The New World
It is flattering and an honour to be asked by Ed Fitzgerald to come to the home of the Grand Ole Opry in Nashville and be exposed to a cosmopolitan group of bright business students from around the world. Ed Fitzgerald did a lot for Canada when he led our great telecommunications company, Northern Telecom. It is not unfair that a Canadian reciprocate. I am happy to be that Canadian and to be able to do so in this way.
SOMETHING MUCH MORE
Over the past two years, it became apparent to me that the changes in the economic and political environment involved more than cyclical or even major structural changes. Something much more fundamentally novel and lasting was going on. I came to the conclusion that these changes are large and pervasive, are systemic in scope and depth and are historically irreversible barring a breakdown or catastrophe of global proportions. When Ed Fitzgerald asked me to speak on global competitiveness, I suggested a discussion of this new world. The thought was that this could provide a broader, more fundamental and more contemporary context for the global competitiveness issues covered in the course, as well as other issues. He agreed that an attempt to identify and describe the major elements of that new world and its practical and mind-set implications could indeed be a useful framework within which to assess and prepare for what is now happening over a wide-range of political, economic and policy matters.
THE NEW WORLD
It may help in following what is a fairly lengthy discussion of the new world and its implications if I outline at the outset what I regard to be the major constituents and main implications of the new world. There are two major constituents of the new world:
- The widespread mastering of production in the past half century has resulted in an historic shift from producer to consumer dominance in a macro and structural sense, so that all producers, be they business firms, unions, workers, governments or other institutions, now live in a wall-less world; and
- The 20th century has been fundamentally about the emergence at a very high cost of one world out of many separate worlds and that late in the twentieth century this confronts the core members of the post-war global economic order with the urgent need to accommodate some three times the present membership into that basic order.
ITS MAIN CONSEQUENCES
There are two main consequences of these new world developments::
- OECD countries like Canada face simultaneous huge and stressful adjustments to both the wall-less world and the exponentially-expanded inclusive economic order;
- The prime instrument of the wall-less world and the expanded global inclusive economic order has been the increasing role of horizontal structures like markets and technology, which are uncaring in relation to their human impacts, relative to vertical structures, like local institutions and communities, which are the essential sources of needed human attachment, identity and meaning. The imbalances, varying among countries, between horizontal and vertical structures will have to be rebalanced over time if serious and potentially irreversible damage is not to be done to our societies.
First, a few words of professional background may help explain the puzzling choice of a Torontonian—and one who is at least nominally still a lawyer—to participate in a course on global competitiveness in Nashville, Tennessee. After the first 15 years or so, the requirements of my particular legal practice increasingly forced me to confront public policy issues and the economic and political forces which shape them. In effect, what gradually happened was that the traditional day-to-day legal side largely dropped away. My primary professional focus became twofold:
- The assessment of the economic, political and policy forces which shape the macro part of the global and North American economic environments; and
- Relating those assessments to more specific micro issues faced by particular businesses and governments.
In effect, what I now hope to do each day is to add something new to my understanding of these forces and both their broad and more particular impacts; to convert that enhanced understanding into specific value-added forms; and to get paid for doing so by those who think they can benefit from them.
NEW CONTEXT FOR A NEW WORLD
What I propose to do today is share with you my assessment of the nature and implications of what I believe is emerging as truly a new world for mankind. When I say it is a new world, I mean that the cumulative effort of all the political, economic, technological, social and intellectual changes has been an essentially irreversible historic watershed in kind and not just in degree. The very fact it is historically new in the most fundamental of senses means that it is a world of both danger and opportunity for which there are no real precedents to go by. The current need is thus for a different, more understandable context within which to assess the kinds of issues that businesses, governments, unions and people generally will more and more have to face and respond to. My hope is you will find that identifying and understanding the elements of this different new world context will enable you to better assess the likely outcomes of the particular forces that are at work at any particular time and their probable relevance to your own particular concerns.
THE FORCES ALWAYS WORK
My approach is based on the premise that the position of any country, group, industry or financial market at any particular time will reflect the interaction of political, economic and policy forces within an overall political, economic and policy system that is increasingly global in scope. Moreover, these forces always work. The only question at any given moment is whether the responses to these forces by the players, such as firms, governments, electorates, unions, consumers and financial markets, are functional (that is, contribute to positive outcomes) or dysfunctional (that is, contribute to negative outcomes).
RESPONSES TO FORCES DETERMINE OUTCOMES
To say that the forces always work does not mean that individual responses are irrelevant. Rather, it means that those responses, to be functional rather than dysfunctional, must start by recognizing that the forces will indeed work. Individual responses must thus seek the best available outcome having regard to all and not just some of those forces. If this is achieved in any particular case, it means that the combined forces are then more likely to lead to functional outcomes than would otherwise have been the case. Where there is a failure to achieve this in a particular case, the reverse is also true. In each case, the forces are an interdependent part of a total system, in somewhat the same way as individual planets are interdependent parts of the total solar system. Once the responses are made, whether for better or for worse, they in turn become a part of the forces which always work. One of the reasons why so many responses are not functional is the human tendency to base one’s responses on finding some individual or group to blame in situations in which the forces—political, economic or policy—overwhelm what any single individual or group can or feels able to handle.
