Distemper

If the prospect of a slowdown wasn't sobering enough, this year the business elite attending the great Alpine event had to go toe-to-toe-with the anti-globalization elite--with no clear winner in sight.

"Switzerland is not a banana republic," fumed Claude Smadja, managing director of the World Economic Forum, during a tense press conference held during the closing days of its gala annual meeting in the ski resort town of Davos, not far from the Austrian border. Smadja, who had not had to defend Switzer land's devolutionary democracy often, found himself doing just that after days of tumultuous clashes at one of the most heated Davos gatherings since the world's business and political elite first began congregating in this remote comer in 1971.

Under the glare of TV cameras from Swiss Broad casting, Deutsche Welle, and the BBC--not to mention a roomful of reporters spilling out into the corridor--leaders of the NGOs (non-governmental organizations) invited to participate at this year's gathering were taking their anti-globalization message directly to the media in the time-honored fashion. In the preceding days, several hundred demonstrators outside the plenary hall clashed with Swiss police, who responded with water canon. Many hundreds more, who had been prevented by Swiss authorities from entering Davos to join the demonstrators, later vented their protests in Zurich and Bern, where clashes and car torchings were carried live on Swiss television.

While NGO leaders attending the press conference were quick to divorce themselves from the violence outside the meeting halls, they nonetheless insisted that "the climate will worsen if CEOs here don't heed the crisis," according to Pierre Sane, secretary general of Amnesty International. Almost immediately after the Swiss authorities began taking action against demonstrators, NGO leaders--including Sane and Jeremy Rifkin of the Foundation for Economics Trends; Vandana Shiva of India's Research Foundation for Science, Technology and Ecology; and Lori Wallach, director of U.S. public interest group Global Trade Watch--voiced harsh criticism and took the opportunity to issue several demands of the WEF organizers.

Clearly surprised, Smadja sat tight-lipped as Sane and company insisted that the WEF publicly renounce the "authoritarian repression" of the Swiss police; that he publicly acknowledge the demonstrators' right to peaceful assembly; and that failing a satisfactory response from Swiss authorities, he would see to it that the WEF refrain from hosting future meetings in Switzerland. "If incidents like this can happen in a 'democratic' Switzerland," Rifkin asked, "how much worse will it get in other banana republics?"

"The Swiss do not need lessons in free speech and democracy," Smadja responded tartly. "We act in accordance with the rule of law."

In other discussions during the annual meeting, the NGO complaints were getting a respectful, if sometimes sullen, hearing from participants. "We've opened the forum to its critics," Smadja said, "but people who are truly interested in free speech and assembly don't engage in bullying tactics designed to shut down the dialogue we are trying to create here."

Such was the state of this year's gathering of business and political elite. CEOs and their spouses became accustomed to barbed wire, barricades, and Checkpoint Charlie-type security measures. The meeting's theme of "bridging the divides" was met with an opening challenge by Mexico's new president Vicente Fox, a former Coca-Cola executive who criticized attempts to "sugarcoat globalization with compensatory policies that are not enough" in a world "where 1.2 billion people live on less than $1 a day."

Gone was the exuberant optimism of last year when dot-com CEOs seemed to be everywhere, comfortable in their inflated market caps and touting their business models and stock options. This year the prospect of a U.S. recession sobered a number of leaders and elicited knowing smirks, especially from Europeans who were irked by American "triumphalism." Stung by the criticism that the World Economic Forum is a cabal of uncaring capitalists, Klaus Schwab, its founder and president, pointed out that half of the 400 politicians present were from developing countries.

And separately, an "anti-Davos" World Social Forum was hastily organized in Porto Alegre, Brazil, and heavily attended by academic and NGO types. A televised debate between the two meetings included George Soros, the financier and philanthropist, and Pascal Lamy, the European Commission's minister for trade. The otherwise sympathetic Soros expressed frustration over what he called, "an impossible way to have a constructive dialogue." Accustomed to having the media at his command to float big ideas, Soros was not amused by what he viewed as others' attempts to use him as a globalist straight man.

To add to the WEF woes, the Swiss newspaper SonntagsZeitung reported recently that it received anonymously--though evidently from the Forum's detractors--a disk said to include a list of 27,000 names and addresses of WEF members and another list of 1,400 credit card numbers and associated travel itineraries, accommodations, and sessions booked. It was perhaps the first anti-globalization cyberheist. To date there have been no reports of further misuse of the stolen data, which suggests the hackers intended only to embarrass the WEF, as well as to prove their own skill.

Why the Backlash?

Certainly, globalization is not a new concept. It predates the Industrial Revolution and peaked in the early years before World War I. But economic integration receded through two world wars and the Great Depression. Volume of world production has increased six times since 1950, while the volume of world merchandise exports jumped 19 times over the same period. International trade has outgrown world output every year since 1950.

But economic integration has sped up rapidly in the past two decades as a result of the confluence of two reinforcing developments: the reduction in the cost of transport and communications and the lowering of tariff barriers around the world. While far more business is conducted within countries than between them, protests about global economic integration--moving from the streets of Seattle and Melbourne to Davos--are becoming more radical and more fiery. New York Times foreign affairs columnist Thomas Friedman, cautioning business leaders who disagree with the critics, observed in a panel discussion that protesters were highly effective in promoting their message in a way that was "far more innovative and entrepreneurial" than the globalists themselves.

