The Perfect Storm:
Globalization Meets Political Gridlock in California

Arthur Warmoth
Sonoma State University

Copyright © 2004

I would like to share the lessons I draw from a couple of events in my personal history. First, my great grandmother came to California on one of the first transcontinental trains following the driving of the golden spike. Lesson 1: Technological innovation changes history. Electronic communications and information processing technology is the mother of all technological innovations. Second, my grandparents met in the aftermath of the great 1906 San Francisco earthquake and fire. Lesson 2: Random events change history. The confluence of globalization with the breakdown of democracy in California makes the state the leader in facing the unintended consequences of globalization.

The current California budget crisis reflects technological imperatives driven by the communications and information processing revolution, particularly the imperative of global economic integration. However, we also find ourselves facing a political crisis exacerbated by an unhappy confluence of circumstances that have amplified the crisis of public funding currently experienced by most states into a disaster of epic proportions. These factors include a string of political leaders seriously lacking in vision, the ideological polarization of the legislature and the extremely divergent views of the electorate, voter distrust of government, excessive reliance on exports and on technology and technology driven industries (which have magnified the effects of the recent recession), a heavy reliance on a culturally diverse immigrant work force, and the sheer size and complexity of the state’s economy, which makes centralized management from Sacramento exceedingly difficult. We need to understand these factors in both their predictable and unpredictable dimensions in order to develop adaptive strategies for higher education. This essay will discuss strategies for both higher education in general and Sonoma State University in particular.

1. Globalization

Technological Imperatives. The context in which we are operating is driven by technological imperatives. These technological imperatives revolve around communication and information processing technology. Therefore, information intensive enterprises are most likely to experience fundamental restructuring. These enterprises include financial services institutions, politics, universities, and the media.


Era of Civilization

Communications
Revolutions

Energy Revolutions

Economic Tools

Hunter-Gatherer
(4 million-50,000 BCE)

Speech, Art, Ritual

Hunting Tools

Money (Media of
Exchange)

City States, Empires
(3,000 BCE-1400)

Writing, Law

Agriculture
(Wind Power, Animal Power)

Coins
Bookkeeping

Modern Era:

Renaissance, Reformation (15th-16th Centuries)

Enlightenment
(18thCentury)

Industrial Revolution
(19th Century)

Print (1456)

 

 

 

Steam Engine (ca 1765)

Internal Combustion Engines

 

 

Savings Banking,

Investment Banking (Capitalism; Financial Instruments--Stocks, Bonds, etc.)

 

Postmodern Era:
(From Mid-20th Century)

 

 

 

Electronic Communications & Information Processing

 

 

 

Sustainable Energy Sources

 

 

 

Phase 1. Mutual Funds, "Paper Entrepreneurialism"

Phase 2. Predicted: Complementary currencies, stake-holder ownership, sustainable & socially responsible investment

Figure 1. Evolution of Civilization: Communications, Energy & Economic Systems


Although pundits routinely invoke globalization as the dominant force in every aspect of life, it actually consists mainly in the global integration of two areas: communications and the market economy. In the 1960s, Marshall McLuhan was the prophet of the globalization of communications. Globalization of the economy consists primarily of the global integration of three economic arenas:

Manufacturing and trade. This process is dominated by global corporations, which integrate the manufacturing process by producing goods for market at the location where the factors of production are cheapest and shipping them to markets where they can be sold at the greatest profit. The Achilles heel of this system may be transportation costs, as this is the area that makes import substitution potentially profitable.

Financial services. As noted above, information intensive enterprises are subject to the most radical restructuring. Financial services are among the most information intensive on the planet. It is the possibility of the global integration of accounting that has made globalization of manufacturing and trade possible. The first phase of financial globalization was the easy phase. In addition to supporting the accounting systems of globally integrated corporations, information technology made possible the accumulation of wealth by manipulating accounting systems. This phenomenon was labeled "paper entrepreneurialism" by Robert Reich in 1983. It is behind the scandals in recent headlines, beginning with Enron and followed by the fall of corporate giants including Arthur Anderson, Global Crossing, K-Mart, Tyco, Merrill Lynch, Adelphia, WorldCom, and AOL-Time Warner. Recent writers, for example Kevin Phillips and William Greider, have pointed out the similarities with the excesses of capitalism in the late 19th century Gilded Age that followed the post-Civil War transportation revolution and are reminding all of us of the ethical and structural limits of global capitalism. The political system has barely begun to try to come to grips with the implications of phase 1. It has been hampered by the fact that, for the moment, the perpetrators of its excesses have largely captured the federal government.

