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Graduate Students Recount Experiences with Globalization

June 1, 2007 at 6:30 PM EST
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KRIENGSAK CHAREONWONGSAK, Parliament Member, Thailand: Tell me a country which closed down their border for trade and they are prosperous.

PAUL SOLMAN, NewsHour Economics Correspondent: Kriengsak Chareonwongsak, a parliament member in Thailand, one of globalization’s apparent winners.

FREDERICK SUMAYE, Former Prime Minister, Tanzania: Nobody said we will close the borders.

PAUL SOLMAN: By contrast, Frederick Sumaye, former prime minister of Tanzania, one of globalization’s losers.

FREDERICK SUMAYE: … and we didn’t even say globalization is totally, you know, a devil. No. We just said it must be controlled.

PAUL SOLMAN: Add Argentina’s Yanina Budkin and China’s Mingyou Bao, and we had four mid-career students at Harvard’s Kennedy School of Government. They’ve spent the past year trying to understand the phenomenon and figure out what to tell their people back home.

Watching the students, two of their professors: the staunchly pro-trade economist Robert Lawrence on the right; and his more ambivalent colleague, Danny Roderick. We assembled them all to hear how globalization is playing around the world, for the winners and losers alike.

So first question: How would their fellow citizens vote if asked to give globalization a simple thumbs-up, thumbs-down?

Thailand?

KRIENGSAK CHAREONWONGSAK: Fifteen percent on the pro, maybe 5 percent on the against, and the rest is a silent majority.

PAUL SOLMAN: Argentina?

YANINA BUDKIN, Former Communications Officer, World Bank: Sixty-five percent no, 35 percent yes.

PAUL SOLMAN: Tanzania?

FREDERICK SUMAYE: Eighty-five percent no, 15 percent yes.

PAUL SOLMAN: China?

MINGYOU BAO, People’s Bank of China: The majority of the Chinese people will say yes to this question. Globalization is a win-win for China and the rest of the world.

PAUL SOLMAN: Mingyou Bao, from the People’s Bank of China, then gave the basic economic rationale.

MINGYOU BAO: I think every country could benefit from the process of globalization, because the developed countries can have better, greater access to cheap labor and markets, while the developing countries can benefit from the inflow of capital and technology.

PAUL SOLMAN: Tanzania’s Frederick Sumaye has learned the theory…

FREDERICK SUMAYE: … but I think, in the long run, there will be more pains than gains. There will be industries in these developing countries that will be just taking off. If you curtail them at that stage, these countries, in the long run, will suffer, because they will just be markets.

PAUL SOLMAN: Argentina?

YANINA BUDKIN: Argentina is an interesting middle point, I would say. We had a very interesting case in the ’90s. We opened our economy. Huge amounts of foreign direct investments came in. We privatized. And we were very much integrated into the world economy. That was very positive, increase of income for almost everybody.

Very nice until 2001, we have a massive crisis. There has to be regulation of some of these investments coming and going out. There has to be regulation of the capitals that are allowed to fly in and out, because you really get destabilized in your economy.

Protecting developing countries

PAUL SOLMAN: This is one of today's main beefs about free-market globalization: that, if foreign investors can pour money into a country and help build it, they can also pull it out quickly and make any bad situation much worse. It happened in Argentina in 2002, in Thailand in the late '90s.

KRIENGSAK CHAREONWONGSAK: I understand fully that the global market sometime can move its capital in a way that could be very disruptive at times. But in Thailand, we have grown 30 times in 30 years. That means we have been richer, on average. GDP per capita have grown. And we can't deny that it's due to our openness with trade, openness with investment.

PAUL SOLMAN: Of course, a freer market means winners and losers, acknowledges the Thai politician.

KRIENGSAK CHAREONWONGSAK: ... there are some industry that are sunset and who have to close down.

PAUL SOLMAN: Sunset industry, meaning it's at the end of its lifecycle?

