Is full global development the silver bullet?

Photo by Markus Spiske on Unsplash

By Carlota Perez and Andres Schafer

This is the fourth instalment in the authors’ ‘After the pandemic’ series. The first, second and third essays in the series can be read here, here and here.

The blow inflicted by the Covid-19 pandemic has raised awareness about what lies ahead for humanity: climate change, environmental damage, global epidemics and mass migrations are an existential challenge to us all. But history has consistently proven that troubling times of dwindling hope can be followed by new Golden Ages. That’s the social dynamic of technological revolutions under capitalism and how they unfold.

The last time we faced such a crossroad was after the Second World War, and it was followed by the full deployment of the mass production revolution.

In the past decades a new stage has been set. It is called ‘globalization’, and it is the result of the overlap in time of two formidable technological paradigms: on the one hand, the old mass-production revolution, desperately trying to extend its lifespan with low-cost global labor and new global consumers. On the other hand, a young and unfettered ICT-revolution that has propelled volume production to global scales but at the same time was laying the ground to displace its predecessor and create a new digital world, favoring intangible products and services.

As the new protagonist becomes powerful and threatening, it is creating new social problems without solving the old. Two forces can provide the necessary guidance: one is proactive governments tilting the playing field in socially desirable directions, the other is the spread of new lifestyles defining new demand in those same directions.

After the Second World War governments unleashed the golden age of mass production by massively funding Cold War technologies, promoting mass consumption and a car-centred, suburban way of living. Similarly, the post Covid-19 reconstruction can fully deploy a prosperity era with the information revolution by massively funding the technologies to confront the climate emergency and setting up socially fair and ecologically sustainable socio-political arrangements across the globe, nationally and supra-nationally.

From dream to nightmare… to new dream

In the Global South, the ‘American way of life’ is still an aspiration for the masses yearning for a better life. But the American dream has become a nightmare: our single planet cannot sustain it. Yet lacking an appealing alternative, the Global South will very likely prolong the old practices of mass production and resource depletion in order to move on and the chance to master the climate emergency will be lost. Instead, we need to get everyone on board a ‘Global, Smart, Green Way of Life’ to reach (sustainable) global development.

In a previous post we ventured to redefine the new ‘Good Life’ as a smart, green and fair one, where needs can be fulfilled with services rather than products, where energy and materials come from renewable sources, production is circular and waste-less, and the rental and regular maintenance of truly durable goods would prevail over the possession of short-lived ones.

Today’s task is to imagine new solutions for a global market with flexible, movable production structures and an increasing trade in intangibles. In developed countries, support for a new sustainable and socially inclusive “reset” of the economy is gaining traction. But to reach this goal we need ‘glocalization’, understood as intelligent specialization for global markets and local production to cover much demand at home.

Funding a new globalization as a greening win-win game

With the information revolution, the best way to expand sustainable demand for business in the Global North and South is full global development.

Engaging the lagging countries in a green growth path can be a powerful engine of job creation at both ends. The more countries join in, the more they will need sustainable capital goods, engineering, training, technology transfers and infrastructures, thus generating export demand for the advanced world and therefore employment. Since such exports will have to be sustainable in themselves and in the way they are used, they will, in turn, create employment in research and development, both in the North and in the South.

The question is how to get a level playing field in the first place. In the Internet era words fly fast, but global capital flies faster. To begin with, a global low-rate financial transactions tax could help fund a new and (in the wake of Covid-19) urgently needed ‘Marshall Plan’ for the developing world, to finance sustainable development and research for green innovation. Taxing such transactions would also make visible and capture funds from avoidance transfers to tax havens, as well as many of the casino-like transactions of the global financial world.

The car-centered mass consumption lifestyle was based on a general understanding that cheap, abundant energy and materials were in the interest of all. Conversely, a green sustainable way of life requires the opposite: high prices for materials and energy, in order to shift the emphasis towards dematerialized growth to tackle the environmental challenge. The oil price hikes in the 2000s led to reduced consumption without harming the advanced economies in a significant way.

