0:00:12.480,0:00:15.021 I’ve been asked [br]to say a few words 0:00:15.021,0:00:20.411 about the global shift [br]in power in politics. 0:00:20.411,0:00:23.850 That's a hotly debated topic these days. 0:00:23.850,0:00:27.858 There’s a great deal [br]of speculation about 0:00:27.858,0:00:32.230 whether or when China will[br]displace the United States 0:00:32.230,0:00:34.480 as the dominant global power, 0:00:34.480,0:00:36.630 perhaps along with India, 0:00:36.630,0:00:41.340 which if true would mean that[br]the global system would be returning 0:00:41.340,0:00:46.242 to something like what it was[br]before the European conquests, 0:00:46.242,0:00:48.673 primarily from the 17th century. 0:00:48.673,0:00:53.040 Just to illustrate[br]the mood with unscientific 0:00:53.040,0:00:56.180 but probably representative sample, 0:00:56.180,0:01:01.047 I was talking recently to [br]a professor of history 0:01:01.047,0:01:04.291 at one of the Massachusetts' [br]state colleges, 0:01:04.291,0:01:09.099 who told me that at the beginning [br]of every semester she asks 0:01:09.099,0:01:13.640 her students what they think [br]are the richest countries in the world. 0:01:13.640,0:01:18.740 And for the last few years,[br]they've been regularly saying China and India. 0:01:18.740,0:01:22.898 Well, you could believe that[br]if you read the headlines. 0:01:22.898,0:01:26.410 A few qualifications may be in order. 0:01:26.410,0:01:30.673 First, what about wealth [br]or the health of the society. 0:01:30.673,0:01:33.022 There's a standard measure, 0:01:33.022,0:01:37.410 it's the Human Development Index[br]comes out every year. 0:01:37.410,0:01:41.278 With the latest release, 0:01:41.278,0:01:45.139 India was ranked at 134th, 0:01:45.139,0:01:47.570 slightly above Cambodia, 0:01:47.570,0:01:51.109 below Laos and Tajikistan. 0:01:51.109,0:01:54.230 That's about where it was[br]several decades ago. 0:01:54.230,0:01:57.822 China was ranked 92nd. 0:01:57.822,0:02:00.310 But that's a little uncertain 0:02:00.310,0:02:02.539 since the poor areas of China 0:02:02.539,0:02:05.645 are not very accessible[br]in this more closed society. 0:02:05.645,0:02:07.706 So it could be lower. 0:02:07.706,0:02:10.260 Where it's ranked [br]it's tied with Belize 0:02:10.260,0:02:12.480 as slightly above Jordan 0:02:12.480,0:02:15.806 and below the Dominican Republic[br]and Iran. 0:02:15.806,0:02:17.680 By comparison, 0:02:17.680,0:02:20.860 Cuba, which has been[br]under harsh US attack 0:02:20.860,0:02:24.875 for 50 years is ranked 52nd. 0:02:24.875,0:02:27.217 It's above both of those, 0:02:27.217,0:02:30.460 also the highest in the Central America[br]and the Caribbean, 0:02:30.460,0:02:33.536 barely below Argentina and Uruguay. 0:02:33.536,0:02:38.370 India and China also have [br]extraordinarily high inequalities, 0:02:38.370,0:02:39.970 some of the worst in the world. 0:02:39.970,0:02:42.220 So that means [br]a well over a billion people 0:02:42.220,0:02:45.300 are much further down [br]in the scale. 0:02:45.300,0:02:47.622 Well, what about debt? 0:02:47.622,0:02:56.247 Common discussion ideas, it places[br]the United States enthralled to China's whims. 0:02:56.247,0:03:00.595 Well, apart from a very brief interlude,[br]which is now over, 0:03:00.600,0:03:03.206 Japan has been the biggest holder 0:03:03.206,0:03:06.426 [br]of the US government debt. 0:03:06.426,0:03:09.589 At best, it’s not much of a weapon 0:03:09.589,0:03:13.968 for many reasons[br]that are well understood. 0:03:13.968,0:03:15.880 What about prospects? 