KRIENGSAK CHAREONWONGSAK: There were the textile industry, the shoes industry.

PAUL SOLMAN: So in Thailand, that's not what you're selling any more?

KRIENGSAK CHAREONWONGSAK: It's going down quickly, and almost gone.

PAUL SOLMAN: Who did you lose the business to?

KRIENGSAK CHAREONWONGSAK: We lose to China. We lose to some other cheap labor countries.

MINGYOU BAO: Cambodia.

PAUL SOLMAN: Vietnam and Cambodia?

MINGYOU BAO: Yes, they are catching up very fast. Even we are starting losing business to these two.

KRIENGSAK CHAREONWONGSAK: But that's normal.

PAUL SOLMAN: So Thailand's losing the textile business to China, and China's losing it...

MINGYOU BAO: Yes.

PAUL SOLMAN: ... to Vietnam and Cambodia?

MINGYOU BAO: Yes.

KRIENGSAK CHAREONWONGSAK: And, eventually, they'll lose to Africa.

PAUL SOLMAN: The guy from Tanzania's laughing. He doesn't know where he fits, if that's the case.

KRIENGSAK CHAREONWONGSAK: Eventually, Latin America and Africa will get all the cheap labor industry eventually.

PAUL SOLMAN: So the good news is, for you guys, that you'll get the cheap labor jobs soon enough.

FREDERICK SUMAYE: No, I don't agree to that. They will probably come up with a technology that will be cheaper to run, and cost per piece of cloth will probably be lower.

PAUL SOLMAN: So there will be no textile jobs?

FREDERICK SUMAYE: It can happen. Cheap labor, yes, might not be that important when we get to that point.

PAUL SOLMAN: So Sumaye wants to protect what industries Tanzania now has.

'Keeping the flies out'

FREDERICK SUMAYE: When China opened its doors to the outside world, they still had a lot of control, OK?

PAUL SOLMAN: He just said that China managed its globalization. You didn't just open yourself up to the world. You had mainly state-owned enterprises. You had very clear policies as to who could invest, and who couldn't, and how you had to have a Chinese partner, and so forth. This was not textbook "let's just open everything up to the world."

MINGYOU BAO: Yes, Paul, I agree. If you open the door to the outside world without, you know, preparing the necessary, fundamental capacities for protecting the weak industries, the people, the vulnerable groups in the society, then you are likely to suffer more in the process.

PAUL SOLMAN: So you agree with him completely?

MINGYOU BAO: When you open the window, you know, you have fresh air. And also, you have, you know, coming of the flies and mosquitoes. So what do you do? What the government needs to do is to install, build a filtering, right?

PAUL SOLMAN: A filter?

MINGYOU BAO: A filter, filter.

PAUL SOLMAN: Oh, to keep the flies out?

MINGYOU BAO: Yes. So you have the fresh air, but it keeps the flies out.

PAUL SOLMAN: Now even China is agreeing with this. So you're on your own here.

KRIENGSAK CHAREONWONGSAK: Basically, you have to feel the hurt of the people. Maybe some gradualism may help in easing the pain.

PAUL SOLMAN: Well, what would gradualism mean?

KRIENGSAK CHAREONWONGSAK: That means you do not abruptly change a lifestyle. There have been generations of growing leek and cumber, garlic, whatever. They don't know anything else. Therefore, how could you expect them to shift suddenly?

PAUL SOLMAN: This is the debate going on in the United States right now, where the argument is, "Let's compensate the losers." But how do you do it?

KRIENGSAK CHAREONWONGSAK: There must be mechanism. For example -- well, retrain is one way.

PAUL SOLMAN: Retrain, but you know, when I'm a journalist, and I go out and say to people who are losing their jobs, "Oh, we have retraining programs. You should retrain." They say, "Retrain for what?"

KRIENGSAK CHAREONWONGSAK: Retrain for something better for you.

PAUL SOLMAN: Ah.

