Globalisation - a network approach

Why is the world teetering from one crisis to another? Has it always been like this? Were things worse in the past? Or better? -- Helena Norberg-Hodge

Inuit people had no word for 'contamination'. Now they are being poisoned by chemicals. -- Geoffrey Lean

The main enemy of the open society, I believe, is no longer communist but the capitalist threat. -- George Soros

In 1970, about 90% of international capital was used for trade and long-term investment - more or less productive things - and 10% for investment. By 1990, those figures had reversed. -- Noam Chomsky

A business or a big corporation is a fascist structure internally. Power is at the top. Orders go from top to bottom. You either follow the orders or get out. -- Noam Chomsky

GNP as a measure of progress is the most stupid, the most absurd and the most pernicious index that could ever have been thought of by a discipline that calls itself scientific. -- Jose Lutzenberger, former Brazilian Environment Minister

... the real choice is not jobs or the environment. It's both or neither. What kind of jobs will be possible in a world of depleted resources, poisoned water and foul air, a world where ozone depletion and greenhouse warming make it difficult to survive? -- United Steel Workers of America

What an outstanding thing it is to watch a civilisation destroy itself because it is unable to re-examine the validity, under totally new circumstances, of an economic ideology. -- James Goldsmith

Let goods be homespun whenever it is reasonably conveniently possible, and above all, let finance be preferably national. -- John Maynard Keynes

He who controls the currency controls the country. -- John Maynard Keynes

What are called structures are slow processes of long duration, functions are quick processes of short duration. -- Ludwig von Bertalanffy

Free traders, having freed themselves from restraints of the community at the national level and having moved into the cosmopolitan world, which is not a community, have effective freed themselves of all community obligations. -- Herman Daly & John Cobb

... the world eventually becomes one vast free-trade zone in which all the social and ecological imperatives to which economic activities are normally subjected, are now systematically subordinated to the short-term interests of the transnational corporations that control the world market - the most fundamental cause of the social and ecological devastation that is fast making this planet uninhabitable to complex forms of life. -- Edward Goldsmith

If we look at an ecosystem we find systems within systems, networks within networks. At the lowest level the self-contained self-regulating cell. We could go one stage lower and consider the genome as a self-organising self-regulating structure, which puts paid to the commercialisation of genetics built as it is on flawed science. Cells are organised in a network structure as tissue and organs. Within an organism we have various systems, respiratory system, digestive system, nervous system. The organism itself is a self-contained self-regulatory system organised into networks within social systems and ecosystems. Gaia is the planetary ecosystem. Esoteric theory considers the solar system, galaxies and the universe to be higher network systems. At each level there is coupling between systems, but this is of secondary effect, there is also network interaction which forms the network structure of the next level system.

The Ancient Greeks recognised the Earth as a living system, systems embedded within systems, the Earth a living part of the Cosmos. Pythagoreans saw the Earth as spherical, animate, ensouled and intelligent; Plato saw the Earth as living, with other living creatures an indivisible part of the whole; the Stoics saw the Cosmos as a sentient being, of which all living things were a part. This holistic, ecological, systems world view prevailed into the 17th and 18th centuries, Linnaeus, John Ray, William Paley and Thomas Morgan all saw life as an indivisible, interrelated part of the whole. Indigenous people today still see a living Earth and all its creatures as an indivisible part to be loved and respected. Rene Descartes created the artificial division between mind and body to separate the legitimate inquiries of science from the grasp of the Church, in doing so the world was artificially divided between res extensa and res cogitans. Sir Isaac Newton, Francis Bacon refined the methodology, a methodology regarded by William Blake as cold and impersonal, without value or feeling, what today is seen as 'scientific method'. Ecologists at the end of the 19th century were the first to see that organisms couldn't be considered on their own, disconnected from their environment, could only be seen as part of interconnected systems. From ecology, the systems viewpoint diffused into other areas, pushed forward by leading thinkers like Alexander Bogdanov, Ludwig von Bertalanffy, Norbert Wiener, Claude Shannon, Gregory Bateson and Margaret Mead. Even economists, at least their more revolutionary brethren, are now beginning to see that their simplistic models of input and output have little merit, that the inputs (resource depletion) and outputs (waste disposal) couple into larger feedback systems. Ironically, at a time when other disciplines are abandoning their reductionist viewpoints and recognising the fundamental nature of a systems, network approach, biologists have turned full circle with their neo-Darwinist, mechanistic viewpoint that the gene determines all, mapping the genome being the Holy Grail of biology. The honourable exceptions being Eugene Odum, who understands the fundamental importance of feedback loops, and James Lovelock and Lynn Margulis with their Theory of Gaia, that the world is governed by large feedback loops, contained within which are ever smaller feedback loops.