STRAYING FROM FUNDAMENTALS
There is an approach to investing that says that if particular asset values stray from the fundamentals, counterforces will in time be provoked which will reverse that process and bring them back. The idea is to respond by identifying and getting out of the overvalued assets and into the undervalued assets in a timely manner so that one can ride those counterforces to one’s own financial advantage. The same can be said about responses to the forces. If those responses stray from the fundamentals and seek to ignore all or part of the forces at work, the resulting dysfunctional responses will aggregate and the finally unacceptable pain, loss or ineffectiveness will force a reversal. The only issue becomes one of timing and cost. Major dysfunctional responses delay the timing and increase the cost of an ultimately achieved more functional adjustment. In some cases, the cost of these failures can be tragically great, as in such ultimate horrors as Lenin’s and Hitler’s takeovers of the Russian and German governments. But even in these terrible cases, the departures from fundamentals proved unsustainable and unworkable over time. The more open the political, economic and social system of a particular country or society, the more likely the worst costs of dysfunctional adjustment can be avoided.
There are two metaphors for our current times which capture something, but not all, of the essence of the forces which have been creating the new world I want to discuss. Perhaps not surprisingly, each involves Europe. One is the Berlin wall. The other is the tragedy in Bosnia.
IT QUITE SIMPLY CAME DOWN
The Berlin Wall, in 1990, against all expectations, quite simply came down. Fifty-five years ago, Winston Churchill said the lights were going out all over Europe. Today, one can say that the walls are coming down all over the world. There has been nothing like it before in history. It is nothing less than the growing emergence for the first time of a wall-less world. Nor did this come about as a result of the efforts of any particular political movement or ideology. Its sources are much deeper than that and reflect the powerful forces of history and of the twentieth century. Its consequences go beyond the reach of politics or ideology.
BEYOND EFFECTIVE REACH
As for Bosnia, what we have been witnessing is that the most overwhelmingly powerful military force the world has ever seen still cannot effective reach the problem. It is not primarily a failure of will or political morality, but of effective reach. This issue of effective reach has become pervasive. It extends well beyond the limits of military power. It also affects governments and big corporations. The reality is that more and more of our lives are beyond the effective reach of power. This is so, be it the power of military force, the power of the state or even the power of the marketplace. As we have variously trusted these powers to do more for us than they can, there has been increasing disturbance and disaffection in our societies. The growth in this disturbance and disaffection renders urgent an understanding of the new world. Only a much better understanding can ensure a better balance of functional responses to the forces now shaping the new world.
TWO ELEMENTS DOMINATE NEW WORLD
There are obviously a host of elements at work which together are shaping what we all feel to be a fundamentally new world at the levels of politics, economics and policy. I have chosen two elements as the most dominant. They reflect between them all the main impacts of the major sources of change of the past one hundred years. They are also each without precedent in the history of mankind. They will increasingly shape our political, economic and policy world. They represent sources of both unprecedented stress and unparalleled stimulus, and thus also of exceptional risk and opportunity. The first element arises out of the shift at the macro or fundamental structural level from a political and economic world of producer dominance to one of consumer dominance. The second element arises out of the historic process which has dominated the twentieth century, whereby the many largely separate worlds of all previous history have by the end of the century increasingly become a single world. This has been a process of very high costs and one that too often was accompanied by tragic failures to recognize our common humanity. The process has seen the growth of the global village. It has also been accompanied by a growing reassertion that the world is also a globe of villages. The functional or dysfunctional reconciliation of the global village with the globe of villages is what much of the next few decades is likely to be about.
PRODUCTION NO LONGER DOMINANT CHALLENGE
Until some time in this century—probably most clearly within the last twenty-five years for the advanced economies and not yet for the poor and newly-developing economies—the mastering of enough production was overwhelmingly the dominant challenge confronting mankind. Now, for the first time, production itself is no longer the dominant challenge for these economies. Why has this happened? It is the combined result of four main elements. The first element is the outcome of the long and painful process of amassing a huge pool of investable savings, and the ease of transferability of those savings to anyone anywhere in the world. This pool is also continuously replenished and augmented by large savings flows on a scale unimaginable even three decades ago. The second element is the scale and scope of technology; the pervasiveness of its impacts; and the pace of its development and application. Moreover, like savings, most technology is easily transferable to anywhere and to almost anyone. The third element is the large increase in the number of countries which have the trained or trainable and educated or educable work-forces able to produce an ever-widening range of goods and services; countries which are also stable enough to attract high quality and effective producers. The final element has been the post-war political and economic achievement of a more inclusive and stable world order.