The second phase of the application of information processing technology to economics is likely to involve its application to the finer structure of the economy, including the management of the social and natural commons at the local and regional level. (See Bernard Lietaer and Arthur Warmoth, "Designing Bioregional Systems in the Context of Globalization" in Andrew Cohill, Ph.D. and Joseph Kruth, Editors, Pathways to Sustainability: The Age of Transformation, published on-line by the Tahoe Center for a Sustainable Future, 1999, at http://ceres.ca.gov/tcsf/pathways/index.html.)

The Labor Market. The first phase of the global integration of the labor market was the export of blue collar manufacturing jobs to Mexico and Asia. The current phase is the export of $85,000 a year executive and engineering jobs to India. I draw several conclusions from this:

Some implications of these observations for higher education:

(See my article "Technology and the Postmodern University.")

Needed: An Economics of the Commons. In order to understand the economic crisis facing higher education, it is necessary to understand the distinctive economics of public goods, a vast arena which some observers are beginning to call "The economics of the commons." The commons includes all resources, goods, services, and assets that must be produced and/or consumed (used), at least in part, collectively. In other words, the commons includes all social system and ecological system assets essential to, or useful for, human wealth and well-being that cannot be produced and/or distributed to individuals operating in price auction markets. In today’s world, most of the areas we find in an ongoing state of crisis, ranging from the integrity of the environment to the social fabric of our communities, are aspects of the commons. This is because we simply do not know how to think about the economics of these critical systems, including education, politics, health care, public safety, retirement security, employment security, energy, transportation, environmental quality, land use, affordable housing, and culture and the arts.

There are two domains of the commons: the natural commons and the social commons. The natural commons includes air, water, earth, sunlight--all natural resources. It also includes all ecological and genetic processes, the basis of all life on earth. It includes all of the processes summarized in the Gaia metaphor. The social commons includes our cultural heritage. Jonathan Rowe's (2001) view of the commons includes our "languages and cultures, the stores of human knowledge, the informal support systems of community, the peace and quiet that we crave." It also includes our instinctive relationship with nature and our impulse for creative expression. And it includes public goods and services such as education, public safety, transportation infrastructure, public health and health care access, and environmental protection.

The economics of the commons is fundamentally different from the economics of markets. Unfortunately, the economics of the commons does not include an elegant self-regulating mechanism comparable to the "invisible hand" of price auction markets that serves the economics of commerce so well. Our relationship to the commons is characterized by mechanisms that operate according to rhythms and orders of conceptual complexity that are different from those governing markets. In the long view of history, the commons has primarily been managed by the largely unconscious (or more accurately, embodied in iconic and narrative consciousness) hand of incrementally evolving tradition. Since the Renaissance, it has become increasingly the province of the conscious hand of politics, which is ideally guided, though often misguided, by reason.

Many economic domains operate according to a mixed model in which the economics of markets is inextricably intertwined with the economics of the commons. Education is one of these. It is true that an individual with a college education will have on the average a higher lifetime income, and therefore a college education is a good personal investment. This is the logic behind the trend to finance higher education through fee increases and student loans. But we should remember that an educated citizenry and workforce is of even greater value to society at large. That was the logic behind the tradition of free public higher education, particularly in the western United States, a tradition that has been a driving force in economic development since the Civil War.

 

 

The Market
The Commons

National & Global Scale

(Gesellschaft)

 

Manufacturing & Global Trade

Political System

Economic System

Society (Media Culture, etc.)

Biosphere

Local/Regional Scale

(Gemeinschaft)

Services

Local Trade

Agriculture

Community Life

(Culture & Politics)

Bioregions

Figure 2. The Market and The Commons

 

Although we need a political economy of the commons, we are cursed with a ‘conventional wisdom’ based on ‘free market fundamentalism.’ The curse of Adam Smith’s brilliant insight into the "Divine Hand" governing price-auction markets is the politically convenient belief that this mechanism applies to all political economy, rather than only to the price-auction market that was the focus of Smith’s explorations. The resulting political ideology has led to runaway privatization and the ascendancy of a power politics based on money (plutocracy), fear, and traditionalist idealism. Internationally, it has led to the infamous "Washington Consensus" being implemented by the World Bank. the International Monetary Fund, and the World Trade Organization that has caused so much economic damage in the developing world and which has been the subject of many recent international protest demonstrations.

