HOW many economists does it take to screw in a light bulb? None.
Open markets will do it for them.
Harvard-trained economist Jeffrey Sachs has told this old war
horse before but still laughs when he trots it out during a recent
speech. As with all enduring jokes, it contains a kernel of truth
that many may doubt, but is popular among economists: Open markets
are a virtual panacea for the economic ills of nations.
"We are living in an unprecedented global revolution" of
expanding democracy, trade, and technology, says Mr. Sachs. "It
gives more fundamental hopes to the prospects of economic
development than anything seen in the world in the past 200 years."
Swiftly developing international trade rules and technological
changes are ripping down economic barriers and shaping a single,
global free-trade zone favoring nations that are lowest-cost,
highest-quality producers, Sachs and others say. On average, the
result is a rising standard of living around the world.
But are governments and citizens prepared to embrace the social
costs of becoming lean, mean competitors to fit the vision of a
"If you live in Montreal and compete with someone in Seoul or
Bucharest who has the same technology and education you do - but a
lower salary - then your salary isn't sustainable," says Kenneth
Courtis, a senior economist with Deutsche Bank Capital
Markets/Asia. "It's as simple as that."
What happens when this sort of personal-yet-global competition
causes standards of living for some less-educated citizens to fall
noticeably in countries such as the United States and Canada even
as they rise in such countries as Thailand, India, and China?
Computer programmers in India will work for $800 a month, for
example, Mr. Courtis says.
Confronted by these growing questions, the leaders of the Group
of Seven (G-7) industrialized nations, who met June 15-17 in
Halifax, only tinkered around the edges of the problems, economists
Surface progress toward a globalized open market has been
steady. The emergence of the European Union, the North American
Free Trade Agreement (NAFTA), and the new World Trade Organization
(WTO) all seem to indicate a growing sense of cooperation in line
with international law.
Yet, the fish war between Canada and the EU (mainly Spain) this
spring and the row today between Japan and the US over cars - both
driven by domestic politics - suggest that globalization of the
world's economies has reached a fragile stage.
"There are obvious, very critical, and unresolved issues staring
us in the face in all the important areas of international economic
policy," says Paul Volcker, former chairman of the US Federal
Reserve. "Let there be no mistake. There is a large unfinished
agenda if we are to make the promise of the recent economic
revolution a reality," he told a recent conference of economists
and business leaders in Montreal. That unfinished agenda includes
finding ways to:
*Confine international trade disputes to multilateral forums
like the WTO instead of fighting nation-to-nation with sanctions
that could run out of control.
*Address the "social dimension" of globalization by better
preparing populations for intensifying competition as world markets
open wider - helping them learn to retrain and reeducate themselves
- to be "resilient," in the words of one economist.
*Avoid a protectionist backlash against economic globalization
and open markets when living standards drop, unemployment rises,
and social safety nets are inevitably chopped.
*Limit violent foreign-exchange-rate swings caused by quick
inflows and outflows of short-term capital.
Capital flow was one issue the G-7 did address in Halifax.
Short-term capital sloshing around the globe in search of the
highest return causes volatile, potentially dangerous exchange-rate
swings. A trillion dollars changes hands each 24 hours on
foreign-exchange and stock markets around the world. …