LIVING IN THE NEW WORLD
What is it going to feel like to live in this new world? First and foremost, the old producer-dominant world meant that producer goals—whatever they might be—took precedence over consumer goals. The examples are legion. Lawyers could never tell a client what a task would cost or when it would get done. French restaurants not only dictate that you must take ten courses but the waiters stood over you to make sure you also ate every one of them! The rigors of the new consumer-dominant world do not allow for such producer sanctuaries. This is not all that difficult to see intellectually once it is pointed out. It is much more difficult to feel it as it really is and to change a producer mind-set deeply entrenched by all history into a new consumer mind-set which is only now emerging.
The most pervasive example of the producer mind-set may be the long-standing pricing practice of most producers and distributors, which is still the practice of most governments. In the past, only those in the commodity markets partly knew better. In the new world of commoditization, that knowledge has begun to spread fast. However, in the producer-dominant world of protective walls of one kind or another, prices were based on costs. There were even such things as standard mark-ups. Governments pursued policies which rewarded costs or inputs more than they rewarded created values or outputs. In the new consumer-dominated world, costs will increasingly be based on the prices achievable in a world which is impacted by rising global production and service capacity and more product and institutional alternatives.
GOVERNMENTS HAVEN’T GOT IT YET
The tax revolt and the underground economy are largely the result of the failure of most governments to realize that cost-based pricing is rapidly becoming history. In other words, most governments have not got it yet. Until very recently, they have continued to think you can still simply add up the costs of operation and claim the resulting amount through taxes or borrowing. Governments in the past have been the ultimate producer institution. Governments have had the exclusive “police power” franchise in their own societies and communities. In the consumer-dominant world, this monopoly and the practical benefits of such power have been steadily eroded. The effective reach of governments has also been steadily and widely reduced. This reduction has been due partly to the impact of rising consumer dominance on an increasingly global scale. It has also reflected the inability of governments, through the necessarily insensitive exercise of centralized bureaucratic power, to reach the real problems of the community on an effective and affordable basis or to enforce their writ deeply enough into the community. That need gave governments a lot of power. Now governments need producers, as consumers everywhere can, with only a measure of exaggeration, be served more and more by producers from almost anywhere.
NO SANCTUARY FOR GOVERNMENTS
So the institutions of government also no longer occupy the unique place or sanctuary that once was theirs. They too have become subject to the same pressures of the consumer-dominant world as the rest. Their success as producers will more and more depend on their role in contributing to the success of the other producers in the system. They are just one more institution that must answer to the new reality of consumer dominance. If anyone were to doubt that governments have lost their mystique and are on no better footing than anyone else, he need only look at the low public esteem disclosed in the “trust-and-confidence-in-government” polls. At least in North America. Governments will only regain lasting trust and confidence when they cut back on acting as wide-ranging consumers who make increasing demands on the system and instead focus more strongly on those essentials which they as producers can supply that on one else can do. One thing is clear. The role for governments in a consumer-dominant world will be fundamentally different than the role for governments in a producer-dominant world. It will not be easy for them to adjust either in terms of mind-set or in terms of structure and ethic.
WORLD NOT BORDERLESS
A wall-less world is still not a borderless one. One may doubt how soon, if ever, the world will be borderless. As long as there is a role for governments and politics, there will be borders. As long as producers resist the realities of the wall-less world, they will look for political allies to help them. Borders are political affairs and more and more of the fallout from the adjustments to the wall-less world will be political in some sense or other. The fact, however, will not necessarily mean that the adjustments themselves will be primarily governmental. In the wall-less world, the power of established producer institutions and their allies—primarily firms, unions and governments—will be steadily eroded. This will happen in part because of the increasingly globalized and open economic system we are now trying to run and by the resulting wide range of alternatives available to producers and consumers alike. It will also happen because those institutions will find it very difficult to adopt what I later refer to as the post-Protestant ethic.
LEADERSHIP, LEADERSHIP; MANAGEMENT, MANAGEMENT
In the new world, the financial and physical assets of a business, and its organizational and franchise characteristics, must be seen as primarily a mixture of opportunities and vulnerabilities. The central requirement for business will thus be the ability to attract the key people who can seize the opportunities and overcome the vulnerabilities. The old nostrums, like “location, location, location”, will no longer by themselves determine business firm survival and prosperity. Nor will it be nostrums about the sector, the cycle or special leverage. It will be “leadership, leadership, leadership”, in the sense of making the decisions to do the right things, and “management, management, management”, in the sense of doing things right.
NO QUICK POLITICAL FIXES
One of the fundamental weaknesses of our collective political governance structures is that governments have got themselves into too many things that go well beyond any credible or focused core business. They have also operated under very constrained structures and under an outmoded conception of authority and legitimacy. The result is that neither their leadership, in the sense of choosing to do the right thing as an organization, nor their management, in the sense of doing those things right, is for the most part very strong. This suggests that there will be no quick ideological or political fixes to the problems of government. It also suggests that nowhere will the waves of the consumer-dominated world beat more relentlessly or for longer than upon governments.
