29.12.2009
It’s time for a change
Dear Ladies and Gentlemen, I’m very pleased to be your guest tonight. Befroe we start our discussion I would like to make a few brief remarks about ous twodays’ hotbutton issue, the ongoing process of globalisation.
Everybody in the upcoming American election is selling big portions of change. You can
buy it enriched with hope – then it comes from a former community organizer. Or it is
loaded with experience – then it will be offered by a war veteran.
But real change needs more then a politician. For example you and me. It´s time now in
the campaign circus to lift the curtain not for an other political strategist, but for
a great behavioral scientist, the Nobel laureate Ivan Petrovich Pavlov from St.
Petersburg, Russia.
By experimenting with dogs he discovered a long time ago the animals have an innate
reflex. He placed food in front of them. Like a push of a button - saliva begins to
flow.
Pavlov combined two stimuli, food and the sound of a bell, until the dogs understood
the connection. The bell rang and the dogs started salivating.
Then Pavlov shortened the reflex chain by removing the food. But the dogs continued to
salivate after the bell tone, even when food no longer followed.
We learned an important lesson: that an experience, once stored in memory, becomes
stronger than reality.
Unfortunately we are not doing better than our dogs. Our political reflexes are very
similar. Whether we call our selves progressives, conservatives or even independents,
we have one thing in common – we are often ill-conditioned.
First:
The risk of terrorism is very real, and we must protect ourselves. But our fears have
been spun out of proportion. The Taliban consists of military dwarves and political
pygmies. A country like Iran, with a gross domestic product the size of Connecticut’s
and a military budget only as big as Sweden’s, doesn’t deserve the attention of the
entire Western public and its governments.
Nowadays, world history isn’t being written in Afghanistan, Baghdad, or Tehran, but in
Shanghai, Singapore, Delphi and Beijing. The defining word confronting our generation
is not terror, but globalization.
It is the rise of India and China, not the goings on in the mountains of Pakistan, that
will leave their imprint on this era. The war for wealth, a bitter struggle for a share
of affluence, and the related struggle over political and cultural dominance in the
tomorrows world, are the real conflicts of our day.
The war on terror is overblown, the man in the White House has set the wrong
priorities, and the public—deliberately or not—is being kept in the dark over the true
extent of the global shift of power and wealth.
Neither the US President nor the British Prime Minister have not spoken about it: But
after two world wars, the center of the world has shifted from Europe to America, and
now it is shifting once again, this time toward Asia. A new topography of power is
taking shape.
By 2025, China and India will likely dominate the world market with their purchasing
power. Meanwhile, the West is turning into a miniaturized version of itself. Its
population is both shrinking and aging, its inventive spirit is diminishing, and its
relative share of the economic pie is getting smaller. Europe’s share of the global
market, three times the size of China’s and India’s combined before World War I, will
shrink to only 15 percent of the economic power of these two
countries within the next two decades. The U.S. share of global exports, for example,
has been cut in half since 1960.
For the Asians, taking control of the low-wage labor market was only the beginning.
Their attack on the middle class and modern, high-tech jobs is still in its infancy, as Asian nations invest more and more of their revenues in research and education. Their
goal is dominance, not being part of a silent partnership. They want to lead instead of
follow. And, be clear about that: I understand their goal. Its the right one – for
them.
Second: We believe, free trade is good for everybody in every country at anytime.
Somebody cries „free trade“and both of your major political partieshalf starts dreaming
of peace and prosperity. Gordon Brown and David Cameron are sharing this dream.
And indeed: The unrestricted exchange of goods had delivered peace and prosperity for
decades. The rise of the Western world was strongly connected to the free trade
philosophy.
It worked well also in the early days of globalization, nearly 500 million employees in
the West, including the United States, Canada, and Europe, were all working under
similar conditions.
It was a competition between companies, not a competition between nations. Experts
referred to this a “level playing field.” The terms of trade were fair.
These world was indeed a flat world. Those times were the glory days for ordinary
workers. You remember, that was the time when Great Britain means also building Great
cars, when „Made in America“ was written on nearly every product. That was the time
when a new word became famous: middle class, a magic word, a huge promise for millions
of people to climb up the ladder finding wealth and prosperity. That was the time when
we all became free traders.
But meanwhile the unpredictable happened. The flat world was crushed. China, India,
and most Communist countries, decided nearly overnight to join the world labor market.
