Re: rambling thought about complex systems

[Roberto Verzola <rverzola@phil.gn.apc.org>]

Globalization: Poor Design?
by Roberto Verzola


Most successful designers of complex systems follow basic rules of
design.

Whether it is a spaceship that will land men on the moon, or a
worldwide network of ten million computers such as the Internet, or a
huge computer program with fifty million lines of code, or a tiny
computer chip with two million transistors on it, the design rules are
surprisingly similar.

One of the most basic rules in designing complex systems is called
modularization. The rule says one should break up a complex system
into smaller parts. These smaller parts -- usually called modules --
should be more manageable and relatively independent from each other.
The modules should interact only through a few well-defined
interfaces. Each module should have high internal cohesion. The
coupling between modules should be minimized.

A good example is the Apollo lunar mission. One of the most complex
systems ever made by human beings, it used modularization all through
out, from the design of the spaceship itself, to the electronic
circuitry that comprised much of its automatic intelligence. The
mission's spectacular success is a tribute to the effectiveness of
modular design.

Another example is the Internet, a computer network designed to
survive a nuclear attack. Again, the basic rule in the design of the
Internet was modularization. The Internet implements communications
through relatively independent network layers which interact with each
other only through well-defined interfaces. Internet communications
protocols have also been broken down into simpler protocols. There is
a protocol for transferring mail, another for news, and still another
for files.

In economics, modularization means that countries should try to become
as self-sufficient as possible and as independent from each other as
possible. It means that interaction between economies should be
minimized and should occur only through well-defined regulations.
Modularization means that there should be minimal coupling among
economies.

Globalization, the current trend among economic planners, violates the
design principle of modularization. By tearing down "well-defined
interfaces" between economies, globalization increases the coupling
among countries and makes countries more instead of less dependent on
each other.

A complex system with high interaction among its parts becomes more
prone to system failures. It is difficult to modify and to improve. It
becomes error-prone, yet the errors are more difficult to identify and
to correct. In a poorly-designed system, attempts to correct errors
often introduce more errors into the system, making it even more
failure-prone.

>From a systems view, a globalized economy is a badly designed economy.
It will be prone to errors and failures. It will be difficult to
maintain and to improve. Attempts at correcting its failures will
result in even worse problems.

Look at the problems of today's globalized economy. Because of the
free movement of goods, diseases spread quickly from one corner of the
globe to another. CFCs produced in one country damage the ozone layer
and threaten the health of the citizens of other countries. Toxic
wastes produced in the North find themselves being dumped in the
South. Chernobyl's radioactive emissions threatened the dairy industry
of the rest of Europe. A stock market crash in the U.S. would probably
send stock prices worldwide tumbling. Because of the free movement of
capital, job insecurity as well as speculation has become a global
problem.

These are all the consequences of the bad design inherent in a tightly
coupled global economy.

Despite this, economists often insist that globalization is
inevitable, and the best we can do is to adjust to it.

For a designer's viewpoint, of course, there is no such thing as
"inevitable." Every design is the result of a conscious or unconscious
effort. Poor designs become inevitable only because the designer
relaxes on his rules, and adopts an "anything goes" approach.

To the economist, on the other hand, relaxing the rules is called
"liberalization", "deregulation", or "levelling the playing field".
And "anything goes" is called "free-market competition". A relaxation
of the rules then makes it easy to violate the basic principles of
good design, and makes globalization inevitable.

Who want the rules relaxed? These are mostly the global corporations,
the main beneficiaries of globalization. They are the equivalent of
global variables in software engineering.

Software engineers try to eliminate global variables or turn them into
local variables. Because global variables can easily cause changes
behind the back of the system designer, they make the whole system
unreliable and crash-prone. When global corporations use transfer
pricing to maximize profits at the expense of the host country, or
when they switch to highly automated equipment and minimize local
employment, or when they compete with local entrepreneurs for skilled
labor or for bank loans, or when they suddenly pull out liquid assets
for some reason or another, we are witnessing what system designers
call the "undesirable side-effects of global variables." Thus a
fundamental rule in system design is to avoid global variables.

Faced with a badly-designed, non-modular system, designers frequently
find it easier and more cost-effective to simply junk the design and
to start from scratch.

Perhaps, this is what we should do with globalization.

                             *****

I wrote the piece above in August 1996, nearly a year before the Asian
financial crisis erupted. In July 1997, a wave of speculation led to
the devaluation of the Thai baht, and the crisis began. Starting with
Thailand, it eventually hit the rest of Southeast Asia and Russia.
Recently, it was Brazil's turn. Today, it threatens the rest of Latin
America and Japan, and has forced the IMF and the U.S. Federal Reserve
to adopt extraordinary measures to keep the crisis from spreading.

Thus, subsequent events have confirmed the insights systems theory
provides about the world economy: that globalization is creating one
humongous economic unit ("global village", so the hype says) that will
be unreliable, problem-ridden and failure-prone.

The most spectacular failure of the globalist mindset will occur in
year 2000 (Y2K), when multiple simultaneous computer and machine
failures are expected to trigger powerful shocks not only in the
periphery but also in the world centers of finance and industry.

Today, a movement towards local-sufficiency has emerged in the U.S.
and the U.K. in anticipation of the disruptions that the Y2K crisis
will cause. In a way, the local-sufficiency movement is a social
expression of the modular principles of systems theory which, as a
 science, certainly boasts of more and greater successes than the
dismal discipline called economics.

"Globalization" is out, "modularization" is in.