The Teflon Global Economy: Globalization Is Going Just Fine, but It Coulduse a Healthy Dose of American Leadership

Article excerpt

Byline: Fareed Zakaria

This year I hopped onto the subway to get to the World Economic Forum. It's not quite the same as flying to Switzerland, but Davos-at-the-Waldorf has its charms--worse scenery but better food. In one important respect, however, Davos is always the same. The main interest of the conference-goers is globalization. This year the chatter in the hallways suggests that there is a quiet fear that the tide is receding, and that historians will look back on the 1990s as the high-water mark of global capitalism. "September 11 marked the death knell of the simple idea of more and more globalization," one participant remarked.

It's not just September 11 that has Davos men worried. Consider the 18 months that led up to it. The technology industry, which had become the symbol of the future, collapsed in a heap. The roaring U.S. economy suddenly and unpredictably slipped into recession. Developing countries around the world that had embraced free markets--like Brazil, Turkey and Argentina--had wrenching crises. New leaders, like Hugo Chavez of Venezuela, began turning their backs on free-market reforms. And then came Enron, taking the last bit of shine off the 1990s miracle economy.

But there's another way to look at this. If you examine the past several years more closely, what is striking is the sturdiness of the global economy. Globalization has weathered a series of severe shocks, from the East Asian crisis to the Russian default, to the crash of Long-Term Capital Management, to the technology bust, to a synchronized global recession, to September 11. And yet it keeps on ticking. Growth is likely to pick up in America and Europe by the end of this year, and there has been little financial panic or contagion.

Stanley Fischer, until recently the No. 2 person at the International Monetary Fund, points out, "Over the last few years almost every country that has had an economic crisis was advised by powerful domestic forces to stop free-market reforms. And yet after an initial period of doubt, almost all of them--Brazil, Russia, Turkey--came back to the same policy path. Often they have come back with greater resolve."

Sure, there's the odd country here and there that is turning its back on reform, but Hugo Chavez is hardly the wave of the future. "For Venezuela, which wants to opt out, there's China that wants to opt in," says Robert Hormats of Goldman Sachs. Add to this Russia, Brazil and India, and you have the four largest once-closed economies of the world all seeking to integrate into the free-market system. That's the real signpost for the future.

This is not to say that globalization will continue just as before. The exclusive emphasis on economics is yielding to an appreciation of politics. …