In an era of unprecedented prosperity, why is there a growing backlash in America against globalization? The benefits of free trade may appear obvious to CEOs, policymakers, and pundits, but denial of a rising wave of public anger against trade could prove dangerous. Those who marched in Seattle and Washington, D.C., reflect a disparate but real collection of grievances that simply will not go away. That they are joined by growing numbers of protesters in Europe makes their cause all the more powerful. Champions of free trade must begin to understand the underlying reasons behind the protest, and craft creative solutions to maintain the momentum of globalization. Unless measures are taken now, with the world economy in a strong upswing, the backlash will become much, much worse once the economic cycle begins to turn down. Denial is not an effective strategy.
A new BUSINESS WEEK poll highlights the fragility of public support for globalization in the U.S. (page 44). Forty-seven percent of the people believe that expanded trade leads to a decrease in jobs; 68% think trade with Mexico and other low-wage countries lowers wages in America; and 37% describe themselves as protectionists -- only 10% say they are free traders. And 79% say Congress should give China permanent access to U.S. markets only when it agrees to meet human-rights and labor standards. These are startling figures to those, including BUSINESS WEEK's editors, who are convinced that free trade incontrovertibly generates growth, competitiveness, jobs, and wealth for all involved.
There are five factors driving the backlash: -- Insecurity. Despite a 3% unemployment rate for American adults, hundreds of thousands of people are still being fired every year. As companies restructure and adapt to the New Economy, they are churning their workforces. Many operations are being sent overseas. Globalization gets the blame, especially from unions representing older workers in Old Economy companies, who face the difficult task of reengineering themselves. In the '80s, only blue-collar workers faced this problem. In the '00s, white-collar employees are watching their jobs migrate to India and Ireland. -- Mistrust. Big, multilateral institutions are losing their credibility. Secret decisions made behind the closed doors of the International Monetary Fund, the World Bank, or the World Trade Organization aren't acceptable to Americans accustomed to transparent, democratic institutions. Interest groups used to being heard in Congress demand that their views be heard in global institutions as well. -- Policy. Long-held IMF prescriptions for solving international financial crises are losing support. Bailing out private banks while depressing growth and forcing unemployment higher -- a strategy the IMF initially pursued in Asia -- is no longer acceptable as the sole remedy to financial troubles overseas. Nor is the World Bank's traditional focus on promoting Third World development by financing huge steel mills or enormous dams. -- Priorities. Like it or not, the environment is a key issue among students and the young in America. It is a genuine movement with growing support, especially among high-tech workers in the New Economy. The greens and the unions led the Seattle and Washington protests. The environment is a new issue on the global agenda, and it won't go away. Likewise, labor standards overseas will not disappear as an issue. -- Technophobia. The battle against genetically modified food is the most visible manifestation of a growing reaction against the modern dot-com world. In the U.S. and especially in Europe, science and innovation are seen by many as threats, not solutions. Progress is considered a charade, growth is harmful, and the preservation of traditional, national values most important. Globalization is the enemy.
How can the public consensus about globalization be reconstructed? The easiest step is to open up the decisionmaking process at the IMF, WTO, and World Bank. Ending the secrecy would give labor and environmental interest groups a chance to join in the global conversation over policy. It would open the doors to Asian, African, and Latin American economists, who often have a much better feel for the consequences of IMF actions. And it would provide the kind of fresh insight that might prevent the cloistered IMF from making serious mistakes in applying cookie-cutter prescriptions to new situations.
Corporations, for their part, should begin to take direct responsibility for the working conditions in their operations overseas, especially in Third World countries. Relying on middlemen to supply goods and turning a blind eye to the way they are produced is no longer acceptable. Overseas, U.S. factories are often the best-paying, cleanest, and safest facilities. But not always. Recent campus protests highlighted the use of prison labor, child labor, and horrible working conditions for women. Multinational corporations are synonymous with globalization in the public eye. They taint free trade when they do not behave responsibly.
There are no easy solutions when it comes to helping Americans adapt to globalization. Constantly improving education and skills is the only real answer. Education savings accounts for community college training, college degrees, or even advanced professional training is one solution. In the New Economy, lifelong learning is essential. Labor unions could also take direct responsibility for improving their members' abilities. There are even insurance schemes to protect the wages of workers displaced by globalization. It's time to try them.
The pro- and anti-globalization divide is fast becoming the new post-cold-war line of sociopolitical disjunction. If the backlash is met with denial, there is a significant risk that the free flow of ideas, people, capital, goods, and services will slow down or come to an end. There is a strong case to be made for the benefits of globalization. Now is the time to make it -- and to initiate the reforms that are needed.:
