Episode One | Episode Two | Episode Three

Episode Three: The New Rules of the Game


  1. Chapter 1: Prologue [6:14]
  2. Chapter 2: The Global Idea [3:52]
  3. Chapter 3: NAFTA: The First Test [5:28]
  4. Chapter 4: Crossing Borders [3:30]
  5. Chapter 5: The Global Market [3:48]
  6. Chapter 6: Emerging Market Hunters [5:01]
  7. Chapter 7: Averting a Meltdown: 1994 [4:56]
  8. Chapter 8: The Global Village [6:47]
  9. Chapter 9: China and the Tigers [5:35]
  10. Chapter 10: The Japanese Paradox [3:01]
  11. Chapter 11: Global Contagion Begins [7:55]
  12. Chapter 12: Contagion Engulfs Asia [7:13]
  13. Chapter 13: Russia Defaults [2:31]
  14. Chapter 14: The Crisis Reaches America [7:07]
  15. Chapter 15: The Global Debate [2:49]
  16. Chapter 16: The Battle Joined [5:08]
  17. Chapter 17: Failure at the Summit [4:58]
  18. Chapter 18: The Global Divide [2:33]
  19. Chapter 19: Capitalism Redefined [7:00]
  20. Chapter 20: The Bottom End of Globalism [4:46]
  21. Chapter 21: Changing of the Guard [3:04]
  22. Chapter 22: The Battle Resumed [6:38]
  23. Chapter 23: 9/11 [4:27]

Chapter 1: Prologue [6:14]

NARRATOR: The attack on America raised so many questions, among them, questions about the dangers of the new world economy. Is terrorism the dark side of globalization?

DANIEL YERGIN, Author, Commanding Heights: Up until September 11, there was a sense that this movement toward globalization really was irreversible. And since then there's been this recognition that things can go in another direction.

NARRATOR: Can our deeply interconnected world deliver prosperity to everyone?

BILL CLINTON, U.S. President, 1993-2001: And that's basically the next big challenge, is making this interdependent world of ours, on balance, far more positive than negative. And the extent to which we do that will depend on whether the 21st century is marred by terrorism of all kinds or whether it becomes the most peaceful and prosperous time the world has ever known.

NARRATOR: This is the story of how the new global economy was born, the story of a century-long battle of ideas to determine who would control the "commanding heights" of the economy -- central governments or free markets.

In the 1990s, a worldwide capitalist revolution fueled the new era of globalization, the greatest expansion of world trade in history.

RICHARD CHENEY, U.S. Vice President: Millions of people a day are better off than they would have been without globalization, and very few people have been harmed by it.

NARRATOR: But with the promise came a debate about the impact of globalization.

GRETCHEN KING, Media Activist, Independent Media Center: And should the world's wealthiest people really dictate how the world's economy is going to run?

NARRATOR: Tonight, the battle over who should write the new rules of the game for the global economy.

GEORGE W. BUSH, U.S. President: Out of the sorrow of September 11, I see opportunity, a chance for nations to strengthen and rethink and reinvigorate their relationships. When nations open their markets to the world, they find in America trading partners, an investor, and a friend.

NARRATOR: We are living through a revolution. The 1990s saw the creation of a new kind of global economy, a single market in which everyone has a stake, but no one has control.

Globalization has brought unprecedented prosperity, but it has also brought crises and risks we are only beginning to understand. It has unleashed a worldwide debate about wealth and poverty, about the "rules of the game" for this new era of globalization.

DANIEL YERGIN: Historians may well say that a new era began at the beginning of the 1990s with the end of the Cold War and the Gulf crises. It was this new era of globalization, of a world being tied together by flows of investment, of trade, of ideas, of culture, of people travelling all the time. And it happened very fast. And as so often happens, the change came more quickly than the ability of thinking to catch up and understand the change. But to understand where we are today and where we're going, we have to understand this recent past.

back to top

Chapter 2: The Global Idea [3:52]

NARRATOR: No economic idea has shaped the era of globalization more profoundly than a belief in free, open markets. Free trade has been a fundamental tenet of capitalism for over 200 years. But in the 1990s, the global market created a new reality that no government, no politician could afford to ignore.

Our story begins in 1992. The global economy was changing rapidly, but America seemed adrift. A recession had left 10 million workers unemployed. Industries struggled against intense foreign competition. Europe had formed a single trading bloc. Japan looked invincible. Japanese companies were buying up American icons, like Rockefeller Center and Universal Studios.

In the 1992 presidential campaign, Arkansas governor Bill Clinton claimed he could get America back on track. He drew crucial support from America's labor unions and seemed to promise workers' protection against global competition.

BILL CLINTON: Look at what our competitors do. Look at what Japan does. Look at what Germany does. We have to keep investment at home so jobs don't go offshore.

WORKER: You'll stand up against the good old boys to do that?

BILL CLINTON: Absolutely. What's the good of having a country if you're going to let it go down the drain?

WORKER: I don't know. Why have we been doing that?

NARRATOR: But at a meeting with Wall Street financiers, Clinton had discussed a different agenda, an agenda some of his core supporters adamantly opposed. Financial markets wanted to rein in government spending, cut the deficit, and embrace free trade. Without these policies, they thought America's economy wouldn't recover. Over dinner in an exclusive restaurant, Clinton tried to persuade some of Wall Street's most seasoned executives that he saw the world as they did.

ROBERT RUBIN, Co-chairman, Goldman Sachs, 1990-1992; U.S. Secretary of the Treasury, 1995-1999: My view was that the threshold economic issue for our country was to restore fiscal discipline after a long, long time during which fiscal discipline had eroded.

Onscreen caption: The U.S. government was $4 trillion in debt.

BILL CLINTON: I could see that Rubin and the others that were there in this rather dark place where we had dinner at night were kind of looking and saying, "Well, you know, can this guy from Arkansas be president? Could he possibly know enough about the economy to do it?"

ROBERT RUBIN: After that meeting I thought to myself that this was a man who cared about what I at least thought we needed to care a great deal about. Now, on the issue of trade, he clearly believed in trade liberalization, and that clearly has been a dividing line in the Democratic Party. It was then, and it is now.

back to top

Chapter 3: NAFTA: The First Test [5:28]

NARRATOR: Trade became an issue in the 1992 presidential campaign. Republican president George Bush had negotiated a treaty that would allow unrestricted flows of trade and investment between the U.S., Canada, and Mexico.

Onscreen title: NAFTA: North American Free Trade Agreement

For its supporters, trade embodies an idea: that open markets create wealth, bind nations together, and help construct a more prosperous -- and a more secure -- world. NAFTA put that idea to a political test. In America, it was the first great debate of the globalization era.

Onscreen title: 1992 presidential debate

ROSS PEROT, Reform Party Presidential Candidate, 1992: You have to admit that NAFTA, the Mexican trade agreement, where they pay people a dollar an hour, have no health care, no retirement, no pollution controls, etc., etc., etc., you're going to hear a giant sucking sound of jobs being pulled out of this country.

GEORGE BUSH, U.S. President, 1989-1993: Ross says with great conviction that he opposes the North American Free Trade Agreement. I am for the North American Free Trade Agreement. My problem with Governor Clinton is that one day he says he's for it, the other he wants to make some changes. When you're president of the United States, you cannot have this pattern of saying "I'm for it, but I'm on the other side."

BILL CLINTON: I am the one who's on the middle on this. Mr. Perot says it's a bad deal; Mr. Bush says it's a hunky-dory deal. I say it does more good than harm if we can get the Mexicans to live up to their own labor standards, their own environmental standards, and if we have genuine protection for workers displaced in America.

NARRATOR: Once in office, Bill Clinton's economic policy was aimed squarely at restoring the confidence of financial markets. His first term was dominated by the battle to reduce the deficit.

On trade, the president changed his position, and announced he would wholeheartedly support NAFTA as it stood.

ROBERT RUBIN: President Clinton gave a speech in the East Room at the White House that set out how he wanted to discuss NAFTA with the American people. It was really quite a remarkable speech. He talked about NAFTA in a much broader context. He talked about NAFTA in the context of the rapid changes taking place in the global economy, not only from trade, but from technological development, spread of market-based economics.

BILL CLINTON: This debate about NAFTA is a debate about whether we will embrace these changes and create the jobs of tomorrow, or try to resist these changes hoping we can preserve the economic structures of yesterday. Nothing we do in this great Capitol can change the fact that people can move money around in the blink of an eye. I tell you, my fellow Americans, that if we learned anything from the collapse of the Berlin Wall and the fall of the governments of Eastern Europe, even a totally controlled society cannot resist the winds of change that economics and technology and information flow have imposed in this world of ours.

NARRATOR: To some of his supporters, the president's change of heart on NAFTA was nothing less than a sellout.

