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CIAO DATE: 07/06
A Conversation About Globalization
We convened three experts for a discussion of globalization and its discontents.
Our discussion moderator James Glassman, resident fellow at the American Enterprise Institute, is a former editor, publisher, and Washington Post columnist who now hosts the Web site TCSDaily.com, which concentrates on the connection between high tech and public policy. Mois és Naím, currently the editor-in-chief of Foreign Policy magazine, is a Venezuelan economist who has served as a World Bank official and as minister of trade and industry for Venezuela in the 1990s. His just-published book is Illicit: How Smugglers, Traffickers, and Copycats Are Hijacking the Global Economy. Claude Barfield is a trade expert, former consultant to the U.S. Trade Representative, and resident scholar at the American Enterprise Institute. He is the author of Free Trade, Sovereignty, Democracy: The Future of the World Trade Organization. He is currently writing a book about China.
While many see globalization as a recent development, our experts explain that it is a phenomenon that has been going on for a long time, in a variety of forms, virtually since people of one nation began trading with those of another. In fact, the period from the 1870s until the First World War, a time of tremendous change in transportation and communication, was once seen as a golden age of globalization. The wide-ranging discussion that follows also touches on recent changes in China and Eastern Europe, the future of the nation-state, counterfeiting and other forms of illicit trade, how globalization affects the developing world, its connection to a resurgence in religious fervor, and globalization's effect on both democracy and dictators.
Glassman: Let's start with a basic question. What is globalization?
Barfield: Well, everybody has a different definition, I suppose, but in the terms that I am comfortable with, I think it is the impact of changing technology on individual countries, individual societies over time. And I think globalization is very much technology-based. The tighter-knit globalization we are experiencing today would be impossible without the breakthrough over the past several decades in transportation efficiency (just-in-time manufacturing and delivery), underpinned by the communications revolution that now allows for instant messaging to individuals and organizations all around the world.
Glassman: Is this a new phenomenon?
Barfield: No, I think you can go back to the Greeks. Any time you've got commerce among different nations or different societies, you're beginning to have globalization, because what you're having are ideas, movements, transactions—commercial transactions—between different peoples. And that's the beginning, as it were, of globalization. You're not in an isolated, human community that has no other contact.
Glassman: So you're defining it in terms of trade?
Barfield: Well, I'm trying [to define it] in terms of societal contexts as well as trade. The two most recent periods that people look at are the late 19th and early 20th century, from roughly the 1870s to the First World War, where you had technology changes in transportation and communication, you had a knitting together of what we would call the developed world very, very closely, in fact more closely than the developed world is today. And some people look back on that as a golden age, as it were, of globalization. And then you could just pick up gradually after 1945 the gathering force in the '70s and '80s into the '90s, where you really have this burst of new technologies in terms of instant communication and very quick travel.
I think public policy certainly can have an impact on globalization. If one looks at the policies after 1920-21 in the United States, and then after the Depression began in the early '30s in Europe and the United States, as well as those countries like Argentina—which was quite advanced at that point—all of those countries had policies that we would call autarkical [aimed at creating self-sufficiency or economic independence]. They drew back into themselves. They cut trade and cut investment.
Glassman: So these "autarkical" countries—are there any significant ones that are left?
Barfield: You could take North Korea as the obvious example today, but even that is breaking down. So that I think you had autarkical systems that the Soviets set up in Eastern Europe with internal policies where you didn't really have much trade.
Glassman: Some people say that globalization is an American idea, that the rest of the world is adopting an American concept. Is that accurate?
Barfield: Only to the extent that I think the United States, given its position as the 20th century evolved, was always on the cutting edge of technology. And that was true even during the Depression.
Glassman: What are the benefits of globalization?
Barfield: I think the main benefits are the ability to consume better goods and better products at cheaper prices, to have a better quality of life. That begins in economics, but it doesn't end there, because people have other goals in their lives besides just economic goals. But I think that globalization is a means by which they can reach those other personal and national and societal ends.
Glassman: Mois és, in your new book Illicit: How Smugglers, Traffickers, and Copycats Are Hijacking the Global Economy, you talk about globalization in terms of not just technological, but also political, change: "One major change that this most recent wave of globalization often brings to mind is the revolution in politics, as deep and transformational as the one in technology." Tell us, this revolution in politics, was this caused by the revolution in technology or the revolution in communications? How has this happened?