FOUR MAJOR CONSEQUENCES
The wall-less world is likely to have four major and increasingly widespread economic consequences:
- Monetary policies among major countries will be increasingly harmonized, leading to a convergence of inflation outcomes. This will be most pronounced initially in advanced economies, but others seeking to develop quickly will have to fall into line. Otherwise, producers who are now more mobile will look elsewhere to base their production operations;
- Flexible free market policies (including for labour markets) will also perforce be equalized among countries over time. Rigid markets will make it more difficult for economies to adapt to a consumer-dominant world and to be value-competitive. They will make it more difficult to attract producers. This largely rules out the classic government industrial policy tools of walls, subsidies and exclusive franchises. These will no longer be lastingly helpful in the wall-less world. It also rules out approaches, however well-intended, that seek to protect producers from the basic realities of a world that are beyond the reach of any government to change;
- Individual business firms will have to keep up with relevant technology and its application or they will be forced to drop out, as technology will always be a critical requirement for achieving and maintaining long-term value-competitiveness; and
- The global process towards the equalization of the three major competitive factors of low inflation, flexible open markets and technology application will make culture increasingly decisive. B culture, I mean the characteristic way in which a people or group responds to what is put in front of them. Culture, which is in part also shaped by values, may now be the major value-competitive factor which cannot be easily or quickly equalized by the forces of the wall-less world.
NON-DEFLATIONARY FALLING PRICES
If we are really in a wall-less world in which goods and services are under relentless commoditization pressures and are also in a low-inflation, stable prices world, we could see something emerge which would be very good but which could also be very difficult to adapt to. This would be non-deflationary falling prices in goods and competitively-tradeable services. In such a world, most improvements in overall standard of living world than come from generally lower prices rather than from broadly rising incomes.
SHAPED BY INDUSTRIAL REVOLUTION
The new wall-less world of consumer dominance and the relentless force of commoditization of virtually all goods and services is in part a function of the changed production and distribution realities of the post-industrial economies. The industrial world was heavily dependent on capital and physical assets. It was not a world in which the average worker needed great skills and workers were for those reasons able to be organized on the basis of vertical hierarchical control. If thus required the Protestant ethic of disciplined work and savings. An ethic of work and savings is obviously still required, but in advanced economies it is perhaps not as hard an ethic to meet as to was in the much tougher and rougher conditions of the Industrial Revolution. This may be one reason the work and savings ethic may seem to be met less often now than it used to be. The modern state and the modern trade union movement grew up and took shape in response to essentially Industrial Revolution conditions and while producer dominance remained unquestioned. Each faces fundamental adjustments if it is to adapt successfully to the wall-less world of today’s post-industrial economy.
A final word about the difficulty of shifting from a producer to a consumer mind-set. The easiest way to test progress by yourself or others is to ask for whose benefit a particular action or actions are taken. Let’s take two prominent current examples—the baseball and hockey strikes or lockouts. Between them, the owners and the players are the producers. Have they stopped the game to benefit the consumer? Obviously, not. It is a fight between the producers and the outcome sought by each side is for their benefit, not the consumer. Another example is a personal one. In the middle of an overseas trip I had my credit card withdrawn and replaced by a more fraud-resistant card which I would only get on my return. Did they do it in that abrupt way without waiting for my return for their benefit or for mine? Similarly, I ordered a television set with my credit card points, and found out ten minutes later that particular set was too big for my space. I immediately sought to cancel the order. I was told this was impossible. I would simply have to wait until the television set was delivered and then send it back! Again, did they do that for me or for them? The examples are numberless, because most of what is designed and done has been designed and done to respond to what the producer wants and not necessarily because it responds to what the consumer wants and needs. There is rarely a day goes by when I do not run into a new example of the resistant power of the producer-dominance mind-set.
MARX ON HIS HEAD
The post-industrial economy still needs physical assets and savings, but the central focus has shifted from physical capital to human capital. One result is to turn Karl Marx on his head. If the primary means of production are now those individuals with knowledge and an appropriate culture for its most effective use, than what we are also witnessing is a massive shift in who owns the means of production. It has become the ability to attract, lead and manage those with the essential skills and culture to function effectively in a post-industrial environment that will be critical to firm or institutional survival and success, and also to personal survival and success. This is a very different world. It will throw up very different social problems and opportunities, as well as very different political and economic problems and opportunities.
TWO DECISIVE COMPETITIVE FACTORS
I have asked myself what then is required for competitive success and survival in the new world, given that the major elements of inflation, flexible free markets and technology will be broadly equalized by the powerful arbitraging forces of the wall-less world. I believe that in this world, two other related requirements will increasingly stand out as the decisive factors. However, nothing can stop those with established positions having their ability to adjust tested under the conditions of the new world. In some ways, those firms and countries who are less established may have important advantages in making essential changes.