THEA LEE, Assistant Director for International Economics, AFL-CIO: The AFL-CIO, the labor movement in the United States, opposed NAFTA as it stood because we saw that as a corporate-dominated trade and investment agreement, one that served the interests of multinational corporations, that improved their flexibility, their mobility, their clout. And at the same time NAFTA did nothing to protect the rights of workers to form unions, to bargain collectively, and to really raise their voices in the political system so that workers could be formidable countervailing power to multinational corporations. I think Clinton did sell out his traditional blue-collar supporters on the NAFTA issue, and a lot of people haven't forgiven him for that.

BILL CLINTON: Our adversaries tried to make it look like the whole American establishment's on one side and the little guys are on the other. And they could, you know, stir that fear factor, and it was a tough sell. It was a tough sell.

NEWT GINGRICH, Speaker, U.S. House of Representatives, 1995-1999: I thought it was the most of courageous act of his presidency, and we worked with him very hard. The Republicans in the House provided a much bigger percentage of the votes than the Democrats did.

NARRATOR: Sixty percent of congressional Democrats voted against NAFTA. It passed only with Republican support.

back to top

Chapter 4: Crossing Borders [3:30]

Onscreen caption: Tijuana, Mexico

After NAFTA became law, thousands of foreign companies built factories in Northern Mexico, exporting goods to the American market just a few miles away. Eighty percent of all televisions sold in the U.S. are now made here. Nearly a million workers found new jobs along the border in Northern Mexico.

MARIA ISABEL, Factory Worker, Tijuana, Mexico: I have two children. In the South I didn't have a job and couldn't give my children what they need. I left them behind with relatives and came here to find work. I found a job in a television factory. I earn enough to send some money home to my children. I couldn't do that before.

JORGE CASTANEDA, Foreign Minister of Mexico: This is a country of about over 100 million people. There is no question that those 10 to 12 million people who live in the North and the border area are not doing badly by Mexican standards. And it has become more industrialized, with more jobs, higher wages, better social indicators, etc. The North has benefited undoubtedly. The people in the South are doing very badly by Mexican, or by anybody's, standards.

NARRATOR: Forty percent of Mexico's population lives in poverty. Mexico's embrace of NAFTA and free trade was part of a broader change in thinking within developing countries. Their governments increasingly saw open markets as the key to economic growth.

VICENTE FOX, President of Mexico: I worked 15 years for Coca-Cola. I started as a route salesman. I started right from the bottom. And I learned that discipline, that hard work, that talent is the way to succeed. I have always seen globalization as an opportunity. Just the trade agreement with the United States has moved our total trading, which was six years ago US$40 billion, today is US$280 billion in just six years. Nobody loses. Everybody can win.

THEA LEE: Obviously trade has increased; investment has increased. And if the only metric you use to measure whether NAFTA has been a success or not is the volume of trade, then NAFTA is tremendously successful. And yet most normal working people, most normal citizens don't watch the volume of trade. Companies have been more aggressive and threatening to move production to Mexico. They've succeeded in bargaining down wages and opposing unions. And so in a lot of different fronts we think that NAFTA has shifted the balance of bargaining power in the continent of North America towards multinational corporations.

NARRATOR: Since NAFTA came into effect, about 400,000 American jobs have been "adversely affected" by trade with Canada and Mexico, according to the U.S. government. Exports to these countries have created more than a million new jobs, and over the '90s, global trade nearly doubled.

back to top

Chapter 5: The Global Market [3:48]

NARRATOR: We tend to think of trade as products and goods moving across borders. In fact, the biggest trade of all can't be seen. It is money, the continuous, 24-hour worldwide flows of stocks, bonds, and currencies. In the 1990s, practically anyone with savings in a pension or mutual fund became an investor in the global market.

Onscreen caption: Trade in goods and services: $8 trillion
Trade in currencies: $288 trillion

DANIEL YERGIN: I was at a dinner, a so-called thinkers' dinner at the White House before one of the State of the Union addresses, and there's this great discussion among all the people around the table about markets, about "them out there," that it's somebody different. Finally I raised my hand and said: "With all due respect, the market isn't just them; it's us. It's our aggregated retirement savings; it's our pension plans. That's what the markets are."

Onscreen caption: Sacramento, California

NARRATOR: The state of California runs one of America's largest pension funds. The fund, known as CalPERS, manages the retirement savings of over a million state employees.

Onscreen caption: CalPERS
California Public Employees' Retirement System
Assets: $150 billion

For decades, CalPERS invested only in America. But in the era of globalization, that changed. A quarter of its money was invested overseas. At one point, CalPERS controlled 5 percent of France's entire stock market.

French television sent a crew to investigate.

MARY COTTRILL, Principal Investment Officer, CalPERS: They were filming in my office, and I had a salad on my desk because it'd been just a very hectic day. We were talking about some figures on my computer, but they kept filming this salad, and I got the feeling that, you know, the story was going to be, "The Americans are coming, and they're going to ruin the French way of life. We're all going to be eating salads at our desk and working 12 or 14 hours," which, of course, is not true at all. But I think it was just a fear, I think, that we've see in the news that globalization means Americanization.

NARRATOR: Pension funds became the powerhouses of the global economy because they had the money.

BILL CRIST, President, CalPERS: Because the world is getting smaller and smaller, as we say, and the growth of the global economy, as we say, this is... The real source of change in today's world, whether anybody likes it or not, increasingly are large pension funds.

Onscreen caption: Americans have $11.5 trillion invested in pension funds.

INVESTOR: I have some of my own mutual funds overseas, and they seem to be doing pretty well right now.

INVESTOR: I think with respect to CalPERS, they have a fiduciary responsibility to seek those markets out and get the best return for their shareholders.

INVESTOR: We can't keep everything in the United States. You keep things in the United States, it's still not in the United States, because so many companies are global. Everything is global; everything is interconnected.

back to top

Chapter 6: Emerging Market Hunters [5:01]

NARRATOR: With the end of the Cold War, many nations opened their markets to foreign investment for the first time. Funds like CalPERS saw new opportunities and hired money managers to scour the Third World, now renamed "emerging markets."

Onscreen caption: Mark Mobius
Templeton Emerging Markets Fund
Travels to 15 countries per month
Manages $6 billion

MARK MOBIUS, Manager, Templeton Emerging Markets Fund: The whole rationale is that these emerging countries grow faster, so what we're trying to do is capture that growth, and of course make money for investors. But of course the risks are very great, because there's no free lunch. If you want to capture that growth you've got to take many more risks. So there's a balance, and of course it's our job to try and minimize the risks and maximize the returns. It doesn't always work out that way, but that's the objective.

NARRATOR: As investment flowed around the world, the Clinton administration expanded the trade agenda it adopted with NAFTA. The U.S. encouraged developing countries to continue opening their economies to the global market.

BILL CLINTON: I favored a very aggressive policy. I thought the emerging countries -- both emerging economically and those that were new democracies -- had a better chance to do well economically and politically if the wealthier countries opened our borders and made trade agreements with them, and if in turn they opened their borders not only to trade, but to investment. I thought that economic policy and traditional foreign policy would tend to merge.

LAURA TYSON, Chair of the U.S. National Economic Council, 1993-1995: This is how it worked. If you go back to the first term, a lot of the international approach of the administration on economic issues was to break down barriers to U.S. firms. We are going to engage our trading partners and encourage, cajole, or convince them to bring down their barriers.

NARRATOR: Many developing countries had been colonies of the West. Although they now wanted long-term foreign investment, some saw fast-moving flows of money as a new threat to their independence.

MAHATHIR BIN MOHAMAD, Prime Minister of Malaysia: Once communism was defeated, then capitalism could expand and show its true self. It's no longer constrained by the need to be nice, so that people will choose their so-called free-market system as opposed to the centrally planned system. So because of that, nowadays there is nothing to restrain capital, and capital is demanding that it should be able to go anywhere and do whatever it likes.

NARRATOR: Some called it "the triumph of capitalism." During the 1990s, more countries than ever adopted market economics.

As an economics professor, Bill Crist had taught a course comparing Marxist and capitalist theory. As president of CalPERS, the California state pension fund, Crist came to believe that only open markets could ensure global stability.

BILL CRIST: If we don't reach out to these emerging markets, if we don't be evangelists, if you will, and try to encourage them to reform and invest some of our capital funds into these markets, taking advantage of those opportunities, if we don't do that, I'm afraid that some of the predictions that were made a long time ago by Karl Marx and Mr. Engels and others [will come true, and] that there will indeed be a confrontation between the haves and the have-nots that can bring the entire system down.

back to top

Chapter 7: Averting a Meltdown: 1994 [4:56]

Onscreen caption: Mexico, January 1994

NARRATOR: The very day NAFTA came into effect, Zapatista rebels launched an uprising in Southern Mexico. Shortly afterward, the leading presidential candidate was assassinated.

