A Rip in the Sea - Bülent Eczacıbaşı

MÜ

Income distribution has deteriorated within countries but improved across the globe. The poor countries have moved a little towards the rich ones, but within many rich countries the middle class has disappeared; the rich are richer and the poor are poorer. So the problem is mostly in developed countries.

America has got to tackle its own problems. There’s a major problem there, and of course, some of it is associated with globalization. But it’s up to America to solve it: I wouldn’t know how they’ll go about it. But at the end of the day, income distribution between countries has improved. You have to accept that. Over the past 15 to 20 years the poor countries have caught up with rich countries. To a certain degree, it’s happened at the expense of the middle class. This is the reality; the G7 became the G20. Sadly, I’m not too clear about the solutions, but trying to reverse what happened in the past 20 to 25 years would go against the natural flow of things. Protectionism is wrong for instance. It might be a little trickier to determine what is right, but we do know what’s wrong.

RG

Professor Üçer is making an important point. Say, you’d always defined yourself by your job in the factory, your parents worked there before you, and you expected to work there, marry a fellow worker, and your children to do the same. The town was that factory’s town. Suddenly the factory’s gone. Now, there’s no longer any reason for that town to exist. You’re still there though; what are you doing? This is the description of structural unemployment – and we don’t know how to cope with it.

But you have to offer these people something else. In the long run, of course, once life and the economy regain their balance, unemployment will vanish. How come? Those people will have died, and their children will be living somewhere else, that’s why. But suggesting that the person working in the factory for 35 years should establish an internet start-up or another business now that the factory’s closed down is not the answer! That’s not the world we live in. People can’t switch from one profession to another just like that. Human capital is truly specialized, and that specialization renders people incapable of doing some jobs.

MÜ

Absolutely. And the next thing is robots; yet another major shock to the system that we have to prepare for in about 15 to 20 years. These are all quite difficult matters; it would be greatly optimistic to assume they won’t cause trouble. That’s why preparation is needed; and I’ll repeat something we all know: Education and hope are the only answers.

RG

There’s social security.

MÜ

Yes, there is. Absolutely, you’re very right. Take social security out, though, and there’s only education and hope when you look ahead, nothing else.

RG

But at the very least you should be able to say this: “OK, I’m going to be on Social Security all my life, but my kids aren’t.” In order to be able to say that, hope and education are essential for countless people. If they can’t even say that, then they become people with nothing to lose.

That’s where we’re now seeing the benefit of spreading risk across society though social security systems. It’s not just an ethical issue; do it for yourself if you don’t care about other people. America’s learning this the hard way now, as is the UK. Not helping up the fallen or even attempting to help bounds back as a cost and hits those still on their feet.

There is one thing I’d like to stress that concerns everyone, not just businesspeople: You can’t just save yourself! If this is the state of the country, we’re in it together. If you say that you’ll stand at the prow of the boat, remember that when the boat sinks the prow’s going to go under, too. That’s why, even if you don’t care, you have to understand what’s happening in this country. So, focus on your business in the broadest sense of the word. Now is the time to take the bull by the horns.

We’re just beginning to see that it’s always been this way; it’s only because we shirked our responsibility that our country’s in this state. I don’t just mean businesspeople either; when I take a look at myself, I can say exactly the same thing about academics, too. It’s not enough to say I’ll just do research and teach. You really do have to care and “do your part.” “Out of sight, out of mind” doesn’t work. Once the problem grows big enough, you’ll not only see it, you’ll feel it. That’s why we have to care, and we can respond in a variety of ways. Some believe there’d be no cultural activity in the land if they didn’t organize it, and others think that if they don’t speak out, no one else will, so they’d better speak out. Everyone can do something. I never regard any of these contributions as being less than my own.

Everyone faces choices like these. I respect people who do what they can. You have to do your own bit. This is our country, and everything we do matters. That’s why we have to assume responsibility, and push and shove if need be. It’s costly, this country punishes the children who serve it; but we all belong here, and that’s how we live.

MÜ

Professor Gürkaynak’s explanation of what we can do is great. The ethical stance matters, of course; at least, that’s my understanding of what he said. It’s very important to do your bit, and the educational aspect is important as well. People often overlook how effective globalization is as a prosperity generator. There are real problems, of course, but globalization and an open economy are realities we have to adapt to, like it or not. In the end, we need to defend globalization, and by that I mean to continue offering a balanced defense of globalization as global citizens, as the global elite, even as we prepare ourselves for different scenarios.

BE

I see. It goes without saying that these are encouraging and optimistic thoughts. You’ve not voiced the concerns or risks that have occurred to me and that I had expected you to mention, however. Take the development in income distribution; I will call it a “change in balances” rather than a “deterioration.” I wonder whether the tendency for higher income groups to grow richer can hamper and ultimately obstruct the capitalist system and democracy. I’m concerned by the growing possibility that the concentration of power and wealth might damage the functioning of democracies and derail a system that generally benefits society.

MÜ

That was partly what I meant when I said, “We know what previous waves of globalization led to.” I mean, we all know how the 1870-1914 wave ended.

BE

Yes. Wars…