Seeing the Elephant: Understanding Globalization from Trunk to Tail - Hardcover

Marber, Peter

Hardcover

ISBN 10: 0470283858 ISBN 13: 9780470283851

Publisher: John Wiley & Sons, 2009

Synopsis

Thanks to globalization, more countries depend on each other for trade, capital, and ideas than ever before. Yet politically, these countries are drifting further apart. In Seeing the Elephant , author and emerging markets expert Peter Marber describes how increasing economic integration and the rise of new actors is drastically altering the geopolitical landscape, and offers insights on how the US can maintain a leading role in the 21st century and beyond. While America remains the single most important economy today, rising economic powerhouses — China, Russia, India, Brazil and others — bring a diverse set of interests to the table that the US cannot afford to ignore, Marber explains. Moreover, globalization has created thousands of non–state actors – corporations, banks, hedge funds, activists and even terrorists – who bring their own concerns to bear on the world system. In the era of globalization, America′s success hinges on the success of its neighbors, too. Yet from its invasion of Iraq to its disregard of major treaties — some recent US choices have shown little regard for these new players. As the lines between economic, defense, environmental, immigration, and energy policy become increasingly blurred, having a holistic and coherent approach to cross–border challenges is essential. Yet the forums and institutions that once coordinated these relationships – the UN, World Bank and the G7— are losing relevance and no longer adequately represent the world′s expanded power roster. To remain vital, Marber believes all our multilateral institutions will require fresh ideas and revamping. Seeing the Elephant demystifies globalization, and analyzes the megatrends and interconnections of the 21st century. With bold suggestions on how America reassert its historic leadership in the new global arena, Seeing the Elephant should be required reading for policy makers, businessmen and informed citizens alike.

About this title

About the Author

Peter Marber (New York, NY) is global head of GEM fixed income and currencies at HSBC Halbis Partners. He was formerly Founding parter and Chief Strategist for the Atlantic Funds LLC, which was acquired by HSBC in 2005. Marber began his career at UBS where he was co–founder and President of the emrgency markets subsidiary. He has been a faculty member at Columbia University since 1993 and has taught at both the Business school and the School of International and Public Affairs. He has also taught at Johns Hopkins University. He is affiliated with theWorld Policy Institute and the New America Foundation.

From the Back Cover

Praise for Seeing the Elephant "Creative and accessible . . . Peter Marber has earned his insights into globalization as a practitioner who studied emerging markets long before they became fashionable in the West. An inspiring, terrific book about the most important subject of our era." — Steve Coll , Pulitzer Prize winner and bestselling author of Ghost Wars and The Bin Ladens "On the money . . . . If you want to understand globalization′s future, as well as some of the reasons we got into our current financial mess, reading Marber′s Seeing the Elephant is a great place to start." — Craig Karmin , Wall Street Journal reporter and author of Biography of the Dollar: How the Mighty Buck Conquered the World and Why It′s Under Siege "Peter Marber is an original thinker who has managed to write a genuinely original book about globalization—a subject that has been exhausted by far too many more conventional analyses. His ′macro quantum′ perspective on the world spotlights the critical, unavoidable fact of infinite connections among states and people. Those connections, and the uncertainty and unpredictability they bring, also open up a world of infinite possibility." — Anne–Marie Slaughter , Dean, Woodrow Wilson School of Public and International Affairs, Princeton University "At a time when we are witnessing the collapse of just about everything, Seeing the Elephant should be required reading for any American looking for a way forward. Peter Marber unpacks the intricately connected, fast–evolving world we live in with crystal–clear prose, apt metaphors, and hard data. Seeing the Elephant provides a prototype of the new flight apparatus America needs to navigate our way successfully through the buffeting winds of the twenty–first century." — Mira Kamdar , author of Planet India: The Turbulent Rise of the Largest Democracy and the Future of Our World "Great timing . . . . Seeing the Elephant captures global reality as it is today and where it is heading far more deeply than any framework offered so far. This is the book government and business leaders must read. By cleverly investigating the connections between finance, the environment, security, and poverty, Marber makes all previous writing on globalization redundant." — Parag Khanna , author of The Second World: Empires and Influence in the New Global Order

