THE INITIAL RESULTS OF GLOBALIZATION HAVE BEEN GROWTH RATES UNPRECEDENTED IN ECONOMIC HISTORY -- AND A HUGE REDUCTION IN THE REGION'S AGE-OLD POVERTY.

BETWEEN 1965 AND 1995, AVERAGE INCOMES IN MALAYSIA, INDONESIA AND THAILAND MULTIPLIED FOUR TIMES -- DOUBLING EVERY SEVEN AND A HALF YEARS.  IN SOUTH KOREA OVER THE SAME 30 YEARS, INCOME MULTIPLIED SEVEN TIMES -- DOUBLING ALMOST EVERY FOUR YEARS.

AND GROWTH AT THIS RATE PRODUCED A DRAMATIC DECLINE IN REGIONAL POVERTY.  OVER THE 20 YEARS BETWEEN 1970 AND 1990, ABSOLUTE POVERTY IN MALAYSIA DROPPED FROM 18% TO ONLY 2%; IN SOUTH KOREA FROM 23% TO ONLY 5%; IN THAILAND FROM 26% TO 16%.  IN INDONESIA, POVERTY INCIDENCE DECLINED PRECIPITOUSLY:  FROM 60% TO ONLY 11% ON THE EVE OF THE FINANCIAL CRISIS.

IN CHINA,  LIBERALIZATION AND DEREGULATION HAVE ALREADY TRANSFORMED THE INSTITUTIONS THAT REGULATE THE ECONOMY  AND ARE ALSO BEING FORCED TO MODERNIZE THEMSELVES.

WILL EAST ASIA EVER LEAD IN WORLD ECONOMIC GROWTH AGAIN?

WILL THE EAST ASIAN ECONOMIES EVER LEAD THE WORLD IN GROWTH RATES ONCE MORE?

THE COLUMBIA UNIVERSITY ECONOMIST PROF. JAGDISH BHAGWATI THINKS THEY WILL -- IF GOVERNMENTS CARRY OUT THE STRUCTURAL REFORMS OUR ECONOMIES NEED URGENTLY.

PROF. BHAGWATI SAYS EAST ASIA'S FUNDAMENTALS REMAIN IN PLACE, TOGETHER WITH THE POLICY FRAMEWORK OF THE ERA OF SUSTAINED GROWTH: HIGH INVESTMENT RATES GEARED TOWARD AN EXPORT ORIENTATION.

THUS, PROF. BHAGWATI RECKONS REGIONAL POST-CRISIS GROWTH SHOULD ONCE AGAIN HIT 7% -- IF NO LONGER THE PHENOMENAL 9%-10% OF THE BOOM YEARS.

THE WORLD BANK DECEMBER 2000 REPORT ON "PROSPECTS AND RISKS IN THE EXTERNAL ENVIRONMENT OF DEVELOPING COUNTRIES" PROJECTS A REGIONAL GDP GROWTH OF NEAR 7% FOR THE YEAR 2000, ALTHOUGH THIS YEAR 2001 MAY BE MORE SLUGGISH.

GLOBALIZATION OFFERS ALL OUR COUNTRIES NOT ONLY IMMENSE OPPORTUNITIES TO SHARE CAPITAL, TECHNOLOGY, AND KNOWLEDGE ON THE GLOBAL SCALE.

GLOBALIZATION ALSO OPENS UP TREMENDOUS POSSIBILITIES FOR EAST ASIAN FREEDOM -- AS THE SPREAD OF MODERNIZATION AND DEVELOPMENT THROUGH INCORPORATION IN THE GLOBAL ECONOMY COMPELS EVEN ONCE-ISOLATED STATES TO CONFORM MORE CLOSELY TO INTERNATIONAL NORMS AND PRACTICES (FOR INSTANCE, IN CIVIL LIBERTIES AND HUMAN RIGHTS).

DEMOCRACY IS PART OF THE SPIRIT OF THE AGE

WHAT IS THE CHALLENGE GLOBALIZATION POSES FOR US IN EAST ASIA?

THE CHALLENGE IS FOR US TO CORRECT THE GROWING MISMATCH BETWEEN GLOBAL CAPITAL MARKETS AND THE INCREASINGLY INADEQUATE NATIONAL INSTITUTIONS THAT SUPPORT AND REGULATE THEM.

THE CHALLENGE IS FOR US TO GRASP THE OPPORTUNITIES GLOBALIZATION PRESENTS -- WHILE MINIMIZING OUR SHARED VULNERABILITY TO ITS RISKS.

THE CHALLENGE IS FOR US TO RECONCILE MARKET FORCES WITH SOCIAL COHESION -- TO ENSURE THAT DEVELOPMENT AND DEMOCRACY ALWAYS GO TOGETHER -- TO RECONCILE THE MARKET ECONOMY WITH SOCIAL JUSTICE AND TO GIVE DEVELOPMENT A HUMAN FACE.

AUTHORITARIANISM MIGHT HAVE BEEN APPROPRIATE FOR FORCED-LABOR INDUSTRIALIZATION.  BUT TODAY, INDUSTRY IS LESS AND LESS SUSCEPTIBLE TO CENTRAL ORGANIZATION -- AS PRODUCTION GROWS MORE COMPLICATED, MORE VARIED, AND MORE FLEXIBLE.

AND THE STRUCTURAL REFORMS THAT GOVERNMENTS MUST UNDERTAKE -- TO KEEP THEIR ECONOMIES COMPETITIVE -- WILL UNAVOIDABLY RESULT IN MORE DEMOCRATIC GOVERNANCE.

