A Future Perfect: The Challenge and Promise of Globalization

by John Micklethwait

  From the other side of the political spectrum, Jerry Brown, a frequent liberal candidate for the presidency, has reached much the same conclusion. The former governor of California is now mayor of Oakland, a port city that would seem to have much to gain from globalization. Yet Brown will have none of it. He was a fierce opponent of both NAFTA and the Clinton administration’s decision to bail out Mexico during the peso crisis. Before he became mayor, Brown hosted a radio program on which antiglobalization was a well-worn theme and multinational companies were often treated as little more than tools of the devil. Sitting in his gloomy office, Brown worries that the port of Oakland brings few jobs and plenty of “particulate matter.” Wouldn’t it be better to turn it into a waterfront playground, just as his hometown, San Francisco, has done? He complains that Oakland is being forced “to serve up the good life for people who live elsewhere.” He loathes p. 279 Bill Clinton’s drive to put “a human face on globalization.” This is “gibberish masquerading as deep concern,” he says. It is also “mendacious,” “Orwellian,” and “contemptuous of the common sensibilities of the people.”

  In one way, the idea that “Governor Moonbeam” (as he has been known) is against globalization is something of a relief. On the other hand, Brown’s record of being ahead of the curve on a whole range of issues—from the environment to flat taxes to campaign-finance reform—is an extremely impressive one. And, as history shows, men like Buchanan and Brown do not have to win for their ideas to triumph. In 1896, a political hurricane named William Jennings Bryan hailed from the farm states and proclaimed that mankind was being “crucified on a cross of gold.” The agricultural recession and price deflation that had raged since the end of the Civil War meant that a farmer who could have paid off his debts with one thousand bushels of wheat in 1865 needed three times as many in 1896. Bryan’s solution was a fairly mad one: increase the money supply by moving America off the gold standard, replacing it with free silver. But his rebellion picked up the support of the silver owners. Bryan was defeated at the polls by William McKinley in both 1896 and 1900, but he undoubtedly helped pave the way for Teddy Roosevelt’s crackdown on the robber barons.

  From this perspective, it is worrying that opposition to globalization seems to be spreading inward from the political extremes. Moderate conservatives who blanch at Buchanan’s nativism still worry that bad culture is driving out good. Liberals wonder if the global economy is being transformed into a giant casino. A particular worry is the rise of third-way politics. So far, this wonderfully vague and thus eminently expandable creed has been largely a rubric under which pragmatic social democrats such as Gerhard Schroeder and Tony Blair can show that they have accepted the domestic market-driven reforms of their conservative opponents. Yet the urge to intervene is strong, and their suspicions of the workings of the free-market economy are palpable.

  Having been forced to shield these impulses in the national arena, the urge to intervene in the international one is often strong. The European Union may be unable to nationalize industries, but it is an obsessive regulator. Third-wayers jumped on the Asian crisis as evidence that “intelligent regulation” is preferable to the creative destruction of unfettered capitalism. “A very important debate has begun, sparked by the general realization that you cannot leave people unprotected before the global market,” argued Anthony Giddens, the director of the London School of Economics and Tony Blair’s globalization guru. “There is a will to recognize the need for some new p. 280 governance of the world economy.” “A way must be found to bring the Frankenstein of deregulated global markets under control,” chimed in Jean-Paul Fitoussi, an adviser to French prime minister Lionel Jospin.[17] Le Monde hailed the protests in Seattle as a victory for “a new idea”—that “the world is not for sale.”

  Intervention is far from politically foolhardy. Public opinion is about evenly split on the merits of free trade. A BusinessWeek survey in December 1999 found that 52 percent of those questioned felt sympathetic to the protestors in Seattle. A late 1998 survey by the Angus Reid Group (on behalf of The Economist) of twelve thousand people in twenty-two countries found that 48 percent of them favored protection. In the same year, L’Humanité commissioned a poll of French attitudes toward capitalism: Fifty-three percent associated it with fear or rebellion, against just 22 percent with hope or enthusiasm.[18] In America, another poll carried out at about the same time (when unemployment was close to a thirty-year low) found that 58 percent of Americans agreed that foreign trade was “bad for the American economy because cheap imports hurt wages.”[19] Most Americans’ opinions of the merits of unrestrained capitalism dived further after the Enron saga in 2002.