Predictably expensive energy and materials would serve as incentives in the North to reduce energy and materials consumption, to drive innovation in new materials, to transform products into services and to engage in all other ways of moving within planetary limits. This could be the result either of taxes and tariffs in the consumer countries, or of higher prices at the producer end (i.e. in the South). The advantages of the latter are clear: taxes and tariffs would incite a competition to the basement among countries, while stable high prices at source would establish a level playing field for all. That way, the developing countries, as producers, would not be victims, but rather the beneficiaries of a green transition.

If international agreements are reached to keep prices high at the producer end, and a mechanism was agreed to channel the extra revenue into a sort of sovereign wealth fund to exclusively foster green investment, the system would become, in itself, a powerful engine of transformation for the developing countries too. As their energy and materials exports would decrease in volume, yet not in revenue, they can intensify the development process, while becoming greener. Thus, facing the climate and planetary challenges could become a veritable win-win game.

Migrations, brain drain and brain gain

Another advantage which works both ways is the migration issue. Emigration is a terrible brain drain for the Global South. A good percentage of the educated population (frequently abroad, expensive, and often funded from scarce resources) ends up choosing the higher salaries, the greater social security and the more challenging jobs in the North. Among the poor and uneducated, it is often the most entrepreneurial and courageous that take the risk of trying by whatever means necessary to get to the North to improve their future and especially that of their children.

By contrast, a flourishing country provides growing opportunities across the spectrum keeps the nationals home. People do not easily turn their back on their country of origin if not pushed by frustration or desperation.

An institutional challenge at the global level

All this won’t be easy. A framework will be necessary, to make the countries (and companies) benefitting from these policies channel their higher revenues into sustainable production and/or green investments in other areas. Probably, a new ‘compact’ between consumer and producer countries will be due, where the advanced economies take the lead fostering full global development as an essential part of their own green strategies.

Since this means no less than a complete overhaul of our basic assumptions, it is useful to draw parallels with the aftermath of the Second World War. We should remember that the World Bank was set up to fund investment all over the world with contributions from the advanced countries; the IMF to maintain financial order; the GATT to oversee international trade; and the United Nations to keep peace between the West and the Soviet Union. Without new agreements of that magnitude, business will not be able to respond at a sufficient rate to reach the environmental goals on time to save the planet. The worst situation would be one of a race to the bottom, induced by big companies and investors, between greening and non-greening countries.

The best route to full development within the ICT paradigm is to dematerialize growth across the planet in order to reach sustainable wellbeing for all. To get there, multilateral agreements adapted to our times are necessary. Either we fully embrace the digital revolution to reach social, economic and environmental sustainability, leaving mass production behind (at a global level), or we will face devastating effects.

The current global leadership has to be as bold and imaginative as the one which created Bretton Woods and the welfare state, providing a context with clear directions and missions, and favoring sustainable innovation and production instead of financial speculation. They could unleash a global sustainable golden age for the smart green and fair deployment of the ICT Revolution. A positive-sum game between business and society; between North and South; and between humanity and the planet.

The post-pandemic reconstruction is our window of opportunity. It is up to the present generations — like our predecessors — to rise to the occasion.

Read the first, second and third essays in the ‘After the pandemic’ series here, here and here.

UCL IIPP Blog

The official blog of the UCL Institute for Innovation and…

UCL IIPP Blog

The official blog of the UCL Institute for Innovation and Public Purpose | Rethinking how public value is created, nurtured and evaluated | Director @MazzucatoM | https://www.ucl.ac.uk/bartlett/public-purpose/

UCL Institute for Innovation and Public Purpose

Written by

Changing how public value is imagined, practiced and evaluated to tackle societal challenges | Director: Mariana Mazzucato | Deputy Director: Rainer Kattel

UCL IIPP Blog

The official blog of the UCL Institute for Innovation and Public Purpose | Rethinking how public value is created, nurtured and evaluated | Director @MazzucatoM | https://www.ucl.ac.uk/bartlett/public-purpose/

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