Stress Testing the Global Economy

March 1, 2002 Topics: Economics

Stress Testing the Global Economy

Mini Teaser: What clues can past episodes of economic integration provide about the future of globalization? Three recent works offer answers.

by Author(s): Eric Jones

The Taliban Scenario

The reach of Western information is more nearly global than either
capital movements or commodity trade. Technologies and markets that
broadcast images and news are capable of causing disturbances in
three ways. First, the Hollywood effect raises unrealizable
aspirations for living at the level of a fairy-tale United States,
where the modal citizen appears to be represented by a film star in
southern California. Second, American movie producers seem
unaware--given the box office appeal of their products, why should
they worry?--that the merest flecks of background in their films may
prove inflammatory in more rigid and patriarchal societies. (I refer
to the ordinary dress and everyday status of American women.) Third,
we are now reaping what we have sown: the electronic transmission of
information and misinformation runs both ways, providing ample
exposure for the opinions of, say, Al-Qaeda. And their messages are
intended to promote negative globalization.

Some of the present troubles accordingly arise from the fact that the
world's political and economic markets are out of kilter. As far as
the mass of the population in the less developed world is concerned,
a disequilibrium consists in the way that information flows have
heightened economic expectations far ahead of the ability of trade
and investment to satisfy them. The poor are both titillated and
frustrated. They therefore listen to the anti-globalization,
anti-Western, and counter-capitalist ("counter-cap") messages put out
by the disgruntled or opportunistic intellectuals among them. These
intellectuals are men (here we can safely say men) whose status would
be most threatened by competition from outside ideas. Some have gone
so far as to forbid students in Muslim madrassas across South Asia
access to newspapers and television. Where
intellectuals-turned-fundamentalists have the grain of coherent
ideologies to work with, their potential threat to the world system
is greatest.

I do not claim that the West could have countered these effects
easily and, although they have led to palpable envy around the world,
they have not always provoked violent anti-Americanism. Nor is the
contemporary revulsion against Westernization the first there has
ever been. A similar element was present in the early rise of Indian
nationalism. E-mails are not indispensable; mass action did not await
their invention. Printing presses, railways, telegraphs, and postal
systems were sufficient. Nor would official attempts to "explain" the
American way of life have been particularly effective; such things
must sound to poor peasants in distant lands like recipes for pie in
the sky. Nevertheless, some intellectuals in the non-Western world
might have been receptive to argument, as were those in the defeated
countries after 1945.

Efforts to argue the abstract case for Western styles of economics
and politics need not prove futile in the longer run either. It is
worth considering an analogy with the way scientific revolutions
occur, at least according to Thomas Kuhn, which is to say not by
changing the minds of established authorities but by converting the
next generation. A new Colombo Plan would help. As it is, Western
academics seem fixated on the motes in the eyes of their own
political systems, while the hubris of private-sector globalization
seems to have blinded politicians to the value of generous and
far-sighted public actions. Closing the overseas libraries of the
United States Information Service, for example, has surely been an
unfortunate act of cheese-paring.

As we quickly learned, the perpetrators of the atrocity in New York
and Washington were not from within. They were external individuals
who make up what Gerard Baker, an American columnist of London's
Financial Times, calls "the ultimate anti-globalization movement." No
one knows precisely what the ordinary inhabitants may be thinking in
the countries from which this movement is recruited. Revealed
preference suggests that many of them have responded to the Hollywood
effect and display no objection to rich-country ways. Some are even
desperate enough to put to sea in leaky boats in the hope of landing
on a Western shore.

The powerful and influential, on the other hand, resist globalization
on any number of grounds, summarized as distaste at the "imposition"
of Western, or so-called American, culture. Their unease is largely
cultural, its bêtes noire the supposed materialism and individualism
of the West. The charge of materialism actually confuses material
wealth with a fixation on objects. As an American friend who had
worked in the Sudan once remarked to me, "we are not the
materialists, goods come easy to us." But no one in the West would
wish to escape the charge of individualism, and individual choice is
a clear threat to hierarchies. Beneath all the various cultural
overburdens, the aged patricians in less-developed societies who rage
against these things are rent-seekers, striving to maintain
privileges associated with existing forms of social organization. (I
will not call the folkways "traditional" since they are adulterated
by plenty of borrowed technology.) Undoubtedly, most of the
individuals involved are so conditioned by their upbringing as not to
recognize the element of selfishness in trying to deny their
brothers, and especially their sisters, a taste of the modern world.

