Globalization and the power of creative destruction | Tom Palmer | TEDxIbmec

Tom Palmer talks about globalization and creative destruction.

Tom G. Palmer is a senior member of Cato Institute, and is the Director of the Cato University. Palmer is the executive vice president for international programs at the Atlas Network and is responsible for establishing operating programs in 14 languages and managing programs for a worldwide network of think tanks. Before joining Cato he was an H. B. Earhart Fellow at Hertford College, Oxford University, and a vice president of the Institute for Humane Studies at George Mason University.

This talk was given at a TEDx event using the TED conference format but independently organized by a local community. Learn more at http://ted.com/tedx

Thank you very much.

It's a difficult act to follow
someone such as Diogo Costa,

but I will do my best.

I want to address the question
of creative destruction

in a somewhat different context.

There's a lot of data
that's been presented,

I'll talk about that very briefly,

but I want to look at it
in the context of globalization,

just another controversial issue.

Many people start
the discussion by assuming

that the term "globalization"
has a negative meaning.

I don't think that's good social science.

We should start with a neutral meaning,
and then, investigate, in the world,

whether something is having
a positive or a negative impact.

So, one common approach
to understanding globalization,

that does not tell you
if it's a good or a bad thing,

is to refer to the diminution
or elimination

of state-enforced restrictions
on exchange across political borders -

so between, for instance,
Brazil and Argentina,

or the United States and Canada,

or Japan and Kenya -

and then, the increasingly integrated
and complex global system of exchange,

commerce, and production
that has emerged as a result.

So, this doesn't tell us if it's
a good thing or if it's a bad thing,

but it is a trend that we can
identify in the world.

It's not a new thing.

People have been talking
about globalization for a very long time.

The philosopher
Democritus of Abdera told us,

"To a wise man, the whole earth is open,

and for the native land
of a good soul is the entire earth."

Now, we can ask, "Is it accelerating?"

And rather than presenting you with data,

I'm going to suggest
you can find out on your own.

You can go to the global internet.

For the first time
in the history of humanity,

we have an entirely globalized
information system.

And here are some of the things
you could check through Google,

or other search engines.

International trade in goods,
as a percentage of economic output:

has it been rising or falling?

Hint: rising, quite dramatically.

International trade in services?

That's an interesting one
because, for most of human history,

services could not be traded
internationally.

You could not have your hair cut
in a different country, for example,

or get a massage on a different continent,

but now, services increasingly can be
traded across international borders.

We can look at cross-border investment,

that is to say, investors in one country

who own assets or businesses
in other countries.

International tourist arrivals.

That's one that is rarely talked about
in the economic context,

but you'd find an incredibly
steep upward curve

in the amount of people
traveling around the world.

When I was young,
you never saw a Chinese tourist,

unless they were from Taiwan or Hong Kong.

Now, people from the mainland can be seen
as tourists all around the world,

a huge increase in international travel.

And then, finally,
international telephone calls,

more people connecting with friends,
neighbors, families,

all around the planet.

I was just at a conference like this,
in Kenya, in Nairobi,

and one of the speakers asked something.

He said, "How many of you here have
friends who live in other countries?"

And the majority of their hands went up,
of East African students.

He said, "You are the first generation
of whom that could be said.

You have friends in Canada, and Korea,
and South Africa, and Germany.

That has never happened before."

It's an enormous change in the world,

and we can go and measure it.

Now, I want to put it
in a cultural context, though;

not so much about economic data
and how this is raising living standards,

but often we hear it said
that this is harmful to culture.

I want to tell a little story
about Guatemalan women

and the clothes that they wear,
the traditional Huipil and Corté.

Huipil is a kind of a shirt
for the top part of her body,

and the Corté is a skirt which she wraps
around herself and folds over.

I had a tremendous
opportunity in Guatemala.

I was teaching at the
Francisco Marroquín University,

and one of the professors there
is an anthropologist.

He made a great offer, and he said,
"You know, next weekend,

I'm going to go visit my family
in the Mayan Highlands."

He's an indigenous person, and he's Mayan.

He said, "Would you like to come with?"

And I am really glad I said yes,

because I saw a part of the country
I never would have seen otherwise.

I got to see a different way
of understanding that complicated country.

It's told me, as we were driving,
he takes many foreigners

because he's an anthropologist,

so he has visitors from universities
in France, England, America and elsewhere,

who want to go "study" the Indians,

and he speaks the Mayan languages,
as well as Spanish and English.