KRIENGSAK CHAREONWONGSAK: That you'll be even richer, even. After you get retrained, you move to a better industry, a better kind of thing you can do. You can compete. You'll be better off.

FREDERICK SUMAYE: What is this "something else" which will not be affected by globalization? Because globalization is just like a flooding river. It's going to fill every room.

KRIENGSAK CHAREONWONGSAK: When we're in our country or hot, we don't wear thick clothes. We come to Boston, we wear thick clothes. We adjust. I would say, as a good government, you would empower them with skills, prepare them ahead of time, and ease their pain by compensate for some of the things that's not their fault.

Maintaining agricultural assets

PAUL SOLMAN: But suppose that most of the people of the world are competing against each other for the same jobs that increasingly machines are able to do more cheaply anyway. It's at least conceivable, isn't it, that people will not have anything to sell?

FREDERICK SUMAYE: That's why we are saying, initially, you don't want to kill everything in these developing countries. You must allow some things to grow.

PAUL SOLMAN: So you mean, right now in Tanzania, 30 million people, how many of those people don't have something to sell in the world economy?

FREDERICK SUMAYE: Oh, many of them. There are those who produce coffee. There are those who produce cotton. The prices are so bad. And, of course, these farmers are not making -- in fact, most of the times they make losses.

PAUL SOLMAN: The kind of industries that you want to nurture in Tanzania, what are those industries?

FREDERICK SUMAYE: Industries that process the agricultural commodities. I would want to process my cotton, I'd want to process my coffee, I would want to process my tea so that I can get the advantage of value addition.

YANINA BUDKIN: It's true that countries can benefit, but also countries can have a strategic decision to integrate to the world economy with products that will allow them to go further than the cacao, the coffee, or the soybean. And it happens. It's more than a dream. It happened in Chile with the salmon industry.

PAUL SOLMAN: The salmon industry, yes.

YANINA BUDKIN: Salmon and wine, also. But I think the key here for my country, at least, is agriculture. And the key debate with the developing world is, what is happening with agricultural subsidies, and what is the story with being asked to have our open economies, but then having to face very closed economies, when we want to export our products?

PAUL SOLMAN: Because we're still supporting our farmers, for example, so that your farmers can't compete?

YANINA BUDKIN: Exactly. If some countries are going to be better, maybe others need to be a little bit less well-off.

PAUL SOLMAN: Well, but you can see why that would be an unappealing argument to an American.

YANINA BUDKIN: Yes, but the problem is, are we talking about being global, having one world for everybody, or are we talking for the U.S. defining how globalization works?

PAUL SOLMAN: For the last word, we turned to the professors. At the end of the day, what did free-trader Robert Lawrence hear? A common theme.

ROBERT LAWRENCE, Harvard University: It was the need to somehow manage the process in some way. Nobody believes that it should just be unleashed and left without a very strong role for government in some way.

PAUL SOLMAN: What did the more skeptical Danny Roderick hear?

DANNY RODERICK, Harvard University: Markets will not work on their own. You need all the institutions that regulate markets, that stabilize markets, that compensate to losers and provide the safety nets, without which markets can neither be legitimate or, for that matter, efficient, if you don't have the appropriate regulatory frameworks.

PAUL SOLMAN: You're from Turkey. What would the vote be in Turkey, pro-, anti-globalization?

DANNY RODERICK: Globalization's a dirty word, without any doubt, so I think we would get 60 percent of the people say that it's a bad thing.

PAUL SOLMAN: And you're from South Africa originally.

ROBERT LAWRENCE: And I think probably 70 percent against.

PAUL SOLMAN: And what do you think in America, if you just asked that question?

DANNY RODERICK: We know the answer. We take those polls all the time, and it's, again, between 55 percent and 60 percent.

PAUL SOLMAN: Against?

DANNY RODERICK: Against.

PAUL SOLMAN: Against globalization, the dirty word on so many people's tongues these days.