LIKE OPEN MARKETS, DEMOCRACY WILL THUS ALSO BE PART OF THE SPIRIT OF THE NEW AGE -- AS ORDINARY PEOPLE CLAIM THEIR RIGHT TO TAKE PART MORE ACTIVELY IN THE ECONOMIC AND POLITICAL LIFE OF NATIONAL SOCIETY.

II.  CORRECTING THE DOWNSIDE OF GLOBALIZATION

THE FINANCIAL CRISIS DRAMATIZED THE DOWNSIDE OF GLOBALIZATION.  IT STIMULATED STRUCTURAL REFORMS, GREATER TRANSPARENCY IN BUSINESS AND GOVERNMENT; AND SPURRED EFFORTS AT CLOSER ASEAN AND EAST ASIAN ECONOMIC COOPERATION.

SLOWDOWN OF GROWTH IN 1998 AND 1999 RESULTED IN A SIGNIFICANT RISE IN JOBLESSNESS AND POVERTY.  INFLATION WAS AT NEAR DOUBLE-DIGIT LEVELS.  GOVERNMENTS STEPPED UP THEIR EFFORTS TO BOOST CREDIT AND LIQUIDITY.  THERE WERE ALSO A RISE IN PROTECTIONISM (MALAYSIA IMPOSED CAPITAL CONTROLS) AND CUTS IN SOCIAL SPENDING -- IN THE CONTEXT OF INCREASED JOBLESSNESS AND INFLATION -- HURTING THE POOREST EAST ASIANS MOST OF ALL.

THE FINANCIAL CRISIS OF 1997-1999 GAVE EAST ASIA A SHOCKING EXPERIENCE FROM WHICH IT COULD EMERGE STRONGER, MORE DEMOCRATIC AND MORE COMPETITIVE.

SINCE THEN, ALL THE AFFECTED COUNTRIES HAVE BEEN GROPING TO REFORM THEIR POLITICS; AND TO MODERNIZE THEIR ECONOMIES AND CORPORATE CULTURES.  THE STRUCTURAL REFORMS INCLUDE EFFORTS TO END THE COZY RELATIONSHIPS BETWEEN BANKS, CORPORATIONS AND GOVERNMENT AGENCIES BY IMPROVING TRANSPARENCY AND DISCLOSURE.  THE RECENT IMPEACHMENT TRIAL OF FORMER PRESIDENT JOSEPH ESTRADA IS A CASE IN POINT.  THE PAPER TRAIL LEADING TO HIS HIDDEN BANK DEPOSITS PROVED HIS UNDOING.

CHINA HAD TRIED TO MODEL ITS POST-MAO ECONOMY ON THOSE OF KOREA AND JAPAN.  NOW IT FINDS IT MUST PRIVATIZE, LAY OFF REDUNDANT WORKERS AND REFORM ITS BANKING SYSTEM.  LI RUIHUAN, A LIBERAL POLITBURO MEMBER, SAYS ECONOMIC REFORM HAS CREATED A DIVERSITY OF INTERESTS IN CHINA.

THE PROCESS OF REFORM WILL NEED GOVERNMENT INTERVENTIONISM; AND THE SECRET HERE IS THAT THE STATE MUST LEARN TO WITHDRAW AFTER IT HAS GUIDED INSTITUTIONAL CHANGE, BUILT SOCIAL SAFETY NETS, AND PUMP-PRIMED THE ECONOMY -- IN ORDER TO COMPEL THE RESTRUCTURING OF CORPORATE CULTURE INTO A MORE SOCIALLY RESPONSIBLE SYSTEM.

THERE CONTINUE TO BE MUCH BACKSLIDING, RETREATS AND COUNTER-REFORM MOVEMENTS.  BUT THE CORRUPT, CRONY-CAPITALIST NETWORKS OF THE PRE-CRISIS PERIOD ARE ALL BEING FORCED TO CHANGE -- TOWARD MORE TRANSPARENCY, MORE EQUITY WITH GROWTH.

THE CRISIS HAS MOVED EAST ASIANS TO CHANGE THEIR POLICIES IN RADICAL WAYS, WHICH WOULD NEVER HAVE BEEN DONE WITHIN THE TRADITIONAL FRAMEWORK.  THE EXTERNAL FORCES OF GLOBALIZATION ARE PUSHING DEMOCRATIZATION IN EAST ASIAN SOCIETIES.

AN EAST ASIAN TRADING BLOC AND SECURITY FORUM

JAPAN, CHINA AND SOUTH KOREA HAVE BEEN CONSIDERING THE FORMATION OF AN EAST ASIAN TRADING BLOC AND SECURITY FORUM WITH THE ASEAN STATES.  THIS INITIATIVE -- NOW MOVING NICELY FORWARD -- WAS ANNOUNCED IN MANILA IN NOVEMBER 1999.

APPARENTLY, THE EAST ASIAN TRADING BLOC WOULD BEGIN WITH THE ASEAN FREE TRADE AREA (AFTA) SIMPLY BEING ENLARGED TO INCLUDE CHINA, JAPAN, SOUTH KOREA -- AND EVENTUALLY OTHER NORTHEAST ASIAN COUNTRIES, SUCH AS NORTH KOREA AND MONGOLIA.

EAST ASIANS ARE WARY OF BEING MARGINALIZED AS EUROPE AND NORTH AMERICA CONSOLIDATE INTO EVEN MORE POWERFUL TRADING AND NEGOTIATING BLOCS.  THE EAST ASIAN BLOC WOULD ENFORCE RECIPROCITY IN DEALINGS WITH THE NORTH AMERICA FREE TRADE AREA (NAFTA), LATIN AMERICA, AND THE EUROPEAN UNION (E.U.), SAYS KOREAN PRESIDENT KIM DAE JUNG.