0:03:15.880,0:03:18.650 The United States has[br]enormous advantages 0:03:18.650,0:03:21.051 over both Europe and Asia. 0:03:21.051,0:03:22.888 For one thing, it's unified, 0:03:22.888,0:03:27.185 has a relatively homogeneous population,[br]one language, 0:03:27.185,0:03:30.427 a huge internal market [br]and rich resources, 0:03:30.427,0:03:33.913 a favorable climate [br]and much more. 0:03:33.913,0:03:36.551 What about military power? 0:03:36.551,0:03:39.222 Well, here there's just [br]no discussion. 0:03:39.222,0:03:43.500 The US is about the same[br]as the rest of the world combined 0:03:43.500,0:03:47.130 in military expenditures, much more[br]if we can add intelligence. 0:03:47.130,0:03:49.740 Technologically far more advanced. 0:03:49.740,0:03:54.167 It's the only country with [br]hundreds of military bases, 0:03:54.167,0:03:56.710 maybe 800 military bases abroad, 0:03:56.710,0:04:01.402 which in fact are regularly used[br]for the exercise of violence. 0:04:01.402,0:04:03.961 So here, there's no comparison. 0:04:03.961,0:04:07.880 Actually there’s more[br]fundamental observation. 0:04:07.880,0:04:11.636 The entire framework of discussion,[br]though conventional, 0:04:11.636,0:04:13.983 is pretty misleading. 0:04:13.983,0:04:18.030 The global system is not[br]just an interaction among states, 0:04:18.030,0:04:22.180 which pursue some[br]so-called national interest, 0:04:22.180,0:04:27.320 which is abstracted from the distribution[br]of domestic power within the society. 0:04:27.320,0:04:31.721 That’s the way the matter[br]is usually viewed in commentary 0:04:31.721,0:04:37.730 and also in the profession and[br]professional international relations theory. 0:04:37.730,0:04:40.275 Largely dominant views[br]called realism -- 0:04:40.275,0:04:44.566 views the international system[br]roughly in this fashion. 0:04:44.566,0:04:47.789 Now, there have always been[br]critics of this view. 0:04:47.789,0:04:51.054 To take one, Adam Smith. 0:04:51.054,0:04:54.676 Adam Smith was concerned[br]primarily with England. 0:04:54.676,0:04:56.278 And he described -- 0:04:56.278,0:04:57.770 He said that in England, 0:04:57.770,0:05:02.069 the principal architects [br]of government policy 0:05:02.070,0:05:04.773 are merchants and manufacturers 0:05:04.773,0:05:07.390 and they make sure[br]that their own interests 0:05:07.390,0:05:10.220 are most peculiarly attended to, 0:05:10.220,0:05:13.530 however, grievous the impact[br]on others, 0:05:13.530,0:05:15.200 including the people of the England, 0:05:15.200,0:05:19.175 but of course far worse [br]of those who are subject to 0:05:19.175,0:05:22.180 what he called the savage injustice[br]of the Europeans. 0:05:22.180,0:05:26.212 He was referring particularly[br]to England and India. 0:05:26.212,0:05:30.430 Well, today, pretty much[br]the same maxim holds. 0:05:30.430,0:05:32.899 It's not merchants and manufacturers 0:05:32.899,0:05:34.981 in the United States and Europe. 0:05:34.981,0:05:40.300 It's primarily multinational corporations[br]and financial institutions. 0:05:40.300,0:05:44.230 The financialization of the economy [br]has been in a dramatic change 0:05:44.230,0:05:47.220 in the last roughly 30 years. 0:05:47.220,0:05:50.580 If you go back to about 1970 in the United States, 0:05:50.580,0:05:55.250 financial institutions amounted to[br]maybe 3 percent of gross domestic product. 0:05:55.250,0:05:57.532 And now it's approaching a third. 0:05:57.532,0:06:01.902 Corresponding fact is[br]the hollowing out of productive industry 0:06:01.902,0:06:04.673 and that has huge effects [br]on the society, 0:06:04.673,0:06:07.310 on political decisions [br]and on the political system 0:06:07.310,0:06:10.390 generally keeping to [br]Adam Smith's maxim. 