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07/26/2001

Globalization...an update

With the recent chaos in Genoa, the term "globalization"
obviously leaves a bad taste in one''s mouth...on both sides of the
issue. Or is it, rather, on all sides, because the issue of
globalization is not a black and white affair. It is also the key
debate of the century.

First off, let''s dismiss the self-styled "anarchists and hooligans"
and eliminate them from this discussion. As commentator
Alasdair Palmer wrote earlier this year, " ''Anarchism'' isn''t a
protest against multinationals, globalization or economic growth.
It is simply shorthand for enjoying smashing things and people,
and a way of making it sound respectable." But the other
protesters (who go about their ways in a non-violent nature)
deserve to be heard.

So what is "globalization?" Some have said that if a problem
erupts in one place and it spreads to another, that''s globalization.
More specifically, perhaps the central issue of globalization is
the premise by some that the process often leads to growing
inequalities between rich and poor. Or as Robert Samuelson puts
it, among its detractors globalization is "(The feeling that) greedy
multinational companies and corrupt political and economic
elites are grabbing all the gains."

Many of the groups protesting these days are in essence saying
that capitalism is to blame for the world''s ills. Of course most of
you would probably agree with me in saying this is a crock.
Obviously, alternatives to capitalism like communism failed
miserably.

A report in the World Bank from last fall concluded: "In the vast
majority of cases growth (has) led to rising consumption in the
poorest fifth of the population, while economic decline led to
falling consumption."

Or as Samuelson opines, "To cut poverty, countries have to get
richer - and the effects do trickle down."

Breaking it down to its essence, the protesters chief targets are
free trade, the environment, and the "system," with the latter
targeting structures like the IMF and its seeming ability to ride
roughshod over the developing nations who seek its aid.

On the issue of free trade and the environment, legitimate groups
like the Sierra Club complain that free trade accords, while
promoting free commerce and lower tariffs, mainly protect
foreign investors, and that "they require the signatory countries
to do little to improve the lives of the hemisphere''s poorest and
almost nothing to protect the forests, rivers, and air." [Source:
Herald Tribune]

And there is no doubt that as free trade benefits consumers
through lower prices, at times it is very harmful to workers. For
example, cheap steel from Korea may make for cheaper
refrigerators in New York, but it does a number on the paychecks
of steelworkers in Pennsylvania or West Virginia.

And while Republicans, traditionally not supporters of Big
Labor, may argue the merits of NAFTA and other trade accords,
it only hurts the party to be insensitive to the simple fact that
free trade also drives some jobs out of the country. Or as
commentator Michael Kelly writes, "(Free trade) results in real
jobs for real people in some places, but also the loss of real jobs
in Akron, OH," adding, "to the greater pain of many for the
greater gain of a few." I''m not sure I totally agree with this last
bit, but the opinion deserves to be aired.

Why is globalization so critically important going forward?
While many demographic studies come up with pie in the sky
estimates, you simply can''t ignore them. By one U.N. report,
which I have quoted previously on this site, in 2050 the
population of the less developed countries will grow from 4.9
billion to 8.2 billion, while the more developed nations''
populations will hold steady at 1.2 billion. [The U.S. will be the
only developed nation among the world''s 20 most populous by
2050, which points out a crucial strength of the country going
forward.]

The above points out a key issue for the globalization crowd, the
growing inequality between rich and poor. But while the
protesters blame governments from Washington to London to
Frankfurt for this problem, the real blame should often be placed
at the doormat of the governments of the developing nations, as
they are the ones that often refuse to reform, are rife with
corruption, and have no real legal system in place to protect
property rights, the foundation of any truly democratic /
capitalistic society.