I have already mentioned one factor, which is culture. I do not today intend to go beyond mentioning culture, as it is a major, untapped subject all its own. Culture is, however, central to the intangible resource base of countries, firms and other organizations. We will less and less understand what is going on if we do not recognize this and deepen our understanding of how culture can help and hurt us and others. One feature of the new world is thus that the intangible resource base will steadily rise as a source of competitive advantage relative to the tangible resource base.
The other decisive competitive factor involves four elements, which I have recently stated to refer to as the post-Protestant ethic. These elements are:
- Openness; and
These four elements are not only good things in themselves. They will also prove to be essential to running governments, societies, firms and other organizations effectively in the new world.
My friend Dick Currie of Loblaws, Canada’s leading supermarket chain, says, “value is not paying too much for quality”. This is leading firms’ new wall-less world to focus increasingly on what I call the cost/quality double track. This track has both vertical (within the firm) and horizontal (outside the firm to suppliers and customers) dimensions. It means proactively controlling both costs and quality every step of the way, from conception through production to final delivery and follow up of any good or service. It also means doing so not only vertically within one’s own organization, but also horizontally outward to suppliers and customers. Moreover, in the new world, wherever governments impact doing business, they must increasingly see themselves, and be seen by others, as suppliers to be worked with by their essential business and consumer customers in order to maximize their value contributions in the overall value creation processes of the economy.
The whole concept of accountability is fundamental where the means of production are increasingly skilled and knowledgeable people who are beyond the effective reach of bureaucratically-administered vertical-control structures. This concept, at the level of the workplace, of minute-by-minute accountability to the next step of the process is the Japanese contribution to what the MIT Automobile Study has called lean production. Accountability will not only be for the individual. It will also be for the group or team. One of my senior management board colleagues describes the establishment and implementation of accountability standards as a process of democratic design (the key element of voluntariness) followed by autocratic implementation (the key element of accountability for an agreed and accepted standard).
In a world of value, accountability and knowledge-based skill as the central means of production, openness is critical. Without it, there can be no effective accountability and there will also be unnecessary knowledge gaps that undermine the cost-quality double track and thus customer value. Openness is also essential for legitimacy and credibility, which in the new less-traditional world will be more critical both inside and outside organizations.
Value, accountability and openness may not always be easy, but they are certainly obvious. For quite a while, I rested with those three as the required elements for successful performance in the wall-less world. A year ago, however, I realized that there was a missing fourth element. I have called it the element of voluntariness, in which the element of choice and persuasion predominate relative to control and force. This came to me for two reasons. One, as I will discuss more fully later, arose because it was becoming obvious that there were problems faced by individuals, families and communities which were beyond the effective reach of governments or private business markets and which were at the same time also more than they could cope with on their own. I saw this as requiring a vast expansion of voluntary action at the levels of local communities that would draw on individuals and families, and also, where appropriate, on business and governments. The other reason came from the deep insight of Toni Morrison, the American black woman novelist who recent won the Nobel Prize for Literature. She said in an interview that real freedom is the freedom to choose one’s own responsibilities—which in this context I see as voluntariness. Voluntariness based on open persuasion leading to free choice is the toughest of the four fundamentals of an ethic which is not just high-minded, but has now become essential to effective functioning in the new world.
THE NEW ETHIC BENCHMARKS
You may find the four elements of the new ethic are handy benchmarks in assessing how functional or dysfunctional any particular country, organization or institution is likely to be. When I set these out for him, one of the shrewdest Japanese observers of the Japanese scene said to me last spring in Tokyo, “Wow, is Japan ever in trouble!”. Another friend, who was a very highly-paid top performer for a major international investment firm, called me recently to thank me for helping him decide to leave that firm. I asked him what he could possibly mean, as I had not recalled saying anything to encourage him in that direction. He responded that, yes, I was right, but when he applied my four benchmarks, the firm met none of them and he realized he should leave. Certainly a review of the benchmarks shows why governments are in trouble. There are few people who do not feel they are paying governments too much for general absence of value, openness and accountability. But these qualities are very hard to come by within the internal structures of governments; and state-enforced police power, even if based on majorities (which it often is not), is at the opposite end of voluntariness. Similarly, bureaucracies in and out of government tend to be the structural and behavioral antithesis of what these four benchmarks suggest is needed.
