Where Has All the
Globalization for Everyone
Nowadays, globalization’s opponents seem to be drowning out its defenders – not least because of the very real surge in inequality in recent decades. But there is a way to make globalization work for everyone, and it depends on information technology – specifically, blockchain, the decentralized ledger that underpins Bitcoin.
LIMA – Nowadays, globalization’s opponents seem increasingly to be drowning out its defenders. If they get their way, the post-World War II international order – which aimed, often successfully, to advance peace and prosperity through exchange and connection – could well collapse. Can globalization be saved?3
LIMA – Nowadays, globalization’s opponents seem increasingly to be drowning out its defenders. If they get their way, the post-World War II international order – which aimed, often successfully, to advance peace and prosperity through exchange and connection – could well collapse. Can globalization be saved?3
GERMANY’S ECONOMIC ROAD AHEAD
At first glance, the outlook appears grim. Every aspect of globalization – free trade, free movement of capital, and international migration – is under attack. Leading the charge are antagonistic forces – from populist political parties to separatist groups to terrorist organizations – whose actions tend to focus more on what they oppose than on what they support.
In Russia and Asia, anti-Western groups are at the forefront of the campaign against globalization. In Europe, populist parties have tended to emphasize their aversion to European integration, with those on the right often also condemning immigration, while the left denounces rising economic inequality. In Latin America, the enemy seems to be foreign interference of any kind. In Africa, tribal separatists oppose anyone standing in the way of independence. And in the Middle East, the Islamic State (ISIS) virulently rejects modernity – and targets societies that embrace it.
Despite their differences, these groups have one thing in common: a deep hostility toward international structures and interconnectedness (though, of course, a murderous group like ISIS is in a different category from, say, European populists). They do not care that the international order they want to tear down enabled the rapid post-1945 economic growth that liberated billions of developing-country citizens from poverty. All they see are massive, unbending institutions and intolerable inequalities in wealth and income, and they blame globalization.
There is some truth to these arguments. The world is a very unequal place, and inequality within societies has widened considerably in recent decades. But this is not because of international trade or movements of people; after all, cross-border trade and migration have been happening for thousands of years.
The anti-globalization movements’ proposed solution – closing national borders to trade, people, or anything else – thus makes little sense. In fact, such an approach would hurt virtually everyone, not just the wealthy elites who have benefited most from globalized markets.
So what is fueling inequality? To answer that question, we must consider what about globalization is generating returns for the wealthy.
A central aspect of globalization is the careful documentation of the knowledge and legal tools needed to combine the property rights of seemingly useless single assets (electronic parts, legal rights to production, and so on) into complex wholes (an iPhone), and appropriate the surplus value they generate. Clear and accessible ledgers that faithfully describe not only who controls what and where, but also the rules governing potential combinations – of, say, collateral, components, producers, entrepreneurs, and legal and property rights – are vital for the system to function.
The problem is that five billion people around the world are not documented in national ledgers in anything approaching an organized manner. Instead, their entrepreneurial talents and legal rights to assets are recorded in hundreds of scattered records and rules systems throughout their countries, making them internationally inaccessible.
Under these conditions, it is impossible for the majority of humanity to participate effectively in their national economies, much less the global one. Without any means of participating in the process of producing high-value combinations, people have no chance of seizing some of the surplus value created.
So it is a lack of consolidated, documented knowledge – not free trade – that is fueling inequality worldwide. But addressing this problem will not be easy. Just determining how many people are left out took my organization, the Institute for Liberty and Democracy (ILD), two decades of fieldwork, conducted by more than 1,000 researchers in some 20 countries.
The main problem is legal lag. The lawyers and corporate elites who draft and enact the legislation and regulations that govern globalization are disconnected from those who are supposed to implement the policies at the local level. In other words, the legal chain is missing a few crucial links.
Experience in Japan, the United States, and Europe shows that a straightforward legal approach to ensuring equal rights and opportunities can take a century or more. But there is a faster way: treating the missing links as a break not in a legal chain, but in a knowledge chain.
We at the ILD know something about knowledge chains. We spent 15 years adding millions of people to the globalized legal system, by bringing the knowledge contained in marginal ledgers into the legal mainstream – all without the help of computers. But we do not have decades more to spend on this process; we need to bring in billions more people, and fast. That will require automation.
Last year, ILD began, with pro bono support from Silicon Valley firms, to determine whether information technology, and specifically blockchain (the transparent, secure, and decentralized online ledger that underpins Bitcoin), could enable more of the world’s population to get in on globalization. The answer is a resounding yes.
