Parts to Wholes: the Socionomic Systems Nexus

Dysfunctions, Breakdowns & Challenges

For Europe’s Middle-Class, Stagnant Wages Stunt Lifestyle The European dream is under assault, as the wave of inflation sweeping the globe mixes with this continent’s long-stagnant wages. Families that once enjoyed Europe’s vaunted quality of life are pinching pennies to buy necessities, and cutting back on extras like movies and vacations abroad. Potentially more disturbing — especially to the political and social order — are the millions across the continent grappling with the realization that they may have lives worse, not better, than their parents. “I have this feeling that there is a wall in front of us,” said Axel Marceau, a 41-year-old schoolteacher living outside of Frankfurt. “We’re just not going to get any further.”  His concerns are well-founded. A study by the German Institute for Economic Research in Berlin found that the broad middle of the German work force, defined as workers making from 70 to 150 percent of the median income, shrunk to 54 percent of the population last year, from 62 percent in 2000. Much of the declining purchasing power of European workers can be traced to those numbers, and to policy decisions and economic developments over the last decade when globalization began to reshape Europe and the world. In Germany, Europe’s largest economy, the decline in purchasing power began in 2000, when employers started wresting wage concessions from unions, or simply shifting jobs to Eastern Europe and China. Inflation-adjusted incomes rose from 1 percent to 2 percent in the late 1990s, but more than one million Germans lost full-time jobs during and after a recession in 2000 and 2001. Subsequently, workweeks got longer without extra pay, and from 2004 through 2007, inflation outpaced income increase for the average family.

Nationalism Frays Global Ties The world isn't as flat as it used to be. During the long march toward globalization, international borders and trade barriers came down. Communism fell. Protectionist walls in Latin America and elsewhere were dismantled. Governments -- long prone to meddling in trade -- took a back seat to broader market forces. In a globalization manifesto, New York Times columnist Thomas Friedman declared that the Internet and other planet-spanning technologies were erasing national boundaries. The world, he said in a 2005 best seller, was flat. No longer. The global economy appears to be entering an epoch in which governments are reasserting their role in the lives of individuals and businesses. Once again, barriers are rising. Call it the new nationalism. The rising strength of national governments expresses itself in different ways. For rich countries, it generally means higher taxes and more regulation. In the 30 mostly rich countries of the Organization for Economic Cooperation and Development, tax revenue as a percentage of the local economy was higher in 2005, the latest year surveyed, than a decade earlier. That's because of the rising cost to governments of health care and social security.

Re-thinking the New World

The End of the End of History In the early 1990s, optimism was understandable. The collapse of the communist empire and the apparent embrace of democracy by Russia seemed to augur a new era of global convergence. The great adversaries of the Cold War suddenly shared many common goals, including a desire for economic and political integration. Even after the political crackdown that began in Tiananmen Square in 1989 and the disturbing signs of instability that appeared in Russia after 1993, most Americans and Europeans believed that China and Russia were on a path toward liberalism. Boris Such determinism was characteristic of post-Cold War thinking. In a globalized economy, it was widely believed, nations had no choice but to liberalize--first economically, then politically--if they wanted to compete and to survive. As national economies approached a certain level of per capita income, growing middle classes would demand legal and political power, which rulers would have to grant if they wanted their nations to prosper. The economic and ideological determinism of the early post-Cold War years produced two broad assumptions that shaped both policies and expectations. One was an abiding belief in the inevitability of human progress, the belief that history moves in only one direction--a faith born in the Enlightenment, dashed by the brutality of the twentieth century, and given new life by the fall of communism. The other was a prescription for patience and restraint. Rather than confront and challenge autocracies, it was better to enmesh them in the global economy, support the rule of law and the creation of stronger state institutions, and let the ineluctable forces of human progress work their magic. But the grand expectation that the world had entered an era of convergence has proved wrong. We have entered an age of divergence. During the Cold War, it was easy to forget that the struggle between liberalism and autocracy has endured since the Enlightenment. It was the issue that divided the United States from much of Europe in the late eighteenth and early nineteenth centuries. It divided Europe itself through much of the nineteenth century and into the twentieth. Now it is returning to dominate the geopolitics of the twenty-first century. The rulers of Russia and China believe in the virtues of a strong central government and disdain the weaknesses of the democratic system. They believe their large and fractious nations need order and stability to prosper. They believe that the vacillation and chaos of democracy would impoverish and shatter their nations, and in the case of Russia that it already did so. They believe that strong rule at home is necessary if their nations are to be powerful and respected in the world, capable of safeguarding and advancing their interests. Chinese rulers know from their nation's long and often turbulent history that political disruptions and divisions at home invite foreign interference and depredation. What the world applauded as a political opening in 1989, Chinese leaders regard as a near-fatal display of disagreement. So the Chinese and Russian leaders are not simply autocrats. They believe in autocracy.