POLITICAL AND SOCIAL STABILITY IMPACTS
The forces which have produced the wall-less world—the shift from producer to consumer dominance and the new pressures for a vast broadening of the inclusive world economic order—are having and will continue to have fundamental effects at the level of political and social stability. This is not only because of the scale and pace of the adjustments that will be required. It is also because the emergence of the wall-less world has involved a major expansion in the role of impersonal horizontal structures relative to more personal vertical structures. The primary mechanisms of this emergence have been the expansion of markets on a global scale and the pervasive speed and scope of technological innovation. This horizontal structure expansion will require a compensating strengthening of vertical societal and cultural structures at local levels, generally below the levels of national governments and of countries outside large organizations. For example, the United States must primarily strengthen its vertical structures at the levels of family and local communities. By contract, Japan must primarily broaden its horizontal structures at the level of the domestic and international marketplaces and in its collective political governance. Canada falls somewhere in between and has work to do both ways.
HORIZONTAL AND VERTICAL STRUCTURES
What do we mean by vertical and horizontal structures? Let me provide a Biblical response. On the one hand, there is the New Testament image that the Lord makes the rain to fall on both the just and the unjust. This is an image of horizontal structure. What happens in uninfluenced by how it affects individual humans or what they want or need. It makes no distinctions based on behavior, status or merit. On the other hand, there is another New Testament image, that even the hairs of one’s head are numbered. This is an image of vertical structure, in which each and every one of us is cared for separately as unique and special. In the end, human beings want and need both equal treatment and to be special.
BOTH STRUCTURES NEEDED
Human beings need horizontal structures for the freedom and equal treatment they provide, quite apart from their palpable economic benefits. But human beings also need vertical structures—of the family, of the private relationship between the Psalmist and his God, of parent and child, or of the vertical mutuality of obligation within the basic Japanese societal structures. It is those vertical structures which affirm the specialness of the individual and respond to his human concerns. Time is a vertical element in short supply in today’s world. One of the results are de facto fatherless families which undermine children’s sense of identity and attachment. The danger which is already present in North America and feared in Japan and Europe is the socially destabilizing effect of a world dominated by the uncaring horizontal structures of markets, technology, individual rights and state-power-enforced democratic majorities (which are increasingly only pluralities). There is no place in this kind of world for the attachments and identity which make life meaningful and worthwhile. Horizontal structures by themselves provide no sustaining or supportive social fabric.
NOT ALL SERVE HUMAN CONCERNS
This does not mean that all vertical structures are primarily in the service of human caring, attachment and identity. They may partly so serve, but too often they are primarily the walls of a producer-dominant society in which the hairs of a few people’s heads are far more important than those of most others. Horizontal structures serve to break down this negative feature of vertical structures, although they can also go too far. So it is not a case of choosing between horizontal and vertical structures. Who, once they had it, would give up the equal treatment of markets or of essential enforceable rights? But who also can live only amidst the rigors and coldness of markets and enforceable rights? The challenges of the wall-less world and of a major expansion of the inclusive order will place ever more stress on the need to strengthen the vertical structures which reinforce caring, attachment and identity.
I mentioned earlier that I foresee a buildup of forces in Western countries, where the sway of horizontal structures has been the greatest to date, whereby cooperative volunteerism will expand to the degree necessary to fill the current gap in well-functioning vertical structures. The growing dominance of horizontal structures has masked an increasing failure to recognize two fundamental shortcomings in our total system:
- The limits to the effective reach of governments and business; and
- The insufficient individual caring able to come from governments, markets and big organizations.
I have since been encouraged in these view by the recent remarks and activities of that ultimate guru of managerial capitalism, Peter Drucker. As I read him, he also sees the volunteer sector as perhaps the most rapidly growing and important post-industrial sector in the United States going into the next millennium.
INTO THE WORLD
Turning now to the world at large, it is easy looking back over the twentieth century to see it as having been very Europe-centred. Two world wars were centrally started, fought and finished in Europe. The forty-five year threat which the Soviet Union represented to the future of Europe and the rest of the Western world emerged out of the First World War in Europe and was contained along the eastern borders of Western Europe. However, just as Europe’s conflicts were often fought outside Europe so many of the decisive twentieth century conflicts of the emergent one world were fought out in Europe.
For the past half-century, however, the great events for change in the world have taken place and had their significance largely outside Europe. There has been the rise to world power of the United States, which started at the beginning of the century, and then later of Russia; the liberation of India and other colonial countries; the unification and stabilization of China; the reconstruction of Japan and its emergence as the world’s second financial and economic power; and more recently, the collapse of communism and the breakup of the Soviet Empire. These developments have been the fundamental elements of political history of the last one hundred years. What is central to this history has been the steady, still ongoing, structuring of a single world political and economic order. This has been accelerating in the few years since the end of the Cold War at a faster clip than we have yet been able to grasp or absorb. It represents the major unfinished political and economic business of the twentieth century. Successful coping with it requires more vision and hard and coherent thinking than it has yet received.
