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SPECIAL REPORT | FEBRUARY 2, 1998 VOL. 151 NO. 5 |
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Expand the Debate on Globalization How to handle the phenomenon that spurs expansion but triggers dislocation By PETER SUTHERLAND
We at the Overseas Development Council believe that globalization raises some of the most important issues facing humankind today. We believe that these are challenges that must be addressed at the highest level and on a continuing basis. We propose a summit meeting of a representative group of world leaders to kick-start such a debate. Globalization's effects have been overwhelmingly good. Spurred by unprecedented liberalization, world trade continues to expand faster than overall global economic output, inducing a wave of productivity and efficiency and creating millions of jobs. Even more impressive is the stunning increase in international investment that is building roads, airports and factories in poorer countries. In the 1990s alone, foreign investors have poured $1 trillion into developing economies. This trade and investment is raising living standards in some countries faster than many thought possible. Until recently, it took at least two generations for living standards to double, but in China, living standards now double every 10 years. But while globalization has raised living standards for many, it has made life more difficult for those dislocated by change and it threatens to leave part of the world behind. It is no coincidence that the disappointing economic performance in much of Sub-Saharan Africa reflects a failure to integrate into the world economy and, thus, to trade successfully and attract investment. The foremost challenge of globalization is to ensure that its fruits extend to all countries. Most forecasts say that economic growth in the developed world will continue to slow, and that expanding markets in developing countries are needed to ensure that living standards continue to rise. The second challenge of globalization is to allay the fear that the growth it brings is inherently destabilizing. The Asian crisis, threatening some of the most formidable economic competitors in the world, amplifies these fears. Nevertheless, the costs of being left behind by globalization are usually much greater than the losses caused by instability. The third challenge of globalization is to address the concern in wealthier nations that international competition will harm living standards. There is ample evidence that stagnant wages in the United States and unemployment in Europe have other causes--technological change, poor education, Europe's inflexible labor markets, high taxes and an aging workforce. But polls show more and more people believe the causes lie in worldwide trade and investment. This undermines the kind of leadership needed to respond to the Asian financial crisis and deal with other global problems. The fourth challenge of globalization is to tackle the problems complicated by expanded trade and investment--environmental degradation, disease, migration, crime and terrorism. Our ability to confront this set of new, post-Cold War challenges will require greater global cooperation. There is no doubt that globalization of trade and investment has in some ways weakened the independence of national governments and made life less predictable for many individuals. But those who would erect barriers to trade and investment to try to recapture an earlier era of independence confuse the cause and effect of globalization. In pursuit of higher living standards, we have created this new world of global markets and instant communication to deliver gains in efficiency and competition that are beyond the powers of national governments. The goal is not to disenfranchise the individual, but to lower costs, broaden choices, deliver more capital and open more markets, giving the individual more power to control his or her destiny. We propose that a global economic summit be held before the end of 1999. Unlike the annual summit of the G-7 industrialized countries--an event that started losing its sense of purpose a decade ago--this gathering should include government leaders from all regions and levels of development. About two dozen governments would be enough to allow broad participation, while small enough for all to have input. The summit would examine the challenges of globalization and establish a framework for ongoing discussion among the participants. Preparation should be undertaken by governments, international organizations and an "eminent persons group," which, after the summit, should continue to provide analysis for the high-level debate. The challenges raised by globalization yield no easy answers. They strain the abilities of national governments to confront them independently. Collective consideration, in the form of the proposed summit and some ongoing consultative process, will be a crucial confidence-building effort. Peter Sutherland is chairman of the Overseas Development Council, an international policy research institute. He is also chairman and managing director of Goldman Sachs International and chairman of British Petroleum p.l.c.
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sia's financial crisis is stoking the debate over
globalization. It can be a whirlwind of trade and investment
that builds economies and spurs development in even the world's
poorest nations. But it can also bring economies low overnight.