Amid the posturings both within and outside of the formal discussions, the NGO agenda was not always clear. Many CEOs, such as Siebel Systems' Tom Siebel and ADM's Allen Andreas, brushed off the friction as part of the normal flak business lead ers attract nowadays. But as Accenture's Joe Forehand said, "It's clear that in a fast changing global market CEOs will need to be attuned to these concerns."

The Real Deal on the Issues

In a recent study conducted by the Center for the Study of American Business at Washington University in St. Louis, Robert Batterson and Murray Weidenbaum have synthesized the issues involved in a monograph entitled, The Pros and Cons of Globalization. On one side are globalists, who believe that open markets and private enterprise operate across the globe for faster economic growth, greater variety of products and services at lower prices to customers, stronger environ mental protections, better working conditions, higher wages, improved human rights, and more democracy.

On the other side are anti-globalists who believe that globalization destroys the environment, undermines the culture and sovereignty of emerging nations, and abuses human rights. They impugn the power of international bodies such as the IMF, World Bank, and WTO, which in their view subject nations to draconian austerity measures and burdensome debt that cripple their economies and con tribute to world financial crises. They also assert that globalization widens the so-called North/South income gap that separates the prosperous economies of the northern hemisphere from the largely impoverished ones in the southern hemisphere.

Batterson and Weidenbaum offer a concise analysis of the pro- and antiglobalists positions on how worldwide economic integration affects growth, consumers, workers and the environment, developing nations, democracy, and the quality of life. Several revealing examples from the report contrast the two sides:

* From 1970 to 1998, the global economy grew 140 percent to almost $40 trillion in annual output of goods and services. The export-intensive countries of the East Asian/Pacific region experienced the most rapid growth--352 percent. During the same period, the economies of the closed market economies in Russia and Eastern Europe shrank by 14 percent.

* During the same time, however, many regions of the world suffered through repeated financial crises brought on by burdensome debt and inadequate banking infrastructure. From 1980 to 1998, the developing world saw its external debt as a share of GDP leap from an average of around 6 percent to more than 18 percent of economic output. The lending policies of the IMF and World Bank are not always adroitly conceived, and developed nations harm developing countries and themselves by imposing trade barriers--for example, the U.S. textile industry enjoys protective tariffs of 25 to 33.6 percent.

* Anti-globalists at Davos and elsewhere frequently charge that global capitalism leads to the exploitation and destruction of the environment in the name of corporate greed. But studies show globalization results in rapid growth that generates resources necessary to clean up eco-systems, such as developing more efficient [CO.sub.2]-reducing technologies. As per capita income in creased with export-driven growth in East Asia, the environment benefited. Examples include the $200 million program that brought life back to the Singapore River and the Kallang Basin. Similarly 74 percent of Hong Kong's rivers were rated "fair quality or better," compared to 35 percent 20 years ago.

* Anti-globalists assert that corporations place profits above people, leading to depressed wages, displaced workers, and diminished workers' rights. Activists such as Wallach of Global Trade Watch blame the rash of global mergers for the fact that one billion workers--or one-third of the world's labor force--remain unemployed or underemployed. Yet the record shows that faster growth leads to higher wages, more employment, and improved working conditions. Workers at Nike's footwear plants in Vietnam, for example, earn an average monthly take-home pay of $55, compared to Vietnam's per capita income of $26 per month. Employers in that country can operate factories seven days a week, while Nike orders its plants to close on Sundays.

Globalization supporters argue that many more people benefit from globalization than are harmed by it. Open market and cross-border investment are the key to the developing nations' emergence into the world of modern economies, resulting in higher standards of living, better working conditions, and a cleaner environment for all. Developing nations seem to rarely endorse the positions of anti-globalists, which they often denounce as disguised protectionism for the developed world. At Davos, former Singa pore prime minister Lee Kuan Yew observed that each country has a choice to "opt-in or opt-out [of the global system] and have your own standards...But those who opt-out risk missing out on investment," he warned. Pham Gia Khiem, deputy prime minister of Vietnam, said his country is committed to participating in the globalization process, even though he worries that it might erode his country's long-held values and business traditions.

NGO leaders claim protests are merely the most visible symptom of a powerful grassroots backlash against globalization. The rate at which capital and technology moves across borders, it is said, enfeebles national prerogatives. Yet, paradoxically, the same advances in technology which anti-globalists say is at the core of globalization has empowered dissident groups by allowing them to mobilize and co ordinate worldwide. Some claim the NGOs use those very skills to organize their message and undermine the public trust in governments and companies that support economic integration.

So far, mass anti-globalization campaigns have not slowed the pace toward more open markets. Protectionism by other means has won few converts among policymakers. But this could change. Both the Blair and Schroder governments have shown some sympathy with the NGOs, and both the World Bank and OECD have sought to build bridges with them. Even the WEF has formed a task force to create a global governance report aimed at rating the efforts of governments in dealing with global problems.

So far, the business community has restricted its pro-globalism to lobbying on Capitol Hill, while the antiglobalists have taken to the Internet and evening news, suggesting that Friedman is dead right about the latter group being far more creative and entrepreneurial in getting its message across.

Let's hope the former group extends its own campaign--and that the two groups are somehow able to meet in the middle for a more constructive and meaningful discourse.

COPYRIGHT 2001 Chief Executive Publishing
COPYRIGHT 2001 Gale Group