The Anxiety Behind Globalization

Making sense of the crazy-quilt of protesters and the contradictory agendas and demands they expressed at the World Trade Organization meeting in Seattle is an exercise in frustration. Some groups shouted that the WTO is a tool of evil corporations ravaging the world and should be shut down. No, others said, the WTO isn't powerful enough and should make more rules to monitor the environment and labor standards everywhere on earth. Perhaps the most important lesson to be taken from the debacle in Seattle is that beneath the overall prosperity globalization is generating throughout the world, there is pent-up anxiety, fear, and anger. Globalization itself is a process of such rapid change that it is causing uncertainties as well as opportunities, downward mobility as well as upward advancement, and economic losers as well as winners.

The great danger is that the inchoate, yet very powerful, "No" shouted at Seattle could, in due time, spark a more popular backlash against the very economic system that is generating so much growth today. Corporate CEOs and political leaders who take globalization for granted and assume that there is universal support for it because the benefits are obvious to them may be making a serious mistake.

Take the U.S. A dual economy exists in America. By most measures, the New Economy is creating enormous wealth--but not for everyone. The growth rate of wages, average hourly earnings, the employment cost index, and compensation per manhour are actually falling.

How can that be when there is so much talk about options, bonus pay, and huge salaries being paid in high tech and companies? Consumer confidence is high, Christmas shopping is roaring, and high-tech stocks are setting records every day. Yet turn instead to what is happening to pay in mining, textiles, and most manufacturing enterprises and you find wrenching change from globalization and declining growth in average hourly wages.

Just a few miles from Seattle's troubled streets, a ski company, K2 Inc., was shutting down most of its manufacturing on nearby Vashon Island in the Puget Sound and shifting it to China. What remains of K2 is a reflection of the New Economy and the future of American employment--engineering, research, and development, design, sales and marketing, warehousing and distribution. Only the highest-end skis will be manufactured in the U.S. All these jobs are well-paying. But all the others are gone.


New Economy industries are doing great in the international marketplace. But global competition is squeezing workers in Old Economy industries severely, as jobs disappear to countries overseas that are more competitive. No wonder that a recent Pew Poll showed that people with lower incomes tend to be against globalization while those with higher incomes favor it. A dual economy exists in China and most other developing countries as well. As globalization opens up economies, incomes for the millions working in export industries are rising. But for the other millions employed in state-owned or state-protected industries that are no longer competitive, real wages are plummeting and jobs are disappearing. In India, software writers are now part of America's labor pool, and their incomes are rising. But workers in once protected auto and motorcycle plants are suffering from new competition from Japanese imports as India opens its economy.

For people anywhere whose industries are under siege in dual economies, globalization is a problem, not a promise; a threat, not an opportunity. Seattle was perhaps not the first but the second sign of the rising discontent over how globalization is evolving. The Asian financial crisis that sent many countries reeling was sparked by the too-quick opening of capital markets without due regard to regulation. Provoked by the unexpected whirlwind of currency depreciation, capital flight, and finally, recession, South Korea, Malaysia, Thailand, and others called for some international agreement on controlling fast-moving, short-term capital flows. After more than two years of deliberations on a new "financial architecture," nothing serious has yet emerged.


Now comes the Seattle Shock, a second warning that should not be ignored. What can be done to bridge the dual economies around the world? Inside the U.S., education and training are the tools to make the transition from the Old to the New Economies. Companies should spend far more resources in increasing the skills of their employees. Raising the minimum wage would help those who are stuck and cannot, for whatever reason, make the move. Protectionism is not the answer for anyone. India and other developing countries made it clear in Seattle that they do not want lectures about child labor but more access to U.S. textile and European agricultural markets.

Change can be frightening as well as exhilarating, and even those who are benefitting the most from globalization and technology today are stressed out and anxious as never before. Unemployment may be extraordinarily low in the U.S., but mergers and layoffs are at record highs, forcing people to live their lives full of uncertainty. Working at Net speed and Net hours increasingly eats into family time. Who isn't frenzied?

Change, especially economic change, may be ever thus, but there are eras when its speed and impact on peoples' lives are extraordinary. This millennial moment is certainly one of them. Globalization is sweeping the world, changing billions of lives before it, most of them for the better. But not all. Seattle was a reminder of that. Before a backlash curbs the enormous benefits that trade and economic growth bring to the world, attention should be paid to those being left behind.

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