It was a great decision for them, but it had a far-reaching impact on average people.
Since their entrance into the world labor market we began to face an inflation of
workers. Now our Western workforce, 500 million people, are confronted with an
additional 1.5 billion workers, competing under a completely different set of rules and
regulation. The term of trade changed.
The new reality since that: Free trade brings prosperity to a lot people and others are
getting hurt. Modern globalization is not a force for good or for bad, its both.
Unfortunately it is not unifying force, but an extremely devise one.
But it not a problem of some people, its an all Western problem.
The dollar is weak because the economy is weak. The economy is weak cause the growth
rate during all this Bush years was driven by consumer spending, and the rise in
consumer spending was not why salary was going up, salary was going down during this
years. Consumer spending was driven by heavy lending. The biggest exporter, of the
world become the biggest importer. The biggest lender of money became the biggest
borrower of money. If we were dogs we would start wondering about our free trade
beliefs. The bell is ringing, but where is the beef?
Third: A Market Economy in the Western style is the role model for everybody. The
invisible hand of the market, Adam Smith, will shape the world. that’s hard for many of
us to understand: If I would try to be polite I would say thats wishful thinking. but I
am not here to be polite. Its wrong. the emerging powers are working with two hands –
the invisible Hand of the market and the iron fist of the government.
Economics and morals have nothing in common. This statement is often what we are told,
but it is a fallacy too. Lets explain.
Every product is made up of only three things: First, there are raw materials such as
oil, plastics, steel, rubber, glass, paper, and wood. Second, there is knowledge, the
know-how to build a sports car, a computer, or a mobile phone from all this plastic,
steel, rubber, and glass. Third, there is the set of conditions that enable a company
to bring together the raw materials and knowledge.
These production conditions—that is, laws, regulations, and a country’s unwritten
traditions—make up the real difference. Its about rules and regulation, stupid.
The Asian and Western countries buy resources from the same dealers, at similar prices.
The know-how mostly comes from the Western countries, whether legally or illegally. The
key difference, though, is the values of each country.
The third component consists of more than just a worker’s salary. It includes not only
Western values such as the worker’s benefits, coffee breaks, separate bathrooms for men
and women, holiday pay, sick pay, overtime pay, a Christmas bonus, unemployment
insurance, and pension benefits but also the health and safety regulations that protect
the workers. Western values also include the protection of the environment, clean air,
clean water, and proper housing, as well as the way children are treated: as children,
not as working slaves.
We sent our children to school, not down the coal mine. We try to protect our nature,
not to pollute it.
Our moral standards, our values as a free western society, which are documented
thousands of times over in collective wage agreements, company agreements, laws,
company regulations, and, to some extent, international treaties, are what make the
difference in today’s world economy.
Today we can buy a washing machine made by Whirlpool, General Electric or Miehle that
includes a piece of the welfare state. Or we can buy a Chinese brand that comes
directly from the Yangtze Delta and has no built-in social welfare costs. If we order a
car that comes with the whole social package, it will be made by Ford in Detroit and
cost an additional $1,600. It would be cheaper to buy a car from the Hyundai dealer
next door.
The latest available data from the U.S. Census Bureau published in August 2007 sent a
very clear message: this is the first boom period in American history where the upper
classes go up while significant parts of the middle class go downhill.
Although median household income, adjusted for inflation, has not reached the
pre-recession high of 1999. Income inequality is at an all-time high.
For many Americans, their country is not the shining city upon the hill. It has become
a shady place down in the valley. Lets have a brief look would really happened. About
16 percent of the U.S. population, or 47 million people, lack health insurance. Nine
million people have been added to the ranks of the uninsured during the past seven
years. It is important to know that about two-thirds of those Americans who became
uninsured last year were members of middle class households with pretax incomes of
$75,000 or more, which raises some important questions:
What has really happened in the? to their country? Where do these new uninsured people
come from? Why have their lives developed in this direction? The answer is disturbing:
they are mostly members of the middle class working for international companies. Their
corporate leaders have cut back employer-provided coverage over the last decade—to
improve the competitiveness of the company. I don´t want to blame their CEO´s for that.
But I would look us to understand that here we see precisely the paradox of
globalization: while the competitiveness of American companies is on the rise, the
standard of living of the average family is shrinking.
