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Over the past decade, at the World Economic Forum and elsewhere, there has been much hype concerning the desirability and inevitability of "globalization". The Asian financial crash of 1997-98 caused much mutual recrimination and reassessment amongst the experts and the powerful with regard to the nature of a possible control system -- previously considered unnecessary. It is now accepted that there was "collective misjudgement". The fact that economic and financial globalization also resulted in rapid spread of economic and financial problems had seemingly not been anticipated despite the immense intellectual and financial resources allocated to the globalization strategy.
The crash elicited the confession from Richard Haass (Brookings Institution), at the 1998 Forum, that: "Creating the institutions for handling globalization is the greatest intellectual challenge now facing the world" (Wall Street Journal, 2 Feb 1998). The same issue notes that the Forum was at least agreed that globalization has outpaced the financial world's ability to manage it and has unleashed forces that the world must come to terms with quickly before a larger crisis strikes. The financier George Soros sees the world's financial system as complex beyond any one individual's capacity to comprehend, as well as chaotic and virtually blind. Using the metaphor of a casino (popularized by Hazel Henderson), he and others call for an "international croupier" to provide rules for the casino -- and to keep track of the large sums moving rapidly around the globe. Furthermore, attention must be given to social safety nets, especially in emerging markets, to guard against catastrophic downturns in the future -- as well as fighting against new forms of protectionism.
For the Secretary-General of the International Chamber of Commerce (International Herald Tribune, 5 February 1998): "Globalization has the potential to bring immense benefits to the human race. But, as recent events in East Asia have demonstrated, it can swiftly magnify local crises into problems affecting the entire world economy. Hence the need for a framework of rules on investment, captial markets, competition policy and a host of other areas."
One of the merits of this intellectual panic and disarray, following a long period of complacency (if not arrogance), is that the challenge of the concrete case of the financial system can be used to illustrate possibilities for other global systems that may be equally challenging, although accorded lower priority. The financial system is at the same time both concrete, in that it is central to the present economic system, and intangible, in that the flows of capital are in many ways unrelated to any tangible assets -- and are often purely electronic entries in electronic "books".
It is traditional for the international community to respond to a new complex problem with yet another complex institution. Already such bodies are advocated to fulfil the "international croupier" role. The question is whether this kind of thinking is of the requisite degree of complexity (Ashby's Law) given the complexity of the financial system is would be designed to control. In the light of the lengthy period of conceptual and policy complacency amongst those who a year ago were vaunting the merits of the tiger economies, it might also be asked whether the kinds of institutions advocated do not emerge from exactly the same style of thinking that gave rise to the recent crisis.
A more interesting approach is to review the complete range of ways of understanding and controlling the global financial system. Many of the approaches would be considered ridiculous or impractical by one constitutency or another, but why particular solutions are excluded needs to be clearly stated.
It is however interesting that the metaphor chosen to frame the crisis is that of a casino. This suits the speculative mindsets of the borrowers and lenders whose inadequacies were so dramatically highlighted by the crisis. Urban planner Donald Schon (see review) has made the point that policy responses are only too frequently determined by the metaphor through which the problem was framed. This point has been made even more recently by Michael Schrage with respect to the design of protocols for the web itself -- conceived as a new way to "publish" essentially static "pages" of information, rather than in the light of other possibilites such as sustaining more meaningful "dialogue" and exchange.
Aside from the above criticsm of the web, it has the recognized advantage of being decentralized and to a large degree self-organizing. The particular concerns regarding obscene and subversive material pose organizational issues of a different order. The question is whether the manner in which the web is organized can be compared with the manner in which it is envisaged that the financial system should be organized -- which has its own higher order issues of money laundering and fraudulent transactions.
There are many interesting parallels. What flows in both cases is electronic information that represents "value", whether monetary or significance -- with perhaps both as particular manifestations of "confidence". In both cases this travels between institutional computers. Many interested parties endeavour to track flows. In the case of the web, tracking is done by official surveillance institutions (concerned with subversion), by intelligence agencies, by commercial institutions (for purposes of economic espionage), and by hackers for criminal purposes or mischevious amusement. Semi-secret agreements have been signed between the European Union and the USA to augment electronic surveillance of the web (Guardian, 25 February 1997). In the case of the financial system (which may ride on the web), similar parties may be engaged in tracking for analogous purposes, notably fraudulent financial transactions.
There is much debate in support of the self-organizing development of the web. Regulation by central institutions is resisted, although the January 1998 decision of the World Wide Web Consortium may be consdered the thin end of the wedge. Dominance of the rest-of-the-world (ROW) from the USA is a continuing concern. The institutional complex around which regulation of the global financial system is envisaged by many is the World Bank Group, especially the IMF -- despite its failure to provide effective warnings concerning the past crisis. Like the web, the global financial system has experienced the advantages of decades of being self-organized -- whether or not this is labelled pejoratively as chaotic and unorganized.
Both the web and the financial system offer the interesting contrast between an operational self-organization and simplistic regulatory endeavours through bodies of fairly traditional form. What is missing is any effort to model the complexity of the self-organizing process as it now stands, in each case, and as it might evolve. Clearly it is easiest to impose on this complexity some simplistic construct like a traditional "consortium" or a casino "croupier" to "determine the rules" -- especially when no effort is made to explore their use through simulation. The question is whether any proposed financial system would be subject to an equivalent of the "moose test" that Mercedes-Benz so signally failed to apply to their "Baby Benz" at the end of 1997.