'Terror and Consent' He writes: “We will not win the Wars against Terror if we do not understand the novelty of the problem we face.” He argues that misunderstandings of the situation have led to a flawed American strategy in Iraq, to moral failings in the treatment of prisoners in Abu Ghraib and Guantánamo and to a risk of militarizing American domestic life. But Mr. Bobbitt also says that accurate perceptions lay behind the very impulse to call this struggle a “war on terror.” He sees in modern terrorism “a threat to mankind that is unprecedented” and predicts that in facing it, more changes will come than during the Long War. Such “nation state terrorism” led to the idea that terrorists were essentially freedom fighters. An alphabet soup of terrorist groups, including the I.R.A. and P.L.O., defined themselves around such ambitions. Similar groups still exist, of course, but the ascendancy now is with Al Qaeda and its ilk. They are not interested in national liberation or mercantile success. They seek to break down the established order of states and enthrone another form of authority (overseen by Islamic jihadists). Such groups are global and decentralized, prepared to “outsource” their attacks and readily trade weaponry and secrets. There are consequences to these new formations. Contemporary terrorist groups, Mr. Bobbitt shows, are far less concerned with the death of innocents than their predecessors; they are not seeking to sway public opinion, but to expand their domain of terror. Weapons of mass destruction become so much more threatening because traditional ideas of deterrence have less sway — and this at the very moment when the global marketplace offers frightening options. But when facing this new market-state world, we often mistakenly apply the older nation-state model, which blinds us to both opportunities and dangers. Mr. Bobbitt traces many of the early errors in Iraq to a misconception that the confrontation was a traditional battle between nation-states. Similar misconceptions, he argues, are at the root of the idea that terrorism could possibly be controlled by police action; in such an approach the need to anticipate and preclude terrorist action, rather than punish it, is overlooked. Even the structure of intelligence agencies, Mr. Bobbitt argues, is a relic of the battles last fought.

David Brooks: The Cognitive Age The globalization paradigm has led, in the political arena, to a certain historical narrative: There were once nation-states like the U.S. and the European powers, whose economies could be secured within borders. But now capital flows freely. Technology has leveled the playing field. Competition is global and fierce. New dynamos like India and China threaten American dominance thanks to their cheap labor and manipulated currencies. Now, everything is made abroad. American manufacturing is in decline. The rest of the economy is threatened. The globalization paradigm has turned out to be very convenient for politicians. It allows them to blame foreigners for economic woes. It allows them to pretend that by rewriting trade deals, they can assuage economic anxiety. It allows them to treat economic and social change as a great mercantilist competition, with various teams competing for global supremacy, and with politicians starring as the commanding generals. But there’s a problem with the way the globalization paradigm has evolved. It doesn’t really explain most of what is happening in the world. Globalization is real and important. It’s just not the central force driving economic change. Nor is the globalization paradigm even accurate when applied to manufacturing. Instead of fleeing to Asia, U.S. manufacturing output is up over recent decades. As Thomas Duesterberg of Manufacturers Alliance/MAPI, a research firm, has pointed out, the U.S.’s share of global manufacturing output has actually increased slightly since 1980.  The chief force reshaping manufacturing is technological change (hastened by competition with other companies in Canada, Germany or down the street). The central process driving this is not globalization. It’s the skills revolution. We’re moving into a more demanding cognitive age. In order to thrive, people are compelled to become better at absorbing, processing and combining information. This is happening in localized and globalized sectors, and it would be happening even if you tore up every free trade deal ever inked.

