about the global shift in power in politics.

That's a hotly debated topic these days.

There’s a great deal of speculation about

whether or when China will displace the United States

as the dominant global power,

perhaps along with India,

which if true would mean that the global system would be returning

to something like what it was before the European conquests,

primarily from the 17th century.

Just to illustrate the mood with unscientific

but probably representative sample,

I was talking recently to a professor of history

at one of the Massachusetts' state colleges,

who told me that at the beginning of every semester she asks

her students what they think are the richest countries in the world.

And for the last few years, they've been regularly saying China and India.

Well, you could believe that if you read the headlines.

A few qualifications may be in order.

First, what about wealth or the health of the society.

There's a standard measure,

it's the Human Development Index comes out every year.

With the latest release,

India was ranked at 134th,

slightly above Cambodia,

below Laos and Tajikistan.

That's about where it was several decades ago.

China was ranked 92nd.

But that's a little uncertain

since the poor areas of China

are not very accessible in this more closed society.

So it could be lower.

Where it's ranked it's tied with Belize

as slightly above Jordan

and below the Dominican Republic and Iran.

By comparison,

Cuba, which has been under harsh US attack

for 50 years is ranked 52nd.

It's above both of those,

also the highest in the Central America and the Caribbean,

barely below Argentina and Uruguay.

India and China also have extraordinarily high inequalities,

some of the worst in the world.

So that means a well over a billion people

are much further down in the scale.

Well, what about debt?

Common discussion ideas, it places the United States enthralled to China's whims.

Well, apart from a very brief interlude, which is now over,

Japan has been the biggest holder

of the US government debt.

At best, it’s not much of a weapon

for many reasons that are well understood.

What about prospects?

The United States has enormous advantages

over both Europe and Asia.

For one thing, it's unified,

has a relatively homogeneous population, one language,

a huge internal market and rich resources,

a favorable climate and much more.

What about military power?

Well, here there's just no discussion.

The US is about the same as the rest of the world combined

in military expenditures, much more if we can add intelligence.

Technologically far more advanced.

It's the only country with hundreds of military bases,

maybe 800 military bases abroad,

which in fact are regularly used for the exercise of violence.

So here, there's no comparison.

Actually there’s more fundamental observation.

The entire framework of discussion, though conventional,

is pretty misleading.

The global system is not just an interaction among states,

which pursue some so-called national interest,

which is abstracted from the distribution of domestic power within the society.

That’s the way the matter is usually viewed in commentary

and also in the profession and professional international relations theory.

Largely dominant views called realism --

views the international system roughly in this fashion.

Now, there have always been critics of this view.

To take one, Adam Smith.

Adam Smith was concerned primarily with England.

And he described --

He said that in England,

the principal architects of government policy

are merchants and manufacturers

and they make sure that their own interests

are most peculiarly attended to,

however, grievous the impact on others,

including the people of the England,

but of course far worse of those who are subject to

what he called the savage injustice of the Europeans.

He was referring particularly to England and India.

Well, today, pretty much the same maxim holds.

It's not merchants and manufacturers

in the United States and Europe.

It's primarily multinational corporations and financial institutions.

The financialization of the economy has been in a dramatic change

in the last roughly 30 years.

If you go back to about 1970 in the United States,

financial institutions amounted to maybe 3 percent of gross domestic product.

And now it's approaching a third.

Corresponding fact is the hollowing out of productive industry

and that has huge effects on the society,

on political decisions and on the political system

generally keeping to Adam Smith's maxim.

In fact we've just seen a very dramatic illustration of that.

President Obama, who has gained office,

in large measure through the support of the financial industry,

huge component of the economy.

And they preferred him to McCain and that was the core of his funding.

And there was a payoff.

Huge bailouts to the financial institutions

when the system collapsed.

And they were actually much more important gifts

that are not so much discussed.

So takes a Goldman Sachs,

which is considered the top dog

in the economy and the political system.

It made a mint by selling mortgage-based securities

and more complex financial instruments

to unwitting buyers.

But Goldman Sachs itself knew what it was doing.

They knew that they were likely to go bust.

So the company insured itself against loss

by betting that what they're selling would fail

using, what's called, credit default swaps

through giant insurance agency AIG,

the world's biggest insurance agency.

Well, when the financial system collapsed,

it took AIG down with it.

But Goldman's boys are well-placed among the architects of power

and they not only arranged for a huge bailout.

but more importantly, they got the taxpayer

to pay to save AIG from bankruptcy by up their collapsed loans

and that incidentally saved Goldman Sachs from the same fate.