But on the other hand (this whole issue is a classic "on the one
hand...but on the other hand" one), organizations like the IMF
often come into a situation where a nation like Indonesia needs
aid and instead of working with the government (as they are
finally doing in Turkey today), they apply a heavy hand which
kills the hopes and dreams of the people. It was in Indonesia, for
example, where the IMF insisted on raising taxes, canceling
infrastructure programs, and eliminating price controls, before
Jakarta could borrow money. Or as Joseph Kahn puts it, "The
fear is that the IMF has been acting a little like a heart surgeon
who, in the middle of an operation, decides to do some work on
the lungs and kidneys, too." What was the result in Indonesia?
The economy collapsed, to the tune of close to 50% in the two
years following the Asian Crisis. The tens of millions who were
working their way up from poverty since the 1970s fell right
back into the poverty trap. At the same time, Malaysia, which
thumbed its nose at the IMF, came through the crisis in relatively
good shape.

Lastly, for now, what frustrates many who observe the anti-
globalization crowd is the fact that it has an anti-tech bias. As
Fareed Zakaria (an emerging superstar in the commentary
crowd) puts it, the poor countries have no choice but to embrace
the technological revolution (bubbles aside). To do otherwise is
committing economic suicide. This doesn''t mean that the mere
act of placing PCs in the jungles of Africa will help, but when
you take into consideration that the big advances of the next few
decades will be in the fields of science and medicine, you can see
the huge advantages that these countries could reap if they were
to just get on board, and it''s to this issue that groups like the IMF
and the World Bank should probably be directing their aid.

And on a related issue, the bias against genetically modified
food, Malloch Brown, director of a UN development program
said, "Not one person anywhere has died by eating genetically
modified food. On the other hand, malnutrition kills millions
every year." And Brown concludes that today''s protesters risk
becoming members of the " ''flat earth society,'' opposed to
modern economics, modern technology, modern science, modern
life itself."

You can see just how many different issues we touched on over
the course of this brief debate. I guess the main point is that
everyone needs to keep an open mind as the discussions heat up.
Both sides have valid points, and we''ll keep reporting on them.

Next week, a Kyoto update.

Sources:

Robert Samuelson / Newsweek
Pete Engardio / Business Week
Joseph Kahn / New York Times
Fareed Zakaria / New York Times and Newsweek
Michael Kelly / Washington Post
International Herald Tribune
Irwin Stelzer / The Weekly Standard

Brian Trumbore


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-07/26/2001-      
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Hot Spots

07/26/2001

Globalization...an update

With the recent chaos in Genoa, the term "globalization"
obviously leaves a bad taste in one''s mouth...on both sides of the
issue. Or is it, rather, on all sides, because the issue of
globalization is not a black and white affair. It is also the key
debate of the century.

First off, let''s dismiss the self-styled "anarchists and hooligans"
and eliminate them from this discussion. As commentator
Alasdair Palmer wrote earlier this year, " ''Anarchism'' isn''t a
protest against multinationals, globalization or economic growth.
It is simply shorthand for enjoying smashing things and people,
and a way of making it sound respectable." But the other
protesters (who go about their ways in a non-violent nature)
deserve to be heard.

So what is "globalization?" Some have said that if a problem
erupts in one place and it spreads to another, that''s globalization.
More specifically, perhaps the central issue of globalization is
the premise by some that the process often leads to growing
inequalities between rich and poor. Or as Robert Samuelson puts
it, among its detractors globalization is "(The feeling that) greedy
multinational companies and corrupt political and economic
elites are grabbing all the gains."

Many of the groups protesting these days are in essence saying
that capitalism is to blame for the world''s ills. Of course most of
you would probably agree with me in saying this is a crock.
Obviously, alternatives to capitalism like communism failed
miserably.

A report in the World Bank from last fall concluded: "In the vast
majority of cases growth (has) led to rising consumption in the
poorest fifth of the population, while economic decline led to
falling consumption."

Or as Samuelson opines, "To cut poverty, countries have to get
richer - and the effects do trickle down."

Breaking it down to its essence, the protesters chief targets are
free trade, the environment, and the "system," with the latter
targeting structures like the IMF and its seeming ability to ride
roughshod over the developing nations who seek its aid.