From the Inside Flap

In the new millennium, it is nearly impossible for us to talk about basic concerns like food or gas prices, without examining global intersections in trade, energy, immigration, the environment, and defense. Many countries once described as "developing" nations now wield greater economic and political influence than some of the so–called "major" powers. Former debtor nations have become creditors of the United States and other developed countries that run budget deficits. Without recognizing and understanding these connections, we cannot even begin to discuss how the United States and other countries can craft and harness effective policies amid this breathtaking progress. In Seeing the Elephant, Peter Marber describes how increasing economic integration and the rise of new actors is drastically altering the geopolitical landscape, and offers insights on how the U.S. can make policy to maintain a leading role in the years to come. The twenty–first century, Marber explains, demands a very different lens for viewing the world. In the era of globalization, America′s success hinges on the success of its neighbors, too. Rising economic powerhouses—China, Russia, India, Brazil, and others—bring a diverse set of interests to the table that the U.S. cannot afford to ignore. Moreover, globalization has created thousands of non–state actors—corporations, banks, hedge funds, activists, and even terrorists—who bring their own concerns to bear. Marber underscores the importance of forging strong relationships with pivotal developing nations and America′s need to reaffirm the centricity of global protocols, rules, and institutions after an unfortunate period of neglect. It′s not too late. By focusing on seven key cross–border, interlinking issues—trade and finance, energy, security, immigration, health, the environment, and poverty—Marber recommends key adjustments in policies that aim to strengthen and modernize our current institutional infrastructure, including NATO, the WHO, the WTO, the World Bank, and the UN, among others. While his strategies do not guarantee that the United States will remain on top economically, they ensure that the global system America helped to create triumphs in the end, protecting against the factionalism that led to two World Wars and destroyed decades of economic progress. In this timely book, Marber demystifies globalization and analyzes new international megatrends and interconnections. With bold suggestions on how America can reassert its historic leadership in the new global arena, Seeing the Elephant will show readers how the U.S. still remains the planet′s best chance at building enduring peace and prosperity.

Excerpt. © Reprinted by permission. All rights reserved.

Seeing the Elephant

Understanding Globalization from Trunk to TailBy Peter Marber

John Wiley & Sons

Copyright © 2009 Peter Marber
All right reserved.
ISBN: 978-0-470-28385-1

Chapter One

Seeing the Elephant in the Twenty-First Century

Progress is impossible without change, and those who cannot change their minds cannot change anything. -George Bernard Shaw

There is a traditional Hindu fable in which several blind men encounter an elephant for the first time. One man feels the trunk and states the elephant resembles a snake;another touches the tail and is convinced the elephant must be like a rope. A third man grabs an ear and compares the elephant to a fan, while another pats the belly and believes it to be like a wall. The blind men start arguing, each insisting that he alone is right. A man passing by asks what the commotion is all about, and the blind men reply, "We can't agree on what the elephant is like." After hearing them all, the bystander calmly explains that each of the men is describing a piece of the animal correctly, but not one perceived the elephant in its entirety. The blind men leave feeling both vindicated and enlightened.

By titling this book Seeing the Elephant, I'm hoping to underscore not that conventional views on globalization-our elephant-are parochial or untrustworthy but rather to emphasize that all reasonable perspectives add value to this important dialogue. Because, when it comes to globalization, perceiving the big picture is just as essential and maybe more important than focusing on one or two areas. The title also refers to the expression "the elephant in the room," that is, an uncomfortable situation where something major is on everyone's mind, but no one says or does anything about it. Globalization is enormous and a bit frightening, so many people choose to ignore rather than confront it.

The extraordinary changes of the last century-the ways we work, eat, communicate, stay safe, and entertain ourselves-are multifaceted, yet also form a coherent whole. Today's elected officials, corporate and financial titans, media commentators, and scholars have taken a magnifying lens to various aspects of the dramatic changes of the past 20 years, providing useful snapshots of information. But we still struggle to see the how the parts are linked together.