AFTA'S SCHEDULE HAS BEEN ACCELERATED SO THAT TARIFFS IMPOSED ON UP TO 90% OF ASEAN GOODS WILL BE LOWERED TO BETWEEN ZERO AND 5% -- CREATING A LARGELY FREE MARKET OF CLOSE TO 500 MILLION PEOPLE WITH A GDP OF $700 BILLION.  VIETNAM WILL HAVE UNTIL 2006 TO COMPLY; LAOS AND BURMA UNTIL 2008, AND CAMBODIA UNTIL 2010.

THE SEQUENCE WOULD BEGIN WITH FIRST AN ASEAN COMMON MARKET -- THEN CONTINUE WITH AN EAST ASIA FREE TRADE AREA, AN EAST ASIA COMMON MARKET AND, FINALLY, AN EAST ASIAN CURRENCY.
IT MAY TAKE SOME DECADES BEFORE THESE INSTITUTIONS ARE FORMED -- BUT INTER-REGIONAL TRADING IS ALREADY SUBSTANTIAL, A FACTOR THAT CONTRIBUTED TO EAST ASIA'S PHENOMENAL GROWTH BEFORE THE FINANCIAL CRISIS OF MID-1997.

IN NOVEMBER 2000, ASEAN AGREED TO CONSIDER THE IDEA OF FORMING A JOINT POLITICAL AND ECONOMIC GROUPING WITH THE NORTHEAST ASIAN STATES OF CHINA, JAPAN, AND SOUTH KOREA -- WHOSE ECONOMIES ARE LARGER AND FASTER-GROWING.  THEIR COMBINED GDP EXCEEDED $5.5 TRILLION IN 1999, WHILE THE AGGREGATE GDP OF 10 ASEAN STATES TOTALED ONLY $675 BILLION.

ASEAN RECOGNIZED ITS OWN WEAKNESSES AND REALIZED IT COULD BE STRONGER IF IT COULD DRAW THE THREE NORTHEAST ASIAN ECONOMIES INTO A LARGER EAST ASIAN GROUPING.

IN SEPARATE TALKS (ON THE SIDELINES OF THE ANNUAL ASEAN SUMMIT IN SINGAPORE), CHINA, JAPAN AND SOUTH KOREA ALSO AGREED TO DEVELOP CLOSER ECONOMIC AND TRADE COOPERATION.

CHINA'S NEW MOMENTUM

ZHU RONGJI FURTHER PROPOSED AN EAST ASIAN FORUM.  FUTURE NORTHEAST ASIAN SUMMITS WOULD ENCOMPASS SECURITY AND POLITICAL ISSUES.  CHINA HAS ALSO OFFERED TO EXPLORE A FREE-TRADE AGREEMENT WITH ASEAN.

ANALYSTS SAY THE PACE AND DIRECTION OF EAST ASIAN REGIONALISM IS INCREASINGLY BEING DRIVEN BY NORTHEAST ASIA'S GROWING ECONOMIC POWER AND THE IMPERATIVE FOR ASEAN NOT TO ALLOW ITSELF TO FALL TOO FAR BEHIND.

EAST ASIA'S CENTER OF ECONOMIC GRAVITY -- ONCE CENTERED ON SOUTH EAST ASIA'S THEN-DYNAMIC ECONOMY -- HAS SHIFTED MARKEDLY TOWARD NORTHEAST ASIA SINCE JULY 1997.  TWO-WAY TRADE BETWEEN CHINA AND ASEAN OVER JANUARY-OCTOBER 2000 REACHED ALMOST $32 BILLION HIGHER THAN THE TOTAL FOR 1999.

CHINA ALONE HAS RECEIVED 60% OF ALL THE FOREIGN DIRECT INVESTMENT (FDI) THAT HAS GONE INTO THE EMERGING ASIAN ECONOMIES IN 2000 -- ABOUT THE SAME RATE THAT ASEAN ENJOYED IN 1990-95.  (IN 1999, FDI TO CHINA REACHED NEARLY $39 BILLION, WHILE THAT TO SOUTHEAST ASIA DROPPED TO JUST OVER $7 BILLION.)

CHINA'S COMPETITIVENESS IS LIKELY TO IMPROVE SUBSTANTIALLY BECAUSE OF:  ITS ACCESSION TO THE WORLD TRADE ORGANIZATION (WTO) WHICH WILL GIVE IT BETTER ACCESS (DUE TO LOWER TARIFFS) TO ITS EXPORT MARKETS; POSSIBLE, BUT MODEST, DEVALUATION OF THE RENMINBI; AND STRUCTURAL REFORMS TO UNLEASH SUPPLY-SIDE EFFICIENCY WHICH WILL ENHANCE THE COMPETITIVENESS OF MANY CHINESE COMPANIES.  THE PRIVATE ENTERPRISES OPERATING IN CHINA NOW NUMBER ONE MILLION -- A TEN-FOLD INCREASE SINCE 1992.

BUT CHINA WILL ALSO HAVE TO LIBERALIZE FASTER, THUS LOOSENING THE REINS ON HER PEOPLE.