Worried about stability, foreign investment began to flee. The global economy was about to face a new kind of crisis.

Onscreen caption: Washington, December 1994

ROBERT RUBIN: Christmas vacation, I was fishing down in the British Virgin Islands, and Larry Summers [U.S. Secretary of the Treasury, 1999-2001] called me, and he said, "There's some problems in Mexico I'd like you to know about." And I thought to myself that it was nice of Larry to call on the one hand; on the other hand I'm on vacation, and, you know, Mexico today, it'll be some other country tomorrow, and I don't know why this can't wait till I get back. Well, it turned out that this was not just another country. It was a very, very serious matter.

NEWT GINGRICH: I was at a restaurant, and they came and said, "The secretary of the Treasury is on the line," and I got on the line, and he said: "Greenspan and I have a problem. (laughs) And we believe if we don't move very decisively that the Mexican peso will implode. If it implodes, the Mexican government will become very unstable, and we believe you could have a wave of five to nine million people walking north to find jobs."

ROBERT RUBIN: He understood it very quickly, and I remember his saying, "This is the first financial crisis of the 21st century."

NEWT GINGRICH: I said to him, "This is the first real-time, worldwide financial crisis of a kind that will become very normal." And so I said, instinctively, "I'll back you."

Onscreen caption: Robert Rubin called an urgent meeting at the Treasury.
Mexico was about to default on its foreign debt.

ROBERT RUBIN: It was fascinating, because we had Mexico, which we really did think was facing default, and we had enormous political problems accomplishing what we felt we needed to accomplish to support Mexico, to try to prevent this from happening, and we all knew that while we believed the program we were recommending was right, there was some risk it wouldn't work.

LAURA TYSON: You go in and say to the president: "Here is a big crisis that could happen. We can tell you something to do about it. We can't tell you it's going to work. It's very risky, and we know it's extremely unpopular, but we think you should do it anyway."

Onscreen caption: The president's advisors recommended a loan package to Mexico: $50 billion.

BILL CLINTON: Somewhere between five and 10 minutes I listened to all of this. I say: "Well, this is a no-brainer. We've got to do this. If we don't do this, Mexico will certainly fail. Then the borders will be flooded with illegal immigrants who are starving and need food and a job. We'll have an enemy on our Southern border, people that will remember when they were down and they were in need [and that] we were not a good neighbor, and we will pay hugely for that. All over the developing world, people who look at us and think that we are smug and rich and unresponsive and don't care about anybody else will have all that confirmed. If we help, at least people will know we tried in a good cause, and it will resonate throughout the developing world."

NARRATOR: The bailout worked. Mexico paid back the loan -- early.

For some, the intervention set a dangerous precedent: protecting big investors from risks they had willingly taken.

LARRY LINDSEY, Assistant to the U.S. President for Economic Policy: Remember, the people that got bailed out were foreign holders of Mexican obligations, so in a sense we were trying to bail out our own citizens. But it signaled to banks and other rich investors that the U.S. Treasury at that time was going to adopt a bailout policy. People who take risks should bear those risks. They got the reward for them; they should take the downside.

NARRATOR: As the Mexican crisis made clear, technology had transformed financial markets: Money could literally be moved across borders in seconds.

back to top

Chapter 8: The Global Village [6:47]

NARRATOR: During the 1990s, technology, too, leapt over national borders, spreading commerce and ideas.

DANIEL YERGIN: It's hard to believe that at the beginning of the 1990s, e-mail was virtually unknown; most people didn't have it. And a decade later it was everywhere, and it would just become part of people's lives. And so this communications network is so powerful. The price of telephone calls plummeted. The number of telephone calls around the world skyrocketed. And people are in contact and connected in a way that had never happened before.

NARRATOR: In two decades, the number of international phone calls from the U.S. increased from 200 million to 5.2 billion.

This AT&T control center handles 300 million calls each day.

Americans were often connected to the developing world without even knowing it. Consumers checking their credit-card balance could be routed seamlessly to call centers like this one in India, where operators identify themselves with made-up American names.

OPERATOR, Call Center, India: Good evening. My name is Tracy. How can I help you?

NARRATOR: In a remote Indian village, farmers took their crop to market as they had for generations, But an Internet connection ensured they were now paid the world price for their crop, a price set at the Chicago Mercantile Exchange 8,000 miles away.

This borderless world created a new kind of businessperson. Entrepreneurs could now think like multinationals, and see the entire world as a single market. Narayana Murthy understood this revolution earlier than most.

NARAYANA MURTHY, Founder and CEO of Infosys Technology: We were all children of a different generation. We were all mesmerized by the charisma of Nehru. Nehru believed in central planning; Nehru believed in socialism. But then I realized that if you want to eradicate poverty, you don't do it by redistribution of existing wealth; you have to create more wealth. And that's when I got somewhat disillusioned by the socialism as is practiced in India.

NARRATOR: With only $250, Murthy helped found a computer software company. His headquarters in Bangalore became the world's second largest software campus. Only Microsoft's was bigger.

Thirty percent of the world's software engineers are from India.

NARAYANA MURTHY: You know, I define globalization as producing where it is most cost-effective, selling where it is most profitable, sourcing capital from where it is without worrying about national boundaries.

Onscreen caption: Silicon Valley, California

NARRATOR: People as well were becoming increasingly mobile. America relaxed its immigration laws, attracting a huge influx of high-tech workers from across the developing world.

PROGRAMMER, Silicon Valley: This is the land of opportunity. This is the place; this is the happening place, so many people come here.

PROGRAMMER, Silicon Valley: This is a place of opportunity. We get a chance to prove ourselves. We get a chance to prove ourselves, to show our skills.

Onscreen caption: Two hundred thousand Indians found jobs in Silicon Valley.

NARRATOR: In many ways, Silicon Valley was the spiritual center of the new global village -- the source not only of its technology, but of its entrepreneurial ethos.

The Draper family had invested in entrepreneurs since the 1950s, when they brought venture capital to Silicon Valley. In the early '90s, Bill Draper's son Tim funded Hotmail. Its instant global success convinced him that the world was fundamentally changing.

TIM DRAPER, Venture Capitalist: We knew the Internet was going to change the whole way the world worked. You could do commerce; you could do communication; you could do all these things over the Web. India and Africa, Pakistan, China had all been trapped, and they were not really participating in the world economy. They could now. They could because now they could communicate with the rest of the world through this Internet. It was a big opportunity, and we saw it; we jumped on it.

I think entrepreneurship can happen anywhere. All it takes is someone with a vision and an idea for how to do something better.

NARRATOR: One of the Drapers' best investments was in David Lee, the first foreign-born American to take a high-tech company public.

DAVID LEE, Entrepreneur: When we came over we had nothing -- $600, 20 kilos of clothes. And this society provided, gave us opportunity and everything.

CECILIA LEE, Wife of David Lee: Being an entrepreneur sounds very good, but being a spouse is very difficult, because most of the time he's traveling or he's not home. I raised my three children by myself. And sometimes he doesn't remember how old they are.

NARRATOR: David Lee manufactures high-end telephones. He embodies the new breed of global entrepreneur.

CECILIA LEE: Don't eat too much.

back to top

Chapter 9: China and the Tigers [5:35]

NARRATOR: In the early '90s, David Lee returned to his homeland for the first time in over four decades.

Onscreen caption: Shanghai, China

DAVID LEE: I was always afraid to go back to a communist country. I was born in Beijing, actually right in Tiananmen Square. And we left there after the revolution in 1949. We were very lucky we were able to leave the country. We were like the boat people on top of a cargo ship. We left everything. The only thing [we had] is whatever we could carry.

This is a free-trade zone. Anything you do in here you don't have to pay tariff, or you can build the thing and then ship it out for export purposes.

NARRATOR: David Lee set up a joint venture in a free-trade zone near Shanghai. Lee saw firsthand a China in the midst of epic economic transformation.

China's Communist leadership had embraced markets and welcomed hundreds of billions of dollars of foreign investment. Almost one-quarter of the world's population was entering the global market for the first time.

Onscreen caption: Economic reforms lifted 300 million Chinese out of poverty.

In villages across China and throughout the developing world, people left their rural homes. They traveled to industrial towns, seeking work in new factories built to serve the global market.

The era of globalization saw the largest wave of human migration in history. Eighty percent of the world's future economic growth is expected to occur in cities rather than the countryside.

LIN SHENGXIN, Factory Worker, China: I was a schoolteacher in the countryside. At that time I only earned 100 a month. My parents are both farmers, so we lived a very poor life. But now I'm earning 3,000 a month. My life is totally different. My child is going to school here, near the factory. So we are living a much, much better life now.

Onscreen caption: Singapore

NARRATOR: China's leaders hoped to emulate the "tiger economies" of Southeast Asia, where trade and investment had transformed once-impoverished nations.