By translating the language of the legal chain into a digital language – an achievement that required us to develop a set of 21 typologies – we have created a system that could locate and capture any ledger in the world and make it public. Moreover, we have been able to compress into 34 binary indicators the questions that computers have to ask captured ledgers to determine which provisions should be inserted in blockchain smart contracts between globalized firms and non-globalized collectives.
At first glance, the outlook appears grim. Every aspect of globalization – free trade, free movement of capital, and international migration – is under attack. Leading the charge are antagonistic forces – from populist political parties to separatist groups to terrorist organizations – whose actions tend to focus more on what they oppose than on what they support.
In Russia and Asia, anti-Western groups are at the forefront of the campaign against globalization. In Europe, populist parties have tended to emphasize their aversion to European integration, with those on the right often also condemning immigration, while the left denounces rising economic inequality. In Latin America, the enemy seems to be foreign interference of any kind. In Africa, tribal separatists oppose anyone standing in the way of independence. And in the Middle East, the Islamic State (ISIS) virulently rejects modernity – and targets societies that embrace it.
Despite their differences, these groups have one thing in common: a deep hostility toward international structures and interconnectedness (though, of course, a murderous group like ISIS is in a different category from, say, European populists). They do not care that the international order they want to tear down enabled the rapid post-1945 economic growth that liberated billions of developing-country citizens from poverty. All they see are massive, unbending institutions and intolerable inequalities in wealth and income, and they blame globalization.
There is some truth to these arguments. The world is a very unequal place, and inequality within societies has widened considerably in recent decades. But this is not because of international trade or movements of people; after all, cross-border trade and migration have been happening for thousands of years.
The anti-globalization movements’ proposed solution – closing national borders to trade, people, or anything else – thus makes little sense. In fact, such an approach would hurt virtually everyone, not just the wealthy elites who have benefited most from globalized markets.
So what is fueling inequality? To answer that question, we must consider what about globalization is generating returns for the wealthy.
A central aspect of globalization is the careful documentation of the knowledge and legal tools needed to combine the property rights of seemingly useless single assets (electronic parts, legal rights to production, and so on) into complex wholes (an iPhone), and appropriate the surplus value they generate. Clear and accessible ledgers that faithfully describe not only who controls what and where, but also the rules governing potential combinations – of, say, collateral, components, producers, entrepreneurs, and legal and property rights – are vital for the system to function.
The problem is that five billion people around the world are not documented in national ledgers in anything approaching an organized manner. Instead, their entrepreneurial talents and legal rights to assets are recorded in hundreds of scattered records and rules systems throughout their countries, making them internationally inaccessible.
Under these conditions, it is impossible for the majority of humanity to participate effectively in their national economies, much less the global one. Without any means of participating in the process of producing high-value combinations, people have no chance of seizing some of the surplus value created.
So it is a lack of consolidated, documented knowledge – not free trade – that is fueling inequality worldwide. But addressing this problem will not be easy. Just determining how many people are left out took my organization, the Institute for Liberty and Democracy (ILD), two decades of fieldwork, conducted by more than 1,000 researchers in some 20 countries.
The main problem is legal lag. The lawyers and corporate elites who draft and enact the legislation and regulations that govern globalization are disconnected from those who are supposed to implement the policies at the local level. In other words, the legal chain is missing a few crucial links.
Experience in Japan, the United States, and Europe shows that a straightforward legal approach to ensuring equal rights and opportunities can take a century or more. But there is a faster way: treating the missing links as a break not in a legal chain, but in a knowledge chain.
We at the ILD know something about knowledge chains. We spent 15 years adding millions of people to the globalized legal system, by bringing the knowledge contained in marginal ledgers into the legal mainstream – all without the help of computers. But we do not have decades more to spend on this process; we need to bring in billions more people, and fast. That will require automation.
Last year, ILD began, with pro bono support from Silicon Valley firms, to determine whether information technology, and specifically blockchain (the transparent, secure, and decentralized online ledger that underpins Bitcoin), could enable more of the world’s population to get in on globalization. The answer is a resounding yes.
By translating the language of the legal chain into a digital language – an achievement that required us to develop a set of 21 typologies – we have created a system that could locate and capture any ledger in the world and make it public. Moreover, we have been able to compress into 34 binary indicators the questions that computers have to ask captured ledgers to determine which provisions should be inserted in blockchain smart contracts between globalized firms and non-globalized collectives.
HERNANDO DE SOTO
Water Gone?