0:06:10.390,0:06:13.978 In fact we've just seen[br]a very dramatic illustration of that. 0:06:13.978,0:06:18.600 President Obama,[br]who has gained office, 0:06:18.600,0:06:22.690 in large measure through the support[br]of the financial industry, 0:06:22.690,0:06:24.828 huge component of the economy. 0:06:24.828,0:06:29.876 And they preferred him to McCain[br]and that was the core of his funding. 0:06:29.876,0:06:32.329 And there was a payoff. 0:06:32.329,0:06:35.595 Huge bailouts [br]to the financial institutions 0:06:35.595,0:06:38.240 when the system collapsed. 0:06:38.240,0:06:40.360 And they were actually[br]much more important gifts 0:06:40.360,0:06:42.910 that are not so much discussed. 0:06:42.910,0:06:44.700 So takes a Goldman Sachs, 0:06:44.700,0:06:47.020 which is considered the top dog 0:06:47.020,0:06:50.061 in the economy and[br]the political system. 0:06:50.061,0:06:54.290 It made a mint by selling [br]mortgage-based securities 0:06:54.290,0:06:57.350 and more complex[br]financial instruments 0:06:57.350,0:06:59.290 to unwitting buyers. 0:06:59.290,0:07:01.940 But Goldman Sachs itself knew[br]what it was doing. 0:07:01.940,0:07:05.171 They knew that they were[br]likely to go bust. 0:07:05.171,0:07:09.735 So the company insured itself[br]against loss 0:07:09.735,0:07:13.633 by betting that[br]what they're selling would fail 0:07:13.633,0:07:16.450 using, what's called, [br]credit default swaps 0:07:16.450,0:07:20.340 through giant insurance agency AIG, 0:07:20.340,0:07:22.750 the world's biggest insurance agency. 0:07:22.750,0:07:24.990 Well, when the financial system collapsed, 0:07:24.990,0:07:27.570 it took AIG down with it. 0:07:27.570,0:07:32.380 But Goldman's boys are well-placed[br]among the architects of power 0:07:32.380,0:07:35.520 and they not only arranged[br]for a huge bailout. 0:07:35.520,0:07:38.052 but more importantly, [br]they got the taxpayer[br] 0:07:38.052,0:07:45.343 to pay to save AIG from bankruptcy[br]by up their collapsed loans 0:07:47.190,0:07:51.364 and that incidentally saved Goldman Sachs[br]from the same fate. 0:07:51.364,0:07:55.890 Now, the CEO of Goldman Sachs[br]Lloyd Blankfein 0:07:55.890,0:07:59.960 is hailed as maybe[br]the greatest genius since Einstein. 0:07:59.960,0:08:02.720 Goldman's making record profits, 0:08:02.720,0:08:05.020 paying out huge bonuses. 0:08:05.020,0:08:08.620 And the other agents[br]of the financial crisis 0:08:08.620,0:08:11.367 are bigger and more powerful[br]than ever. 0:08:11.367,0:08:16.246 Well, the public may not understand [br]the details, but they are furious. 0:08:16.246,0:08:19.990 The banks that created the crisis [br]are visibly booming, 0:08:19.990,0:08:22.403 the population is suffering, 0:08:22.403,0:08:26.690 the unemployment is officially [br]at about 10 percent, actually much higher. 0:08:26.690,0:08:31.160 In manufacturing industry,[br]it's about the level of the Great Depression. 0:08:31.160,0:08:33.160 And those jobs [br]are not coming back 0:08:33.160,0:08:37.330 because of the shipping[br]of productive capacity abroad. 0:08:37.330,0:08:39.560 In fact, for the last 30 years, 0:08:39.560,0:08:42.130 for the majority of the population, 0:08:42.150,0:08:46.220 there has been roughly stagnation,[br]sometimes decline, 0:08:46.220,0:08:51.770 in the real wages as wealth[br]poured into very few pockets 0:08:51.770,0:08:55.180 at highest inequality in US history. 0:08:55.200,0:08:56.746 So there's plenty of anger. 0:08:56.746,0:09:00.110 And finally President Obama[br]had to react to it. 0:09:00.110,0:09:01.690 And he did a couple months ago. 0:09:01.690,0:09:04.176 He reacted first with [br]the rhetorical shift, 0:09:04.176,0:09:06.660 started talking about [br]bad bankers and so on. 0:09:06.660,0:09:11.565 And also a few policy suggestions [br]that the financial industry didn't like. 0:09:11.565,0:09:14.020 But he was supposed to be[br]their man in Washington. 