LEE KUAN YEW, Senior Minister of Singapore: When the British came here in 1819, they found a fishing village of about 120 people. When the empire broke up, everybody wanted to do their own trading, and we could easily have withered on the vine. So we just had to make ourselves relevant to the world. And the countries that make themselves relevant become better off; their people become better off. Those who opt out, they suffer.

NARRATOR: Since the 1970s, the countries of Southeast Asia had become became world-class exporters, shipping everything from cars to computers across the globe.

DANIEL YERGIN: They called it the Asian economic miracle because the world had not really seen that kind of economic growth, that many people brought out of poverty, that rapid a creation of a middle class so quickly anywhere in the history of the world.

NARRATOR: By the mid-90s, many Asian economies were growing at the astonishing rate of 10 percent or more each year.

LEE HSIEN LOONG, Deputy Prime Minister of Singapore: There was a tremendous confidence and hope that this was the Asian century, and the place was being transformed, and you just had to put money there and it would grow on trees.

DANIEL YERGIN: I remember the CEO of one major company in about 1995 or so saying, "If we're not investing in Asia tomorrow, we're too late."

back to top

Chapter 10: The Japanese Paradox [3:01]

Onscreen caption: Tokyo, Japan

NARRATOR: Yet there was one big exception. Japan, the world's second largest economy, had fallen into a deep, unexpected slump that shook the confidence of its people.

KAORI MARUYA, Parliamentary Secretary for Foreign Affairs, Japan: Japan was in the so-called bubble economy, and at that time the Japanese people were not very careful about debt. After the collapse of the bubble economy, people came back to reality and came down from their dreams.

Onscreen caption: Japanese banks hold $1 trillion in bad debts.

NARRATOR: Japan's economy once looked unstoppable, but it was slow to adapt to the rapid changes of a fast-moving, interconnected world.

EISUKE SAKAKIBARA, Vice Minister of Finance, Japan, 1997-1999: Japan is a very sort of parochial and very closed economy; there's no question about it. Walk around the Japanese cities, you don't see many foreigners.

NARRATOR: Japan, the great exporter, protected its domestic industries. At the heart of the country's economic problems lay a contradiction.

EISUKE SAKAKIBARA: One sector of the Japanese economy is an export-oriented sector which is highly competitive, consisting of Toyotas and Sonys. And the other is domestic manufacturing sector which is extremely uncompetitive. We have a market-oriented capitalistic system on the one hand; we have a very socialistic, egalitarian sector on the other.

NARRATOR: In Japan, government bureaucrats managed a highly regulated economy. As Masahisa Naitoh was to learn, ideas about change met with profound skepticism.

MASAHISA NAITOH, Ministry of Trade and Industry, Japan, 1961-1993: I wanted to deregulate our financial system. The new global markets of the 1990s created a new reality. I said we had to change for Japan to thrive in the new world economy. My colleagues in the government criticized me. They said that it was in the best interest of Japan that my ideas be destroyed.

NARRATOR: Naitoh was fired without warning. Japan stuck to its old ways, and the nation's economic slump continued. For the first time, an Asian "economic miracle" was in trouble.

back to top

Chapter 11: Global Contagion Begins [7:55]

Onscreen caption: Bangkok, Thailand

By early 1997, Southeast Asia's rapid economic boom was overheating. Sirivat Voravetvuthikun was one of many who thought the good times would never end.

SIRIVAT VORAVETVUTHIKUN, Former Real Estate Developer, Thailand: Ever since I was a child, I have been wanting to be a multimillionaire. I wanted to be rich. I wanted to do something that no one has done -- build a luxurious condominium. I knew a lot of rich people and multimillionaires would like to take time off to play golf, to enjoy the fresh air in the mountains, which you cannot find in Bangkok.

I looked at the golf course. It's designed by Jack Nicklaus. I put my effort into making it one of the most beautiful condominiums in Thailand. Still today, with the mountains in the background, with a fairway and a lake in front of the condominium, it's really beautiful.

ANAND PANYARACHUN, Prime Minister of Thailand, 1991-1993: People were just buying apartments and condominiums like they were gambling. And they were tempted by this easy money, tempted by this easy profit.

NARRATOR: During the '90s, Thailand had opened up its capital markets. For the first time, local businesses could borrow money from foreign banks which offered lower interest rates.

ANAND PANYARACHUN: People would come and knock on your door and plead with you to borrow, be they European or Japanese banks. The Western financial world, the banks or the financial companies, they came and begged us to borrow from them.

NARRATOR: In just four years, loans to Thai businesses had tripled to over $200 billion. American and European governments encouraged the inflow of money.

ROBERT RUBIN: Oh, yeah. We were very strong advocates of opening up capital markets and the benefits that could flow there from, but we were also strong advocates at the same time, because we recognized the tie of developing the banking systems, the capital markets, and developing regulatory systems, none of which is easy.

DANIEL YERGIN: And there was an underlying flaw in the system that people really didn't focus very much on, which was the institutional weakness. What that meant is the banking systems were not well developed; securities laws were not well developed. They had not kept up with the development of these economies and their integration into the world economy.

NARRATOR: Thailand's Central Bank had kept its currency artificially high, fueling the speculative bubble.

The International Monetary Fund, which acts as a bank of last resort to countries in financial trouble, began to worry that Thailand was heading for a fall.

STANLEY FISCHER, First Deputy Managing Director, International Monetary Fund, 1994-2001: I went to Bangkok in May 1997. It was full of cranes everywhere, and it looked like the boom would never end. But they were very weak banks who were lending against buildings which were never going to be filled.

NARRATOR: Muang Thong Thani was a sign of the times -- a "new city" built from scratch for 700,000 people. It was meant to be bigger than Boston. But almost no one was moving in.

MARK MOBIUS: The vision was great. The vision was to take this huge tract of land and build a city, basically. between the downtown congested Bangkok and the airport. So the concept was excellent. The problem was it was financed by U.S. dollars.

NARRATOR: Thailand's currency, known as the baht, was pegged to the dollar. As the Thai economy weakened, financial markets sensed this policy couldn't last.

STANLEY FISCHER: Thailand had fixed the value of its currency in terms of dollars. It had a fixed exchange rate. And as people began to wonder, "Well, do they actually have enough dollars to always be able to give me dollars in exchange for the baht, the Thai currency I have?," and when they begin to wonder about that, they start asking for the dollars, and then they attack the currency.

MARK MOBIUS: The Central Bank kept saying no, no, no. And they were shelling out the U.S. dollars to protect the currency. So their foreign reserves were dwindling, and of course any hedge fund manager looking at that would say, "Hey, these guys are going to be in trouble, and I'm going to short the Thai baht."

NARRATOR: The baht came under relentless market pressure. In July 1997, the Thai government was forced to devalue.

The bubble had burst. The Asian financial crisis was about to begin.

SIRVAT VORAVETVUTHIKUN: When the crisis hit, I realized my fate. I could not sell a single unit when the crisis hit.

My condominium is called the American dream home, dream condominium. But we are broke. Even my clients who were multibillionaires are broke also.

NARRATOR: The economic shock reverberated throughout all levels of Thai society.

PANJIT NIYOMDET, Factory Worker, Bangkok. Thailand: When the economy went bad, my husband's salary was cut 30 percent. I was lucky; I kept my job, but I didn't get a raise. To support our family, my husband had to find other work.

NARRATOR: The cost of living was rising. Everything was going up -- water, electricity, even soap. But the salaries were staying the same, or going down.

With its economy in a virtual free fall, Thailand received an emergency rescue loan from the International Monetary Fund. When that didn't work, the Thai government asked Washington for even more help.

No one imagined that an economy as small as Thailand's could spark a global crisis.

back to top

Chapter 12: Contagion Engulfs Asia [7:13]

LAURA TYSON: Thailand is a very small economy. It didn't have a lot of links, and it's not exactly in your backyard. So in any event, the U.S. chose not to intervene in Thailand, thinking it was not going to spill over. Why would it? The contagion effects were not apparent to anybody, not just the administration.

LEE HSIEN LOONG: I think they misjudged the situation. They misjudged the situation, probably because it was seen too much as a financial issue rather than an overall strategic issue.

NARRATOR: Global markets worried that other Asian countries might have similar hidden flaws. Like a classic run on the bank, money began to pull out of the entire region. They called it contagion.

Onscreen caption: $116 billion flowed out of Southeast Asian markets.

DANIEL YERGIN: And at each stage, the crisis turned out to have a virulence that became known as contagion, much greater than anticipated. And what that really reflected was indeed globalization, was the way these economies had become locked together and investors looked at emerging markets. They said there was a problem in Thailand; well, then there's a problem in these other countries. And so each step of the crisis created these shock waves that carried on into the next.

Onscreen caption: Kuala Lumpur, Malaysia, July 1997

NARRATOR: Contagion spread to Thailand's neighbors. Malaysia's economy had seemed stable. Suddenly, it, too, was facing relentless pressure from global markets.

