Globalization and technology are creating a world that is increasingly interdependent and increasingly dependent on America, according to Laura D'Andrea Tyson, Dean of the Haas Business School at Berkeley and former National Economic Advisor to President Clinton.
"Technology has made the slowdown much faster, more synchronized and it takes in more of the world," said Tyson in a well-attended lecture last night at Dartmouth's Cooke auditorium.
The world is more interdependent than it ever has been before, said Tyson. Technology in areas like financial markets has made many economies vulnerable in ways they have never been vulnerable before.
She dismissed those who compared today's level of interdependence to those at the beginning of the 20th century, saying that there are "many more players" -- including smaller and rapidly countries -- more products and services, and more intra-industry independence.
"Now there is a supply chain connecting countries of different development levels around the world, and that's something new," she said.
In addition, the U.S. has occupied a more central role in the new global economy, especially its high tech industries and their high-flying stock prices.
This is why many economists became worried about the "Internet bubble," notably Federal Reserve Chairman Alan Greenspan, who famously warned of "irrational exuberance" in the U.S. stock market in 1996.
"By any conventional model, stocks were at levels ... that would not last," said Tyson last night. She then quoted Greenspan, saying "'I'm a real believer in the new economy, but you have the same old flawed human being.' The system could easily suffer a shock that could radically affect the U.S. economy. That is basically what we have today."
However, throughout her lecture Tyson qualified her predictions about the possibility of a U.S. or global recession, saying "this would be the first recession of the information age ... and the first recession of the global supply change. So we can gather from that that the usual models do not apply."
Taking a stand that was reminiscent of Clinton's New Democrat economic policies, Tyson was quick to sing the praises of the trade liberalization for countries like Malaysia, Singapore and Mexico. "There's an upside and a downside to any global system," said Tyson. In any case, "the record shows quite clearly that it's better to be a part of the game than not. But it comes with a price."
Tyson qualified the vulnerabilities of the global economy again. "I'm a real believer that information technology is a very major part in a major technological revolution, and technological revolutions do two thing. They lead to a market boom and bust, but the technology goes on. The ones who benefit are consumers and workers ... investors are not usually the winners."
Both in her generally optimistic evaluation of the global economy as a whole and in her support of many issues the audience raised in questions after the lecture, Tyson reflected economic policies of the Clinton Administration.
On the question of the Free Trade Area of the Americas, which recently drew attention at this month's Quebec City summit, Tyson said that Clinton had tried to advance the idea, which was conceived during the Bush Sr. administration, but had lost its coalition of support after NAFTA.
She said that Bush's current administration may be able to push the issue through a Republican House if it finds a new coalition, the primary factor for its success.
Tyson spoke as a Class of 1930 lecturer. The Class of 1930 fellowship is a program of Rockefeller Center.
