PREPARE TO FIGHT THE BACKLASH
By Robert Rubin
Robert Rubin, former U.S. Treasury secretary, is now chairman of the
executive committee of Citigroup, Inc.
SINGAPORE -- The economic environment of the 1990s was greatly affected
by forces of change that had been at work for some time but reached new
levels during this period. Among them were increased integration of trade
and capital markets across the world, new technologies and advances in
applying existing technologies, the spread of market-based economics throughout
the globe and real economic progress in many emerging-market
and developing economies.
These enormous forces of change on balance brought much economic benefit,
although it was unevenly distributed. The beneficiaries included many
emerging-market countries, for example, in Asia.
The forces of change still provide the potential for favorable long-term
economic conditions for the United States and the global economy if, and
this is a big if, the challenges to realizing that potential are met in
economic policy, geopolitics, environmental protection and much else.
The real progress in growth stemming from the great forces of change has
been accompanied by serious costs: economic and social dislocation for
some, adverse environmental impacts, a sense of uncertainty and insecurity
even among many who were doing well, and two financial crises that undermined
tens of millions of lives -- Mexico in 1995 and the one that started in
Asia and became global in 1997 and 1998.
Moreover, far too little progress has been made in combating global poverty
and increasing the broad-based sharing of growth.
Half of the world's population still lives on less than $2 a day.
The pendulum swung powerfully toward the forces of change in the 1990s.
Now there is a backlash, also very powerful. There is a real danger for
the future economic well-being of the globe that the pendulum may swing
back to restraints on trade and capital market integration, labor market
rigidities, greater regulation and the like. The realities (which most
people don't want to acknowledge) are that change is key to growth, that
restraining change restrains growth, and that change inevitably creates
winners, losers and dislocations. That hard set of realities underlies
the policy decisions around globalization and market-based economics.
As president of the United States, Bill Clinton gave great thought to
this central dilemma of our economic era. He brought the two perspectives
together into the best path forward -- continued trade liberalization
and movement toward market-based economics, reduction of rigidities and
the embrace of change -- to best promote growth.
But this is combined with an equally important parallel agenda of combating
poverty, broad-based public education, programs to help those dislocated
by change, appropriate social safety nets, environmental protection and
much else, to respond to the concerns underlying the backlash.
Making this parallel agenda work globally would require greatly increased
assistance from the industrial countries for the developing world. The
political support for such aid is exceedingly difficult to garner. It
requires increased awareness among the citizens of industrial nations,
especially in America, of their imperative self-interest in such assistance.
Moving forward with change, the backlash against change, a parallel agenda
and foreign aid will be at the center of the political and policy debate
throughout the world for many years. The longer term economic potential
of the global economy is great, but so are the challenges to realizing
A major danger now is that global economic uncertainty could lead to counterproductive
policy: protectionist trade decisions, more restrictive labor measures
or other movement away from the growth-maximizing regime of embracing
(c) 2002, Global Economic Viewpoint. Distributed by Los Angeles Times
Syndicate International, a division of Tribune Media Services.
For immediate release (Distributed 8/14/02)