MAHATHIR BIN MOHAMAD: We have the currency going down and down and down, and we have the stock market doing the same. The index kept on going down, no matter what we do. And we felt totally helpless. We felt that there was no way we could recover. So, I mean, the feeling was very bad, very frightening.

Onscreen caption: Jakarta, Indonesia

NARRATOR: Contagion next hit Indonesia, the most populous country in the region. Its government collapsed; its cities descended into chaos.

LEE KUAN YEW: The fund managers didn't know the difference between Indonesia and Malaysia, Thailand, Singapore. They just said, "I want out." Property prices collapsed; companies collapsed. And in the case of Indonesia, the social fabric collapsed. Churches have been burnt; mosques have been attacked; they have killed each other. This will take years to heal. And it's all the fallout of an economic collapse.

NARRATOR: This was a new kind of financial crisis, unlike anything the International Monetary Fund had ever encountered. The IMF organized huge loans for Indonesia and other Asian nations, on the condition they cut government spending, raise interest rates, and eliminate corruption.

STANLEY FISCHER: You're the doctor going in to deal with a very sick patient. The public blames the doctor for the fact that the patient is sick, but the patient was sick to begin with. But these things are societally wrenching, and there are huge vested interests, and you wouldn't get into these crises if the vested interests weren't that important. That I think is why it takes political change to deal with a crisis as big as this.

NARRATOR: To some of the region's entrenched leaders, the IMF's conditions smacked of a new kind of colonialism.

MAHATHIR BIN MOHAMAD: Presently we see a well-planned effort to undermine the economies of all the Asian countries by destabilizing their currencies.

In the old days you needed to conquer a country with military force, and then you could control that country. Today it is not necessary at all. You can destabilize a country, make it poor, and then make a request for help, and for the help that is given, you gain control over the policies of the country, and when you gain control over the policies of a country, effectively you have colonized that country.

NARRATOR: The market forces were simply too powerful for the IMF, or any government, to contain. In late 1997, contagion reached Korea, one of the most successful economies in the world.

EISUKE SAKAKIBARA: It was unbelievable that the crisis had spread as quickly as to Indonesia and Korea, and within a matter of six months or seven months. But the world was much globalized that we thought it was at that time.

Onscreen caption: Seoul, Korea, December 1997

ROBERT RUBIN: In the last week of December of 1997, the 11th largest country -- economy, rather -- in the world, which was Korea, had roughly speaking $4 billion of reserves left and was using reserves at the rate of $1 billion a day. Well, it didn't take a great deal of quantitative insight to see that that was not a long-term viable situation.

NARRATOR: Korea had been misleading the world, claiming it had enough money to withstand the crisis. The IMF's Stanley Fischer arrived in Seoul to inspect the Central Bank's accounts.

STANLEY FISCHER: I visited Korea a couple of days before they turned to the IMF for help, and it was a circus atmosphere. It was a state of panic, and it was at that point that I went to the Central Bank and was shown how much money was left in the Korean Central bank. It was essentially all gone.

NARRATOR: Korea was about to default on its loans from Japanese and Western banks. Pressured by their governments, the banks agreed to share some of the pain: They rolled over their loans. Korea was then given the largest bailout in history.

Onscreen caption: Korea received $55 billion in new loans and credits.

LEE HSIEN LOONG: If they had done that in Thailand, I think that they would have not only avoided some economic problems, but I think that a sense in Southeast Asia that the Americans were really on the side of putting things right would have been stronger.

back to top

Chapter 13: Russia Defaults [2:31]

WILLIAM McDONOUGH, President, Federal Reserve Bank of New York: Then a very, very strange thing happened. From about the first of February until the beginning of August, there was a period in which financial markets essentially decided that risk didn't exist anywhere.

Onscreen caption: Moscow, August 1998

NARRATOR: Markets thought contagion had been contained in Asia. Investment flowed elsewhere. Some came to Russia, where the Moscow stock market was the best performing in the world. But economic reforms had stalled, and Russia was heavily in debt. Even so, investors were convinced they'd found an emerging market that couldn't fail.

WILLIAM McDONOUGH: Investors had decided Russia is an ex-superpower; it has lots of missiles and lots of atomic warheads -- certainly you could not have a financial accident in Russia, because the rest of the world, the rich countries, would bail Russia out. Well, it turned out that that was wrong.

NARRATOR: Russia defaulted on its debt. Its currency plummeted. Global investors were stunned.

WILLIAM McDONOUGH: All these people who in the previous seven months had decided there was no risk anywhere literally panicked and decided there's got to be massive risk everywhere. Behind each fence and barnyard wall there must be a risk that we hadn't though of, you know, like the redcoats retreating from Lexington.

NARRATOR: Everywhere, markets were freezing up. The economic crisis seemed to have taken on a life of its own.

ROBERT RUBIN: I thought at the time that I had a pretty good sense of what was going on. But what I didn't know, and nobody could possibly have known, was not what was going on at the moment that you were looking at, but what was going to happen at the next moment.

RICHARD GEPHARDT, Democratic Leader, U.S. House of Representatives: When you get in a room with both Alan Greenspan and Robert Rubin and they say they're scared to death, and they've never seen anything like this, and they're worried about whether they can get through it, I get worried, because they know a heck of a lot more about it than I do. You had the contagion sweeping across the developing countries. As Rubin said, we'd never seen that before. I mean, maybe in the Depression they saw that over a period of time, but nothing happened that quickly.

back to top

Chapter 14: The Crisis Reaches America [7:07]

NARRATOR: Now the crisis had reached America. A little-known but powerful private investment fund was on the brink of bankruptcy.

Long Term Capital Management, or LTCM, directly controlled $100 billion of global assets and, indirectly, more than a trillion dollars.

JON CORZINE, Co-chairman, Goldman Sachs, 1994-1999: The '90s saw a huge buildup in concentrations that we had never seen on a global scale. Maybe we had way back in history. Maybe the Romans had financial institutions that were disproportionately large to the overall activity of the world that they operated in, but LTCM was a specific type of hedge fund. They were involved whether it was the Singapore exchange, the Tokyo stock exchange, the London stock exchange, the New York. There was no market that they weren't [involved in] -- maybe the largest player, or close to the largest player.

NARRATOR: By September 1998, LTCM's losses were spiraling out of control. Contagion had arrived on Wall Street. Incredibly, the failure of this single investment fund threatened the entire global economy.

DANIEL YERGIN: If LTCM went down, it would be just the gears, the machine just stopping, the economy not working. And of course it's not just what's on the balance sheet of banks and so forth, but that would translate into people not working, businesses not operating, small businesses not being able to get their capital they need. And this in a global economy. It was almost inconceivable to see what the picture was, but it was sort of just not working, and people just not working.

NARRATOR: The New York Federal Reserve summoned representatives of major U.S. and European banks to an urgent meeting. Jon Corzine, then at Goldman Sachs, was among them.

JON CORZINE: The real problem of Long Term Capital was nobody really understood all the downsides. All one knew was it was going to be extraordinarily dangerous to enter into that. And everybody, I think, understood the Fed's concern that that had real implications to the real economy.

NARRATOR: Since LTCM was a private fund, the government could not impose a solution. The fate of the global economy was in the hands of these bankers.

WILLIAM McDONOUGH: The head of a securities firm or a bank is not paid to be a patriot. He or she is paid to serve the best interests of the shareholders, so the most that one could do in a position like mine is to say the public interest may well be served by Long Term Capital Management not failing, but there is no public-sector money to solve the problem. The taxpayer is not going to do this. You folks have to decide whether it's in your interest to do it.

NARRATOR: The banks agreed to put up their own money to rescue LTCM. Wall Street had averted disaster, but the global crisis had one final chapter to go.

Onscreen caption: Rio de Janeiro, Brazil, December 1998

What had started in Asia now reached Brazil, the eighth largest economy in the world. But this time, a loan package was put in place early. Brazil's government cut spending and enacted reforms.

It worked. Brazil's problems were contained. Global financial markets gradually returned to normal.

ROBERT RUBIN: Well, and it's not clear when you would say it ended, but what happened was that the countries that actually took ownership of reform -- Korea, Thailand, the Philippines, Brazil -- began to reestablish stability in their financial markets, and their economies started to recover. And after a while there came a point we began to feel, "Well, maybe we're past the crisis." Then a little bit past that we said, "You know, it does look like we are past the crisis." And finally we got to the point where we said, "Well, we think this is over."

NARRATOR: The world economy had survived the first crisis of the globalization era, but millions of ordinary people had paid the price.

ANAND PANYARACHUN: And that's the unfortunate part of so-called globalization, because such negative effects can be totally responsible, can come very fast. It takes decades for a country to grow up to a certain level, and all of a sudden it disappears.