On the issue of free trade and the environment, legitimate groups
like the Sierra Club complain that free trade accords, while
promoting free commerce and lower tariffs, mainly protect
foreign investors, and that "they require the signatory countries
to do little to improve the lives of the hemisphere''s poorest and
almost nothing to protect the forests, rivers, and air." [Source:
Herald Tribune]

And there is no doubt that as free trade benefits consumers
through lower prices, at times it is very harmful to workers. For
example, cheap steel from Korea may make for cheaper
refrigerators in New York, but it does a number on the paychecks
of steelworkers in Pennsylvania or West Virginia.

And while Republicans, traditionally not supporters of Big
Labor, may argue the merits of NAFTA and other trade accords,
it only hurts the party to be insensitive to the simple fact that
free trade also drives some jobs out of the country. Or as
commentator Michael Kelly writes, "(Free trade) results in real
jobs for real people in some places, but also the loss of real jobs
in Akron, OH," adding, "to the greater pain of many for the
greater gain of a few." I''m not sure I totally agree with this last
bit, but the opinion deserves to be aired.

Why is globalization so critically important going forward?
While many demographic studies come up with pie in the sky
estimates, you simply can''t ignore them. By one U.N. report,
which I have quoted previously on this site, in 2050 the
population of the less developed countries will grow from 4.9
billion to 8.2 billion, while the more developed nations''
populations will hold steady at 1.2 billion. [The U.S. will be the
only developed nation among the world''s 20 most populous by
2050, which points out a crucial strength of the country going
forward.]

The above points out a key issue for the globalization crowd, the
growing inequality between rich and poor. But while the
protesters blame governments from Washington to London to
Frankfurt for this problem, the real blame should often be placed
at the doormat of the governments of the developing nations, as
they are the ones that often refuse to reform, are rife with
corruption, and have no real legal system in place to protect
property rights, the foundation of any truly democratic /
capitalistic society.

But on the other hand (this whole issue is a classic "on the one
hand...but on the other hand" one), organizations like the IMF
often come into a situation where a nation like Indonesia needs
aid and instead of working with the government (as they are
finally doing in Turkey today), they apply a heavy hand which
kills the hopes and dreams of the people. It was in Indonesia, for
example, where the IMF insisted on raising taxes, canceling
infrastructure programs, and eliminating price controls, before
Jakarta could borrow money. Or as Joseph Kahn puts it, "The
fear is that the IMF has been acting a little like a heart surgeon
who, in the middle of an operation, decides to do some work on
the lungs and kidneys, too." What was the result in Indonesia?
The economy collapsed, to the tune of close to 50% in the two
years following the Asian Crisis. The tens of millions who were
working their way up from poverty since the 1970s fell right
back into the poverty trap. At the same time, Malaysia, which
thumbed its nose at the IMF, came through the crisis in relatively
good shape.

Lastly, for now, what frustrates many who observe the anti-
globalization crowd is the fact that it has an anti-tech bias. As
Fareed Zakaria (an emerging superstar in the commentary
crowd) puts it, the poor countries have no choice but to embrace
the technological revolution (bubbles aside). To do otherwise is
committing economic suicide. This doesn''t mean that the mere
act of placing PCs in the jungles of Africa will help, but when
you take into consideration that the big advances of the next few
decades will be in the fields of science and medicine, you can see
the huge advantages that these countries could reap if they were
to just get on board, and it''s to this issue that groups like the IMF
and the World Bank should probably be directing their aid.

And on a related issue, the bias against genetically modified
food, Malloch Brown, director of a UN development program
said, "Not one person anywhere has died by eating genetically
modified food. On the other hand, malnutrition kills millions
every year." And Brown concludes that today''s protesters risk
becoming members of the " ''flat earth society,'' opposed to
modern economics, modern technology, modern science, modern
life itself."

You can see just how many different issues we touched on over
the course of this brief debate. I guess the main point is that
everyone needs to keep an open mind as the discussions heat up.
Both sides have valid points, and we''ll keep reporting on them.

Next week, a Kyoto update.

Sources:

Robert Samuelson / Newsweek
Pete Engardio / Business Week
Joseph Kahn / New York Times
Fareed Zakaria / New York Times and Newsweek
Michael Kelly / Washington Post
International Herald Tribune
Irwin Stelzer / The Weekly Standard

Brian Trumbore