0:09:14.020,0:09:15.920 They'd bought him [br]and put him in. 0:09:15.920,0:09:19.900 And the principal architects[br]very quickly sent their instructions. 0:09:19.900,0:09:25.140 They announced very publicly that[br]they're shifting funds to the political opposition. 0:09:25.140,0:09:29.607 And they poured money[br]into crucial election in Massachusetts, 0:09:29.607,0:09:34.535 which gave the Republicans the power[br]to block any congressional legislations. 0:09:34.535,0:09:36.591 An Interesting story in itself. 0:09:36.591,0:09:39.416 And Obama got the message[br]within days. 0:09:39.416,0:09:42.000 Within days, he informed[br]the business press 0:09:42.000,0:09:45.550 that bankers are, I'm quoting now, [br]"are fine guys." 0:09:45.550,0:09:48.445 He singled out for praise [br]the chairmen of chairs[br] 0:09:48.445,0:09:53.670 of the JP Morgan Chase and Goldman Sachs,[br]the two biggest players. 0:09:53.670,0:09:56.520 And he assured the business world[br]as he put it that, 0:09:56.520,0:10:02.058 "I, like most of the American people,[br]don't begrudge people's success or wealth." 0:10:02.058,0:10:07.069 He's referring to the huge bonuses and profits[br]that are infuriating the public. 0:10:07.069,0:10:11.450 "That's part of the free market system,"[br]Obama continued. 0:10:11.450,0:10:14.763 Not inaccurately[br]as free markets are interpreted 0:10:14.763,0:10:17.410 in state capitalist doctrine. 0:10:17.410,0:10:23.257 It's a very revealing snapshot[br]of the Smith's maxim in action. 0:10:24.534,0:10:28.000 Well, with Adam Smith's[br]crucial corrective in mind, 0:10:28.000,0:10:30.000 let's take another look[br]at the global system. 0:10:30.000,0:10:31.840 See what's happening to it. 0:10:31.840,0:10:34.630 There is a real shift of power[br]across the world, 0:10:34.630,0:10:38.650 namely, from the workforce[br]to transnational capital. 0:10:38.650,0:10:41.510 And China does play a big role in it. 0:10:41.510,0:10:46.961 It's basically the assembly plant[br]for a regional production system. 0:10:46.961,0:10:51.000 Japan, Taiwan, [br]other Asian economies 0:10:51.000,0:10:55.310 export high-tech parts[br]and components to China, 0:10:55.310,0:10:58.740 and China assembles [br]and exports them 0:10:58.740,0:11:03.264 using its advantages of extremely cheap[br]and highly repressed labor and land. 0:11:04.972,0:11:08.970 There's much concern[br]about the trade deficit with China, 0:11:08.970,0:11:10.750 -- US trade deficit. 0:11:10.750,0:11:12.820 Which is in fact huge and growing. 0:11:12.820,0:11:17.769 But there’s less attention to the fact[br]that there's a compensating factor 0:11:17.769,0:11:22.725 that trade deficit with Japan[br]and the rest of Asia have sharply declined, 0:11:22.725,0:11:26.690 as the new regional production system[br]takes place. 0:11:26.690,0:11:29.974 And US manufacturers are[br]following the same course. 0:11:29.974,0:11:32.900 They're providing parts[br]and components for China 0:11:32.900,0:11:36.900 to assemble and export[br]back to the United States often 0:11:36.910,0:11:40.480 for the financial institutions[br]and the retail giants 0:11:40.480,0:11:46.450 and the ownership and management[br]of manufacturing industry. 0:11:46.450,0:11:49.762 And the sectors closely related[br]to this nexus of power. 0:11:49.762,0:11:52.940 It's heavenly.[br]That's also well understood. 