SIRIVAT VORAVETVUTHIKUN: We've been a poor country, so we never tasted richness. When we tasted the richness, we wanted more, being greedy. I blame myself also; I never had enough.

Yeah, it's quite a view, and I really feel bad because no one can enjoy it now. It's all left to the bank. Nice fairway and nice lake. It's so sad.

I had a big dream and couldn't achieve it. That's why I am today standing selling things for two hours. But after four years of struggling, at least I know I have a chance. Today my big dream is to be McDonald's of Thailand, because selling sandwiches on the streets, now I've developed a new Japanese sushi. I use Thai brown rice. I am the first in Thailand. So hopefully in the near future I will raise my funds in the local stock market so in the future I will be McDonald's of Thailand.

back to top

Chapter 15: The Global Debate [2:49]

NARRATOR: The global economy rested on institutions that dated back to the end of the second world war. The contagion crisis proved that the new era of globalization needed new rules.

WILLIAM McDONOUGH: We have to improve the rules of the game. You want the financial system essentially to be like the shock absorber in a car. When you hit a pothole the car still bounces, but have you ever been in one that didn't have a shock absorber? If you have a good, strong shock absorber, at least you get through the pothole and you're still driving in the same direction that you thought you were when you hit it.

LEE HSIEN LOONG: I think the morale is that there are risks to globalization. But in the end there is no alternative to globalization. So don't let your banks go lend recklessly; don't allow bubbles to get out of hand. Keep prudent measures, sound economic policies which will inspire confidence and maintain confidence so in a crisis people will know that you will stay the course and won't panic and be up and off. It's easier said than done, but these are the principles you have to follow.

LAWRENCE SUMMERS, U.S. Secretary of the Treasury, 1999-2001: We had a close call. And without an activist international policy, you could have seen perhaps a serious and economic downturn as we'd seen any time since the Great Depression. And that's why we need to continue to understand the dynamics of financial crisis better. And that's why especially the United States needs to be prepared to take a lead in working to contain financial crises.

NARRATOR: For many Americans, the world financial crisis created new unease about the risks of the global economy.

LORI WALLACH, Global Trade Watch: People sense the instability of it. They get indicators of it, but they sense it. They get indicators like big meltdowns, like the financial crises in Asia. But they also get indicators of things like, you know, the local bank which just keeps getting merged and renamed. And like your card does work, and it doesn't work, and the name keeps changing every three weeks. And you combine that with the real financial cataclysms like the Asian meltdown, and a lot of people in their everyday life are seeing this sort of out-of-control scenario very personally. You know, it's out of their personal control.

NARRATOR: For critics like Lori Wallach, this was an opportunity. Together with allies in labor unions, they began to channel public anxiety into what came to be known as the anti-globalization movement.

back to top

Chapter 16: The Battle Joined [5:08]

Onscreen caption: Seattle, December 1999

The World Trade Organization, known as the WTO, manages the rules that govern global trade. In late 1999, delegates from 135 nations gathered in Seattle. They planned to launch a new round of negotiations that would expand trade even further. Instead, Seattle was a watershed.

DANIEL YERGIN: As one could see from the way Seattle exploded, it really caught the people of the World Trade Organization meeting there quite by surprise. The World Trade Organization meeting became a lightning rod for all of those people across this very broad spectrum who are concerned by some aspect of globalization or what they perceive as globalization or by the causes that animate and move them.

LESBIAN AVENGERS: The WTO, which is led by CEOs of the company that make bovine growth hormone, get to make rules saying that these countries can't ban an unsafe product.

NARRATOR: While the protestors represented an array of interest groups, the majority were from American labor unions, which had bussed in thousands of their members.

THEA LEE: People came together from all over the world in Seattle to say that the rules of the current global economy as embodied in the World Trade Organization are unfair. They're bad for developing countries, they're bad for workers, and they're bad for the environment.

NARRATOR: In the 1990s, the expanding U.S. economy created 17 million new jobs, but unions' share of the workforce had fallen dramatically. The AFL-CIO blamed cheap labor overseas. As an example, they pointed to this factory in China, where workers are paid five dollars a day to make bicycles once built in America.

THEA LEE: Our workers are in direct competition to workers overseas. We can't control whether every single job stays in the United States or not, but it's another thing to lose jobs to workers who are not represented by independent trade unions. And so that changes the nature of competition that American workers face.

NARRATOR: Countries that opened their markets saw their overall wealth and living standards increase, yet the politics of trade were less straightforward than the economics.

LAWRENCE SUMMERS: It's always difficult to sell open markets. There's a basic cost of open markets. Whether it's somebody losing a job particularly or very obvious, the benefits are much less clear. Who said on Christmas day, "Gosh, thanks -- without open markets I would have been only able to buy half as many toys for my kid"? Or whoever says, "You know, I'm not that great a worker, but they really had no choice to promote me given the surge and export demand"? On the other hand, every job loss that can be remotely connected to international trade, people do. So this problem of invisible beneficiaries and visible losers is one that bedevils the political economy of trade.

THEA LEE: The truth is that the business community has very good access to the international institution and to their own governments. And we hit the streets because we feel that we have a hard time getting our government to listen, or that our governments are unresponsive to the concerns that we've raised. And we think we can do better. We think we could write a set of rules for the global economy that would ensure that corporations had to live up to a minimum standard.

NARRATOR: But inside the Seattle meeting, the unions' demands met stiff resistance from the developing world. They wanted more trade, not less. Poorer countries charged that America and Europe unfairly protect industries with powerful union and business support.

JAIRAM RAMESH, Senior Economic Advisor to India's Congress Party, 1991-1998: The fact is the rules of the game are tilted in favor of the economically powerful. I understand, I respect that, and until India is economically powerful we are not going to be able to influence the rules of the game. Let's take the textile trade. Now all textile imports into America, for example, are governed by quotas. Every country is allocated a certain quota. It's not free trade. It's managed trade. America is free to sell textiles to us, but we are not free to sell textiles to America.

NARRATOR: Developing countries forged a negotiating bloc to make Western markets more open.

DELEGATE: This should not be a time when big countries, strong countries, the world's wealthiest countries, are setting about a process designed to enrich themselves.

back to top

Chapter 17: Failure at the Summit [4:58]

NARRATOR: Bill Clinton had been a leading proponent of expanded trade, but the protests forced him into a political corner. A presidential election was about to begin, and Democrats needed union support. In a speech to WTO delegates, Clinton appeared to side with the protestors on the streets.

BILL CLINTON: I condemn the small number who were violent and who tried to prevent you from meeting, but I'm glad the others showed up, because they represent millions of people who are now asking questions about whether this enterprise will in fact take us all where we want to go.

NEWT GINGRICH: I think his speech at Seattle was an absolute disgrace and an act of strategic defeat for him. I think they were gearing up for the election, and appeasing the unions to elect Gore was more important than standing for free trade.

NARRATOR: Clinton instructed American WTO negotiators to keep protections for key U.S. industries. The summit ended in failure. Leaders across the developing world vowed to block the next round of trade negotiations unless their demands were taken seriously.

MAHATHIR BIN MOHAMAD: We believe in trade, but we didn't believe in just being a market for other people. So when you talk about opening markets, you talk about the rich people who can manufacture goods with added value and sell them in our markets, not the other way round.

NARRATOR: Countries like Tanzania that rely on foreign aid claimed they wouldn't need the aid, if they could only sell their products to the West.

BENJAMIN MKAPA, President of Tanzania: You see, we talk about a level playing field, but in fact it is very much tilted in their favor. We would earn so much more than we are possibly getting by bilateral aid if those markets were just open to us, literally by billions.

NARRATOR: Global poverty soon became the galvanizing issue among globalization's opponents. In the wake of Seattle, control of the protest movement began to shift from unions to a disparate network of grassroots activists.

JAGGI SINGH, Activist, Canada: We're trying to move from the politics of protest to the politics of liberation. It's not simply trying to create a kinder, gentler capitalism. It's not simply trying to negotiate the terms of our misery, to make our misery less miserable. It's about changing the world; it's about creating institutions, structures, and frameworks, communities and neighborhoods that are based on our values, which are values of social justice, of mutual aid, of solidarity, of direct democracy. And we're a long way from where we want to go, but we have to start now.

Onscreen caption: World Bank/IMF meeting
Washington, D.C., April 2000

NARRATOR: One of the protestors' next targets was the World Bank, an institution whose sole purpose is to reduce poverty in developing countries.

JAMES WOLFENSOHN, President, The World Bank: When you see someone outside a barricade attacking you vehemently because of something called globalization, you have to wonder what it is they're getting at. It enrages me when you have people who assume they have the moral high ground against a team of people here who are devoting their lives to addressing the very questions that these people claim to be addressing.

NARRATOR: But the protests had become impossible to ignore. Inside the World Bank and other institutions, officials struggled to make sense of the growing debate.