If the quote from Richard Haass (above) is to be taken at face value, that: "Creating the institutions for handling globalization is the greatest intellectual challenge now facing the world", what is the nature of the challenge? Is it that no resources have been devoted to systems of the degree of complexity of the financial system? If not, why not? Who has been asking the wrong questions and placing other peoples livelihood's at risk? The pattern of recimination following the Asian crisis is such that most of those involved are recognized to be at fault. How will that milieu go about framing the nature of the challenge and the criteria of an adequate response?
It is an ironic coincidence that the January 1998 issue of Scientific American features the challenge to understanding self-organization in the most primitive biological forms: "How groups of molecules assemble themselves into whole, living organisms is one of biology's most fundamental and complex riddles. The answer may depend on 'tensegrity', a versatile architectural standard in which structures stablilize themselves by balancing forces of internal tension and compression. The same relatively simple mechanical rules, operating at different scales, may giovern cell movements, the organization of tissues and organ development" (p. 2). Donald E. Ingber argues there: "A universal set of building rules seems to guide the design of organic structures -- from simple carbon compounds to complex cells and tissues" (The Architecture of Life, January 1998)
Given that in both the case of the web and of the financial system, the challenge is to achieve self-organization and self-regulation in the absence of any privileged central authority, there is great merit in observing the patterns of tensional integrity through which such challenges have been successfully and visibly resolved in the most primitive organisms. What these patterns offer is a way of looking at the exchanges between the parts that enable the successful organization of the whole.
Both the web and the financial system are eminently suitable to experimental simulation -- as is so extensively done in the investigation of global weather patterns.
The web is already based on a particular protocol -- although more advanced forms (Internet 2) are envisaged. The financial system is based on a greater variety of "protocols" although the "bottom line" of a confirmed exchange is perhaps even simpler.
The question is how, in information terms, the organization of primitive biological forms (including diatoms) differs from these two cases. What "discipline" do the molecules or unicellular organisms practice in order to be able to configure together, through self-organization, into more complex structures? Such self-organization clearly enables "global" flows around the structure, as well as more localized flow pehomena -- to the advantagte of both local and global. Again the range of such structures lends itself to simulation.
Could the debate on the organization of the global financial system benefit from insights into the self-organization of primitive biological forms? Who would block such an investigation and why? Can such resistance be usefully incorporated into a simulation to explore how structures can transform from more simplistic forms into more complex forms?
Beyond simulation within a computer, such protocols and patterns are eminently suitable to experiment in electronic exchanges over the web. The need for new kinds of protocols to filter and redistribute e-mail messages is evident in an electronic conference of any size. How can large numbers of people use filter rules or protocols to control the distribution of meaning amongst themselves, avoiding counter-productive overload and filtering? As Schrage jokingly says: "How scalable are conversations?...How do you go from dialogues to kilologues to megalogues to teralogues? What conversations with thousands and millions of people look like?" This is the core issue of electronic democracy if it is to become a meaningful reality. Are the phenomena through which an electronic confrence goes sour in any way analogous to those jeopardizing the integrity of a financial system?
In the case of any e-conference experiment, consideration could be given to filters which "position" participants and issues in relation to one another on a more complex framework -- and the tensegrity patterns offer many clues, as management cybernetician Stafford Beer has demonstrated. The fundamental issue is how to avoid overload at any point (leading to reactive filtering) whilst retaining a sense of globality and a degree of transparency.
How might such an approach work in the case of the financial system? It is intriguing to think that "competitive" financial relations could usefully be encoded by the resistive compression elements of tensegrity, whilst "cooperative" financial relations could be encoded by tension elements. Clearly there would be major transfer pathways as well as myriad local pathways. What factors would optimize the distribution of pathways -- the entrainment of local processes by global processes -- in the light of the biological model. It would be ironic if the most profitable deals were in some way related to the most efficient tensegrity organization. This would be consistent with self-organization "clicking in" around an empty centre. Perhaps the much quoted phrase of Lao Tzu from the Tao Te Ching could be paraphrased with respect to the global organization of the financial system:
share the wheel's hub. It is the centre hole that makes it
useful...Therefore profit comes from what is there; usefulness from what is not there.
Whether the focus is on conventional regulation or on the possibility of such radical innovations, the concern will be on the protocol of exchange and how its design relates to the global system it enables. Would the tensegrity model hold the myriad transactions in such a way as to allow comprehension of when the global system was becoming unstable? This is certainly how it works in the case of architectural models whose dynamics have intriguing self-stabilizing characteristics. Can the conventional mathematical models match that? Given the failure of the latter to predict the Asian collapse, there is at least a case for actively investigating these possibilities.
Hopefully the immediate challenge of the global financial system will focus investigation of necessarily more complex approaches to global social organization, which many expect to be sustained by the web -- if it is sustainable.
Harlan Cleveland, Hazel Henderson and Inge Kaul. The United Nations: policy and financing alternatives. Wahsington DC, Global Commission to Fund the United Nations, 1996
Hazel Henderson. Building a Win-Win World: Life Beyond Global Economic Warfare. San Francisco, Berrett-Koehler Publishers, 1996
Michael Schrage. Technology, silver bullets and big lies. Educom, January/February 1998, pp. 32-37
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