longer realistic and they have not been able to generate legitimacy in the Weberian sense. Mass migrations, one of the great challenges of the future, which grow exponentially because of the demonstration effect of the social networks, don’t even have their own space from which to coordinate a global solution. But we also observe how their own complexity undermines even the integration projects in areas that we thought were stable and consolidated, such as the European Union. It’s the same with climate change: the UN panel on this subject is increasingly questioned as a forum for discussion and a mechanism for taking decisions.

A delocalized world undergoing multipolar change is by definition more unstable. No longer can anyone play the role of the world’s policeman that corresponds to the Empire –neither through economic, demographic, scientific nor military power. Nevertheless it is a more just and egalitarian world, in spite of the insistence on internal inequality in the developed countries; globalization has put millions of human beings into the middle class in the emerging countries and has lifted many other millions out of misery. It’s another question whether this will bring a corresponding rise in the absolute levels of what we consider human dignity, both economically and politically. That is why we need new institutions for cooperation and to solve economic and political conflicts. Because it is in moments of change that new hands are dealt, when new winners and losers appear. The great challenge of the 21st century is to create a system that will combine adequate incentives to stimulate desired change with generous security networks that will lighten the load of the losers, the displaced and the excluded.


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