EFFICIENT GROWTH AND THE ERADICATION OF MASS POVERTY

EFFICIENT GROWTH REMAINS THE ONLY SUSTAINABLE WAY OF ERADICATING MASS POVERTY -- BUT A MARKET ECONOMY WHICH IS EXPECTED TO PROMOTE SUSTAINED GROWTH REQUIRES GOOD GOVERNMENT.  DEVELOPING COUNTRIES MUST RESIST THE TEMPTATION TO CREATE WESTERN-STYLE WELFARE STATES.  THE FOUR CRITICAL LESSONS OF DEVELOPING COUNTRIES OF THE LAST HALF-CENTURY (1950-2000) ARE:

1. MACRO-ECONOMIC STABILITY IS ESSENTIAL FOR ACHIEVING GROWTH.

2. GROWTH TRICKLES DOWN TOO SLOWLY, SO DEVELOPMENT EFFORTS MUST DEAL DIRECTLY WITH HUMAN NEEDS AND CAPACITY-BUILDING.

3. NOT ONE SUPER-POLICY WILL SPUR DEVELOPMENT; A COMPREHENSIVE APPROACH IS NEEDED.

4. SUSTAINED DEVELOPMENT MUST BE SOCIALLY INCLUSIVE AND FLEXIBLE ENOUGH TO ADAPT TO CHANGING CIRCUMSTANCES.

DEVELOPMENT TO BE SUSTAINABLE REQUIRES GOOD GOVERNANCE THROUGH OPEN, TRANSPARENT AND ACCOUNTABLE PUBLIC INSTITUTIONS AND QUALITY LEADERSHIP.  TRANSPARENCY MEANS ACCESSIBLE COURTS, EFFECTIVE BANKRUPTCY LAWS, SOUND SECURITIES AND COMPETITION REGIMES, AND STRONG ANTI-CORRUPTION POLICIES.  FREE MARKETS CANNOT WORK BEHIND CLOSED DOORS.  AND THE QUALITY OF CORPORATE GOVERNANCE IS JUST AS IMPORTANT.

IN OUR TIME, THE OPEN ECONOMY IS THE ONLY CHOICE.  EVEN IF EAST ASIA'S LATE INDUSTRIALIZERS WANT TO, THEY COULD NO LONGER FOLLOW THE PROTECTIONIST POLICIES OF JAPAN, KOREA, AND TAIWAN.  THESE POLICIES ARE NO LONGER POSSIBLE UNDER INTERNATIONAL AGREEMENTS SUCH AS THE WTO.

AS WORLD BANK'S JAMES WOLFENSOHN SAYS, "DEVELOPMENT IS POSSIBLE -- BUT NOT INEVITABLE."  HE ADDS, "THE UNDERLYING SOCIAL STRUCTURE HAS TO BE DEVELOPED TO UNDERPIN AN EFFECTIVE AND FAIR GLOBAL FINANCIAL AND TRADING SYSTEM."

DEVELOPMENT REQUIRES THE CONCERTED EFFORT OF ALL THE PEOPLE AT ALL SOCIAL LEVELS; DEVELOPMENT REQUIRES THE DEDICATION OF LEADERS; DEVELOPMENT REQUIRES INTELLIGENCE, SELF-SACRIFICE, AND DEDICATION FROM EVERYONE.

III.  ENSURING THAT GLOBALIZATION BENEFITS NOT ONLY THE RICH COUNTRIES

THE SPREAD OF THE MARKET SYSTEM, THE FREE MIGRATION OF CAPITAL, THE REVOLUTION IN INFORMATION AND COMMUNICATIONS TECHNOLOGIES ARE WORSENING THE INCOME GAP BETWEEN THE RICH AND POOR COUNTRIES.  AS A PERCEPTIVE AMERICAN JOURNALIST HAS OBSERVED, THE INTERNET MAY BE WIRING TOGETHER "A WORLD IN WHICH THE RICH STILL GET RICHER, AND THE POOR GET POORER -- ONLY FASTER."

GLOBALIZATION WILL NOT AUTOMATICALLY BRING ABOUT GENERAL PROGRESS.  THE POOR COUNTRIES WILL HAVE PROBLEMS PLUGGING INTO GLOBALIZATION.  DEVELOPMENT ASSISTANCE FROM THE RICH COUNTRIES HAS DECLINED FROM $60 BILLION TEN YEARS AGO TO $35 BILLION TODAY -- ALTHOUGH MOST POOR COUNTRIES HAVE ADOPTED FREE MARKET SYSTEMS AND LEARNED TO USE AID MORE EFFECTIVELY.

WOLFENSOHN WARNS THAT AT THE LEVEL OF ORDINARY PEOPLE, GLOBALIZATION IS NOT WORKING.  WOLFENSOHN PROPOSES NOT JUST MACRO-ECONOMIC FINANCIAL PROGRAMS BUT A "COMPREHENSIVE DEVELOPMENT FRAMEWORK" WHICH WOULD BIND TROUBLED POOR-COUNTRY ECONOMIES TO THEIR COMMITMENT TO INTEGRATED PROGRAMS TO DEAL WITH SOCIAL PROBLEMS SUCH AS GROWING UNEMPLOYMENT, INADEQUATE HEALTH SYSTEMS AND POOR ACCESS TO EDUCATION.

WOLFENSOHN WOULD WANT TO SEE THESE EFFORTS PLACED ALONGSIDE THE TRADITIONAL INTERNATIONAL MONETARY FUND (IMF) PROGRAMS TO FIGHT INFLATION AND CURRENCY TURMOIL.

GLOBAL POVERTY

ONE QUARTER OF THE WORLD'S PEOPLE STILL LIVE IN LESS THAN $1 A DAY.  ON A PER-CAPITA BASIS, PEOPLE IN THE INDUSTRIAL COUNTRIES ARE NOW 74 TIMES RICHER THAN THOSE IN THE POOREST COUNTRIES.  AND THE WEALTH OF THE THREE RICHEST MEN IN THE WORLD IS GREATER THAN THE COMBINED GNP OF ALL THE LEAST-DEVELOPED COUNTRIES, WITH A COMBINED POPULATION OF 600 MILLION PEOPLE.

A WORLD BANK STUDY REVEALS THAT 1.2 BILLION PEOPLE STILL HAVE A DAILY SPENDING POWER EQUAL TO THE PRICE OF  A CAN OF SOFT DRINK OR A CHOCOLATE BAR IN THE ADVANCED COUNTRIES OF THE WEST.