Now, the CEO of Goldman Sachs Lloyd Blankfein

is hailed as maybe the greatest genius since Einstein.

Goldman's making record profits,

paying out huge bonuses.

And the other agents of the financial crisis

are bigger and more powerful than ever.

Well, the public may not understand the details, but they are furious.

The banks that created the crisis are visibly booming,

the population is suffering,

the unemployment is officially at about 10 percent, actually much higher.

In manufacturing industry, it's about the level of the Great Depression.

And those jobs are not coming back

because of the shipping of productive capacity abroad.

In fact, for the last 30 years,

for the majority of the population,

there has been roughly stagnation, sometimes decline,

in the real wages as wealth poured into very few pockets

at highest inequality in US history.

So there's plenty of anger.

And finally President Obama had to react to it.

And he did a couple months ago.

He reacted first with the rhetorical shift,

started talking about bad bankers and so on.

And also a few policy suggestions that the financial industry didn't like.

But he was supposed to be their man in Washington.

They'd bought him and put him in.

And the principal architects very quickly sent their instructions.

They announced very publicly that they're shifting funds to the political opposition.

And they poured money into crucial election in Massachusetts,

which gave the Republicans the power to block any congressional legislations.

An Interesting story in itself.

And Obama got the message within days.

Within days, he informed the business press

that bankers are, I'm quoting now, "are fine guys."

He singled out for praise the chairmen of chairs

of the JP Morgan Chase and Goldman Sachs, the two biggest players.

And he assured the business world as he put it that,

"I, like most of the American people, don't begrudge people's success or wealth."

He's referring to the huge bonuses and profits that are infuriating the public.

"That's part of the free market system," Obama continued.

Not inaccurately as free markets are interpreted

in state capitalist doctrine.

It's a very revealing snapshot of the Smith's maxim in action.

Well, with Adam Smith's crucial corrective in mind,

let's take another look at the global system.

See what's happening to it.

There is a real shift of power across the world,

namely, from the workforce to transnational capital.

And China does play a big role in it.

It's basically the assembly plant for a regional production system.

Japan, Taiwan, other Asian economies

export high-tech parts and components to China,

and China assembles and exports them

using its advantages of extremely cheap and highly repressed labor and land.

There's much concern about the trade deficit with China,

-- US trade deficit.

Which is in fact huge and growing.

But there’s less attention to the fact that there's a compensating factor

that trade deficit with Japan and the rest of Asia have sharply declined,

as the new regional production system takes place.

And US manufacturers are following the same course.

They're providing parts and components for China

to assemble and export back to the United States often

for the financial institutions and the retail giants

and the ownership and management of manufacturing industry.

And the sectors closely related to this nexus of power.

It's heavenly. That's also well understood.

So the head of the very influential Sloan Foundation,

Ralph Gomory, testified before Congress a couple years ago

and he explained that, as he put it,

"In this new era of globalization, the interests of companies and countries have diverged

in contrast to the past.

What is good for America's global corporations

is no longer necessarily good for the American people."

Take one striking illustration.

Take IBM, peak of the computer industry.

Today it employs about 400,000 people

in its facilities in the United States and its subsidiaries abroad.

By now, employees within the United States

have declined to about 30 percent.

Many of the employees here are informed

that they have to go abroad if they want to keep their jobs.

Well, that's fine for IBM owners and directors,

but it's grievous for the country as Adam Smith put it.

And it's worth adding that IBM became the global giant in computing

in large measure thanks to the magnificence of the US taxpayer

who substantially funded the core of the IT revolution

and most of the rest of the high-tech economy.

But business is not philanthropy.

Corporations are dedicated to maximizing profit and market share.

In fact, that's a legal obligation for management.

So it's not good for the country. It’s too bad.

Well, China became the world's assembly plant.

The Chinese workers are suffering along with the rest of the global workforce.

And it's just as we would anticipate in a system

that's designed to concentrate wealth and power,

and to set working people in competition with one another worldwide.

Worldwide the share of workers and national income has been declining

but dramatically so in China,

maybe more than anywhere else close to it,

which is also leading to growing unrest in this highly inegalitarian society

one of the most inegalitarian in the world,

and capable of considerable violence to suppress dissent.

Well, there's a good deal more to say about all of this

but just to summarize with few salient points from a much more complex reality.

There are indeed very important shifts in global power.