Systems engineers deal with systems. Open-loop systems are open to external environmental influences, we close the loop to form a closed-loop feedback system and we minimise external influences. Closed-loop feedback systems can be analysed by simple algebraic equations. Any internal non-linearities are smoothed out by the feedback, cross-coupling with adjacent systems is minimised, the systems may be organised into networks. For the network we have networks within networks. We can though produce tight coupling between systems (that is one system effects the internal workings of another). Connect the output of one into the input of the other. Our simple feedback system and its simple analysis is no longer valid as the loop is now determined by what happens in the coupled system, we can no longer control a single system in isolation. We have to consider the two systems as one large system, we no longer have two separate systems with weak coupling between the two. Simple algebraic maths will no longer suffice. We have to use matrices of simultaneous differential equations usually non-linear. Such systems are often chaotic, that is the initial conditions determine the current state, small differences in initial conditions lead to extremely wide differences in the current state. Such systems often have cusps, an infinitesimal difference in conditions, often randomly determined, can lead to two widely diverging paths. Imagine a drop of water poised on the top of a knife-edge ridge. A small perturbation or the flip of a coin leads to a final destination a continent apart. Such systems appear random, they are not, they are chaotic, they are deterministic but to all practical appearances are non-deterministic and random.

Globalisation is unravelling these local loops and replacing them with inherently unstable systems. We can see many examples of this.

The massive stock market crash in the summer of 1998. Large amounts of money are sloshing around the world. Banks traditionally lent for investment. An entrepreneur needed money to add value. The value may not have been of value to society, it could have been to build a nuclear power station or to manufacture weapons, but in the narrower economic sense value was added and the entrepreneur and the bank benefited. Less and less are banks lending in this way, instead money is being lent to funds (gambling syndicates in all but name) who speculate on short-term outcomes. The funds have returned high profits, increasing the tendency for banks to lend. The funds have driven up stock prices which has pulled in more money, which has driven up stock prices which has increased the funds returns. The whole system is unstable as it is a positive feedback loop that has an ultimately limit. Eventually there is no more money to be drawn in and it collapses.

Barings, the world's oldest bank, discovered the hard way that there is no such thing as a free lunch. Traditionally merchant banks have raised money on behalf of industry. Barings found it was far more profitable to speculate on the Far East Futures Market in Tokyo and Singapore. Not only their own money, that of clients too, everyone wanted to jump in the act, get a slice of the action. Nick Leeson was gambling millions on split second differences in future options in different trading centres. Such was the volume of his trading that he was dragging everyone else along on his coat-tails even to the extent of influencing the Nikkei. Whilst everyone was pulling million dollar bonuses at Barings a convenient blind eye was turned to the fact that Singapore trader Nick Leeson was sailing extremely close to the wind. Only when the bubble burst did the rats jump ship and place all the blame on a rogue trader. Had the truth been told, that an unsupervised trader been given the nod and the wink, senior personnel at Barings, if not the Bank of England been put on trial, then the entire future of London as a world financial centre would have been put at risk. Barings was allowed to sink, taking the truth with it, leaving Nick Leeson (now dying of cancer) to rot in a Singapore gaol. {Nick Leeson was released July 1999}

There has been no successful mega-merger. Shareholders suffer, employees suffer, clients and customers suffer. The only ones to benefit are the senior managers who look to their share options for a quick killing, rather than the long-term interest of the company for which they are paid. Mega-mergers are on the increase due to the huge short-term gains. If the stock value doubles on the acceptance of a bid, then funds sell to realise a short-term gain, to invest elsewhere to capitalise on yet another short-term gain. Senior management with their stock options and bonuses benefit even more, the long-term future of the company is the last thing on their minds.

For a feedback system to work, the regulatory feedback path has to be at least an order of magnitude faster than the system it is regulating.

The hot money is sloshing around the world ever faster, resulting in ever increasing instability. Computer share tracking systems cut in and sell at pre-determined points, the fall accelerates, then cut in more sell programs, which causes ever greater acceleration. Manual systems are also increasing in speed. Instead of going through a broker, humans can now use on-line systems for instant buying and selling of stocks. The creation of a pan-European stock exchange will add further instability.

National economies are notoriously difficult to manage as they are not one simple homogeneous economy but a series of nested, interacting economies - regional economies, sector economies. Attempts to cool the UK economy may help the South, may help the service sector, but also triggers ever more redundancies in the depressed North, bankruptcies in the engineering sector.

