67. Short term v. long term perspectives

The economists of this world like to divide perspectives into macro and micro; the short term and the long term. John Maynard Keynes, among the greatest of his profession, said “In the long run we are all dead,” so what is important is the short term. Inevitably, if we cannot cope with the present there is little point in focusing on either the short or long terms. Much of what is happening in the world right now may be unsatisfactory, but projections about tomorrow are truly frightening.

The most disturbing statistic coming out of the World Economic Forum in Davos this January was that 45% of jobs in the United States will be taken over by automation over the next two decades.* How is the society going to tackle this daunting “long term” challenge? By comparison, dealing with the growth of an aging population, air and water pollution and global fish stock depletion seemed slightly less threatening. But to their credit, for the first time at Davos, economists openly discussed ways in which capitalism might be saved from itself.

Looking at where we may be headed is influenced in many ways — not only by our location on this planet but by our education, employment, cultural background, social outlook (now much affected for the younger generations by the internet) and expectations. The Chinese, for example, have a different perspective on what needs to be done for the long term well-being of their nation. Their commitment to the long term was already there a couple of millennia ago when they built the Great Wall and continues to the present day. No nation has ever introduced a long term social project on the scale of China’s Birth Control restrictions in which couples were limited to having only one child. Reasonably fearful of their ever larger population, the Communist leadership never even considered the consequential imbalance of the sexes as most couples felt having a son was more important than raising a daughter.

Today this Chinese orientation towards the long term is evidenced by the development of numerous mega-projects ranging from the high-speed rail system (of which 10,000 miles have already been completed ) at a cost of $300 billion, to the South to North Water Diversion Project under construction which will cost $80 billion. I admire the incredible scale of the Chinese commitment to the long term, but recognize that in Europe or the United States such giant projects would create powerful political opposition. Very few of the projects will yield immediate returns, but China’s authoritarian rulers can set aside any social, economic and environmental critiques or any open discussion of the possible consequences.

When one considers the extraordinary long-term mega infrastructure projects of the Chinese in Africa and Latin America (like the $50 billion canal across Nicaragua to compete with the Panama Canal) one must also wish that our politicians, overwhelmed as they are by the pressure of news headlines, could hold visions which extended beyond the next election. Alas, most leaders seem at the mercy of the economic forces of capitalism. None of the incredible advances of the technological revolution (many of which were initially sponsored by the government) are now planned by the state or in any way controlled. This has created short term uncertainty which in turn undercuts social and economic stability. A prime example of this was the inability of the governments to control the banks early on in the 21st century to ensure that the extraordinary short term profits they realized did not endanger the very basis of the entire financial system.

A prime component of leadership is long term perspective. A leader must know or have a vision of where he/she and their organization are headed — not just in the next quarter, but over the next decade or more. A number of American Presidents in the 20th century had long range visions, starting with Teddy Roosevelt who moved to protect the environment and battled against corporate irresponsibility; Woodrow Wilson who worked hard on the creation of the League of Nations; FDR who pushed for Social Security legislation and banking reform, and LBJ who supported Civil Rights legislation. In England too, Clement Atlee instituted the National Health Service and many other long term social reforms following WWII.

Working against those with long term visions have been the overwhelming forces of corporations. With their focus on profits and competition, they are principally concerned with this year’s earnings and their expectations over the next two to five years. Short-termism is also a dominant theme in the financial world where the corporate results of every three months have become part of “quarterly capitalism.” Most corporate executives, although fully aware of the wisdom of long-term planning in areas like the environment, do little to encourage it. They misconceive that tackling environmental change will be bad for business.1

The long term process of giving power to an overpaid corporate and financial elite has resulted in inequalities which no one is clear on how to correct. Economic inequality is like a slow-growing cancer which one may not notice in the early stages but when there is metastasis, demands radical treatment. That is what we shall shortly be facing in both the UK and the US. However the inordinate power that economic inequality gives to the few, like the two Koch brothers in the US who will be spending close to a billion dollars on helping their approved candidates in the 2016 elections, effectively blocks even modest changes or reforms in taxation. Indeed the rich have shown their capacity to protect their ever larger holdings over the past 30 years. Somewhat rhetorically, President Obama in his State of the Union address asked how much longer the American people would “accept an economy where only a few of us do spectacularly well?”

The rich also have been effective in steadily emasculating the power of the trade unions and this very weakness has become an increasingly important factor in the rising global inequality.2 The unions are no longer able to give their members a voice or the power to collectively bargain for higher wage levels. As a result, wage growth is manifestly falling behind the ever higher automation-pushed global levels of productivity.

Politicians have permitted “the market” and technology to go unobstructed on the assumption that they are economically and ethically beyond the need for any public or state control. This has led to the indiscriminate, careless and even corrupt sale of many of the public assets such as the rail and postal services in the UK. The Conservatives in power in Britain appear to have no problems letting the Chinese take leading stakes in the generation of nuclear power stations. The long term consequences of such moves appear to be side-stepped, but perhaps the thinking is that if anything goes wrong in such nuclear facilities then the blame can be outsourced!