We need a new, or at least a more complete, theory of the economics of the commons. In addition, we need new narratives or stories that make the connection between economics and the sociology and ecology of the commons accessible to the average citizen. The environmental movement has sensitized public opinion to the natural or ecological commons, but has not developed a coherent theory of its economics. Their stories about the commons have focused on the global (macro) commons, where issues such as global warming, the destruction of the rain forests, and the pollution of the oceans can be the basis for powerful narratives. But the spinners of economic narratives also need to focus on the local and regional (micro) commons, where issues of human community and quality of life are central. Helena Norberg-Hodge’s documentation of the devastating effects of globalization in Ladakh and Jonathan Rowe’s tales of growing up in a neighborhood, as well as of his wife’s life in her Philippine village of origin, evoke responses that evoke in most hearers a nostalgic sense of lost community.

Both the theory and the stories imply a revitalization of democratic decision-making, based on citizens becoming increasingly aware of the costs of apathy. This popular political education for democracy can be greatly accelerated by radically decentralizing political decision-making. Political decision making needs to be decentralized to the local and bioregional level for four basic reasons:

  1. Globalization concentrates conventional economic power in global corporations and weakens the economic power of the nation-state.
  2. Globalization has created a power vacuum at the local and bioregional level, which is where the unsolvable problems--education, health care, public safety, retirement security, and a sustainable environment--and the underutilized resources--human capital--are located.
  3. Local politics is the essential laboratory for learning about political systems.
  4. Effective citizenship is likely to become a more important factor than marketable skills in the quality of life that the individual enjoys.

Local democracy is the laboratory in which citizens can learn experientially as well as theoretically how to think systemically about political, social, and economic issues. Higher education should play a central role in this decentralization of political decision-making.

(See my article "Governing the Commons.")

2. Political Gridlock in California

The bad news: California is the equivalent of the sixth largest economy in the world. Therefore, when voters lose their trust in government, the ability of the state to respond to the enormous dislocations generated by globalization is paralyzed. The good news: California is the equivalent of the sixth largest economy in the world. Therefore, it has the resources to deal with the crisis it faces without depending on federal leadership or assistance.

In some ways, California’s economic leadership has left it particularly vulnerable to the shocks of economic globalization. It rode its technological leadership and the accompanying dot-com bubble to the top of economic prosperity. And when that bubble burst, the effects of the economic fall have been stunning.

In the meantime, government’s ability to deal with economic crises has been slowly eroding. Ironically, the progressive era innovations of the initiative, referendum, and recall that were implemented as a political response to the economic excesses of the Gilded Age have played a major role in this deterioration. As the state government has proven too slow or too inept in its responses to a series of fiscal crises beginning with the excessive property tax burdens of the 1970s, voters have imposed restrictions on fiscal flexibility available to the governor and legislature that leave them relatively little room to maneuver in the present crisis.

A couple of factors have exacerbated the resulting gridlock. On the one hand, the radical right has shown increasing effectiveness at political organizing. Although this group is a minority of the electorate, its organizational discipline has been able to block progressive legislation and persuade voters to adopt regressive fiscal policies. On the other hand, the heavy dependence of the huge low tech sectors of the state’s economy (particularly agriculture and tourism) on foreign, often undocumented, labor has created a large population of politically disenfranchised residents with significant needs for social services. This combines with the state’s unfortunate history of racial politics to leverage the attractiveness of underfunding public services.

The bottom line is that the revitalization of contemporary politics needs to be focused on the community and the bioregion. And it needs to focus on the understanding of social and ecological systems that the university can provide as well as on the ideological leadership that progressive organizations such as those that belong to John Vasconcellos’ Politics of Trust Network (http://www.politicsoftrust.net) can provide.

Most of our intractable social problems (the ones that are the focus of most of the Politics of Trust principles) require the mobilization of local human resources to solve. They include education, health care, human and social services (including mental health), public safety, housing and land use, and bioregional environmental quality. (Transportation infrastructure, basic research, labor standards, and industrial environmental policy still require state, national, and even international government involvement.) Underutilized human resources are available in abundance at the local level, and the money (complementary currencies) and political will to mobilize them can be created at the local level. We do not need to wait for leadership from Sacramento and Washington, both of which are increasingly hobbled by the plutocratic character of macropolitics. (That does not mean that state and national leadership do not have abundant opportunities to provide a more just and sustainable economic environment and to avoid a large amount of unnecessary pain. It is just that they do not appear likely to have the requisite insight and political will in the near term.)