WHILE GLOBAL POVERTY HAS DROPPED FROM ABOUT 28% IN 1987 TO ABOUT 24% IN 1998, THE RATE OF REDUCTION HAS SLOWED AND THE BENEFITS OF ECONOMIC GROWTH ARE BEING SPREAD MORE UNEVENLY.  ONLY IN ASIA HAVE POVERTY RATES DECREASED DURING THE PAST FIVE YEARS, ACCORDING TO A COLLABORATIVE REPORT OF THE WB, THE IMF, THE OECD AND THE UNITED NATIONS (U.N.).

LEFT TO ITS OWN LOGIC, GLOBALIZATION WIDENS THE GAP BETWEEN WINNERS AND LOSERS AT THE NATIONAL AS WELL AS THE INTERNATIONAL LEVEL.  WINNERS ARE THOSE EQUIPPED TO BENEFIT FROM IT; LOSERS THOSE WHO ARE LEFT ON THE SIDELINES.

DEVELOPED COUNTRIES WITH THE TECHNOLOGY AND THE CAPITAL ARE THE CLEAR WINNERS; UNDERDEVELOPED ONES, WITH ONLY THEIR TRADITIONAL LABOR TO OFFER, ARE THE LOSERS.

A RISING TIDE DOES NOT YET LIFT ALL BOATS -- ONLY THE YACHTS ARE LIFTED, AND IN THEIR WAKE THE LITTLE BANCAS AND CANOES GET SWAMPED.  EVEN AMERICA'S LONG BOOM PERCEPTIVELY WIDENED AMERICAN INEQUALITY.  FROM 1995 TO 1998, THE AVERAGE FAMILY GREW 26% WEALTHIER.  BUT THE POOREST OF THE AMERICAN POOR HAVE BEEN GETTING POORER.

THE DIGITAL DIVIDE AND JOBS

IN THE UNITED STATES, CANADA, AUSTRALIA AND SINGAPORE, 40% OF THE POPULATION HAVE ACCESS IN THE INTERNET;  IN PAPUA NEW GUINEA AND OTHER POOR COUNTRIES, LESS THAN 1%.  THE RATIO OF INTERNET USERS IN THE UNITED STATES IS ONE HUNDRED TO TWO HUNDRED TIMES THE LEVEL IN SOME DEVELOPING APEC ECONOMIES.  ACCORDING TO FORMER PRESIDENT CLINTON AT THE APEC SUMMIT IN BRUNEI LAST YEAR, THE GLOBAL E-COMMERCE MARKET IS EXPECTED TO BE WORTH $7 TRILLION BY 2005.

THE DIRECTOR GENERAL OF THE INTERNATIONAL LABOR ORGANIZATION (ILO), JUAN SOMAVIA OF CHILE, PREDICTS GLOBALIZATION IN ITS PRESENT FORM WOULD COLLAPSE UNLESS POLICY-MAKERS FOUND WAYS TO "MAKE MARKETS WORK FOR EVERYBODY.  THE GLOBAL ECONOMY RIGHT NOW IS NOT DELIVERING ENOUGH BENEFITS TO ENOUGH PEOPLE."

AT AN UNCTAD MEETING IN BANGKOK, "HAVE-NOT" NATIONS CRITICIZED INDUSTRIAL NATIONS FOR RETARDING THEIR DEVELOPMENT BY IMPOSING UNEQUAL RULES FOR GLOBAL TRADE.  LARGE CAPITAL FLOWS CAREENING FROM ONE CORNER OF THE WORLD TO ANOTHER ARE CREATING INSTABILITIES IN LABOR MARKETS.

THE WEAKEST WITHIN A SOCIETY OFTEN BEAR THE BRUNT OF STRUCTURAL MARKET CHANGES:  SMALL ENTERPRISES ARE UNABLE TO COMPETE WITH GIANT CORPORATIONS AND MEGA-MERGERS.  THE PUSH BY RICH COUNTRIES FOR HIGHER LABOR AND ENVIRONMENTAL STANDARDS WOULD ALSO DISADVANTAGE DEVELOPING COUNTRIES IN WORLD TRADE.  ECONOMIC UNCERTAINTY COULD LEAD TO PROTECTIONISM -- AS IT DID IN THE PERIOD BETWEEN THE TWO WORLD WARS.

THE INTERNATIONAL LABOR ORGANIZATION SAYS GLOBALIZATION AND INCREASING TRADE LIBERALIZATION HAVE CAUSED JOB LOSSES AND LESS SECURE WORK ARRANGEMENTS.  GOVERNMENTS MUST BALANCE SOCIAL PROTECTION FOR WORKERS WITH COMPETITIVENESS.  WORKER PROTECTION IS ESSENTIAL FOR ECONOMIES UNDERGOING RAPID CHANGE THRU TRADE LIBERALIZATION "BECAUSE WORKERS WHO ARE WELL-PROTECTED ARE FAR MORE WILLING TO ACCEPT SUCH CHANGES."

THE POOR NATIONS MUST BE HEARD

THE POOR NATIONS ARE BEING SHUT OUT OF KEY DECISIONS ON THE GLOBAL ECONOMY.  THE WORLD'S POOR COUNTRIES ARE BEING DENIED A SEAT AT THE TABLE WHERE KEY INTERNATIONAL DECISIONS ARE BEING MADE -- EVEN IF THOSE DECISIONS HURT THEM.