Naím: I don't think we know. All we know is that it happened at the same time, and there is a very good, solid case to say that the more information people have, the more free they are to learn how others live. That has created strong incentives for them also to strive and fight for freedom. And so there is a connection between new communication and transportation technologies and the political revolutions of the 1990s that opened borders and created a wave of democratization. It's going to be very hard to really decide on causality, but it doesn't matter. All we know is that these two things converged, and I think it's very important.
One of the things I try to do in the book is to decouple the very common association between globalization and trade, or globalization and investment, or globalization and economics. I think it's very important that we understand that the world now is connected in ways that go beyond economics, and beyond trade. You know 9/11 is an example of globalization. The attack on the World Trade Center was driven by political turmoil on the other side of the world. The terrorists relied upon the tools and technologies of globalization. They also took advantage of the opportunities created by more open borders due to the political changes.
Barfield: I agree with that. And I'm not sure what the dimensions were of the political revolution. But I do have a cautionary note. And this is a puzzle that we will have to work out in the next years, not just we, but all nations. With globalization you get technology coming over the borders, and governments not having as much control over their populations as they did, but the nation-state is still the only focus of democratic legitimacy. There is no democracy above the nation-state. It may be at some point you could have it. But you've got to work at this with the approach of what is possible, or what is legitimate for a nation to do, and what it should give up. And we argue about that. I mean the U.S. administration's position on the International Criminal Court, or what powers we should give to the United Nations, or the World Trade Organization for that matter.
Glassman: A lot of people have said that with globalization technology, the nation-state would wither away. Now, maybe it's a little early to see it withering away, but do you think that's going to happen?
Naím: No. And I do agree that the nation-state is a core, central organizing element of the international system. There is a lot of discussion about the withered nation-state, and I frankly think that's a silly conversation. I think the nation-state is going to be with us for a long time. What is happening is that nation-states are being transformed by globalization, are being transformed by the liberal politics inherent in the new technologies. And the constraints on nation-states are narrower and tighter than in the past. You talk to any head of state today, even those that exercise the role of an authoritarian government, and they will tell you that they're very limited, or more limited than in the past.
Glassman: So what kind of constraints? Is it that the population has more contact with the outside world, or is [it] also [the] flow of capital into countries?
Naím: All of that. Authoritarian leaders have to contend with bond markets and international financial systems that constrain their economic choices. They have all sorts of trade constraints and possibilities. But also they have international standards. They cannot torture as freely and as openly as in the past. It happens, and it continues to happen. But one interesting change we now have as a result of globalization and the changes of the '90s, is that dictators no longer sleep as easily at night as before. Dictators don't always now go from the presidential palace to houses and villas on the Riviera. They may end up like Milosevic on trial.
Glassman: I'd like to talk about the downside of globalization since Claude had earlier talked about the upside, which is economic growth and more exposure to new ideas and perhaps, as you say, more democracy, less control by dictators. Your book actually talks about one of those deficiencies of globalization. You say that you're convinced that more and more ideas and things are being stolen or plagiarized. You begin with a terrific anecdote about how Bill Clinton's autobiography was stolen in China and rewritten to some extent. Is that something that we really should be worried about? Is it a drain on the resources of countries that more and more are devoted to producing intellectual property?
Naím: That's a great question. When one thinks about countries and the explosion of the international trade in counterfeits, the examples that come to mind are the very expensive sneakers that you can buy for a fraction of the price if they are counterfeited, or the elegant ladies' bags, or the DVDs of the movies and music that are constantly copied and used without payment. And then the question is, who is this, in effect, damaging?
But one tends to forget several things. First is that illicit trades are connected, and very often the person that is selling you the elegant bag, the street vendor, is as illicit as the bag that he or she is selling you. He probably was trafficked from another country, and he's being used and exploited by the networks that traffic in people to peddle these counterfeited items. He's the equivalent of an indentured servant trying to pay back the debt that he owes to the traffickers.
Very often they are not the happy volunteers, these workers. Very often they have been—in the case of the international trade in women—enticed with the opportunity, with the notion that they're going to be taken from Eastern Europe to Western Europe to work as domestic workers, and then they are coerced into prostitution and exploited. And that is a huge element of that trade.
Going back to the counterfeiters, we can joke about the watch that costs $5,000 and one buys for $20 in the streets of Manhattan and that's fine, but there are other things that are counterfeited and they are very dangerous. There are counterfeit airplane parts that are defective and cause plane crashes. There are counterfeit medicines that, instead of curing, kill. There are all sorts of dimensions associated with these trades that are not as easy to tolerate as watches and handbags.