Food  Crisis

Freer Trade Could Fill the World’s Rice Bowl RISING food prices mean hunger for millions and also political unrest, as has already been seen in Haiti, Egypt and Ivory Coast. Yes, more expensive energy and bad weather are partly at fault, but the real question is why adjustment hasn’t been easier. A big problem is that the world doesn’t have enough trade in foodstuffs. The damage that trade restrictions cause is probably most evident in the case of rice. Although rice is the major foodstuff for about half of the world, it is highly protected and regulated. Only about 5 to 7 percent of the world’s rice production is traded across borders; that’s unusually low for an agricultural commodity. So when the price goes up — indeed, many varieties of rice have roughly doubled in price since 2007 — this highly segmented market means that the trade in rice doesn’t flow to the places of highest demand. Poor rice yields are not the major problem. The United Nations Food and Agriculture Organization estimates that global rice production increased by 1 percent last year and says that it is expected to increase 1.8 percent this year. That’s not impressive, but it shouldn’t cause starvation. The more telling figure is that over the next year, international trade in rice is expected to decline more than 3 percent, when it should be expanding. The decline is attributable mainly to recent restrictions on rice exports in rice-producing countries like India, Indonesia, Vietnam, China, Cambodia and Egypt. Restrictions on the rice trade run the risk of making shortages and high prices permanent. Export restrictions treat rice trade and production as a zero- or negative-sum game where one country’s gain comes at the expense of another. That’s hardly the best way to move forward in a rapidly growing world economy.

• Nobel Prize Winners and the Food Crisis Nobel Prize winners discuss the global food crisis.

• Ban Ki-Moon to Head United Nations Task Force to Tackle Global Food Crisis

Silver Lining in High Food Prices Today's soaring commodity prices scream a fundamental truth of modern life that many politicians, particularly in the West, don’t want us to hear: the world’s natural resources are finite, and, as billions of people in Asia and elsewhere escape poverty, Western consumers will have to share them. Here is another truth: the price mechanism is a much better way to allocate natural resources than fighting wars, as the Western powers did in the last century. The United States’ ill-considered, biofuels, subsidy programme, demonstrates how not to react. Rather than acknowledge that high fuel prices are the best way to inspire energy conservation and innovation, the Bush administration has instituted huge subsidies to American farmers to grow grains for biofuel production. Never mind that this is inefficient in terms of water and land use. Moreover, even under the most optimistic scenario, the US and the world will still be relying mainly on conventional fossil fuels until the hydrocarbon era comes to an end (which few of us will live to see). Last but not least, diverting vast tracts of agricultural land into fuel production has contributed to a doubling of prices for wheat and other grains. With food riots in dozens of countries, isn’t it time to admit that the whole idea was a giant, if well-intentioned, mistake? Another wrong turn is the proposal recently embraced by presidential candidate Hillary Clinton to temporarily scrap taxes on gasoline. As laudable as it may be to help low-income drivers deal with soaring fuel costs, this is not the way to do it. The gas tax should be raised, not lowered. The sad fact is that by keeping oil prices high, Opec is doing far more for environmental conservation than Western politicians who seek to prolong the era of unsustainable Western consumerism. Of course, it isn't just the cost of oil that is high, but all commodity prices, from metals to food to lumber. Prices for many commodities have doubled over the past couple of years. Oil prices have risen almost 400 per cent in the last five years. The proximate cause is a global economic boom that has been stronger, longer, and more broad-based than any in modern history.