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Economists on Globalization

How do professionals cope with the daily challenges of the global economy?

July 5, 2001

How do professionals cope with the daily challenges of the global economy?

They are the professionals who call themselves economists. One group is out there battling the markets as advisors to banks and investors or other financial institutions. Another group teaches at universities. There, they look at what is happening and try to come up with theories to explain to their students what is going on. Global markets are a challenge for all of them. Is the market just another gamble?

How can economists communicate with anti-globalization protesters?

“You respond with facts when you can. Often, you just get slogans quoted back at you”.

(Stanley Fisher, IMF deputy managing director, September 2000)

What about the relevance of classic economic models in the age of globalization?

“You get a sense that this is all now truly left to Adam Smith’s invisible hand — it is beyond any country’s ability, and institution’s ability, to control.”

(Jeffrey Garten, dean of the Yale School of Management, September 1998)

And what about more recent economic theories?

“Even the Communists understand that joining globalization is not only a way to more democracy, but it’s a safe way to a rise in standards of living”.

(Rudi Dornbusch, MIT economics professor, April 2000)

Has competition become stronger?

“In a global economy, you can’t provide jobs for unskilled people at $10 an hour — we can’t, they can’t, nobody can.”

(Robert Lawrence, Harvard University economics professor, June 1997)

But not everything is nice in the garden, right?

“There is an inherent discrepancy in the process of globalization. On one side, you have the decision makers, maybe one million people around the world. On the other side, there are the remaining 5.99 billion people, who are experiencing globalization in their daily lives. We must win these people over for globalization.”

(Prof. Klaus Schwab, founder and president of the annual World Economic Forum in Davos, January 1999)

Why should poor countries encourage their best and brightest to go off to work elsewhere?

“Having your own people in the rich countries works to your advantage whereas holding on to your people against their wishes in conditions that are not conducive to their full development is not helpful.”

(Jagdish Bhagwati, Columbia University economist, on brain drain, October 1999)

What would you tell critics of global financial markets?

“The problem is to ensure that the benefits of capital mobility exceed its costs — rather than pretending that it can be made to go away.”

(Berkeley economist Economist Barry Eichengreen, March 1999)

Is there at least agreement among the Western countries on the effects of globalization?

“Europe has a longer tradition of deeper concern for equity — and a different view of the role of the state. We [in the United States] need to replace ideological textbook economics and their simplistic explanations of what makes markets work.”

(Former World Bank Chief Economist Joseph Stiglitz, on U.S. confidence in free-market forces, June 1999)

What does ‘globalization’ mean for the environment?

“No vehicle exists for nations to negotiate new multilateral pacts on environmental issues. That is one big reason why environmentalists have focused on the WTO.”

(Laura D’Andrea Tyson, former Chairwoman of the U.S. Council of Economic Advisors, March 2000)

What are the “side effects” of global branding?

“This is like the worst of all worlds for them. Coke is associated with purity. You go to a third-world country where you’re not sure of the water, and you drink Coca-Cola.”

(Merrill Lynch analyst Emanuel Goldman, on the effects of health concerns in Europe about contaminated Coca-Cola products, June 1999)

Who are the people that are mostly affected?

“Underneath it all is a feeling that globalization has not brought the benefits to the poor as promised. The architecture of the world financial system is decided by finance ministers behind closed doors, but farmers and small businessmen are the ones who get hurt.”

(Harvard economist Jeffrey Sachs, April 2000)

And finally, how did your studies prepare you for the global economy?

“When I was a graduate student, factor-price equalization was always taught with a smile, because it was right in theory. But we did not have a global economy, so nobody could point to it in reality. The reality is here.”

(Lester Thurow, MIT Professor, October 1993)