3. Some Implications for Higher Education

Solving these critical problems is essentially about revitalizing democracy at the regional level, and this revitalization has both an educational and a political dimension. Promoting engaged citizenship requires both educational and political leadership. Effective citizenship requires personal maturity, community awareness, and civic engagement. Both higher education and politics are the institutions that need to be at the heart of this enterprise. The role of higher education includes at least the following elements:

Governor Arnold Schwarzenegger’s’ proposed budget for 2004-2005 further weakens public funding across the board for higher education, health care, and social services, as well as hitting basic city services such as police and fire protection. Some of the proposed cuts will threaten the quality of life, and even life itself, while others are more of a threat to property (for example, cuts affecting city budgets in areas such as fire protection and street repair). Within a framework of giving priority to the former set of expenditures, since these are the areas where deterioration will be more rapid and often irreversible, higher education could take the lead in framing a strategy that includes the full range of affected social services. These including health care (especially clinics and mental health services), county social welfare services, and nonprofit organizations, as well as higher education itself. They should also probably include K-12, although that sector is apparently less immediately threatened. All of these services, as well as the budget crisis itself, are appropriate areas of focus for curriculum.

4. Some Implications for Sonoma State University

1. We need to strengthen the core undergraduate liberal arts and sciences curriculum so that our graduates have uniformly high levels of skills in writing, public speaking, critical and creative thinking, research (library, web, primary data based), and interdisciplinary problem solving, and are able to apply these skills to making sophisticated decisions as citizens. Creating a population of educated citizens and a workforce of sophisticated information managers is a public good and therefore should be largely supported by public funds.

2. In addition to the foundational perspectives and skills provided by a solid core liberal arts and sciences education, we need to provide applied information management knowledge and skills at both the undergraduate and graduate levels. At the undergraduate level, this could take the form of career minors. At the graduate level it takes the form of professional M.A. (or M.S.) degrees. Since applied information management skills have a high value in the labor market, it is appropriate to look at these courses as a personal economic investment and to fund them largely through fees (which will largely be financed through student loans).

3. Responding to the implications and challenges of the communications and information processing revolution will require a substantial investment in faculty development, one element of which could be faculty seminars on the implications and challenges of the communications and information processing revolution.

4. Sonoma State University should develop a coherent funding model predicated on a mixed income stream composed of state funds, student fees, and extramural funding including grants, contracts, and philanthropy. Participation in complementary currency systems (Time Dollars, scrip, or a parallel currency as proposed by the Community Support Dollar Project) would give significant leverage to all of the components of a mixed income funding model.

5. Sonoma State University should define the resource needs of its core liberal arts and sciences curriculum, focusing on an assessment of pedagogical needs (seminars, mentoring, experiential learning and independent study opportunities) as well as on the balance between disciplinary and interdisciplinary content and basic and applied scholarship and research.

6. Sonoma State University should embark on a series of fiscal planning initiatives designed to provide adequate support for our core liberal arts and sciences mission:

6.1. Legislative. We should seek official designation as a public liberal arts campus and parity of funding with other small liberal arts campuses within the CSU system.

6.2. Development. We should develop a strategy to ‘sell’ our core liberal arts and sciences mission to the community as ask for:

  • Bridging support to get through the current fiscal crisis
  • Endowment for permanent support for our mission

6.3. Grants and contracts. We should systematically explore these options, especially grants for curriculum and faculty development for our core liberal arts and sciences curriculum, and contracts in areas such as service-learning and community-based research that can support that core curriculum.

6.4. Fee-based instruction. We should develop a coherent policy for marketing and offering fee-based instruction in career minors and professional graduate programs. (This should also include mixed models such as the current Hutchins M.A. program.)

7. Sonoma State University should conduct an audit of all activities, including those not tied to the general fund such as enterprises, the foundation, and residential life, to assess their support of the core liberal arts and sciences mission of the university.

Conclusion

The current California budget crisis provides the opportunity for Sonoma State University to undertake curricular and other innovations that respond to the changing educational needs of twenty-first century society in general and to the acute needs of our service region which are exacerbated by the crisis. (See the recent reports "The American Democracy Project" by the American Association of State Colleges and Universities and "Greater Expectations" by the American Association of Colleges and Universities.") An effective response will require faculty, students, administration, and staff to think in creative new ways about politics, economics, and social systems.