NEWS RELEASE, 3/17/97 Global economy is out of control and is undermining social fabric, says UC Berkeley sociologist

by Patricia McBroom

Berkeley -- Today's global economy is a "mighty whirlwind" of turbulent, shifting investments operating in a random, unpredictable way far beyond human control. Rather than a New Order, the new society looks like a "meta-social" disorder. Thus concludes the first volume, "The Rise of the Network Society," of a huge three-volume work on the information age by sociologist Manuel Castells of the University of California at Berkeley. Castells, whose work has been compared to Daniel Bell's classic, "The Coming of Post-Industrial Society," argues that the global economy has undermined the social institutions and governmental controls that have been able to rationalize and balance capitalism since the 19th century. A wild form of capitalism is sweeping the world, leaving social safeguards in shambles, he says. Castells, however, is not gloomy about the capacity of humans to recover from and eventually control this headless capitalism. Although he offers no solutions in his book, he takes on the grand task of mapping out the transformations that have occurred in social and material life around the world during the past 15 years. In the process, he describes a new form of organization -- the network enterprise -- that he says has become predominant economically. A professor of planning and of sociology, Castells has mined the world's urban environments for 30 years for the insights that culminate in this work. He speaks five languages himself and has searched the literature of nine. He did fieldwork in Russia for seven years and in Asia, Latin America and Western Europe for four. His statistical data base -- drawn from reputable national and international sources such as the Organization for Economic Cooperation and Development and the United Nations -- is widely available; the analysis and theory, however, are far-reaching and original enough to be compared in a London Times review to Max Weber's "Economy and Society," the founding book of modern sociology. Later this month (March 22), Oxford university will host an international conference titled "The Castells Conference" to discuss this book. One of the most provocative conclusions Castells draws about the global financial market is that it operates under its own electronic steam, responding more to random turbulence in the world than to any economic logic of supply and demand or productivity. It is known, for instance, that only three percent of the $1.2 trillion in daily global transactions represents the actual trade of goods and services. Investments in this global "casino" are driven by the "nonhuman logic of an electronically operated, random processing of information," says Castells. There is no class of managers or capitalists in charge. "The speed and size of the transaction has surpassed the ability of anyone to evaluate or even track what is happening," said Castells. "We have lifted unpredictability to new levels." This purely financial market -- in which every dollar of goods is equivalent to $50 of money in play -- is capable of vast social destruction in the blink of an eye, says Castells. He recalls an Oct. 1992 crisis in Europe over a threatened devaluation of English, Spanish, Italian and Portuguese money. European central banks tried to stop the devaluation with a market injection in the hundreds of billions of dollars, but their intervention was overwhelmed by the size of global daily transactions. The devaluation continued. The social consequences of that crisis were severe, says Castells. European unification was delayed for five years, and European nations embarked on a policy of austerity which led to new levels of unemployment. "This is an example of how capital flows create their own logic," he says. "The governments' capacity to control this market was simply not there." It also is a good example of the unintended social consequences of financial markets set lose from any constraints. A main thesis in Castell's work is that the new form of multinational networking supersedes and renders obsolete all the mechanisms created in the industrial age to provide some equilibrium between labor and capital and to give individuals a representative voice. Effective labor unions, democratic processes, community standards and environmental regulations are among the casualties. "The labor movement is powerless except in certain public service areas. Welfare and institutions of social protection have been lost. There is a downward spiral of the conditions of work and the environment," he says. "I am not saying necessarily that the global economy will destroy the world. But that is happening now." According to the scientific theory of chaos, which Castells believes is operating in the global economy, new order arises out of a period of disorder, but "we cannot see that order now," he said. What he does see is a new organizational form called the "network" whose main characteristic is that it has no place, no location -- and no durability in time. "People are connected around one particular task that cuts across borders, institutions and nations. Economically, for instance, the operative unit is no longer an individual corporation, but a network of companies and subcontractors organized at the international level. Politically, as well, national governments increasingly work together, not separately, said Castells. But the social consequences of these transformations must be addressed, says Castells, if the world is not to collapse into a violent and unwieldy division between those who can operate within the new system and those billions of people who are simply being left out, as irrelevant human baggage. By deliberate choice, Castells does not offer solutions. "People in different countries with different values will find the solutions," he says. "I did not want to get attached to any particular scheme of my own. I just raise the issues."