It is fashionable to see resentment against the West in terms that
amount to a stage theory of economic history. Economies that have
failed to climb aboard the bandwagon of growth fester away in corners
of the world while the rest of us proceed ahead. Every so often the
losers erupt in ways that hitherto have seemed little more dangerous
to the West than an occasional spent meteor clanging into the desert.
In any case, as the saying once went, we have the Maxim gun and they
have not. There is a smack of the "end of history" thesis about the
underlying assumption of unidirectional change. In its bald form, the
thesis is economistic.

In this vein, individuals are assumed to seek happiness in material
form. Once they attain something approximating their goal, they, or
their children, will move up to a new stage, looking for services as
well as goods, and for services that embody freedoms--independent
judiciaries, an end to corruption, a press that does not suppress too
much at the behest of the powerful, maybe even pluralistic
government. We know that this happened in Europe, and we can see it
happening in East Asia. We can interpret part of the struggle within
Iran in approximately the same way. Where the tendencies have still
not emerged, we tend to rescue the thesis by saying that momentum has
stalled not through choice but via the machinations of old elites.
Hence we portrayed the backlash in Afghanistan as a pathological
response to national economic failure, whereby those in power stir up
their people to opt out.

Opinion in the developed world assuredly believes that the
fundamentalist challenge to the West is driven by the inability of
alien leaderships to cope with modernity. Yet if it is economic
humiliation that bothers the fundamentalists, resentment should
direct itself against East Asia, not the West. While other regions
fell behind, East Asia pulled itself up by its bootstraps. If anyone
has lost face they have lost it to the spectacular economic growth of
Japan, the little dragons, and now China. The West was rich from the
start. Since fundamentalists attack America and not Asia, it follows
that the animus must have more complicated roots than simple economic
humiliation.

Undoubtedly, the economistic interpretation of global change is
acceptable in a broad sense. It is borne out by the history of the
developed countries--unless one wants to imagine that the quest for
freedoms and introduction of liberal laws has been independent of the
emergence of a bourgeoisie. Yet as soon as this is said, the
limitations of the theory are evident. Again: history takes place in
the lags where motion outruns inertia. Economistic models and "swell
of the ocean" theories must always assume that the outcome is
written. So it may be in broad outline, but the pace and details of
the story are made up as we go along. Economic history is not so
deterministic, at least not in fine grain.

At the very least, the growth process may be delayed or distorted
(involving attempts to pick and choose among borrowings, with the
emphasis on information technology and military hardware). This seems
to be the case now, given the reactive hardening of attitudes and the
narrowing of Quranic teaching among the current young generations in
the Islamic world. Anything approaching outright war on a regional
scale or even a series of big terrorist strikes could still close
down a large share of world trade. In that sense external backlash
retains the power to disrupt globalization. Prevailing unidirectional
theories do not adequately prepare us for this.

The Seattle Syndrome

Further rapid liberalization of global trade had become doubtful even
before September 11, 2001. Most governments are compromised by favors
owed to special interests. Western leaders respond snappily to polls
in shopping malls. Businessmen are at least as short-termist and even
more reactive. They have not gone out of their way to proclaim why
the anti-capitalist and anti-globalist lobbies have added two and two
together and got five, besides failing to face down the shock troops
of the protest movement. Few business people write books and,
ironically, the most publicized exception, George Soros, has come out
against global capitalism. With political and business leaders like
these, economist authors may well feel they are tacking into the
wind. They may be reduced to hoping that Keynes was right--meaning
that educated opinion will capture the minds of later generations.

Essay Types: Book Review