History of the world economy|
Date: Sun, 11 Jan 98 14:37:23 CST
From: Jagdish Parikh <email@example.com>
Subject: Our Economic System: Badly Designed
From firstname.lastname@example.org Fri Jan 9 01:38:02 1998
Our Economic System: Badly Designed?
By Roberto Verzola
9 January 1998
The international financial crisis which struck Asian countries in
1997 and continues to cause widespread damage this year is a perfect
example of what system designers call "the side effects of global
Take the most complex systems ever designed by people -- like the
spacecraft system which took men to the moon and brought them back,
or computer chips that are made of tens of millions of components,
or a complex operating system with one hundred million lines of code.
They work as designed because the system designers followed certain
rules of design which time and again have been proven correct.
Follow the design rules, and you get a system that is robust and
reliable. Violate the design rules, and you get a system that is
unreliable and crash-prone.
One of the most important rules that good designers will never violate
is modularization: breaking up a complex system into relatively
independent modules, which are isolated from each other except for a
few well-defined interfaces. This design rule can be found in all
engineering and computer science texts. It is true for hardware and
software designs. Without exception, all complex systems, which have
violated this rule have ended as miserable failures, while those which
have tried to implement it have shown much better rates of success.
The reason for the rule is simple: as the number of components in a
system increases, the number of possible interactions between
components increases dramatically. Beyond a certain number of
components, it becomes impossible to double-check or even to trace the
results of every possible interaction. Such cases increase the
possibility of undesirable interactions, called "side effects."
Because these potentially undesirable side effects increase at a
faster rate than the number of components, they eventually bring the
whole system crashing down.
The history of systems design is replete with crashed spacecrafts and
crashed computer operating systems that drive home the point: complex
systems must be broken up into smaller, more managable, independent
modules; otherwise, you get an unreliable, crash-prone, or unworkable
The opposite of modularization is globalization. No kidding. The
favorite word of President Ramos and World Bank economists is an
absolute no-no among systems designers. Open any respectable textbook
on computer science or system design, and one of the first design
rules you are going to meet is: avoid global variables. Avoid anything
that affects the entire system globally. Break up large systems into
smaller modules. Protect your modules from interference by other
modules. Isolate your modules from each other. Build firewalls.
Most of all, avoid global variables.
In an economic system, a global variable is anything that affects the
system as a whole, particularly one with significant effects. Global
corporations, because they operate worldwide, are a good example. The
IMF, the World Bank, and the World Trade Organization (WTO), because
they intrude into almost every economy in the world, are also good
examples. Their moves and decisions affect so many subsystems of the
economy, and result in millions of other interactions, that
undesirable "side effects" proliferate. Eventually, these side effects
can bring the whole system down.
Unfortunately, most economists appear to have little understanding of
system design. (When I was in college, many of those who failed our
engineering subjects shifted to economics.) Instead of following good
principles of design, our economists repeat the most common mistake of
amateur programmers: they rely on global variables.
Instead of building a protective firewall around our economy, they
tear down existing walls of protection. Instead of strictly regulating
those global variables that penetrate the remaining protective walls
we have, they launch a perverse program of "deregulation". Instead of
blocking IMF, WTO and World Bank interference, they kneel and bow
before them. Instead of relying on local variables and local
interactions, which are manageable locally, they put greater reliance
on global markets and global players. All those legal infrastructures
which in the past protected us from the side effects of global
variables -- such as protective tariffs, foreign exchange controls,
regulatory mechanisms and others which would have dampened the impact
of global side-effects on our economy -- are being torn down.
Worse, the reliance on global variables is even being touted as "sound
Until we learn the basic lessons of systems design, and apply these to
our own economy, we will be saddled with an unreliable, crash-prone
economic system, one which will cause us endless suffering.
There is another lesson we can learn from successful designs of the
past. If a system is badly-designed, and suffers from too many global
variables, any attempt at modification will likely produce even more
unintended side effects. Often, it is better to discard the
misdesigned system altogether and to start again from scratch.
Perhaps, this is what we should do with the system and a regime that
embraces globalization, leaving us at the mercy of its side-effects.
* Roberto Verzola is an engineer who specializes in computers. Funded
by the Philippine government, he designed a computer system in 1981,
the first Filipino to do so. He also designed the software for first
online systems used at the Philippine Senate and House of
Representatives in 1991. He has devoted a lot of time studying the
social impacts of technology.