  On specific issues, the protectionists can often outmaneuver the freetraders. The losers from open markets are usually concentrated and visible, popping up on television whenever a steel mill is closed or a factory moved abroad; the winners are dispersed and invisible. As Robert Reich has put it:

  Buried in the economic theory of comparative advantage is one stark political reality: trade benefits an economy only to the extent that it restructures the economy, making it more efficient. Trade reduces the demand for people and capital where they are less productive and increases the demand for them where they can be more productive. The bigger the gains from trade, the bigger the dislocation. . . . The number of Americans who feel they are among the losers—or, more importantly, sense that they could be—is a large portion of the electorate.[20]

  Globalization is such a broad and brutal process that it often seems hard to defend. You do not have to be particularly left-wing to shudder at the Guardian headline that read WHAT IS THE DIFFERENCE BETWEEN TANZANIA AND GOLDMAN SACHS? ONE IS AN AFRICAN COUNTRY THAT MAKES $2.2 BILLION A YEAR AND SHARES IT AMONG 25 MILLION PEOPLE. THE OTHER IS AN INVESTMENT BANK THAT MAKES $2.6 BILLION AND SHARES IT BETWEEN 161 PEOPLE. Is Peter Drucker—arguably the most reliable prophet of our times—wrong to warn American p. 281 bosses that their capacity for rewarding themselves while sacking others cannot continue? Few modern bosses, he says, “can even imagine the hatred, contempt and fury that has been created.” Who has not worried that a global financial virus will have the same effect on their savings that it has already had on the savings of millions of middle-class people across Asia? And who has not wondered if Hollywood’s love affair with violence is barbarizing the world’s youth?

  The Enemy Within

  It is precisely these sorts of doubts that represent globalization’s greatest weakness. In the end, all the militant Muslims and pitchfork rebellions probably matter less than the much more powerful people who claim to be in favor of globalization in theory but find endless excuses to oppose it in practice. The political ineptness of the cosmocrats aside, globalization’s main problem is not the ideologues who hate it but that familiar old villain, the pragmatic politician.

  The most obvious problem is the naked opportunism that drives the typical politician. Far too many of them want to reap the benefits of a smaller world without bearing any of the costs. Thus, they approve of exports and the jobs they generate but disapprove of imports. Or approve of money flowing into their countries but disapprove of it flowing out. Or approve of economic liberalization but disapprove of political rights. Lee Kwan Yew denounces “the boys in red suspenders” with one breath and invites international companies to make Singapore their regional hub with another. Lee and other Asian leaders are engaged in a delicate experiment to see whether you can combine Western economics with “Oriental politics.” The Chinese leadership is trying to create “capitalism with Chinese characteristics”—namely, authoritarianism and xenophobia.

  Two phenomena make it particularly easy for pragmatic politicians to find problems with globalization. The first is nationalism. Refusing to accept a country’s cars or cheese is a politically inexpensive way of showing patriotism. In some emerging countries, this has a more violent undercurrent. India’s decision to explode its nuclear bomb was as much an obscene salute to the new world order
as its discrimination against Kentucky Fried Chicken restaurants. (“The air is thick with ugliness,” Arundhati Roy wrote about India in 1998, “and there’s the unmistakable stench of fascism in the breeze.”) In places such as Quebec and Scotland that are not countries but want to be, politicians claim that their only chance to defend local identities p. 282 in a world of footloose capital and Hollywood trash is to keep as much power as close to home as possible.