And he said, "Consistently,
they complain about one thing,"

which is the Mayan women
are wearing their Cortés and Huipils

less often than they used to.

They say, "I was here ten years ago,
and all the women had them.

Now, not so many."

They concluded that the Guatemalan women
were being robbed of their culture,

that they were victims of globalization.

But what was interesting, he said,

not once had he ever heard a foreigner
ask a Guatemalan woman a question,

the simple question: "Why are you
not dressed like your grandmother?"

That seems a little strange,
and maybe rude,

but increasingly, the indigenous women
are wearing clothes for everyday purpose

like the women you would see
in Brazilian cities,

and they reserve their Corté
for special occasions:

weddings, for going to church,
for special family occasions.

He, however, is a scientist,
and he speaks the local language.

So, he asked them,

"Why do you not wear the Corté?"

And he said, "I always get
the same answer, in one form or another.

They say this has become too expensive.

These are too expensive."

Now, they're handmade,
made generally by women,

it's traditionally
considered "women's work,"

and they take a long time to make.

They're very elaborate works of art.

What does it mean for her to say
these have become too expensive?

Well, what does "expensive" mean?

It means you have to give up
more to get it.

Well, it's labors what she has
to give up. To get what?

In economic terms, what it means is,
for the first time in their history,

the value of the labor
of an indigenous woman is rising.

That's what it means.

The value of her labor is rising.

So, she could make a Corté for herself,
and wear it, every day.

working in the field, doing her work,

or she could make it
and sell it to a lady in France.

They're very expensive.

And with the money she earns,
she could by five or six outfits

like Brazilian women wear,

and have enough money
also to buy eyeglasses,

so she can see at a distance,

and to buy shoes and school books
for her daughter,

so she can go to school
and learn to read and write,

so she can buy medicine
against dengue fever,

which they don't have
in France and America,

where they complain about these things.

So, the question is:

was her life made worse off

by the opportunity to trade with people
in France, in the United States,

in Germany, and elsewhere?

She now can buy more with her labor,

and she reserves the Corté
for going to church,

not for everyday work.

And the other question is:

from whose perspective
has her life been made better or worse?

From the perspective
of the foreign tourist, it's worse,

you don't see colorful
native people as often,

but maybe, from her perspective,
it's an improvement.

I personally have heard,
said by foreigners in Guatemala,

complaints when they see indigenous people
take out mobile telephones.

"Oh, it ruined the whole experience!
It wasn't authentic!"

They're supposed to have
"smoke signals," or something.

(Laughter)

They didn't like it, but they didn't think
from the perspective

of that indigenous person.

What does it mean
to have a mobile telephone?

It means you can call your parents
and talk to them.

You don't learn two weeks later
that your mother got sick,

and you didn't have time to visit her.

You get a phone call from your dad,
saying, "Momma is sick, come home."

Is that a positive thing
for your life or not,

from the perspective of that person?

Now, if we want to look at it,

what's happening in the world
is this process of creative destruction,

from an economic perspective.

Joseph Schumpeter is one of the most
important economists of the last century.

He was really a great genius,

and these are some of the most intelligent
words ever written in economics.

It's about a dynamic perspective,
not a static perspective,

"The problem that is usually
being visualized

is how capitalism
administers existing structures,

whereas the relevant problem
is how it creates and destroys them,"

a constant process
of creative destruction.

It's happening in the economy.

It's also happening in the context
of cultural life, artistic life, as well.

If you want to visualize it,
let's think first about technology.

Here's something that is disappearing:

phone boxes.

There are a few outside here,

but they're disappearing
from Brazilian cities.

You cannot find them anymore
in North America,

or Western Europe, or Japan.

The first time I noticed, I was at a hotel
I frequently go to, for conference.

Someone who worked at the hotel said,

"Look at that wall.
Does it look different?"

It took me a moment.
There were no telephones on it.

Why? Everyone has a telephone now.

They have it in their pocket,
so why should they invest in these?

So, here we have what's replaced it.

My first mobile telephone
was the one on the end.

It was like talking into a giant shoe.

(Laughter)

It was huge and very, very expensive,
a gigantic device.

I had to have this put
into a special briefcase.

Now, they've become so tiny
you can put it in your ear.

This has transformed the world.