Glassman: Claude, let's talk about some of the more popular images of globalization. I just attended the World Trade Organization meeting in Hong Kong and there were some South Korean rice farmers who got a lot of attention for their demonstrations, and their complaint was that if South Korea opens itself up to trade in rice, then we're going to be out of a job. We can't do anything but farm rice, they say. We're not very good at anything else. They're older people. And rice doesn't cost that much anyway. So is the rice farmer's dilemma part of the negative force of globalization, or is it actually ultimately positive?
Barfield: I think all nations are delinquent in dealing with the negative sides of opening up your markets to trade or investment basically because the policies are not very good. Those South Korean farmers, that's what they've done for generations, and nobody has stepped in to try to—except by attrition, which is actually what's happening in Korea—to try to ease that change, the transition of the adjustment. I think all nations are delinquent. We don't really have a handle on how you make this adjustment, but there certainly is a moral or a social obligation of the nation that is involved with this, whether it's Korea or the United States or the British or the Europeans, to step in. And it can be a wrenching situation.
There is another side to this, though. When you get into the anti-globalist movement, there is a lot of sort of romanticism that we should leave these tribes in the upper part of the Amazon or the impoverished farmers in Southern Mexico, that somehow this is a terrible thing that's happening to them, that Mexico is being opened up. Well, think of the life those people are living. You know, we think about the good old days here—a great agricultural life in the 19th century. But even on our American farms in the Midwest and the South, those were long days, people were not educated—there was drudgery. And so it's the transition questions, in terms of public policy, that I think are important. But as the other speaker said, you're not going to be able to stop it. It's how do you make the adjustment more socially acceptable, or morally acceptable?
Glassman: Do you think that one way to make it acceptable, as some people say, is to have a different pace of taking down of trade barriers for developing countries compared to developed countries?
Barfield: The United States and the Europeans and the developed countries said, we just need a decade or decade-and-a-half on textiles and clothing, which are the most protected parts of many economies. So in the early '90s we said give us that decade. The developing countries are similarly saying, well, give us that extra decade or decade-and-a-half, but the problem you face is nobody does anything.
So I don't have any problem with giving more time, but it has to be a time certain set as much in concrete as possible. And you have to also keep in mind that—what the developing countries often talk about when they talk about so-called special and differential treatment—is to allow themselves to be plagued by their local monopolies, their inefficient industries, for a longer period. So you're not really doing them a great favor.
Glassman: Besides this illicit trade in counterfeiting, The Downside of Globalization
Naím: It has negative consequences, and some of the consequences we are already seeing. There is a generalized sense of uneasiness in the population. You know, a lot of their resistance is the sense that something big is going on—changes that are very, very profound in the way people live, in which companies can survive or not survive. Entire sectors are being redefined. We just heard in this country, the United States, in the last year a very furious debate about outsourcing, about the whole idea of utilizing employees in Asia, in India, to do work that used to be done here, and you could detect a lot of anxiety that went way beyond the job losses. If you measure the job losses with outsourcing, it's very small. And then the big debate would lead you to think that we're talking about hundreds of thousands of Americans losing their jobs, and that's not the case.
So there is a general anxiety about globalization because there is a sense that there are changes going on that are touching all of us, and we don't know how, at the end of the day, our families, ourselves, our companies, our communities are going to end up being hit or not hit.
Glassman: I always had the feeling that globalization is an example of something where the benefits are very widespread, and that the costs are very narrow and they hurt specific industries—the American shoe industry or the Korean rice industry—and those people are yelling and screaming, but you're talking about something, a more widespread anxiety. Does that have a basis in fact?
Naím: The best example is an example you yourself gave of the South Korean rice farmers, because I wonder where the consumers of rice were in those meetings? Of course there is a whole generation of South Korean rice farmers that are going to suffer from what's happening to the international trade rules in rice. But far more people are going to benefit from the opening of trade and the elimination of subsidies—the trade-distorting subsidies in rice. These are consumers that are not represented there because each one of them is going to benefit in a tiny way, in often an imperceptible way, whereas the Korean farmers are going to be hit right now in a very measurable way. So it's easier to mobilize them and organize them.
Your point is that, yes, that is happening, but there is something wider. And I think that we are still adjusting our minds to a new world where the traditional ideologies of the past—you know, socialism or Soviet Union-type communism—gave a lot of people anchors on how to think about the world and how to interpret changes, a world in which you had two superpowers that balanced each other. Now there is only one, and every day we get news of changes that we don't know how to interpret, from cloning to things brought by the Internet, to the illicit trades, to the war in Iraq, to international suicidal terrorists that are willing to kill and die.