  The other thing that predisposes many pragmatic politicians against globalization is the threat that it poses to their bailiwick: the state. Free trade challenges modern governments’ habits of taking on mind-boggling ranges of responsibilities, from steering the economy to guaranteeing collective welfare. As soon as the government starts to regulate (or run) an industry, it becomes the prey of lobbyists and pressure groups. And as soon as it claims to look after the welfare of its citizens, it becomes the protector of workers who claim that free trade is damaging their livelihood. Granted, the past two decades have seen governments try desperately to reduce their responsibilities. But the expansion of the state has merely been slowed, not reversed.

  In such circumstances, drift is often the main enemy. There may be no new Smoot-Hawley Tariff on the horizon, but free trade is constantly in danger of being eroded by a thousand small cuts: All those “trifling” concessions to lobbyists and “compassionate” exceptions for the vulnerable few eventually add up. Few of the American congresspeople who lined up to condemn the “flood of cheap steel” into their country in 2002 viewed themselves as protectionists; they were just less interested in the principle of free trade than they were in the fact that American steel towns looked as if they were being devastated. Few of the Republicans who voted against giving Bill Clinton fast-track authority in trade negotiations wanted to gum up the world trading system. They just gave more mind to their hatred of Bill Clinton than they did to a little thing like the international economy. By the same token, Bill Clinton seemed to be thinking principally of the election hopes of Al Gore (and the need to cuddle up to American trade unions) when, in Seattle, he tried to impose strict labor-standards provisions on poor countries and talked about his sympathies with the demonstrators. And these examples were during the good times. Ever since the American economy turned, more attention has been paid to the trade deficit, which is caused by evil foreigners unfairly selling cheap goods to Americans.

  The WTO’s disaster in Seattle may have grabbed the headlines, but the almost unnoticed collapse of the Multilateral Agreement on Investment (MAI) in 1998 may prove a longer-lasting case study in the politics of drift, opportunism, and complacency. The basic idea of the MAI was a good one: to do for cross-border investment what the Uruguay round of the GATT had done for trade in goods and services. Cross-border foreign direct investment had grown to $350 billion in 1996; the MAI was supposed to be a rule book that would give people building factories in foreign countries some security. But the execution was seriously flawed. To begin with, the project was given to p. 283 the OECD, the rich country club, rather than the broader WTO. This predictably enraged the very developing countries the MAI was designed to help. A massive antiglobal protest began, typified by a full-page advertisement, sponsored by the International Forum on Globalization, asking whether corporations should govern the world and warning readers that “the same wonderful people that brought you NAFTA, the WTO, Fast Track and the Asian financial mess” now had a new product that would lead to all sorts of horrors, including the “McBig Ben,” “The Mitsubishi Taj Mahal,” and “Disney presents the Canadian Broadcasting Corporation.”[21] Angry at the roles granted to businesses in the discussions, labor movements and environmental groups demanded specific protection for workers and trees, and the project was rapidly shelved.

  However, the interesting point is that even without this fusillade support among the developed countries was weak. Politicians of all sorts seemed unconcerned about a project that seemed boring and arcane. When Jack Straw, a senior minister in Tony Blair’s government, was asked to give his opinion about the MAI on Question Time, a BBC talk show, he said he would be happy to do so, but he did not know what it was. The only politicians who were interested in the MAI were those trying to stop it. The European Union and the United States, the two bodies you might expect to support the package, both demanded concessions that would have made nonsense of the whole project: The EU wanted to be able to discriminate in favor of local investors, while the Americans thought that states should be allowed to stop foreigners from buying farmland. Politics, clearly, is still a local affair.

  You Say “Tomato”

  At the end of his polemic against globalization, Edward Luttwak reassures his readers that what he calls turbo-capitalism is just a phase: It, too, will pass. Even leaving aside another huge terrorist attack, it is possible to imagine any number of events that might mark that passing: a war in the Middle East, the complete collapse of the next round of the WTO, a savage post-Enron recession, the rise of a populist politician committed to reining in the modern “malefactors of great wealth,” as Teddy Roosevelt called them. The chances remain, however, that the globalization caravan will not career off the road so much as just run out of gas: The passengers will realize that they are gradually slipping back down the hill only when they are already halfway down.

