Understanding global chaos

While Israelis look inward, staring at our navels and focusing on our exasperating political deadlock, things are happening in the world.

Demonstrators protest against Chile’s government in Santiago on November 28 (photo credit: REUTERS)
Demonstrators protest against Chile’s government in Santiago on November 28
(photo credit: REUTERS)
While Israelis look inward, staring at our navels and focusing on our exasperating political deadlock, things are happening in the world. Mass protests have broken out in Hong Kong, Bolivia, Chile, Ecuador, Spain, Iran, Iraq, Lebanon, and yes, Gaza; before that, the yellow-vest protests in France, and lately, two weeks of climate crisis protests in the UK. And as I write these words, new protests spring up in Malta and Colombia.
Why is the world in such a mess?
Bloomberg-Business Week explained: “In Chile, it was sparked by a minor increase in the capital’s subway fare. In Ecuador, it was the end of fuel subsidies, and in Bolivia, an allegedly stolen election. Latin America isn’t in the midst of a pink tide, nor a lurch to the right. Rather, the movement is pure down-with-the-system rage.”
These social protests will surely impact Israel, in ways that may be hard to predict. We had our own early version, the Rothschild Boulevard tent protests in August 2011.
Is there any connection between the protests taking place in widely separated countries?
There are strong links connecting these ongoing demonstrations, separated by thousands of miles. The main theme was best captured in the 1976 movie “Network,” when Harold Beale, the news anchor, taunted once too often, says, “I’m mad as hell and I’m not going to take it anymore.” In many countries people are indeed mad as hell and they are indeed saying they are not going to take it passively anymore.
Corrupt leaders? Garbage piling up? Costly public transportation? We suffered for years. But, say the protesters, no longer. But why?
There are four main themes of these protests: inequality of wealth and income, corruption in government, lack of political freedom, and climate change. And technology, too, plays a role. Social media inform the masses of government incompetence even when official media are tightly controlled, and Facebook and Twitter can ignite a mass protest gathering at a given time and place in hours or even minutes. No wonder some countries, like Iran, try hard to control the Internet.
Is there an underlying single common thread that ties these diverse protests together?
There is a wrenching syllogism, or logical argument, to explain what is going on. Global open trade and global capital markets have made a few wealthy, leaving many mired in poverty. In turn, that wealth has bought political influence through corruption, in order to preserve its privilege based on low or zero taxation. Resulting unrest leads to political oppression, as elected leaders corrupt the system to remain in power. And me-first (e.g. American first) nationalist policies make a coherent global climate policy impossible.
Sometimes, a tiny spark ignites a huge wildfire – in Chile, the price of public transportation; in Lebanon, uncollected garbage; in Hong Kong, a law to extradite suspects to mainland China; in Malta, a shocking murder of a crusading investigative journalist.
But beneath these issues are the four festering sores noted above. People all over the world are really angry. They’ve been passive so far and have ‘taken it’ – but no longer. And of course with social media, one protest, for example in Hong Kong, can ignite others half a world away, in copycat fashion.
Could we, should we, have seen this mess coming, and could we have forestalled it?
We should have seen this coming. Some 75 years ago, in July 1944, experts gathered at Hotel Mt. Washington, in Bretton Woods, New England, to reinvent the global economy. They did a great job. Led by the US, a system of open free trade and global capital markets led to economic growth, particularly among Asian countries but also in Europe. With minimal foresight, we should have seen that if some countries and individuals grow rich or richer, those countries and people left behind and growing poorer will sooner or later upset the apple cart. Three generations later, that apple cart is upside down, its apples strewn across the road.
The poor in millions are striking out across oceans and deserts, risking their lives to reach places where they can feed their children. By one estimate, some 23,000 people since 2011 died crossing the Mediterranean seeking a better life. And in response, rising nationalist racist governments threaten democracy, as they give voice to the until-now silent underclasses.
That incredible new global architecture invented at Bretton Woods? It lacked just one small component: a way to transfer some of the enormous wealth from rich to poor, out of decency and long-term stability.