Barfield: But that's not just true in the closed-off societies; it's true in the United States, too. We are a society that has traditionally been mobile, accepting new ideas, and [with] much greater capacity to do that and not be worried than other societies. But I do think that looking beyond economics, there is a greater sense now that there are a lot of forces that are out of your control. I'm talking about the individuals; I'm not talking about governments. And it would come from anything from biotechnology through the extraordinary impact of the information revolution.
Young people, I think, accept a lot of this stuff and understand it. They understand how to deal with their cell phones and all the computers, et cetera, but they're still even more aware of the fact that this is something when the technology is really mind-boggling, even for them.
Glassman: But are things really more out of people's control than they used to be, or is it that we know more about what's going on in the world than we used to know? In other words, I'm bringing up again the role of communications, which may have overall beneficial effects but could also produce a lot more anxiety. For example, we've seen the number of natural catastrophes is on the rise, but actually a lot of scientists believe that it's not really on the rise, it's just that we happen to know what's going on.
Barfield: I think the combination. People talk—you get these stories in the early to mid-19th century when people first saw a train and it scared the hell out of them. Or you first got a radio and you could get beyond your own county or city in the United States. But I think—I just think it's the scope of change coming from all directions and from various kinds of disciplines—technology as well as science.
Glassman: Mois és, is there a connection between globalization and the rise in religious fervor—some people call it fundamentalism—that we see not just in the Muslim world but in other religions?
Naím: We see it in the United States. There is no doubt. The results are a movement toward more religiosity and more formalized practice of religion, and even a bigger presence of fundamentalist interpretations of religion in daily life, and even in politics. I think behind your question there is a powerful hypothesis; that, as the world changes, either because of globalization or the information revolution, that as all of the changes you two have discussed touch all of us, people are looking for anchors. What is happening is that predictability has declined. People used to have a sense that their lives could proceed more or less like those of their neighbors and parents. Now the sense is that many things can happen to your lives—many wonderful things but also some very terrible things that will make your life and that of your family not look like the ones of your neighbors or your parents or your brothers or sisters.
So with that sense of uncertainty, of anxiety about where this is going—people need to have something to grab on to, and I think there is a very forceful opportunity to do that through religion. That is in some countries. In other countries religion has replaced the hope for prosperity as a way of thinking. In a lot of the Middle East, as we know, the economic performance, even in countries that are wealthy, is dismal. And if you combine that with the demographics where there are a lot of very young people that essentially have no hope, no hope for better politics or for participating in the public life and the political life of the country, or no hope for really prospering and having more material goods, then religion becomes a very interesting option. It's often the only option in terms of devoting one's life to a cause, to an idea, to a hope, or to a sentiment, a religious fervor.
Barfield: The really fascinating thing, though, I think, is the Middle East certainly has to be front and center. I mean, just think about what's going on. We talked about lives being uprooted and changed. Think about a young person, let's say in the 1960s or the '70s or '80s in China, what they're saying. Then think of this generation that's coming along, let's say teenagers in China now. We have some young people at my institute—young Chinese who are convinced that there will be some form of democracy. These are practical MBA types, they're not dreamers, and yet that transition is going to be very difficult.
Glassman: Let me ask that question, which is almost a clich é, but I'd still love to know the answer: Does globalization—let's just define it in economic terms as meaning a more open economy, a more market-oriented economy—does that naturally lead to democracy?
Naím: I think it's too soon to tell. We don't know.
Glassman: Not just in China but anywhere?
Naím: Anywhere. We don't know. Remember, we have had waves of globalization throughout history. This is not the first time that the world has experienced a very intense integration of different economies. This one started at great speed in the '90s. It is, again, the information revolution coupled with the collapse of the Soviet Union, the opening of countries that were closed before. And it's happening as we speak, and it's happening at a speed and in ways that we still do not fully comprehend. In some areas globalization is creating better conditions for democracies. In others, globalization is hampering democracy.
Glassman: Where is it hampering democracy?
Naím: I am thinking of, for example, oil countries where globalization has created very large markets. The price of oil these days is in large part very high because of what's happening in China and because the global economy is growing quite significantly. That creates a stream of revenue for authoritarian governments, and those very high revenues are inhibitors of economic and democratic reforms.
Barfield: I don't disagree except I think the unfortunate thing for them is they have this one resource, so the forces of globalization don't hit them as much.
Glassman: I think the bigger problem is that one resource is owned and controlled by the government.