  How will this happen? If we knew the answer, we would be shorting the necessary stock markets and hoarding supplies rather than writing a book. p. 284 However, consider the way that two disturbing trends—the drift toward regionalism and the repeated trade battles over food—might encourage each other.

  Nobody has ever managed to find out whether there is such a thing as a guilt-free General Motors executive. Yet for anybody from GM who is even slightly insecure about his or her position, a trip to London recently has likely been a distinctly Kafkaesque experience. Pick up a tabloid newspaper, flip on a television talk show, study the graffiti on walls, and you are greeted by a constant refrain: “GM is evil.” At Notting Hill dinner parties, people plot how to drive GM back to America; in Soho pubs, people mutter that GM is dangerous and disgusting. Just about every titled person in London from the marchioness of Worcester to Prince Charles wants to get you.

  In fact, the GM that has so enraged Britons stands for genetically modified, as in GM food (though opponents now seem to have stopped adding the word food, presumably out of fear that it will be contaminated by the deadly initials). The furor in Britain dates back to February 1999 and a bit of routine political tit for tat. Britain’s Conservative Party, which took a drubbing over the mad cow–disease fiasco, accused Tony Blair’s Labor government of ignoring health risks about GM food. Labor replied (correctly) that there was no credible scientific evidence that it was dangerous. But somehow the phrase Frankenstein food got out, and soon Monsanto, the American multinational that some public-relations genius had rather creepily decided to re-brand as a “life sciences” company, was on trial.

  One MP labeled Monsanto “public enemy number one” in a debate in the House of Commons. “Frankenstein,” a costumed environmentalist, started appearing outside supermarkets, warning that they sold GM foods, from which, inevitably, the supermarkets soon refrained. According to one piece of research for the British government in 1999, only one in a hundred Britons (a pollster’s way of saying nobody) thought that GM products such as herbicide-resistant soybeans and late-ripening tomatoes were good for society. An organic farmer from Gloucestershire named Charles Windsor gave the anti-GM crusade a royal seal of approval, warning about “an Orwellian future” in the Daily Mail

  Nor is this just a British phenomenon. Despite an expensive advertising campaign by Monsanto, antagonism runs deep across most of Europe. A number of powerful Japanese food-buying cooperatives—which claim nearly two million members—are trying to screen out or label GM foods. In India, people working under the name Operation Cremation Monsanto have burned fields of GM seeds.

  To many Americans, these odd noises coming from overseas
may seem p. 285 like a slightly dottier, more global replay of Britain’s mad-cow farce. After all, there are GM foods in most American supermarkets. In the United States, biotechnology has generally been something that you buy shares in, not something you boycott. Most of the arguments against GM are more sentimental than logical. Genetic modification, albeit of a more gradual sort, has taken place in fields for centuries without any harm to humans. The charge that efficient farming per se despoils the countryside seems a little Luddite, not to say selfish. In many inhospitable corners of the world, GM’s efficiency might be the difference between a harvest and starvation. The area in which there seems to be the most genuine scientific uncertainty has to do with GM seeds’ effect on local ecosystems; potentially, they could spread with the winds and contaminate neighboring plants and insects.

  With clearer labeling (something that the multinationals insanely resisted at first) and a degree of goodwill on both sides, some sort of consensus should have been achievable. Yet it has not emerged. Some of the reasons for this failure have nothing to do with globalization. In particular, the concern about GM foods reflects a much more general (and arguably overdue) questioning about what agribusiness has been thrusting down our throats. The fuss about GM food in 1999 coincided, first, with a scare about Belgian chickens and pigs being fed a carcinogenic substance, which led to a huge culling, and then with a widely publicized incident in which people became ill after drinking poorly made Coca-Cola. Many would argue that the only reason why a similar backlash has not happened in America is that politically well connected agribusinesses have done better jobs of hiding their disasters.