A FORTY-FIVE YEAR DISASTER
The first 45 years of the process towards one world were disastrous beyond description: two world wars; a severe global depression; mass murder within Germany and the Soviet Union; and the survival and subsequent arrival to world power during that process of a truly evil outlaw state that lasted almost seventy-five years and stood against everything valued by Western tradition or indeed by ordinary people everywhere. The consequence of those terrible forty-five years was a post-war period of very great statecraft—perhaps the greatest in history. The idea was to build integrating institutions to offset the forces of disintegration that had wreaked such havoc. The concept of balance of power was not entirely absent, but it served the different and broader purpose of preserving and expanding the inclusive order.
INCLUSIVE ORDER AND CONTAINMENT
The decade after 1945 was thus used by Western statesmen to build a more inclusive political and economic order and to put in place what was required to contain those forces that were not includeable and which represented a threat to that order. The primary instruments of the inclusive order were the Marshall Plan, the beginnings of European Community, the reconstruction of Japan, GATT, the World Bank, the International Monetary Fund and the United Nations. The primary instruments of containment were NATO and the global leadership of the United States as the principal and ultimate underwriter of both containment and a more inclusive global order.
NEW FORCES IMPACT INCLUSIVE ORDER
The great post-war policies of inclusion and containment were shaped by the decisions of the Soviet Union and China to stay out of the post-Second World War inclusive order sponsored by the West, and instead to direct a lethal challenge to that order. Now forty-five years later in the more fragmented post-Cold War world, new forces are at work which are impacting the twentieth century drive to a single world. On the one hand these forces seek a massive broadening and deepening of the inclusive order. On the other, they pose new threats to it.
NEW COUNTRIES WANT IN
The countries of the former Soviet Union—the CIS or Commonwealth of Independent States—and China now want in to the inclusive order. In addition, countries like India and many in Latin America are now better equipped to function effectively within that order. These developments have resulted in the current great challenge of achieving a practical expansion and deepening of the inclusive economic order by as much as a factor of three over a relatively very short period of time. This would be enough to handle in and of itself. The fact that it is taking place at the same time that the imperatives of the wall-less world are pressing upon our societies can be expected to increase the challenges and opportunities for business and to make the tasks of governments and politicians much more stressful. The successful political management of these stresses is essential. A failure to achieve this new broadening of the inclusive order would be ominous for peace and social stability throughout the world. This is why the successful passage of NAFTA and GATT, especially in the United States, and U.S. leadership to expand free trade in the Western Hemisphere and the Asia Pacific are of such fundamental importance.
NEW THREATS DEMAND CONTAINMENT
In addition to the challenge of broadening the inclusive order, there are new destabilizing threats of all kinds to the inclusive order. These range from spreading local wars, drugs, terrorism, ethnic violence, ethnic cleansing and major migrations and displacements to disease, environmental degradation and the uncontrolled expansion of nuclear capability. The development of effective policies and necessary consensus on containing these threats will be much more difficult to achieve today than it was almost fifty years ago in order to contain the more clearly definable communist threats.
NEW WORLD NEEDS NEW VISION AND POLICIES
The new world thus needs a new vision and a new set of policies for both broadening the inclusive order and containing what is not includeable until such time as further inclusion becomes possible. The world will also need a different basis for the leadership and underwriting of that tasks. The United States will have to play a primary role. However, it can no longer be expected to play as large a role as it has up until now. Moreover, the role it does play will be even more dependent on cooperative decisions and actions in the future than it was in the past.
NO AMERICAN AGE
Some people have gone further to predict the rapid coming and going of the so-called American Age of history. My assessment is rather different. It is less dramatic and apocalyptic. There has been and will be no American Age as such. Rather, to a degree greater than has previously been the case for any other country and increasingly so as the century has progressed, the United States in the twentieth century has been a primary catalyst for proxy for the emerging new world of consumer dominance and for the process of making one world out of many. The United States will thus continue to play the major role in leading and sustaining this new world—or in failing to do so. But no one else can or will take over.
STRONGLY ATTRACTING, STRONGLY DISTURBING
The United States in this century has had both its strongly attracting and strongly disturbing sides, each for much the same reasons. The United States is attracting and disturbing in large part because it represents, as no other single country does, the arrival of the wall-less world with both its benefits and its costs. The vertical moorings it has lost or which have been weakened in the process have become sources of disturbance both inside and outside the United States. My own assessment is that this disturbance dimension will become worse before it starts to become better again. On this argument, such concepts as the “rise and fall of the American Empire” are not likely to be very useful either for understanding or for decision-making. However, a series of major dysfunctional responses to the forces of the new world by the United States which undermined its effective role, could be extremely negative.
DISENTANGLING THE FORCES
It may be useful to make a final set of observations about the need in making assessments and decisions to disentangle the cyclical, structural and systemic forces from one another. The cyclical forces are essentially short-term in their impacts. Structural forces are longer term. For example, I have suggested in a rather arbitrary many that we are now about half-way through a great structural transition that started in 1989 and will end in the year 2000. Finally, there are the slower-moving systemic forces. These systemic forces have very much longer time frames, both in their origins and in their destinies. At any one time, one or other of these sets of forces may be operationally dominant. They may thus appear to override or mask the other forces. These other forces will nonetheless continue to be operative and will again reassert themselves. What we have been primarily talking about today goes beyond the cyclical and structural forces. They are the forces which reflect what I see to be the essence of the greatest and most fundamental systemic changes of the post-war period. Although in their origins they obviously reach back even further.