NEMAT SHAFIK, Vice President, The World Bank: Well, the protest movement is multifaceted, and the anger is multifaceted, but there clearly is a sense of losing control and a sense of alienation. The old structures and the old institutions and the old lines aren't working anymore, and I think we're at a stage where is this extraordinary chaos in international organizations, in international rules of the game, that we're trying to define, and we're not there yet. And I think, like in any chaotic situation when you're in the middle of it, you don't see the way out, but I think what we're observing -- the series of protests, the series of engagements -- is part of the process of coming towards some new structure for managing a global economy.

back to top

Chapter 18: The Global Divide [2:33]

NARRATOR: Globalization did not cause global poverty, but it did make us more aware of it. And by creating a single global market, it raised the question of how that market benefits the world's poorest nations.

DANIEL YERGIN: We are seeing around the world a movement towards greater reliance on markets, greater confidence in markets. But for that confidence to last it has to be seen that these markets are fair, that they are delivering the benefits widely, that people are benefiting from them. And if they don't have that kind of legitimacy, then the confidence is not going to remain, and the markets will be vulnerable to disruption and be replaced by other kinds of controls. So every day the market has to earn and prove its legitimacy, and that's a big test, particularly in the developing world, where the number-one issue, the central preoccupational concern, is the issue of poverty, and delivering the goods means lifting people out of poverty. And that more than anything else is what these markets would be judged by.

JEFFREY SACHS: Professor of Economics, Harvard University: The world is more unequal than at any time in world history. There's a basic reason for that, which is that 200 years ago everybody was poor. A relatively small part of the world achieved what the economists call a modern economic growth. Those countries represent only about one-sixth of humanity, and five-sixths of humanity is what we call the developing world. It's the vast majority of the world. The gap can be 100-1, maybe a gap of $30,000 per person and $300 per person. And that's absolutely astounding to be on the same planet and to have that extreme variation in material well being.

back to top

Chapter 19: Capitalism Redefined [7:00]

HERNANDO DE SOTO, Founder and Director, Institute for Liberty and Democracy, Peru: The problem that's happened over these last years is that somehow or other people who are capitalists in countries like the United States considered the real interlocutors are rich people from developing countries, so they've been touching the wrong constituency. The constituency of capitalism has always been poor people that are outside the system. Capitalism is essentially a tool for poor people to prosper.

NARRATOR: Hernando de Soto is one of the most original economists in the developing world. An advisor to Mexico, Peru, Egypt, and other countries, he seeks to cut through the old debate about wealth and poverty and reinvent capitalism in the name of the poor.

CHARLIE ROSE, Journalist and Talk Show Host: Hernando de Soto has been called the most important economist in the Third World. He's a champion of market economics and property rights in Latin America. His new book, The Mystery of Capital, talks about the question of why capitalism triumphs in the West and fails everywhere else. Welcome.

HERNANDO DE SOTO: So the important thing about a capitalist system is that it's a system of representations. Therefore it's a little bit like when I go to the United States. People ask me for my identity, and I say: "My identity is me. I mean, look at my face. I am Hernando de Soto." But the man at the U.S. immigrations just says, "Look, give me your passport."

The reason that things travel so well in the market economy of the United States, and values travel from one place to another, is because they all have passports. And the real value is like my identity. It's not in me; it's in my passport. Real value to pay the hotel room is not in me; it's in the credit card. And so what happens is that this system by representation, it requires of course that all the representations -- the credit cards, the passports, the IDs, the property titles, and the shares -- be organized by a system of law that allows people to be able to trust what they're dealing with.

NARRATOR: In September 2000, de Soto published his explanation of why capitalism hasn't worked for the poor. He took his message directly to some of Latin America's most remote regions.

HERNANDO DE SOTO: The reason I'm going to Cajamarca now is because 12 years after the fall of the Berlin Wall and 11 years after Peru adopted pro-market policies, their situation hasn't got much better, and they want to know why. The Mystery of Capital offers an explanation. It says that the system per se works in the West, but that in our country, like in much of the Third World, it isn't functioning because we have missed some of the crucial elements that the Westerners added in the 18th and 19th centuries, like property rights, without which the system cannot function.

Onscreen caption: Cajamarca, Peru

NARRATOR: De Soto's book had become the number one bestseller in Peru's history. And in poor neighborhoods across the country, this economist had become a celebrity.

De Soto believes that people are capitalists by nature, but that in the developing world, most are locked out of the capitalist system.

HERNANDO DE SOTO: Peru, like in every other developing and former communist nation, people on the ground, with or without a property law, have basically agreed on the distribution of assets among themselves. You go to any of the places we've been to -- the hinterland of Egypt, of the Philippines, of Haiti, where there is no official law that is actually in place or being enforced, but there is another law in place: You step on somebody's territory, and somebody comes up and says, "Get off my territory," where there's a law or no law. You walk down the street, and you walk into a garden, and the dog starts barking, and you start finding out that that dog is defending a consensually agreed determination of possession rights throughout a certain area. So there are property systems in place. The question, I think, the important thing is that they're illegal. They're extra-legal, to be more precise.

Onscreen caption: Kilimanjaro, Tanzania

NARrATOR: In the West, property rights are taken so for granted, they rarely cross our minds. But in many countries, these crucial "tools of capitalism" simply aren't available.

In the foothills of Mt. Kilimanjaro, Philip Tesha's family has grown coffee for generations. He sells directly into the global market, yet like many in the developing world, he can't prove that what he owns is actually his.

INTERVIEWER: So who owns the land around here?

PHILIP TESHA, Coffee Farmer, Tanzania: The land is our property. We brought it from the farmer who was willing to sell to us. So we brought this land, although we don't hold any title for the ownership. But it's our property.

INTERVIEWER: So how can you prove that's your property?

PHILIP TESHA: Because I'm here. I was the person who brought it, and the person who sold it to me is also around here.

HERNANDO DE SOTO: So what we've been discovering is that there's a real huge paper wall that stops the poor from actually being able to develop private legal enterprise.

NARRATOR: Without property rights, ordinary people in developing countries can't get a loan, a mortgage, or credit. They are excluded from the capitalist system, and the global market simply passes them by.

HERNANDO DE SOTO: So this is a time of crisis for the cause of capitalism worldwide, because for the moment it has only meant giving the elite of developing countries additional opportunities, and not being able to get down deep, deep into where the real majority interests of people in any developing country are, which is among the poor.

back to top

Chapter 20: The Bottom End of Globalism [4:46]

JEFFREY SACHS: It is an incredible moral problem how to live together with this vast gap in wealth. It's also an incredible intellectual problem. It's what development economists such as myself spend all our time thinking about. Why is the gap so large? What can be done to help the poorer countries narrow the gap? It's a very tough question.

NARRATOR: Places like Merelani, in Northern Tanzania, are the bottom end of the global economy. Miners hunt for gemstones -- tanzanite -- that will eventually sell for over $1,000 per stone.

Some mines are too narrow for grown men to navigate. Those mines are left to children as young as 10, known as "snake kids." For each stone, they receive less than one dollar.

HERNANDO DE SOTO: Oliver Twist has come to town, and he's poor, and he's got a TV set, and he's able to see how you live as compared to how he lives, and he's going to get very angry. So either you show him a capitalist route to do it and integrate him, or he's going to find another ideology. And the fact that today there is no more Kremlin that is organizing a revolt doesn't mean that they're not going to find another capital, because when these things happen, when people are unhappy and rebel against a system, they'll find another locus of power very, very quickly.

BILL CLINTON: I'm not one of these people that believes that economics solves all problems, but if people know they're taking care of their children, and if they have a personal interest in maintaining the peace, it's just easier for them to manage life's difficulties. You know, it's no accident that the Nazi Party arose in Germany. Everybody who was alive at the time remembers people in the Weimar Republic, after the harsh peace of Versailles after World War I, carrying wheelbarrows full of worthless Marks to the bakery to buy a loaf of bread. So I don't want to oversell this: It is not sufficient to build a peaceful, free world, but it is absolutely necessary. What is? Trade.

Onscreen caption: Warwick, England, December 2000

NARRATOR: In his final foreign policy address before leaving office, Bill Clinton sought to define the challenges of globalization. He had come to the presidency saying that free trade would benefit America. He left arguing it was crucial to maintaining the peace in an interconnected world.

BILL CLINTON: First let me say I think it's quite important that we unapologetically reaffirm a conviction that open markets and rule-based trade are necessary, proven engines of economic growth. Now I know that many people don't believe that, and I know that inequality, as I said in the last few years, has increased in many nations, but the answer is not to abandon the path of expanded trade, but instead to do whatever is necessary to build a new consensus on trade. And it's easy for me to say -- you can see how successful I was in Seattle at doing that. No generation has ever had the opportunity that all of us now have to build a global economy that leaves no one behind. For eight years I have done what I could to lead my country down that path. I think for the rest of our lives we had all better stay on it. Thank you very much.

back to top

Chapter 21: Changing of the Guard [3:04]

NARRATOR: Washington's free-trade agenda passed seamlessly from the Clinton to the Bush administration.