SOME IMF DECISIONS MADE DURING THE EAST ASIAN FINANCIAL CRISIS ADVERSELY AFFECTED WORKING PEOPLE AND SMALL BUSINESSES.  MANY SMALL PEOPLE WERE THROWN OUT OF JOBS EVEN THOUGH IT WAS THE VOLATILITY OF THE INTERNATIONAL FINANCIAL MARKETS THAT WERE AT THE ROOT OF THE PROBLEM.  THE IMF CAUSED THE RAISING OF INTEREST RATES THAT DROVE MANY SMALL BUSINESSES INTO BANKRUPTCY.

THUS, THE CHALLENGE FOR THE INTERNATIONAL FINANCIAL COMMUNITY IS TO ESTABLISH A FRAMEWORK IN WHICH ECONOMIC POLICIES ARE MADE THROUGH A CONSENSUAL APPROACH TO ENSURE THAT ALL THOSE AFFECTED CAN HAVE A VOICE.

GLOBALIZATION SHOULD NOT PROCEED ENTIRELY ACCORDING TO THE PRIORITIES DICTATED BY THE UNITED STATES AND EUROPE.  THE CHALLENGE IS WHETHER WE CAN CREATE A MULTILATERAL SYSTEM FOR GLOBAL GOVERNANCE WITH ENOUGH CREDIBILITY AND LEGITIMACY TO FUNCTION AS A FRAMEWORK FOR CONSENSUS-BUILDING AND DECISION-MAKING.  A TRULY MULTILATERAL SYSTEM SHOULD INTEGRATE REGIONAL SENSITIVITIES, PRIORITIES AND INTERESTS.  MEDIATING MECHANISMS MUST BE RELIABLE ENOUGH FOR THE WEAKEST STATE TO TRUST.

MULTILATERALISM IS DIFFICULT TO DEVELOP -- GIVEN THE DOMINANT POSITION THE UNITED STATES HAS IN THE MILITARY, ECONOMIC, TECHNOLOGICAL AND FINANCIAL DOMAINS.  THE "GROUP OF 20" WHICH INCLUDES EMERGING MARKET ECONOMIES IN ADDITION TO THE INDUSTRIALIZED COUNTRIES IS A GOOD BEGINNING.  A REDEFINITION OF THE ROLES OF THE IMF AND THE WB IS ALSO NEEDED.

IV.  THE WORLD ECONOMY NEEDS NEW RULES

THE UNITED STATES AND THE EUROPEAN UNION STILL ARE FAILING TO RESPOND TO THE TRADE CONCERNS OF THE DEVELOPING COUNTRIES.

SINCE THE URUGUAY ROUND (U.R.) IN 1994, WORLD TRADE HAS RISEN SIGNIFICANTLY FASTER THAN WORLD GDP.  THE URUGUAY ROUND WAS SUPPOSED TO IMPROVE MARKET ACCESS FOR THE EXPORTS OF POOR COUNTRIES.  BUT IT IS THE SHARE OF GLOBAL EXPORTS ORIGINATING FROM THE UNITED STATES AND THE EUROPEAN UNION THAT HAS GROWN BETWEEN 1993 AND 1999.  THE UNITED STATES SHARE OF WORLD EXPORTS ROSE FROM 15.7% IN 1993 TO 17.7% IN 1999; WHILE EUROPEAN UNION'S SHARE ROSE FROM 34.7% TO 38%.

THE SHARE OF THE REST OF THE WORLD DECLINED FROM 49.6% TO 44.3%.  PROTECTIONIST SUBSIDIES AND PRICE-SUPPORTS IN THE RICH COUNTRIES WERE PARTLY TO BLAME

THE UNITED STATES AND EUROPEAN UNION HAVE YET TO DELIVER ON THE MARKET-ACCESS PROMISES THEY MADE IN THE URUGUAY ROUND.  IN EXCHANGE FOR ACCEPTANCE OF INTERNATIONAL STANDARDS FOR INTELLECTUAL PROPERTY RIGHTS (IPR), THE POOR COUNTRIES WERE SUPPOSED TO GAIN ACCESS TO RICH-COUNTRY MARKETS FOR THEIR EXPORTS OF LABOR-INTENSIVE GOODS SUCH AS TEXTILES AND FARM PRODUCTS.  THE RICH COUNTRIES WERE ALSO SUPPOSED TO END THE EXPORT SUBSIDIES THEY PAY THEIR FARMERS.

NEW RULES TO GOVERN THE WORLD ECONOMY

THE RULES THAT GOVERNED THE GLOBAL ENVIRONMENT FOR THE PAST 150 YEARS ARE NO LONGER APPLICABLE.  WITH COLONIALISM AND THE COLD WAR OVER, WE NEED MORE EQUITABLE ARRANGEMENTS TO GOVERN THE RELATIONSHIPS OF THE DEVELOPED AND DEVELOPING ECONOMIES.  THE DEVELOPING COUNTRIES LACK REPRESENTATION IN THE DECISION-MAKING COUNCILS OF THE WORLD ECONOMY.

A FRAMEWORK FOR DEALING WITH SHORT-TERM AND LONG-TERM FLOWS OF CAPITAL MUST BE AFFORDED TO ALL THE ECONOMIES.  THE NEW ECONOMIC ORDER SHOULD NOT BE BASED ON IDEOLOGIES BUT ON A BROADER SYSTEM OF CONSENSUS-BUILDING AND A MORE COMPASSIONATE SENSE OF CARING AND SHARING.  NO SINGLE MODEL OF GOOD GOVERNANCE WILL WORK BECAUSE THE DIFFERENT COUNTRIES MUST COPE WITH DIFFERENT CIRCUMSTANCES AND PROBLEMS.

AS A HEDGE AGAINST THE UNITED STATES AND THE EUROPEAN UNION DOMINATING THE WORLD TRADE ORGANIZATION, THE POOR COUNTRIES ARE GROUPING TO SEE TO IT THE RICH COUNTRIES HONOR THEIR PAST COMMITMENTS, AND TO OFFER ALTERNATIVES TO THEIR PROPOSALS IN THE FUTURE.