We should have seen it coming; and now it is almost too late. The protest genie will not willingly go back into its bottle, as the global protests and chaos prove.
US presidential candidate (for the Democrats) Elizabeth Warren wants to tax the super-rich. Is this the answer to the enormous inequality in wealth?
Probably not. Wealth is what economists call fungible. It moves easily, liquidly, from place to place. Tax it in Zambovia, it will move instantly to Slobovia, which offers it a tax-free haven.
What then should we do? What is the right response to these protests? What proactive policies could Israel embrace, assuming one day we have a capable functioning government?
Here is my take: modern economies shift sharply from producing goods to producing services, as they grow. Some 80% of US Gross Domestic Product comprises services; in Israel, it is 70%.
Service economies are strongly binary, zero-one. Either you work low-paying jobs serving fast food and caring for the elderly, or you work high-paying highly productive jobs like writing software and analyzing big data with artificial intelligence.
In the US, the fastest-growing demand for labor is for caregivers for the elderly. Yet many of them are paid $12 an hour, or $480 for a 40-hour workweek – starvation wages.
Unemployment rates in both Israel and America are historically low, because lots of low-pay service jobs are created. But wages from those jobs cannot properly support a family.
Moreover, technology is rapidly replacing low-wage service jobs. Airport check-in is now largely automated. Supermarket checkout is quickly becoming so. So in the future, even those low-pay service jobs are doomed to disappear.
Let’s look closely at the US. Trends there often arrive here in Israel, with a delay.
In the past 20 years, food service jobs (like Wendy’s or McDonald’s) rose by 50% and now employ 12.2 million people. They pay $15 an hour or less. Meanwhile, the manufacturing workforce shrank by 25% in the same period, and now employs roughly the same number of people as food services. Jobs in an automobile factory once paid $24 an hour or more. Those jobs are disappearing.
The result is what TIME magazine calls “the left-behind economy.” And it is strongly present in Israel as well. Poor-paying service jobs are replacing well-paying manufacturing jobs.
It thus becomes crucially important to reinvent our school system, starting with pre-school – to offer everyone schooling that equips them for productive employment.
Strategically, what skills will Israel need in 10 or 20 years? And how can we help our young people acquire them, so that we do not have a left-behind economy? Why do we not see mass social protests in Israel, as in other countries?
Two reasons: First, the political crisis has sucked the oxygen from every other issue. And there is no lack of political protests, both on the left and right. Second, despair. I believe young people have simply given up on the dream of owning their own apartment. So they spend all their income, live for the present, and believe their future is not what it once was. Despair and apathy trump active protest.
How will the global chaos impact Israel?
It already has. The Israeli economy is slowing. It has to, inevitably, as the global economy slows. Economist Ian Bremmer notes that economies in Germany, UK, Italy, Brazil and Mexico have stalled, perhaps the US, as well. China’s industrial output is growing at the slowest pace in 17 years.
The source of the global slowdown is largely political uncertainty. Businesses do not spend money on capital investment when the future is shrouded in uncertainty. And with an unpredictable US president, a trade war between the US and China, and an uncertain future for the UK and the European Union, companies that normally would invest their profits are holding onto them. For an export-driven economy like Israel’s, a global slowdown is bad news.
In his novel For Whom the Bell Tolls, about the Spanish civil war, author Ernest Hemingway warned, quoting John Donne, “No man is an island, entire of itself…. Never send to know for whom the bells tolls; it tolls for thee.”
No country is an island – especially not Israel. We urgently need a government of intelligent leaders who will open our windows permanently, look out with sharp eyes, and take wise action.
The global protest bell is tolling, for Israel, too. Social protests of various sorts occur on each of our borders. And maybe it would not be terrible if we had a little more social protest here at home, too, and a little less despair, to remind our politicians that housing, healthcare, education, transportation – all those need urgent solutions without delay.
The writer heads the Zvi Griliches Research Data Center at the S. Neaman Institute, Technion, and blogs at www.timnovate.wordpress.com