NOT EVERYTHING IS NEW
These most fundamental systemic changes are the sources of what I have chosen to call the new world. In speaking of the new world, however, one must not make the mistake of believing that human beings are no longer human beings or that the laws of nature or of economics no longer work. They still work. My contention is simply that they now work in a different world. Nor will everything in the old world and in all places change completely or at all at once. It is not wrong to call this a new world; a new world which is calling for new institutions and new ways of thinking and behaving. It is, as I have suggested, also a new world which required a new ethic—what I have called the post-Protestant ethic, but one which also still needs some of the old Protestant ethic.
OLD PRINCIPLES, NEW URGENT NEED
The principles of the new ethic are in many respects old. Likewise, the need for the new ethic is not new, in the sense of being unknown or totally unpracticed, or that it might not have been a better world if these principles had already been more broadly applied. What is different is that the need for the new ethic has become pressing for literal survival at each of the levels of society, economics and politics. This need for a new ethic stands to be enormously energizing for all who respond. Like the original Protestant ethic, it is far from an easy ethic. But like the Protestant ethic, it offers great energizing power across the whole sphere of economics and politics for those able to act on it in practical and realistic ways.
BEYOND A NEW ETHIC
At a still deeper level, one could view what has been happening and is now likely to happen as requiring a new spirit as well as a new ethic. It is possible to look at the changes we have been discussing and conclude that the mills of God grind slowly but exceeding small. On this thesis, the twentieth century has seen a series of false gods—false in the sense that in the Biblical fallen world in which humans have lived since Adam and Eve’s ejection from the Garden of Eden, neither the state nor the marketplace, neither consumption nor production, neither technology nor ideology, ultimately responds to the deepest human needs and anxieties, however much we wish they would. On this basis, alienation lies far beyond, and survives, even the most functional of our responses to the forces. I mention this not to get us too far over our heads, but because wherever unrealizable expectations are not met in cases where in the very nature of things they cannot be met, the resulting disturbance from those unmet expectations can nonetheless become a powerful source of broader disturbances in the total system. There may be nothing that can be done about this in the normal way of the world, but this does not say the potential impacts cannot still be very great or that one can afford to ignore them.
ENTER THE SPIRIT
So as one seeks to disentangle the cyclical, the structural and the systemic forces from one another, one thing that the new world has not changed is that there remains an existential or human condition dimension, of which suffering, loss and death are fundamental, that is in the end out of reach of all responses to these forces, but which nonetheless can also have a basic influence upon them. It may be here that the spiritual condition of individuals and societies can enter the picture. I do not commend this as too fruitful an area for decision-makers in the worlds of governments and business. I do, however, commend keeping it in mind so that, as leaders of the future, you do not mislead yourself or others about what is ultimately achievable by what we are able to do in the often less-than-human world of politics and economics.
THREE CONCEPTUAL COMPONENTS
Let me conclude rather simply. I have sought to outline the conceptual contours of a new world having three main components:
- The wall-lessness of the newly emerging consumer-dominant post-industrial economy;
- A daunting new round in the expansion and deepening of the inclusive economic order, involving as many as three times the number of those participating in that order at the beginning of this decade; and
- The anticipated growth of forces in the Western world which will seek to balance, whether functionally or dysfunctionally, the present horizontal-vertical structural imbalance caused by the accelerating ascendancy of the horizontal structures of markets, technology and state-enforced majorities.
NO CRYSTAL BALL
I want to stress that what I have sought to arrive at in my own mind and present to you here is not some kind of forecast or prophecy of what the world will look like, or some kind of prescription for what the world should look like or how any particular individual, organization or country should go about its business. Whatever validity there may be in my attempt to capture some of the main elements of the new world arises not from a crystal ball but from an attempt to see and conceptualize as clearly and broadly as one person can hope to do what is in fact already happening. I will have achieved basic success if your response to this lecture is “Yes, I understand what he is saying, because I recognize that as the world I am already trying to operate in”. I will have achieved even greater success if you were to tell me in the months and years ahead that the thinking provided a useful context and some useful benchmarks to form judgments and assessments as events unfold.
LOWER LEVELS TO DOMINATE
If there is a central message for our collective future, it is that there will be no great or sweeping universal principles or structures coming from the top which can save us or help us very much. One of the habits of the old world which will die hardest is the habit of the automatic upward vertical gaze looking for guidance; and, I might add, the habit of the automatic downward gaze offering that guidance. Stability and progress will, more than they have been, be achieved at lower levels in the total system. Only rarely will more centralized control or direction be the most functional response to what is going on.