WTO NEGOTIATIONS BECOMING MORE DIFFICULT

ALL THE EASIER AGREEMENTS -- SUCH AS TARIFF-CUTTING AND THE ELIMINATION OF IMPORT QUOTAS FOR MOST TRADE IN MANUFACTURES -- HAVE ALREADY BEEN DONE.  NEGOTIATIONS THAT REMAIN -- ON AGRICULTURE AND SERVICES -- DEAL WITH SECTORS THAT ARE POLITICALLY-SENSITIVE AND HIGHLY-REGULATED BY INDIVIDUAL COUNTRIES.  THEY WILL ALSO INVOLVE SUCH TRADITIONALLY DOMESTIC ISSUES AS ANTI-TRUST POLICY, CONSUMER SAFETY, AND OTHER REGULATORY QUESTIONS.

WHAT CAN BE DONE?  THE ORGANIZATION OF A PERMANENT EXECUTIVE COMMITTEE WITHIN WTO TO REPLACE ITS LOOSE AMBASSADORIAL MECHANISM SHOULD HELP.  PERHAPS WE SHOULD ALSO DROP THE "GLOBAL ROUND" APPROACH TO TRADE TALKS.  INVOLVING ALL WTO PARTICIPANTS IN A COMPREHENSIVE AGENDA MAY HAVE OUTLIVED ITS USEFULNESS.  NEGOTIATIONS THAT FOCUS ON LIBERALIZING TRADE IN INDIVIDUAL SECTORS MAY BE AN ATTRACTIVE ALTERNATIVE.

THE FUTURE ROLES OF THE IMF AND THE WORLD BANK

GIVEN THE VOLATILITY OF FINANCIAL MARKETS, GLOBALIZATION MEANS THAT FUTURE FINANCIAL CRISES WILL SPREAD FASTER AND CONTAMINATE MORE NATIONAL ECONOMIES.  PREVENTING THE SPREAD OF SUCH CRISES IS NOW AN IMPORTANT PART OF INTERNATIONAL ECONOMIC DIPLOMACY.

IN THE WAKE OF THE EAST ASIAN FINANCIAL CRISIS, THE WORLD BANK CHARGED THAT THE IMF AND THE U.S. TREASURY MISHANDLED SAID CRISIS BY PRESCRIBING POLICIES THAT TURNED INVESTOR PANIC INTO DEEP RECESSION.

THE KEY MISJUDGMENT, ACCORDING TO THE WORLD BANK, WAS THE IMF'S DECISION -- WITH THE ADVICE OF THE U.S. TREASURY -- TO PRESS THAILAND, INDONESIA, AND THE REPUBLIC OF KOREA TO RAISE INTEREST RATES IN AN EFFORT TO STABILIZE THEIR CURRENCIES.  INCREASED INTEREST RATES WERE SUPPOSED TO RESTORE INVESTORS' CONFIDENCE AND KEEP THEM FROM SELLING OFF EASILY LIQUEFIED ASSETS THEY HOLD IN THE AFFLICTED COUNTRIES.

BUT THE STRATEGY BACKFIRED -- CREATING A FAR LARGER DISASTER.  HIGH INTEREST RATES CREATED A HUGE NUMBER OF BANKRUPTCIES AS SMALL BUSINESSES SUDDENLY FOUND THEMSELVES UNABLE TO PAY OFF DEBTS OR BUY RAW MATERIALS.  THE WORLD BANK REPORT CALLED FOR A "TREMENDOUS SLOWDOWN IN THE MOVEMENT TO DEREGULATE FINANCIAL MARKETS IN DEVELOPING COUNTRIES."

JAPAN HAS BEEN THE MOST VOCAL IN URGING A REFORM OF THE IMF.  TOKYO SUGGESTS THAT IMF IS NOT EQUIPPED TO COPE WITH CRISES CAUSED BY THE RAPID MOVEMENTS OF MONEY.  THE WORLD NEEDS STRONGER MONITORING OF PRIVATE CAPITAL FLOWS.  TOKYO HAS ALSO PROPOSED AN EAST ASIAN FUND THAT WOULD DEAL WITH REGIONAL CRISES IN COOPERATION WITH THE IMF.

THE WORLD IS TRANSITING TOWARD THE POST-INDUSTRIAL ERA, WHOSE KEY RESOURCE IS INTELLECTUAL CAPITAL.  THIS NEW ECONOMIC ERA HAS DEEP POLITICAL IMPLICATIONS FOR DEMOCRATIZATION AND DECENTRALIZATION.  ITS EVOLUTION IN ANY GIVEN COUNTRY REQUIRES A DRASTIC EXPANSION OF HUMAN FREEDOM.

ECONOMIES THAT ARE INTELLECTUAL-CAPITAL-INTENSIVE CANNOT FUNCTION UNDER CONDITIONS OF CENTRALIZED SOCIAL CONTROLS.  THEY REQUIRE LOOSER, SELF-EVOLVING SOCIAL STRUCTURES BOTH IN INDUSTRY AND IN SERVICES AS WELL AS IN THE FINANCIAL INVESTMENT PROCESS.  THE UNITED STATES HAS BEEN THE FIRST TO MOVE AGGRESSIVELY TOWARD THIS POST-INDUSTRIAL ERA BECAUSE ITS POLITICAL CULTURE AND ITS LEGAL AND INSTITUTIONAL FRAMEWORK HAVE BEEN MOST SUITED TO CREATIVITY, INNOVATION AND INDIVIDUAL ENTERPRISE.

