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Davos 2000 sure had a split personality. At ennui-ridden sessions, the political and academic elites attending this year's World Economic Forum anguished over the backlash against globalization. Meanwhile, the protestors who had disrupted the World Trade Organization meeting in Seattle last year were at it again in the streets of this tiny Swiss resort town.
But along with the anxiety inside, a palpable wave of euphoria flowed through the event. Exhibit No. 2: A new millennium had dawned with the Internet and the New Economy transcendent. AOL's Steve Case was clearly the Davos poster boy this year, pushing aside Microsoft's Bill Gates, who played second fiddle to Case in several sessions. Every meeting seemed to have an "e" in its title, as in e-commerce, e-business, and e-learning.
Both President Clinton and British Prime Minister Tony Blair used the term New Economy in their speeches (Blair's was by far the better. Clinton looked and sounded very tired). Even economist Paul Krugman -- dripping with disdain for the whole idea of a New Economy not long ago -- grudgingly acknowledged its existence.
CONVENTIONAL WISDOM.
U.S. Treasury Secretary Lawrence Summers congratulated Business Week at a media gathering on being "prescient" in covering the issue. Indeed, the once-marginal concept was conventional wisdom of the forum, with such Americans as Cisco Systems President John Chambers and Sun Microsystems President Edward Zander on the stage, explaining the virtues of living the Net life to audiences of German, French, Italian, and British business execs.
Such scenes made it hard not to smile -- especially if you work at Business Week -- and to be upbeat about the future. Sun's Zander said he thinks we're only into the third year of an information-technology revolution that could go on for 10 to 15 more, raising productivity to unprecedented levels. Note to Dr. Greenspan -- chill, Alan. Productivity increases like that will raise the safe speed limit for the economy even further, without having to worry about any overheating.
Mexican President Zedillo said the globophobes are trying "to save the people of developing countries from -- development."
Cisco's Chambers, who actually speaks at Net speed, said any company not already deep into e-commerce is already way behind. Virtual manufacturing, with most production outsourced, is now king. Cisco owns only 2 of it 34 factories. And not too far in the future, companies should be able to close their books at any time, and check the revenues and margins of any operation, to make sure there are no quarterly surprises -- ever. Sun is already there.
The pithiest quotes at Davos came from Mexican President Ernesto Zedillo. He blamed the blowup in Seattle on an increasing "globophobia" among U.S. and European environmentalists, labor unions, self-appointed social prophets, and extremists on the left and right. Zedillo said they're trying "to save the people of developing countries from -- development." Ardent, altruistic, and intent on protecting the environment, the poor, and those living in the past, the globophobes don't even see their own condescension or their self-interest, such as protecting their own jobs against competition, Zedillo said.
CONVINCING CRITICISM.
Not that the protesters outside were completely in the wrong. A Malaysian appearing on stage with Zedillo made a persuasive case that opening up capital and trade markets doesn't benefit every country. If nations don't have the right regulatory and legal structure or even a strong enough nation-state, liberalization can lead to chaos and a decline in living standards.
Indeed, some 59 nations, most of them in Africa, have seen sharp economic drops over the past decade. And Joe Stiglitz, the World Bank economist, was convincing in his criticism of the way the International Monetary Fund and U.S. Treasury tried to open up capital markets in Asia. Stiglitz thinks the West went too far, too fast, especially in Korea, and helped precipitate the Asian financial meltdown.
All that said, Zedillo was mostly right. Yet the participants at Davos mostly didn't hear him. We all saw the pictures of anarchists outdoors smashing windows in Seattle. What we forget is that, inside the Seattle trade talks, diplomats from India and other developing nations were protesting, too. Oh, they weren't against globalization. If anything, they were wildly for it. They just wanted a better deal and a louder voice. As one Indian economist told me in Davos, the developing world has, after a very long time, decided to open its markets. It has signed open-trade agreements on information technology and financial services. And the developing countries agreed at the last Uruguay Round to lower tariffs on goods.
Third World nations killed the Seattle WTO talks. They weren't against globalization -- they wanted more of it
In the meantime, Europe refuses to open its agricultural markets, as it had promised after Uruguay Round, and the U.S. still has high walls around textiles (of all ridiculous things to build a wall around in a high-tech world). So, who are the protectionists here? Inside the WTO meeting in Seattle, everything was done behind closed doors, no outside parties could present amicus briefs, and most of the organization's members weren't included in the decision-making. With such a total lack of transparency, the Third World walked -- killing the WTO talks. They bolted not because they were against globalization -- they wanted more of it. And they didn't like President Clinton threatening them with multilateral sanctions if they didn't adopt labor and environment standards that were made-in-the-U.S.A.
Let me ask you: In all the coverage of the Seattle debacle, did that message come across? Presidents, Prime Ministers, and academics galore gave voice to the protestors by bemoaning the wages of the poor, the pillaging of the environment, and growing global inequality. Hardly anyone, with the exception of Zedillo, spoke up for the protestors inside the buildings in Seattle who wanted more, but fairer, globalization. Indeed, it appears that the Indians, who usually send dozens of people to Davos, boycotted it this year in anger. Perhaps they read the programs released in early fall and realized that once again, they would be ignored.
Which is where the two Davos conferences should have converged. Globalization is a key part of the New Economy. Yet it is suspect and under attack on a number of fronts. Meanwhile, the corporate elite that has so much to gain from globalization isn't paying attention. It's being swept away by the giddy promise of technology. And the political leaders in charge of free trade are listening to the wrong voices of protest. We may be three years into a 10- to 15-year trajectory of high-tech expansion, but it won't matter a whit if globalization falls apart.
Nussbaum is editorial page editor for BusinessWeek. He attended the World Economic Forum in Davos EDITED BY DOUGLAS HARBRECHT
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