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Growing, Growing ... Gone? China's under control, Europe's finally reforming, and the global economic outlook is rosy, right? Not quite |
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Follow The Stars Forget politicians and titans of industry — celebs like Bono, Sharon Stone and Angelina Jolie set the agenda at the World Economic Forum |
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Davos Identity Have business élites lost touch with their national roots? The WEF annual meeting in Davos this week crystallizes the debate over globalization |
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| :: IKEA Furniture for Everyone |
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| :: Networking Manners maketh Business Relationships |
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| :: Gadgets The Slide Shuffler |
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| :: China Cat-and-Mouse Game |
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| :: Rank Rules! Executive Summary |
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:: Star Turn
Jolie makes her way to the forum |
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Posted Sunday, January 23, 2005; 11:27 GMT
 But Asian nations are also making some smart moves of their own. They're are creating "a remarkable environment of innovation," says John Chambers, chief executive of Cisco Systems in San Jose, California. "China and India are graduating currently more than five times the number of engineers that we are here in the U.S." That means that U.S. and European companies are now facing high-quality, low-cost competition from overseas. Late last year, for example, the U.S. telecom firm 3Com introduced advanced networking gear manufactured in China by Huawei Technologies — 25% cheaper than Cisco's routers yet claiming much better performance. No wonder so many Western workers worry about losing their jobs. "If the issue is the size of the total pie, globalization has proved a good thing," says Orit Gadiesh, chairman of consultants Bain & Co. "If the issue is how the pie is divided, if you're in the Western world you could question that."
The biggest shift may just be starting. A landmark 2003 study by Goldman Sachs predicted that four economies — Russia, Brazil, India and China — will become a much larger force in the world economy than widely expected, based on projections of demographic and economic growth, with China potentially overtaking Germany this decade. By 2050, Goldman Sachs suggested, these four newcomers will likely have displaced all but the U.S. and Japan from the top six economies in the world. Few economists would argue that such predictions are a reason to put the brakes on globalization — even if that were possible. But it's no longer disgraceful in the academy to argue that globalization threatens to take a toll on advanced economies.
The best case for such a reassessment was made last year by Paul Samuelson, a Nobel prizewinner and a professor emeritus at M.I.T. Samuelson took aim at the theoretical underpinning of globalization and the virtues of free trade, for which the case was first made in 1817 by David Ricardo, the British economist. Ricardo argued that trade is always beneficial because it encourages nations to specialize in the products they are best at and import those they are less good at.  So if a rich country like the U.S. is much better at making computers than a poor country like China but only a little better at making sweatshirts, the U.S. should concentrate on making computers, and U.S. colleges should source their goods with logos in Guangdong province. Both the U.S. and China would benefit. Samuelson argued, however, that if the poor country suddenly learned how to make more efficiently the goods in which the rich country specialized, then the rich country would no longer benefit from free trade. In fact, wages in the rich country would fall.
Globalization's defenders reply by saying, Relax: the doomsday scenario will never happen. This counterblast (much of it in a paper co-authored by Columbia University's Jagdish Bhagwati) has two parts. First, free trade's defenders say, it is unrealistic to assume that China or India will suddenly develop a monstrous capacity in high-end, high-technology innovation. "The oft-repeated argument that India and China will quickly educate 300 million of their citizens to acquire sophisticated and complex skills," write Bhagwati and his colleagues, "borders on the ludicrous." Indeed, for the past few months, there have been reports of skilled-labor shortages in the most economically advanced areas of China. Second, free traders argue that even if China and India become advanced economies almost overnight, they will look just like Germany and Japan.
A vast majority of economists would accept that trade between rich economies has wide-reaching benefits. C. Fred Bergsten and Gary Clyde Hufbauer of the Institute for International Economics in Washington estimate that global trade brings $1 trillion in benefits to the U.S. annually, or roughly $9,000 per U.S. household. "The permanent gains from past and potential liberalization are so enormous that the United States can easily afford the modest sums necessary to alleviate the temporary pains of adjustment," they write.
"Temporary pains of adjustment" sounds bitterly euphemistic among the jobless programmers of northern Virginia. But there's no sympathy from Chinese businesses.  "Americans might see a threat to their workers, but consumers in America also benefit from globalization because they enjoy low prices," says Li Dongsheng, the 48-year-old chairman and CEO of Chinese firm TCL, which recently acquired the TV operations of France's Thomson. And even some in the labor movement now see globalization as a tool that can be used to unions' advantage, especially in pushing for global rules of corporate behavior. "I'm strongly opposed to naive deregulation, the idea that you should leave everything to the markets," says John Evans, a Paris-based international union official who is a regular attendee at Davos. "I think we need more globalization of labor standards, not less. I don't want to leave decisions on labor standards to the Burmese military regime."
It's also entirely possible that the near future may see the pendulum of capital swing away from Davos Man-style globalization. One counterpoint is Manila Woman — low-paid migrant workers from Asia and elsewhere who are increasingly providing key services around the world. Valerie Gooding, the chief executive of British health care company BUPA, says the British and U.S. health care system would break down without immigrant nurses from the Philippines, India, Nigeria and elsewhere. While BUPA employs about 300 people in India to handle its outsourced information technology needs, about 10% of the nurses and health care assistants in its nursing homes and hospitals are from overseas — and, unlike Davos Man, she says, they're not ambivalent about being strongly patriotic.
Not all Davos Men seek global markets, either. Patrick Sayer runs a private equity firm in France called Eurazeo, and complains there are still too many barriers to cross-border business in Europe, let alone the world. So he's focused Eurazeo on its domestic market. "I profit from being French in France. It's easier for me to do deals," Sayer says. "It's the same elsewhere. If you're not Italian in Italy, you won't succeed."
That may sound like a narrow nationalism, yet it contains a hidden wisdom. Recall that Italy itself was, until 1861, not a unified nation but an aggregation of city-states. Despite tension between its north and south, there's no contradiction between maintaining a regional identity and a national one. Marco Tronchetti Provera, chairman of Telecom Italia, for example, can feel both Milanese and Italian at once, even as he runs a company that is aspiring to become a bigger international presence. The question is whether it will take another 140 years for Davos Man to figure out how to strike the same balance on a global scale.
With reporting by Michael Elliott/Hong Kong, Matthew Forney/Beijing, Jeff Israely/ Rome, Laura A. Locke/San Francisco and Eric Roston/Washington
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:: Building Bridges Feb. 08, 2001
Much of Davos was devoted to closing the gap between the technology haves and have-nots
:: Doubts At Davos Jan. 27, 2003
At 2003's World Economic Forum meeting, misgivings about America are the talk of the town
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What The World Needs Now Jan. 19, 2004
Smaller nations have the chance to put poverty, AIDS and the environment back on the table
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Voices Of A New Generation Jan. 19, 2003
Eight young leaders with huge hopes for Europe and big ideas about how to make a difference.
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Rotten At The Core? Jan. 27, 2004
Germany and France have always driven E.U. integration, but smaller states say Berlin and Paris should move over
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The War On Poverty
Apr. 15, 2003
In office just two months, President Lula da Silva and his team have begun to tackle inequality in Brazil
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Can't Stand The Heat Mar. 22, 2001
Global warming is making many winter-sports lovers hot under the collar
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