A lot of people think either or either. But it all the time both: globalization
connects people. But on the same day, and in the same country, it divides society.
Today competition is not driven by new technologies, or a new management style, it’s a
competition about social and environment standards. So, economics and morals are
stronger connected then ever.
Forth: The natural progression for a developed economy is to move from an
industry-based to a service-based economy. Thats the way it works. That’s what we have
learned, that’s what we believe.
Seen in this light, the disappearance of industrial jobs is even a good sign because it
clears the way for the new economy. Happy farewell to the blue-collar worker! The new
worlds looks like Wall street and Silicon valley, not like Detroit, Gary and all the
other regions we call rust belt now.
Wait a minute! What we see outside may be not the end of the industrial age, but merely
a shift of industrial work to Asia. All over the world there are more people doing
industrial jobs than ever before. Today there are 600 million blue-collar workers
worldwide. Even in India, most of the new jobs are in the industrial sector. We are
living maybe at the beginning of the second industrial age. Blue Collar 2.0
Only the Western countries are losing these jobs. Germany has lost 29 percent and
France 17 percent of jobs in these sectors since 1991. In the United States, the
economy has lost more than a quarter of its industrial jobs since the late 1970s.
Many economists continue to defend the old theory that the Indians and the Chinese are
merely going through the same industrial age Western societies have already put behind
them. But this way of thinking fails to explain today’s development in India and China,
because they are building their industrial and service sectors at the same time.
Clearly, we are experiencing, not a postindustrial age worldwide, but a series of
simultaneous developments for which we have not been prepared. What is old to built a
car, a airplane, a container ship.
Perhaps the service sector economy is simply a part of the industrial society: service
jobs are at the end of the production chain, not an independent unit. For example, the
pilot flies an airplane, one of the most advanced industrial products. The waiter
serves meals made by the food industry. The investment banker is selling pieces of a
real automotive plant or pharmaceutical production facility, even if what he really
sells are artificial products like high-yield or junk bonds. At the end of the chain we
find all the jobs with which we are all too familiar: researchers, blue-collar workers,
marketing specialists, back-office people, and sales forces.
Let’s put this in terms of the family: the service jobs are in all likelihood not the
sons and daughters of the industrial father but simply his brothers and sisters. This
sounds banal, but it has serious consequences for our political behavior. If the
service and industrial sectors are parts of one and the same family, we cannot separate
ourselves from one without destroying the family as a whole.
Families want to stay together, not be torn apart. If we don´t stop our wrong
conditioning we will lose both, the old and the new jobs. Corporate outsourcing experts
have a term for the phenomenon that the family goes together abroad: They call it
“network outsourcing.”
A lot of experts say: Be patient. In the long run, globalization will create a flat
world, all nations will become market economies with political liberty for everybody.
My question is: How long is the long run? Could it be that its too long to have any
relevance for our life’s?
Lets come to the conclusion:
1. America must search for a third way between die-hard free traders and
protectionists. Trade is a question of interest and not a matter of beliefs. So I
advocate to bring politic back to the table. We need trade and we need a trade policy,
driven my national interest not by religious beliefs
2. Education. We should give our workforce a huge upgrade to counter he inflation of
workers. the unskilled people are faced with a competition they never can win on their
own. This people are rich. These society is rich too. We have a lot of oil in this
country. But it is not hidden in the ground. Its hidden in the brains of people. We
should start exploiting it. That means to double the expenditure!
3. We nee a consumer revolution. If your house looks like a storage room of the asian
export industry you cannot expect that your workplace looks like a American one. It
will change and that’s not the change you are waiting for. So I suggest to give
consumers real power, means much more information.
4. Western cooperation. I think we have to pool our interests. We work together in Nato
for security reasons. We should now cooperate also on economic, environmental and
social issues. we are all members in the democratic capitalistic club and we should try
to educate them, to integrate the emerging powers in our system.
5. For all that we should rethink globalization. If the bitter people cling to their
religion and their gun, the upper classes cling to their free trade belief and the
dream that all the emerging countries want to be and will be little Americas.
Fortunately, we also have Pavlov to thank for the discovery that false reflex chains
can be repaired. If a test animal hears the bell for an extended period of time without
being fed, reflexive salivation disappears. Pavlov called this “deletion.”
Maybe inside our political brain we have to do the same thing. Deletion could be a
premise for change. We should learn it from our dogs.