From the system, ecological viewpoint of viable self-contained, self-regulatory systems nested within networks we can see the destabilising effect of globalisation. Globalisation is producing ever tighter coupling between previously self-contained self-regulating systems.

The EU attempts to stimulate cross-border trade, treat all countries to common policies, regardless of national sensibilities, local custom, local industries and economies. The common currency is designed to accelerate this trend, destroy local loops, ever tighter coupling. It becomes no longer possible to regulate national economies at the national level due to the high degree of cross-coupling (ie the high levels of cross-border economic flows). The common monetary policy cannot, will not work. We have practical experience with the forced economic reunion of the two halves of Germany (two vastly different economies). This destroyed the East German economy and ruined the once mighty West German economy. Although not exactly comparable, the only other experience we have of single currency zones, yen, dollar, sterling, have not worked over the long term. Monetary Union has no escape clause, once you're in, you're in for ever (or until the scheme collapses). Monetary Union will destroy all the local loops and replace with one community loop. It ignores the vast difference in economic activities, plus the differences in language, culture, law, political structures. The only way to make it work would be to replace the regional, national regulatory mechanisms with an EU regulatory mechanism. This would have to have such Draconian powers that it is unlikely to be acceptable at a national level. It would also require huge amounts of funds to be moved around to compensate for its negative effects (unlikely to be acceptable to those who would be paying). Failure to move huge compensatory funds would lead to mass migration and consequential civil unrest. The only beneficiaries of monetary union will be transnational corporations who will find it even easier to move money across borders increasing the amount of hot money sloshing around, decreasing the stability of the world economy still further.

Not content to destroy national economies with EMU, the EU is now planning 'tax harmonisation' - weasel words for denying national and local authorities the ability to regulate their own economies via a tax regime.

The emblem for Brussels is a little boy pissing. Quite appropriate for a city that is fouling up Europe and dumps all its raw sewage untreated into the river to eventually flow into the North Sea.

NAFTA (North American Free Trade Agreement) created a free market across North America. Despite dire warnings of the consequences it has gone ahead. The only beneficiaries have been US global corporations. Massive job losses have occurred in the US as low skill jobs have moved across the border to Mexico. US corporations love Mexico, lower taxes, lower environmental standards, zero workers rights.

NAFTA has led to unprecedented military activity against indigenous people as the Mexican government tries to seize their land for use by US corporations. The US has poured in millions of dollars of military aid, thinly disguised as 'the war against drugs'.

Trade union activists working for Mattel in Mexico (Barbie doll) have been illegally detained and threatened. Assembly workers in Thailand work in extremely unpleasant and dangerous conditions, when they protest they are threatened not only with the sack but that they will be silenced 'forever'. The brutalisation of Third World workers to produce brand-name goods is not simply a feature of NAFTA, it is a common malaise of globalisation.

Lori Wallach and Robert Naiman sumarised NAFTA thus:

NAFTA has not simply failed to provide the promised benefits but has led instead to widespread poverty, unemployment, social dislocation and environmental disruption. The few beneficiaries have been corporations - mainly transnational corporations - who necessarily benefit from deregulation that reduces their costs and the free market that they largely control.

GATT and its successor WTO, are establishing a quasi-world government with legislative, executive and judicial powers. The world is being turned into one gigantic single economic system for the benefit of transnational corporations.

At the Rio Earth Summit, the Convention on Biological Diversity (CBD) was agreed in recognition of the need to conserve local feedback loops, though it was not worded in that way. Local communities to be the guardians of their own biodiversity as the best way to conserve that diversity. No sooner was the ink dry on CBD than the WTO (World Trade Organisation) and with it TRIPs (Trade Related Intellectual Property Rights) were created. TRIPs grants global corporations the rights, and safeguards those rights via patents on life, to bioprospect in the Third World. Third World countries are hit by a double whammy, genetic resources are stolen from their countries, they then pay to use those same resources via patent royalties.

TRIPs, WTO only hastens the trends institutionalised by the IMF and World Bank. The World Bank commits loans for large scale projects that benefit the West in the Third World, the IMF calls for structural adjustments to ease and speed up wealth extraction from the Third World.

Post-WWII the emphasis has been on flattening local loops, increasing the fluidity of capital flows, maximising the ease with which wealth can be extracted and concentrated elsewhere (as opposed to created), we now need to put the same effort into decoupling national and regional economies, to reconnecting regional, community and neighbourhood loops.

Web Resources


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Gaia index ~ worker exploitation ~ role of corporations ~ WTO
(c) Keith Parkins 1998-2000 -- February 2000 rev 9