0:11:52.940,0:11:57.561 So the head of the very influential[br]Sloan Foundation, 0:11:57.561,0:12:03.050 Ralph Gomory, testified before Congress[br]a couple years ago 0:12:03.050,0:12:05.050 and he explained that, as he put it, 0:12:05.050,0:12:11.140 "In this new era of globalization, the interests[br]of companies and countries have diverged 0:12:11.140,0:12:13.480 in contrast to the past. 0:12:13.480,0:12:17.130 What is good for America's[br]global corporations 0:12:17.130,0:12:21.612 is no longer necessarily good[br]for the American people." 0:12:21.620,0:12:24.250 Take one striking illustration. 0:12:24.250,0:12:27.440 Take IBM, [br]peak of the computer industry. 0:12:27.440,0:12:31.997 Today it employs[br]about 400,000 people 0:12:31.997,0:12:37.579 in its facilities in the United States[br]and its subsidiaries abroad. 0:12:37.579,0:12:41.110 By now, employees [br]within the United States 0:12:41.110,0:12:44.654 have declined to about 30 percent. 0:12:44.654,0:12:48.589 Many of the employees here are informed 0:12:48.589,0:12:52.340 that they have to go abroad[br]if they want to keep their jobs. 0:12:52.340,0:12:56.370 Well, that's fine for IBM owners[br]and directors, 0:12:56.370,0:13:00.010 but it's grievous for the country[br]as Adam Smith put it. 0:13:00.010,0:13:05.578 And it's worth adding that IBM became[br]the global giant in computing 0:13:05.578,0:13:10.140 in large measure thanks to[br]the magnificence of the US taxpayer 0:13:10.140,0:13:14.672 who substantially funded[br]the core of the IT revolution 0:13:15.657,0:13:18.330 and most of the rest [br]of the high-tech economy. 0:13:18.330,0:13:20.650 But business is not philanthropy. 0:13:20.650,0:13:25.250 Corporations are dedicated[br]to maximizing profit and market share. 0:13:25.250,0:13:28.120 In fact, that's a legal obligation[br]for management. 0:13:28.120,0:13:32.204 So it's not good for the country.[br]It’s too bad. 0:13:32.204,0:13:36.700 Well, China became [br]the world's assembly plant. 0:13:36.700,0:13:41.521 The Chinese workers are suffering[br]along with the rest of the global workforce. 0:13:41.521,0:13:44.149 And it's just as we would anticipate in a system[br] 0:13:44.149,0:13:47.841 that's designed to concentrate[br]wealth and power, 0:13:47.841,0:13:52.550 and to set working people in competition[br]with one another worldwide. 0:13:52.550,0:13:57.510 Worldwide the share of workers[br]and national income has been declining 0:13:57.510,0:13:59.770 but dramatically so in China, 0:13:59.770,0:14:02.930 maybe more than anywhere [br]else close to it, 0:14:02.930,0:14:09.640 which is also leading to growing unrest[br]in this highly inegalitarian society 0:14:09.640,0:14:12.220 one of the most inegalitarian[br]in the world, 0:14:12.220,0:14:17.298 and capable of considerable violence[br]to suppress dissent. 0:14:17.298,0:14:20.890 Well, there's a good deal more[br]to say about all of this 0:14:20.890,0:14:29.106 but just to summarize with few salient points[br]from a much more complex reality. 0:14:29.106,0:14:33.651 There are indeed very important shifts[br]in global power. 0:14:33.651,0:14:37.500 And if we escape from [br]the doctrinal framework, 0:14:37.500,0:14:39.650 we can see what they are. 0:14:39.650,0:14:44.510 There's a shift from the general[br]population worldwide 0:14:44.510,0:14:48.230 to the principal architects[br]of the global power system 0:14:48.230,0:14:53.430 that's pretty much as[br]what any rational person would expect, 0:14:53.430,0:14:58.421 particularly when in an era[br]-- reffering now to the West 0:14:58.421,0:15:01.206 particularly the United States and Europe -- 0:15:01.206,0:15:07.384 large-scale depoliticization,[br]undermining of functioning democracy. 0:15:09.077,0:15:11.803 Where it goes from here depends on[br] 0:15:11.803,0:15:15.056 how much the great majority[br]is willing to endure.