Money and Love

How does globalization affect money and love? Friday's first plenary session at the World Forum, "Global Financial Systems," explored this provocative question. "Futurist" Hazel Henderson kicked things off by declaring that "economics is a form of brain damage." (By the way, she also describes herself as an "economist.") She claimed humanity is entering "an Age of Light," citing fiber optics, lasers, optical scanners, and declared that this age of light is not all sweetness. No, it "is a Faustian period because these technologies give us the powers of gods, but we're still moral children." Henderson also asserted that humanity is in "an accelerating shift from an industrial age based on fossil fuels to an information age fueled by solar power." Then she noted that our information economy is based on high speed computers that "gobble up 13 percent of all electricity generated in the U.S." (Which, I should point out, is produced mostly by fossil fuels.) Finally, Henderson told the Forum attendees that there are "two ways of transacting" in the world: The "money-based money economy" characterized by fear and scarcity vs. the "information-based love economy" using barter and mutual aid and characterized by cooperation and abundance. Economics? Brain damage? I know my pick.

Henderson's fanciful musings were followed by McKinsey & Co. director Roberto Newell's hard-headed and factual insights on the causes of periodic financial crises in developing countries. The process of globalization is leading to "the emergence of a fundamental consensus on a set of standards by countries, corporations, and other social actors." Very clearly defined standards and expectations are being set in the world's two great capital markets, New York and London, where 70 percent of the world's equity is issued and traded. Basically, any country that wants to attract investment better adhere to these standards. As an explanation of how global financial markets affect developing countries, Newell offered an analogy: "Think of New York and London as two very powerful generators of electricity from which our homes are taking energy. If we've prepared our homes to use the their energy, then it will run all of our appliances safely. If we haven't and if we then if we connect to them, the energy will destroy all of our appliances and maybe burn down the house, too."

Newell dismissed those who blame international financial crises on speculators. Government fiscal mismanagement has played a role, but McKinsey's research found that "everywhere there's been a crisis there's been a sick real sector." That is, corporations in developing countries have been shown to be incapable of competing in a globalized economy. The illness of the real sector typically gets passed on to a developing country's banks because they have imprudently lent to the corporations. Part of the reason that the corporations in developing countries have been incapable of competing globally is that they've been protected. This is a paradox, says Newell, because developing countries have to expose their corporations to competition in order to make them capable of competing–even when it is known that they are not capable of competing when they are exposed to global competition. But if the world is going to prevent future financial crises in the developing countries, their corporations have to become global competitors.

Fierce disagreement erupted among the panelists who followed these presentations. David Korten, president of the People-Centered Development Forum, denounced globalization for 30 years of world poverty, claiming that "the most important decisions in the world are set by speculators with absolutely no consideration for human values and the environment." To Korten, speculators in capital markets are sucking up all the gains from productivity and increasing their claims on the wealth of the world. Financial markets are "facilitating the more rapid destruction of natural and social capital by turning them into money for the already rich." His solution would be to distribute asset ownership so that it is rooted in the communities and places that are affected by the assets.

Judith Woodard, senior vice-president of Digitas, heartily seconded Korten and argued that currency collapses like the recent one in Indonesia are very destabilizing. If we don't want the new democratic government there to fall, she argued, the currency must somehow be supported. "If we want to save democracy and the environment, we have to stop the speculation on Wall Street," Woodard declared. (Perhaps Woodard has it backwards–didn't the Suharto's authoritarian government fall after Indonesia's currency collapsed, allowing for free elections for the first time in decades?)

The foregoing critiques were too much for Andres Velasco, director of the Center for Latin American and Caribbean Studies at New York University. "In contrast to all this talk of love, cooperation, and handholding–all the things that we like– much of this talk misses the fundamental point that poverty means lack of wealth," said Velasco. "Some countries have been good at producing wealth and some countries not. Globalization is an opportunity for those countries to do better." He pointed out that after Chile's currency crisis in the 1980s, the country decided to open itself to world markets and the result has been an average 7 percent annual growth rate over the past 12 years. Average incomes have doubled in that time.

Mark Weisbrot, chief economist of the leftoid Center for Economic and Political Studies, took issue with the notion that globalization really boosted economic growth at all. As evidence he pointed to Africa's dismal record where between 1960 and 1980 the continent's total output grew 35 percent, but since 1980 it has declined by 18 percent. Weisbrot also claimed that the median U.S. wage is exactly the same as it was 47 years ago. This assertion intrigued me, so I went to the Statistical Abstract of the U.S. to look. I didn't come across the wage data, but I did find that median family incomes have risen in real dollars from $20,102 in 1947 to $44,568 in 1997. And just in case one might think family incomes increased because two-earner families are more common, it turns out that for families in which both spouses work the median income is $60,669, up from $24,442 in 1950.

Weisbrot thinks that the World Bank and the International Monetary Fund are too strong and need to be cut down to size by "giving countries more power to make their own decisions–that is democracy." He further asked, "What is democracy if the major economic decisions are outside the purview of democratic institutions?"

Weisbrot's demand for more democracy has been a constant theme throughout the Forum's discussions–every thing must be democratized. The consensus is that limits should be put on corporations, but there is little discussion of what limits should be put on the power of governments. Participants do not fear democratic tyranny in which majorities trample the rights of minorities. Democracy is apparently a higher good than is liberty.

Korten chimed in with the claim that globalization "is all about competition. By its nature it is about winners and losers, and everybody can't win." Typical leftoid zero-sum thinking: He doesn't understand markets are also cooperative and offer win/win outcomes. Woodard wondered why poor countries whose currencies have collapsed have to pay back the loans in dollars? Velasco responded by pointing out that some of those dollars invested abroad come from American pension funds. "Would you be willing to invest in a pension fund that invests in assets denominated in sucres and rupees so that your pension is subject to the fiscal vagaries of developing country governments?" he asked

Richard McCormack, former U.S. Undersecretary of State for Economic Affairs, added, "There is simply no substitute for sound macroeconomic policies. There is no way that people can be protected from their governments' own policies."

In the afternoon I attended a session on "The Future of Human Health and Happiness." I won't go into the details of the discussion, but I do want to share a few fascinating statistics from that session. University of Pennsylvania demographer Samuel Preston looked at the improvement in global health over the past century. He has concluded that most of the increase in life expectancy worldwide from 30 years in 1900 to 60 years today is the result the personal health and sanitary practices that people adopted once they understood the germ theory of disease. Only 25 percent of the increased life expectancy in the developed countries can be attributed to better medical interventions. He also noted that data on U.S. Civil War veterans indicates that the disease burden suffered by adults in the 19th century was 4 to 6 times greater than that experienced by contemporary adults. Americans in 1900 actually ate more calories than we do today, so Preston attributes most of this century's increase in average height to lower infectious disease rates rather than to better nutrition. One more fascinating statistic: If the U.S. of 1900 were transported to the present, it would still rank in the top quartile of economies today in GNP per capita.

The Millennium Summit across town at the United Nations ended today with the world's political leaders pledging to halve the incidence of absolute poverty by 2015. Absolute poverty is defined as living on $1 or less a day and there's a shocking 1.2 billion people getting by on that paltry figure. If the incomes of all 1.2 billion people simply double, the total rises from $438 billion annually to $876 billion. That's only 2.5 percent of the world's total projected output of $33.9 trillion in 2001. In other words, such a goal is eminently achievable within a year's time–especially if the current pace of economic globalization continues.