Barfield: Well, that's true, but the whole thing is that these oil countries don't have to scramble as they had to do in Brazil, Argentina, or Chile, for example. This whole question—to go back to your original question, does globalization "naturally" produce democracy?—The answer is no. However, this is a fight that is going on in intellectual circles—that I think Mr. Naím's book takes on—between realists and so-called liberal internationalists. And we have, at the institute at which I work, those who work in security and diplomacy say that economists, or people who favor globalization keep saying it's going to lead to democracy. Well, look at the Chinese; it doesn't seem to have done that. And I agree with that. I do not think there is a natural progression.
However, it is also true that with globalization, and even with the fact that the Chinese government can control the Internet in part, and they control these other information sources, it is just impossible today to control your population in terms of information, in terms of sealing them off, as you could do in Eastern Europe, in Hungary and Czechoslovakia in the 1950s and '60s, or China in the 1960s. And then you realize that the Chinese are also letting their students go all over the world. If you're an authoritarian at the top, you've unleashed forces that you will ultimately not be able to control. Whether it will produce democracy, I don't know, but it is certainly true that it is going to be unsettling for whatever government is in power.
Glassman: Do you agree with that?
Naím: Yes, I fully agree with that. Let's remember for a second that the majority of mankind today lives in non-democratic regimes. It is normal. A normal human being today is a person that does not eat three meals a day, who does not get information from independent sources, if at all. A third of humanity today doesn't have a phone and has never made a phone call, and most of humanity doesn't live in democracies.
The majority of children in the world do not go to school. The majority of people in the world don't have formal paying jobs.
Barfield: But I think we need to be careful. I think you would have to say that more than any other time in human history, you've got people living under some kind of democratic state.
Glassman: I think the number of democracies has actually tripled in the last 30 years, although the majority of people don't live in democracies, if we count China as a non-democracy, as most people would.
Let's just talk about where globalization is going. Is this—well, we've had periods in history when there was globalization, but it did come to a screeching halt for a fairly long period of time, for at least 40 or 50 years. Is it possible that we'll see the same thing again? Is globalization here to stay or is it cyclical?
What particularly concerns me is that in the developing world, we're talking about a lot of people who have really not joined this globalization process. Is there anything that can be done about that?
Barfield: I think if you look at developing countries—forget about what the politicians say and what they will sign to, or the heads of state will sign to in Hong Kong trade talks. Just take East Asia or even Latin America and just go back to the question. They refuse to sign up to treaties that lock in investor rights or investment, but they've thrown their borders wide open.
And the other thing to keep in mind is that, in trade terms, the amount of just voluntary opening of markets—forget about the negotiations—is enormous in almost every region except maybe Africa or the Middle East. What Argentina did and what Indonesia has done in investment over the last 20 years is far beyond anything they would put on paper, but it's happening. In other words, they are convinced. They see that this is the way to go, but they're very nervous about being hauled before the World Trade Organization or some other international organization and being told you have to do this. They want to be able to throw it open to foreigners, to General Motors, or General Electric, but they don't want somebody to say that you have to have the same rules that you have in your autonomous company there in Brazil or in Chile or in Mexico.
Glassman: But you're generally optimistic about the developing world as well as the rest of the world?
Barfield: Yes.
Naím: Again, if you take the definition of globalization and heavily imbue it with trade and investment, then it is true. Trade cycles may go up and down, and we may have a spur of protectionism.
Glassman: By the way, do you think that's happening right now?
Naím: No. I think that trade is very strong and free. Every year international trade grows, and has been growing more than global GDP. So, yes, there are all sorts of trade impediments, and there are all sorts of subsidies and distortions, but trade is moving.
Take a broader definition of globalization that includes not just trade and investment, and you compare it with the 19th century. When the telegraph came, there was this furor of communication around the world. But the telegraph was mostly used by institutions. Instead, the Internet is being used by teenagers that get together with like-minded teenagers across the world. There are all sorts of like-minded groups, interest groups, people that share interests, passions, technologies, hobbies, who get together across borders and create virtual communities that have all sorts of activities and capabilities and develop all sorts of new political dynamics. That is irreversible, because as Mr. Barfield said, you can control the Internet but there are limits to how much you can control it.
So the cat is out of the bag. People are organizing. We have more—this is more individual globalization than we have ever seen in history. The prior waves of globalization were institutional, were commercial, where the central actors were trading companies. Today there is a globalization of individuals, and that is a very important difference.
The opinions expressed in this article do not necessarily reflect the views or policies of the U.S. government.