WE NEED EFFECTIVE STATES MORE THAN EVER BEFORE

CAPITALISM'S NATURAL DRIVE IS TO MAXIMIZE RETURNS.  IT HAS NO INTERNAL GOVERNOR TO CHECK ITS SOCIAL BEHAVIOR.  LEFT TO ITSELF, THE MARKET REMAINS INDIFFERENT TO THE ETHICAL DIMENSIONS OF WHAT IT IS DOING TO VULNERABLE PEOPLES.

THIS IS WHY, IN THE AGE OF GLOBALIZATION, WE NEED EFFECTIVE STATES MORE THAN EVER BEFORE -- TO RECONCILE THE PRIORITIES OF GLOBAL MARKETS WITH SOCIETY'S NEED TO CARE FOR THOSE WHOM DEVELOPMENT LEAVES BEHIND.  THE QUESTION IS THE DEGREE OF REGULATION THE STATE MUST IMPOSE.

CHINA'S NEW DEFINITION OF SOCIALISM, "SOCIAL JUSTICE PLUS MARKET ECONOMICS", SEEMS TO AGREE WITH WESTERN EUROPE'S EXPERIMENT IN THE "THIRD WAY."  THE SOCIAL DEMOCRATS OF THE EUROPEAN UNION ARE TRYING TO FIND THE MIDDLE GROUND BETWEEN PURE MARKET ECONOMIES AND THE ELABORATE SAFETY NETS OF THE WELFARE STATE.  THEY ARE TURNING AWAY FROM RUNAWAY  ENTITLEMENTS WHICH HAVE INVITED ABUSE -- AND TRYING TO BRING PEOPLE FROM WELFARE TO WORK.

CERTAINLY, THE EUROPEAN "THIRD WAY" IS ONE PATH THE WORLD COMMUNITY MIGHT FOLLOW TOWARD A MORE BENIGN GLOBAL ECONOMY -- ONE THAT RECONCILES OPEN MARKET FORCES WITH A MEASURE OF SOCIAL JUSTICE.
AGAINST THIS MODEL, WE MUST WEIGH THE VITALITY OF AMERICA'S ENTREPRENEURIAL CAPITALISM.  ITS STRENGTHS SEEM TO LIE IN THE INFORMATION AND INNOVATION ECONOMY OF THE FUTURE.  STRONG IN CREATIVITY AND ENTREPRENEURSHIP, U.S. CAPITALISM IS, UNFORTUNATELY, WEAK IN ITS COMPASSION FOR THOSE WHO ARE LEFT BEHIND.

THE SOCIAL CONSEQUENCES OF UNREGULATED CAPITALISM IN THE UNITED STATES (ACCORDING TO THE RAND CORPORATION) IS A DRAMATIC INCREASE IN INEQUALITY -- WITH THE EFFECTIVE EXCLUSION FROM MAINSTREAM EDUCATION AND HEALTH CARE OF A LARGER AND LARGER SEGMENT OF ITS POPULATION.

CLOSING MESSAGE

LADIES AND GENTLEMEN, YOU -- THE POLITICAL LEADERS, CEOs, MEDIA MOVERS AND SHAKERS, SOCIAL SCIENTISTS AND CIVIL SOCIETY ADVOCATES -- ARE SHAPING THE WORLD'S INITIAL LESSONS AND FORMULAS TO GUARANTEE THAT GLOBALIZATION WHICH IS BEING FORCED UPON OUR PEOPLES WILL RESULT IN A MORE HUMANE KIND OF INTERDEPENDENCE.

IT MAY BE JUST THE ILL-EFFECTS OF INTERDEPENDENCE THAT WE ARE SEEING NOW.  BUT WHILE, IN THE TRANSITION, GLOBALIZATION MAY SHARPEN SOCIAL INEQUALITIES, THREATEN ECONOMIC STABILITY, AND ENDANGER LOCAL CULTURES, LET US MAKE SURE THAT IT ALSO SPURS AND SUSTAINS ECONOMIC GROWTH, SPREADS NEW TECHNOLOGY, RAISES LIVING STANDARDS IN RICH AND POOR COUNTRIES ALIKE, AND PROTECTS THE NATURAL AND HUMAN ASSETS THAT WILL SUSTAIN LIFE ON OUR PLANET.

THUS, THE CHALLENGE BEFORE HUMANKIND --  FOR ALL OF US -- IS TO SEIZE THE OPPORTUNITIES THAT GLOBALIZATION PRESENTS -- WHILE MINIMIZING THE VULNERABILITIES OF PEOPLES AND NATIONS TO THE THREATS IT GENERATES.

IT IS OUR RESPONSIBILITY TO ENSURE THAT INTERDEPENDENCE PROSPERS -- THAT IT LEADS TO A GLOBAL COMMUNITY OF MUTUAL SYMPATHY AND MUTUAL BENEFIT -- TO A DEMOCRATIC AND MORAL GLOBAL SOCIETY -- FOR OURSELVES AND FOR THOSE WHO WILL COME AFTER US.

IF WE ARE TO REMEMBER A SIMPLE MESSAGE FROM THIS IMPORTANT GATHERING, LET ME SAY THIS: IT IS OUR CARING, SHARING AND DARING FOR EACH OTHER WHICH WILL TRULY EMPOWER OUR PEOPLES, OUR NATIONS AND THE CORPORATIONS OR INSTITUTIONS WE REPRESENT.

AND AS WE ENTER THE 21ST CENTURY, I CAN THINK OF NO WORTHIER SET OF VALUES TO INSURE THAT OUR GLOBAL COMMUNITY OF CIVIL SOCIETIES AND GOVERNMENTS, WILL WIN THE FUTURE TOGETHER.

THANK YOU AND MABUHAY (BEST WISHES)!