*{WAKE UP TO GLOBALIZATION: THE SEQUEL [http://www.weforum.org/pdf/AnnualMeeting/AMreport2001.pdf]

BY CLAUDE SMADJA

This article was published in Time magazine prior to the Annual Meeting 2001.}

It is the morning after irrational exuberance, life after the dotcom bubble. It is the period when many countries, especially in Asia and Latin America, are facing the prospect of having to export their way out of economic stagnation without the US as a market of last resort. There is a lot of hand wringing about the new economy not being what it was supposed to be. But as we emerge from the overhyped nirvana of the Internet – and from its distorting impact on our analytical capabilities – it is time for a good look at the real new economy. It will continue to develop, although perhaps at a slower pace in the context of decelerating growth, or even a hard landing, for the US economy.

There are at least four features of this new economy that have tremendous implications for business, for society and for the individual. First: the massive injection of information and communications technology into every aspect of economic activity is increasing the efficiency of these endeavours and creating new products and services. These technologies are also radically transforming the nature of each corporation, its relationship with its employees, customers and suppliers, and its very position in the society. We are already way beyond traditional companies grappling with click-and-mortar alternatives. We are confronting a new corporate beast and have yet to figure out some aspects of its functioning logic.

Second: last year we learned the hard way that the new economy does not mean the end of the old business cycle. Still, the huge injection of technology has translated into sharp gains in productivity with – judging by the US experience – a significant increase in economic growth trends. We just have to figure out how to sustain them. 

Third: the new economy means a clear shift of power from producers to consumers at every step in the chain of economic activity. How will this impact the positioning of corporations, particularly when the demands of the market are increasingly expanding beyond the quality of their products or services to their behaviour and ethical standards in every part of the world? How does this shift of power coexist with the concentration of corporate power that also caracterizes the new economy? Or does this latter aspect create a mitigating factor with respect to the former one?

Fourth: the new economy’s impact, like globalization’s, is cumulative, creating a very brutal trade-off between quicker prosperity and greater insecurity. Although this may mean drastically different things for the high-flying fund manager and the blue-collar worker, for the first time both of them – and not just the working man – will have to adjust to this new reality.

These are the kind of issues that will be part of the agenda of the 31st Annual Meeting of the World Economic Forum in Davos. Unlike last year’s optimistic millennial event, this meeting will convene in the context of increased uncertainty about the world economy. In a context also where the second wave of the Internet revolution, the trends toward technology convergence and the emergence of m-commerce (m as in mobile phone) are already present, with all the implications they portend for business and society.

But Davos will also reflect that this is a time of globalization angst. As much as the new economy is not necessarily what it was supposed to be, globalization is definitely not at this stage what it should be. We see accumulating evidence that the world’s system of governance is not functioning up to the requirements or the urgencies created – or amplified – by globalization. In one year, we have gone from the predictable collapse of Seattle to the no less predictable collapse of the conference on climate change in The Hague. In Seattle or in The Hague, failure was preordained quite simply because there is a limit to the way differences created by selfish, egotistical interests can be papered over, and rhetoric can be a substitute for action. In the same way, don’t feel guilty if you don’t remember the outcome of the UN Millennium Summit last September. This was supposed to be a historic call to arms for addressing the global challenges of the planet, with more than 180 heads of state and government travelling to New York to make solemn pledges about fighting poverty, reducing illiteracy and other lofty goals. But the absence of real impact explains the growing scepticism toward these big governmental conferences that amount to little more than exercises in tourism promotion for the host city.

There needs to be more efficient ways to make globalization deliver the goods, especially for the developing countries. There has to be a better approach so that globalization can take real account of the requirements, agendas and sensitivities of these countries that comprise more than 3 billion people, each surviving on about US$ 1 a day, many still waiting to make their first telephone call. How to develop and expand the new kind of public/private partnerships and cooperative efforts that are emerging will of course be part of the Davos agenda. 

We have now definitely entered what might be called Globalization Part II. It is a time to draw lessons from the realization that some optimistic assumptions underlying the first ten years of the globalization process have been proven wrong. No, globalization does not mean necessarily that governments have been relegated to the waste bins of history by the liberalization of financial markets and economic activity. On the contrary, if globalization is not to be equated with a return to the law of the jungle, it will mean reinventing governance and casting governments in a new, different role. Even then, globalization will not be able to automatically provide greater benefits to everybody and his mother, and all countries on earth. But the way globalization is currently proceeding demonstrates the acute need to address the challenge of unequal distribution at national as well as international levels. Without strong action involving governments, international  organizations, business and civil society, the growing wealth, health, knowledge and digital divides are in danger of fragmenting our planet – maybe beyond repair. We need a system of global governance – not a global government – that can
amplify and coordinate efforts, build on best practices, capitalize on technologies with great leapfrogging potential and create more integrative synergies.

In the same vein, we know now that the man in the street will not “just go along” with globalization out of some sort of fatalism or illuminated revelation of its benefits. Globalization – especially as its impact is magnified by the IT and biotech revolutions – is raising serious and genuine anxieties. Some aspects of globalization even put into question what we used to consider parameters for assessing the degree of civilization in a society. The man in the street will not genuinely “come along” if he feels that his questions and anxieties are not getting at least some responses.

The cultural and societal dimension of globalization should not mean blending national cultures into some form of bland magma. This unhappy consequence can be avoided by developing ways to manage – and capitalize on – diversity, helping cultures to coexist and flourish in a global context. In this regard, corporations will have to find ways to reconcile their search for maximum return to shareholders with their inescapable social responsibilities to the people and environments in which they operate.

As we have seen in the last few years, these issues will not fade away. Nor will they have automatic solutions. It is better to try to address them in a collaborative effort that would allow us to share the benefits of success instead of having to allocate blame for failure.