For the great majority in the US and the UK, the scope of their prospects seems to be contracting. In the sixties Americans were coaxed into believing that rising living
standards would lead to more choice, more leisure and less hard work. Instead, the corporate culture has resulted in a charged competitive environment with longer working hours.3 Similarly, great hopes were held that technology would bring liberation. Instead, Americans are spending increasingly more time on the internet and its social networks and are becoming enslaved to its demands. Thirty years ago no one predicted such results, Even now we do not know how these technological advances, so readily incorporated into young minds, are affecting the new generation.

A long term perspective can empower politicians, corporations, organizations and individuals which can enable them to affect the future. Some of the earlier writers about our future prospects had varied ideas about the general assumptions we could make.4 Wendell Bell in the Foundations of Future Studies (1997) focused on three general concepts broadly accepted by futurists: First, the future is not predetermined. This suggests that more than one future is possible, which is at the basis of the theory of alternative futures. Some of those futures will be better or worse than others, so we have the opportunity to choose. Second, while the future cannot be known, it is possible to make educated guesses with reasonable accuracy about what would be best and worst. Third, we can exercise strategic planning. This is where we design a vision of a future outcome we might want in ten or more years. The important thing is to have a destination towards which we can move, that is, a long term perspective.

A variety of planners and groups are currently proposing a number of ways to balance short term policies with plausible long range measures which would reduce the chances of boom and bust episodes. The Oxford Martin Commission for Future Generations is a group which focuses on the increasing short-termism of modern politics and our collective inability to break the gridlock which undermines attempts to address the biggest challenges that will shape our future. Pascal Lamy, then the Director-General of the World Trade Organization presented a report, “Now for the Long Term” (2013) which listed five shaping factors that make positive change so difficult:

  1. Institutions: Too many are struggling to adapt to today’s hyper-connected world.
  2. Time: Short-termism directs political and business cycles.
  3. Political Engagement and Public Trust: Politics has not adapted to new methods.
  4. Growing Complexity: Problems can escalate far more rapidly than they can be resolved.
  5. Cultural Biases: Globalization can amplify cultural differences and exclude key voices.

One voice in the Commission, Camilla Toulmin, Director of the International Institute for Environment and Development, was particularly interested in understanding why people are reluctant to consider the “long term” and in identifying ways to reward those who do. She pointed out that the banking sector remained highly skeptical of the long term efficacy of carbon cutting policies, which unfortunately translates into an aversion to change for the common good. Another, critic, Professor Paul Elkins expressed his view that the current state of politics made it extremely difficult to promote the well-being of future generations. All the large developed economies are using short term policies to help generate growth

Bjorn Lomborg, a Danish economist and futurologist, has launched the “Post-2015 Consensus” in which experts are drawing up a list of objectives for humanity on how to best spend the $2.5 trillion in international development assistance which is to be distributed between now and 2030.5 Bjorn’s group contends that providing free condoms and other contraceptive devices to all who want them would give a return of $120 for every dollar spent. Halting sub-Saharan tax evasion, which currently costs 20 African governments about 10% of their gross domestic product a year would bring in close to $50 for every dollar given in assistance.

Philanthropists Bill and Melinda Gates, who have given billions to cut down malaria and infant mortality rates, have carefully been following many long term challenges. In their annual letter they predicted that “The lives of people in poor countries will improve faster in the next 15 years than at any other time in history.” It is hard not to celebrate long term predictions of this nature!

This September the nations of the world will discuss the adoption of a new set of long term goals which will replace the Millennium Development Goals adopted in 2000. The new Sustainable Development Goals (SDGs) will aim to end extreme poverty by 2030 as well as a range of other problems such as climate change, pollution and access to justice. The question then arises as to what really works with such a large set of long term goals? There are currently some 169 SDGs targeted on their list and such over-ambition needs serious trimming if planning for the long term is ever to be effective. Priorities also need to be applied if one searches beyond the sustainable to the achievable.


 

1Yorick Blumenfeld, Dollars or Democracy, (2004) p.93

2Seumas Milne, The Davos oligarchs are right to fear the world they’ve made,” The Guardian, January 22, 2015.

3Larry Elliott, “Short-termism rife as world longs for real solution,” The Guardian, October 21, 2013.

4Bertrand de Jouvenel, The Art of Conjecture, (1967); Robert Jungk and Norbert Mullert, Future Workshops: How to Create Desirable Futures (1987).

5“The economics of optimism,” The Economist, January 24, 2015, p.67

*The technology revolution is creating phenomenal changes in employment. The Gary Steel Works in Indiana, the largest such mill in the USA, employed 30,000 workers at its postwar peak in which it produced 6 million tons of steel. Today it can produce more than 7 million tons a year with only 5,000 workers!

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