I. A Wrong-Way World
The mighty beacon of globalization was pushed off center stage by the war on Iraq but is returning with a strangely diminished glow. Only now the all-encompassing lamp that was going to light the new millennium looks more like a flickering candle. The world’s 146 trade ministers are gathering in Cancún this month with their standard declarations of great intentions. They are working on a new global agreement–the Doha Round of the World Trade Organization–dedicated to fostering greater trade and growth, liberating commerce and eradicating poverty, all the familiar pieties. Yet the lack of enthusiasm–and lack of momentum toward any agreement–is felt around the world.
Representatives of the wealthiest nations are anxious to achieve something, if only a rhetorical victory that might lighten the gloom of global investors and producers. They usually get their way in trade rounds, but great complications lie in their path. The developing countries are also desperate for concrete advances–genuine market-opening concessions from powerful nations like the United States–and the weak are gradually acquiring a stronger, more skeptical voice. But having been finessed and duped so many times in the past, the poorer nations remain quite fearful that the big boys will roll them once again amid the fiendish complexities of trade negotiating. So much has been promised for globalization, so much not delivered.
The new millennium turns out to be an inhospitable time for selling new promises about the wonders of global economic integration. The reason has nothing to do with tariff barriers or policy particulars of the Doha Round. The great engine itself–the globalized economic system–is sputtering, giving off clanking noises that suggest the machine is seriously malfunctioning. Developing countries that enjoyed robust expansion in the past decade are stalled out (with the important exception of China). But so are the industrial giants–Europe, Japan and the United States, all struggling with varying degrees of stagnation or worse.
The dynamic boom in global investing and bank lending that fueled far-flung industrialization during the nineties has tapered off dramatically. Actually, the process seems oddly reversed. Instead of the center lending capital to the developing periphery, capital is flowing back to the center–that is, the United States. Even poor nations, China in particular, are lending the United States huge quantities of surplus capital, mainly to keep America afloat as the world’s buyer of last resort. If the United States falters and can no longer absorb such huge flows of exports from other nations, the entire system is in deep trouble.