We live on a parched planet, where farmers till arid pastureland and policymakers fret over empty reservoirs, dry rivers, and thirsty cities. But this only scratches the surface of a much deeper problem: subterranean aquifers, which amount to the world’s reserve water tank, are also running dry.
MANILA – We live on a parched planet. Farmers till arid pastureland, and policymakers fret over empty reservoirs, dry rivers, and thirsty cities. And that only scratches the surface – literally – of the world’s water problem. Subterranean aquifers, which amount to the world’s reserve water tank, are also running dry. If this continues, the consequences could be dire, especially for water-stressed and fast-growing Asia.
Subterranean aquifers are repositories of water located deep underground, in permeable rock, soil, or sand. And they contain about 100 times the amount of water found on the earth’s surface, in streams, lakes, rivers, and wetlands. If you’re in central Africa, South America, or some parts of Europe, you’re probably standing just a few hundred feet above one.
Surface water resources, such as desalinated seawater or recycled wastewater, will not close the global gap – predicted to reach 40% by 2030 – between water supply and demand. So subterranean aquifers are increasingly being exploited for agriculture, power generation, and daily use in fast-growing cities (urban Asia is growing at a rate of 120,000 people per day).
Today, about 30% of the world’s liquid freshwater comes from subterranean aquifers. And one-third of the 37 largest aquifers studied by the University of California between 2003 and 2013 were severely depleted, receiving little or no replenishment from rainfall. Some of the most stressed aquifers are in the driest regions, including Asia, up to 88% of which is water-stressed.
Asia contains around one-third of the world’s land irrigated by groundwater, with India, China, and Pakistan being the biggest consumers. South Asia alone accounts for half the groundwater used globally. But Asia’s aquifers – many of which were formed millennia ago, when areas like northern China had a more humid climate – are no longer being replenished regularly by rainfall.
Instead, boreholes are getting deeper and water tables are falling. In Pakistan’s Punjab Province, over-pumping is lowering the water table by up to a half-meter (20 inches) per year, threatening future food and water security and making thirsty crops like sugarcane and rice tougher to grow.
Asia’s surging population – which could jump by 25%, topping five billion, by 2050 – will put even more stress on food, energy, and water supplies. Globally, 60% more food will be needed by then, with agriculture soaking up increasingly scarce freshwater. Climate change will exacerbate conditions further.
But the problem extends beyond water depletion. Over-pumping of groundwater is already leading to soil subsidence, causing some Asian cities to sink. By 2030, as much as 80% of North Jakarta could be below sea level. Parts of Beijing are sinking by several centimeters per year, according to some estimates.
Moreover, depleted aquifers near coastlines are prone to contamination from saltwater, rendering land barren. Some aquifers are contaminated by arsenic, which can occur naturally deep underground. Nature Geoscience estimates that more than 60% of groundwater in the Indo-Gangetic aquifer is contaminated by arsenic or salt. In Bangladesh, water tainted by arsenic is blamed for more than 40,000 deaths each year.
The first step toward remedying this situation is to establish precisely how much groundwater is left and how it is being used – not easy, but not impossible either. NASA’s Gravity Recovery and Climate Experiment satellite provides information on changes in the earth’s gravity due to fluctuating water volumes. And by applying remote sensing technology to river basins, we can determine how much surface water is available and who is consuming what.
Another important step is to improve the pricing of groundwater. China has run a pilot program in which farmers had to pay extra if they pumped more than their allocation. Similar approaches have worked well in Australia and Mexico. But such measures can be politically difficult to implement. The key to success will be to help countries not only to design the right policies, but also to create the legal frameworks needed to establish and enforce them.
Even more politically difficult would be the elimination of electricity and gas subsidies, which encourage farmers to pump groundwater all day. If such subsidies can’t be withdrawn, there are innovative alternatives that could curb over-pumping.
For example, in Gujarat, India, the government has reduced groundwater pumping by offering power for just eight hours per day. Farmers have the power they need, but can’t pump all day long. Another approach could be to buy back surplus power from farmers to feed into the grid. That would not just reduce over-pumping, but also help to supplement rural incomes.
Efforts to replenish aquifers could also be pursued. A pilot program in India’s Uttar Pradesh state collects excess floodwater in storage ponds, from which water seeps into the water table.
The final step would be to improve management of surface water, thereby reducing the temptation to turn to groundwater in the first place. Around 80% of wastewater is returned untreated to rivers, often contaminating them. Taking stronger action to stop this would be far simpler – including logistically and politically – than conserving groundwater.