Well, here's another one.
Some of you may not have ever used these.

When I first started writing,
I wrote with a pen on paper,

and then I would type them
with one of these.

I had an Underwood 5.

Many people don't know
how to use these anymore.

A good friend of mine told me his son,
when he was five, came to him, and said,

"Daddy, there's something strange.
I want to show you."

He said, "What is it?"

He said, "It's a computer,
but there is no screen!"

(Laughter)

He didn't understand;
he went and looked,

"Oh, I see, yes. It's a typewriter."

These are now found mainly in museums.

I'll show you a big improvement
in my personal life:

my first IBM Correcting Selectric tool.

It could correct your mistakes.

You had to type backwards,
and it would take the type off the page.

You have no idea what an improvement
this was for people who type a lot.

And, talk about sexy,
you could change the type font,

the kind of letters you used.

You bought these expensive little things.

You had to take it out,
and put in the other one,

and snap it shut, and then type with it.

So, that's how we got by,
but now, I have a Macbook Pro,

and this is better than my typewriter.

Now remember, something was destroyed.

There are no more typewriter factories.

In every town, there were
typewriter repair shops.

They're all gone. I haven't seen
a typewriter repair shop in years.

When I was a boy, I thought I wanted
to become a typewriter repairman.

I thought, "You'll always have work."

I'm glad I didn't choose that career path.

(Laughter)

I can do things with this
I couldn't do with my typewriter,

like watch movies.

If I talked to my typewriter,
people thought I was crazy.

I talk to my computer all the time,

and it talks back, with someone
who's in another country.

Now, we can look at another example.

When I was a boy, I watched Star Trek
with my father on television,

the first Star Trek,

and they had these amazing devices
called "communicators."

You opened it and you could
talk to one person. That's it.

And that's all it could do,
talk to one person.

I thought, "Wow! That is so cool!

In the distant future,
someone will have those."

(Laughter)

Well, I've got one,

and it's a lot better than they had
in these science fiction movies,

flying between the stars.

I can watch movies, I can play music,
pay my bills, convert currencies,

I read the newspapers on it,

I can do all kinds of things
you could not do

on a Star Trek communicator.

It's not just products
that are being replaced.

It's also ways of doing business.

Imagine, 20 years ago,
having a discussion of online banking.

"What's that?" People would not
have understood you.

Live-streaming media:

your grandparents
wouldn't have understood that.

Hub-and-spoke airlines,
which have revolutionized travel:

poor people can afford to fly
because of this tremendous innovation.

And also firms:

firms are also destroyed
and created, on a constant basis.

Standard & Poors
measures the largest firms

by "market-capitalization" value
of their shares.

How many of those
that were in the Top 100 in 1960

were still on it in 2012?

Ten. Only ten.

And 25% of the Top 100
had joined in just the last few years.

So, firms are coming and going,

going out of business, being destroyed,
and being created to replace the others.

Now, a lot of people focus
on the destructive part

of creative destruction,
but how destructive is it?

Is it destructive on balance?
I don't think so.

Some value is destroyed,
but it's not pure destruction,

because you get something else
that adds more value.

That's why it replaced it.

My computer is more valuable
than a big typewriter,

it can do a lot more, and it cost less
than I paid for my old typewriter.

And I'll conclude: what makes possible
value-added creative destruction?

And we have a pretty
good idea what that is.

It's entrepreneurial freedom.

Now, what does entrepreneurial
freedom mean, though?

Something rather special.

It's liberty for the unknown person;

not for any known person, per se,
but for weird people, strange people,

who are called, in English, "geeks."

The boys who created the computer industry

were strange, socially
badly-adjusted kids.

They could not get any
of the girls to date them,

because they were obsessed with radios,
computers, and working in their garage.

This has changed.

They all found that the girls
were more interested in dating them

after they became billionaires.

(Laughter)

Friedrich Hayek put it very neatly,

"What is important is not the freedom
for what I would personally like to do,

but rather what freedom
some person may need

in order to do things
beneficial to society.

And this freedom we can assure
to the unknown person

only by giving it to everyone."

Now, that is in an economic context,

but it has a deep root in your society.

"Freedom is disruptive
because it's about freedom for everyone,"

as Joaquim Nabuco put it very neatly
in his book on abolitionism.

He says, "You should love
the freedom of other people.

When you love the freedom of other people,
you'll live in a great society."

Thank you.

(Applause)