GEORGE W. BUSH: Conquering poverty creates new customers. What some call globalization is in fact the triumph of human liberty stretching across national borders, and it holds the promise of delivering billions of the world's citizens from disease and hunger and want.

RICHARD CHENEY: At this stage I don't find in my travels around the country or even around the world that there is widespread opposition to the basic fundamental trends that have been there for the last 40 or 50 years. Millions of people a day are better off than they would have been without those trends and development, without globalization, without the developments of the increased international commerce, and that's all of the good. And very few people have been harmed by it.

Onscreen caption: San Cristobal, Mexico, February 2001

NARRATOR: On his first foreign trip, President Bush came to Mexico. His friend Vicente Fox wanted to use the global market to relieve his nation's endemic poverty.

VICENTE FOX: Mexico has been one of the losers of the 20th century. We tried many different alternatives to development, and unfortunately we have 40 percent of the population poor; we have a per capita income that is extremely low. It is the same per capita income we had 25 years ago, so we must change things.

NARRATOR: Presidents Bush and Fox hoped to expand the North American Free Trade Agreement to the entire Western Hemisphere.

VICENTE FOX: Now we want to go further. I'm taking about a NAFTA-plus, a NAFTA that takes us to a further integration. I've been talking this with President Bush, and fortunately he's seeing it the same way.

NARRATOR: But as his foreign minister, Fox chose a leading voice of the left: a onetime friend of Fidel Castro, and critic of global capitalism.

JORGE CASTANEDA: The left's main issue since the middle of the 19th century has been inequality that accompanies capitalism. There is probably more inequality pressing against society today than before within rich countries, within poor countries, and between rich countries and poor countries. So on this score, for example, the left has more of a cause, more of a raison d'etre, than perhaps in any time recently.

back to top

Chapter 22: The Battle Resumed [6:38]

Onscreen caption: Quebec City, Canada

NARRATOR: Presidents Fox and Bush were set to meet again in Quebec City at a summit for 34 democratically elected presidents from North and South America. Anti-globalization activists made the summit their next target.

ACTIVIST: No matter what anybody says, there's going to be some kind of property destruction.

ACTIVIST: So far the way the debate has been played out is violence, nonviolence. But for me that's not the issue. Our goal is to disrupt the summit as best we can with the largest possible mobilization on the 20th and 21st.

Onscreen caption: Summit of the Americas, April 2001

NARRATOR: The summit's agenda was to be trade, poverty, and the new rules of the game. Organizers sealed off the city center. As President Bush and other leaders arrived, the demonstrators tried to break through. Inside the barricades, Mexico's foreign minister was now a part of the system he'd once criticized.

JORGE CASTANEDA: They never mention the Americans. They said, "We need leeway to show that we can get results," and that's true.

This is my first big summit as foreign minister, and it's fun. Everybody's here.

INTERVIEWER: If you were 25 today, where would you be?

JORGE CASTANEDA: On the streets. I would think that's certainly a hell of a lot more fun.

NARRATOR: Like Jorge Castaneda, most of the delegates were from developing countries that had embraced globalization. Casteneda wanted more trade. He also hoped to narrow the gap between the rich and the poor of the developing world.

JORGE CASTANEDA: The issue that's been coming up constantly in the speeches is that the small countries, the poorer sectors of each society need a special deal; that they cannot just be left out, because if they are, they'll never be brought in. There is, I would say, a growing consensus on that, but there isn't necessarily a consensus on what to do.

GEORGE W. BUSH: I'm here to learn and to listen from voices, to those inside this hall and to those outside this hall who want to join us in constructive dialogue.

NARRATOR: By now, the street demonstrations had become a routine feature of major international meetings. Protest organizers were increasingly sophisticated, using the Internet and other "tools of globalization" to try to bring the system down.

GRETCHEN KING: So we travel around the country, and we set up these Web streams wherever there's a minor or a major demonstration. Wherever people want this to be set up, we'll help them. If we can provide alternatives, if we can provide criticisms that come from the streets and represent a diversity of people, then I think there's a possibility of success. And that success would be, you know, burning the free-trade agreement of the Americas; that success would be disbanding the WTO; that success would be removing the power from the top one percent of the world's population.

JORGE CASTANEDA: The protestors, by staking out an extremist position, make a more regulatory position more centrist, and that's fine. Perhaps that's not what they want, but that's too bad. You don't always get what you want, and you don't always know who you're working for. But I do think that the protestors are natural allies of people who believe that there are things that should be done to manage world trade a certain way.

NARRATOR: The lasting impact of the protest movement was subtle, but real. Since Seattle, the terms of the global debate had shifted.

NEMAT SHAFIK: In the early days, when the first protests started, I remember feeling very frustrated, because their rhetoric was so abstract. It was, you know, it was about economic justice; they had no alternative program. And the more I thought about it, the more I realized that if one looks historically, the role of protest movement isn't to provide solutions; it's their job to be critical, and then it's the job of the insiders, the people in the system, in their response to those protests to come up with new solutions. And I think that's where we're at now. And so I do think it's healthy that we have them banging at the gates.

BILL CLINTON: They care about legitimate problems, but they have the wrong diagnosis. Their diagnosis is that the global economy has produced all the misery that they're protesting against. On the other hand, you cannot have a global economy without a global social response, without a global environmental response, without a global security response. It's just... it's unrealistic to think you can. And that's basically the next big challenge, is making this interdependent world of ours, on balance, far more positive than negative. And the extent to which we succeed in doing that will determine whether the 21st century is either marred in its first 50 years by terrorism of all kinds across national borders, and more racial and religious and ethnic strife, and tribal strife in Africa, or whether it becomes the most peaceful and prosperous and interesting time the world's ever known.

back to top

Chapter 23: 9/11 [4:27]

NARRATOR: In the first decade of the 20th century, the global economy was in many ways as integrated as ours today. That era of globalization ended in Sarajevo in 1914, when a bullet fired by a terrorist triggered the first world war. In the aftermath of September 11, it seemed possible that history could repeat itself.

DANIEL YERGIN: Up until September 11, there was a sense that with the crisis and the risks, that nevertheless this movement towards globalization really was irreversible. And since then there's a recognition of that you can't turn back the clock; we're not going to abolish e-mail, or computers aren't going to get slower, but things can go in another direction. Markets do best and work best and deliver what they can do during times of peace. And if you're not in a time of peace, but you're in some other kind of time, then things won't work as well, and priorities will be elsewhere as well.

NARRATOR: The U.S. economy was already in recession. As the war against terrorism progressed, the Bush administration sought to rebuild economic confidence.

GEORGE W. BUSH: Out of the sorrow of September 11, I see opportunity, a chance for nations to strengthen and rethink and reinvigorate their relationships. When nations open their markets to the world, they find in America a trading partner, an investor, and a friend.

NARRATOR: In November 2001, the World Trade Organization gathered as planned in the Middle East. The remote city of Doha had been chosen to keep protestors away, but September 11 had dampened the anti-globalization movement. Delegates reached the compromise that had eluded them in Seattle. A new round of trade negotiations was launched, and the concerns of the developing world will be at the top of the agenda.

ROBERT RUBIN: I think that the new technologies, that the breaking down of trade and capital market barriers, the spread of market-based economics, that all of this has contributed greatly to global economic well-being, and it will contribute enormously for a long, long time to come. I think the potential is tremendous. But the people in those countries who feel that they are left out and the system isn't working for them have merit on their side of the case. And I think it's not only an issue of being helpful to them; I think it's enormously in our interest that they become part of the system.

RICHARD CHENEY: I don't think there is any one overnight solution. I don't know anyone who's smart enough to sit down and write a brand-new set of rules that we should all then adhere to. I think it is a process for negotiation among solvent and independent nations, and that's probably as it should be. And it will evolve over time. And I do think we learn from our mistakes. But I the idea that there's some sort of basic right way to do it out there, and there's one individual or group that have got all the answers, I'd be deeply suspicious of that notion.

NARRATOR: Months later, the American economy seemed on the road to recovery. While threats remained, the system itself seemed more robust than many had feared.

The era of globalization looks set to continue, as does the debate over the new rules of the global game.

DANIEL YERGIN: The belief that trade increases the odds for peace and also leads to higher standards of living is something that has been part of the American political tradition. And looking back on the Depression, looking back on the first or second world war, it became very deep seated, and it's not just a question of specific trade agreements, but it's really a broad consensus about the importance of trade to the American economy, to what it does for economic development around the world, and also as one of the foundations for a more peaceful world.

back to top

Episode One | Episode Two | Episode Three