The journey home from the wasteland may be the most difficult one of all

PUBLISHED : Saturday, 22 October, 2011, 12:00am
UPDATED : Saturday, 22 October, 2011, 12:00am


Restlessness and inchoate stirrings of revolt have reached the very gates of the bastions of capitalism, Wall Street in New York and the City of London. For days, protesters have been encamped in both financial capitals raising banners, flags and voices against burning injustices of the modern economic system. Their anti-greed message has struck a chord worldwide and 951 cities in 82 countries have seen similar demonstrations, marches or sit-ins.

Tempting as it is to say that it is about time someone got together to protest against manipulation of the world by the 1 per cent of the super-haves, one real problem is that we live in a so-called global village, but the laws, customs, practices and mindsets of community leaders are still stuck in the old walled village, full of prejudice against anyone beyond its narrow confines.

Globalisation has created powerful new forces that have smashed old structures. Any road out of the mess is rocky and needs to be cut by farseeing political leaders, financial and business executives with vision and integrity, and judges who understand both the narrow points of the law and wider principles of justice. All of the above are hard to find.

To get a sense of perspective, the anti-Wall Street protesters can point to a startling set of figures that feed their anger: US unemployment is at the highest level since the Great Depression, while corporate profits are also at all-time highs; wages as a percentage of the economy are at an all-time low; top earners have a higher share of the national income than at any time since the 1920s, while real average earnings haven't increased in 50 years.

Barry Ritholtz of the influential Big Picture blog offered a three-point plan: bring back real capitalism, meaning no more bail-outs and a return to the days when companies lived or died on their own successes; end 'too-big-to-fail' banks and restore competition (and if they are indeed too big to fail, then make them smaller), and get Wall Street money out of the legislative process. He declared the US has become a 'corporatocracy' in which 'campaign finance and lobbying money has so utterly corrupted Congress that we might as well put elected officials up for bid on eBay'.

The global village is producing a small number of big winners and an immense number of unemployed. Ask the sainted Steve Jobs: Apple's success is built on outsourcing jobs to China and elsewhere, allowing the company to make just 16 per cent of the world's smartphones but 66 per cent of global profits on such devices and build a cash hoard of US$76 billion, much of which is waiting offshore for a tax concession to attract it back to the US.

In the old village community days, there was room for whole streets of butchers, bakers, candlestick makers, cobblers, even in places like Seoul. Failure to ensure fair competition allowed oligopolistic superstores to gobble up individual shops, while global production chains outsourced manufacturing to where labour was cheapest.

What is left? What Nobel-winning economist Michael Spence calls non-tradable goods such as haircuts, plumbing services and dentistry, which are not easily outsourced because you have to have the customer present. Even specialist medical skills are on the verge of being outsourced, if you believe claims for the wonders of the internet.

Then take away the moral restraining anchors of religion or sense of community; add the pernicious god of money and banker-gamblers clever enough to manipulate speedy computers and the internet, and you have a recipe for disaster. It helps to have politicians who can only see to the next election, media fascinated by tittle-tattle, and ordinary people distracted by the inanities of Facebook and computer games, so no one bothers to understand what's really happening.

Getting out of the mess requires a vision that is hard to see. Take the US. Big corporations cut 2.9 million jobs in the last few years, while creating 2.2 million outsourced jobs. Where are 2.9 million new US jobs to come from? Will Americans accept poorer wages and working conditions to compete with China? Or can they upgrade their education - a persistent problem - and productivity to do new jobs higher up the value chain?

One of the depressing aspects is the continuing dialogue of the deaf. Bankers in both Wall Street and London complain about the protesters, saying that they should be working, not blocking the streets, but that is precisely the point. On the other side, the demonstrators are such a mixed bunch that the Occupy Wall Street manifesto says, 'First of all, there are no Official Demands of the Occupy Movement', though it promises votes on a plethora of proposals.

The dialogue of the deaf is exacerbated at the global level. This is not just a question of the failure of France and Germany to agree on how to support the euro. Beijing has been crowing about the failures of capitalism, forgetting both how China benefits and how many demonstrators might spill onto its streets if Beijing allowed them to express their opinions.

Next month, the Group of 20 meets in Cannes. What savage irony if the demonstrators are corralled safely away, so that global leaders can enjoy their banquets and discussions undisturbed by the squalid real world they supposedly supervise, only to come up with a communique as bland as blancmange, proving it's a battered world with broken leadership.

Kevin Rafferty was managing editor at the World Bank