The result of these incomplete efforts is a checklist of worries instead of a logical plan for tackling our thoroughly new challenges. When the Twin Towers topple, we fear global terrorism. Al Gore wins an Oscar for An Inconvenient Truth, and we fixate on global warming. An Indian customer service representative answers our toll-free call in Bangalore, and we add outsourcing to the worry list. Brazilian supermodel Gisele Bndchen demands to be paid in euros, then a weak dollar grabs the headlines. Gas rises above $4 a gallon, we proclaim an energy crisis. We discover tainted shipments of Chinese pet food, and protectionist tempers flare. We see pictures of George Clooney, Bono, or Angelina Jolie in Africa and add genocide, poverty, and AIDS to our anxieties. Lehman Brothers goes bust, and we worry if our savings accounts are safe.

This patchwork of international problems deserves more than the scattershot attention it now receives. The parts of the elephant-poverty, energy, business, environment, and security-need to be understood as a systematic whole. Americans can no longer avoid this elephant. While globalization is incredibly complex, the meteoric rise of economic powerhouses and nonstate actors demand new forums where tough questions and policy prescriptions can be discussed. But first, let's look at the path we followed to where we are today.

What's Old Is New Again

Walking through the thirteenth century, one would be surprised by how similar lifestyles were in Mesoamerica, continental Europe, Africa, and Asia. The key bio-social markers of progress-life expectancy, daily caloric intake, infant mortality rates, literacy-were fairly similar in ancient Mexico City, London, Istanbul, and Beijing. Most people farmed, went to market, lived, and died close to where they were born. Family size was roughly similar in each location (that's to say large), and no civilization looked much better off than another. Certainly no country back then could be considered rich by today's rubric. Compared to our modern existence, Hobbes was right: Life was nasty, brutish, and short.

With the advent of the Renaissance, a renewed interest in learning helped Europe break free from the Dark Ages. This led to the watershed late eighteenth-century invention of steam power in Great Britain. Adam Smith's 1776 Wealth of Nations provided the philosophical framework for organized capitalism, and the Industrial Revolution was born. Machine-driven capacities dwarfed animal and human labor, output soared, and costs declined. Trade accelerated as improved canals and railways and the invention of the internal combustion engine allowed more goods to move farther, faster. Great Britain's mass education system generated skilled workers capable of operating the new mechanical inventions. After millennia of struggling with scarcity, Homo sapiens had found a formula for producing abundantly while working less.

Great Britain was the first industrial economy, but its lead did not last for long. Goods, ideas, and formal education spread throughout Europe and North America in the late nineteenth and early twentieth centuries leading to the convergence of living standards (or flattening as Tom Friedman might say). By the late 1800s, poor countries around the southern European periphery-the emerging markets of their day-were growing fast, catching up to the rich industrial leaders at the European core.

Asia did not join the action until late in the nineteenth century, when the establishment of the Suez Canal, innovations in marine transport, and penetration of the continent's massive interior by railroad liberated it from the tyranny of geographic isolation. Thereafter, the West rapidly engaged Asia in exchange. China opened its ports in 1842 and Thailand in 1855, both with small tariff barriers. India followed Britain's free trade model in 1846, and Indonesia mimicked Holland in 1870. The most dramatic change, even by the standards of the recent Asian Miracle, occurred in Japan, which went from being an isolated feudal country to an open economy in the mid-1850s. Some 15 years after the arrival of Commodore Perry, Japan's foreign trade rose from 0 to 7 percent of national income, which itself grew an estimated 50 percent!

Outside of Japan, Asian nations' living standards continued to lag. These countries' huge populations, with education and literacy trailing the West, left them unable to switch from manual labor to machinery-based economies. From the dawn of Industrial Revolution through the late twentieth century, per capita income in India relative to Britain dropped from assumed parity to 15 percent, a fall of 85 percentage points. India and China had already lost ground to the U.K., United States, and Russia that they would not start to regain until the 1990s. (See Table 1.1.)

In the late nineteenth century, after a half-century of open trade and relatively peaceful relations throughout the continent, short-sighted politicians across Europe began erecting commercial barriers. A lack of forums for cross-border economic coordination led to distrust and misperception. Trade competitiveness and protectionist policies resulted, countries started forming alliances and blocs and markets ended culminating in military conflict, commercial stagnation, and 30 years of destruction. In World War I, 28 million people were injured and 13 million people died, with military costs and property destruction the equivalent of trillions of dollars. The bleak intrawar years brought further protectionist measures. As tempers flared among trading partners, a worldwide depression set in, allowing for the rise of fascist and nationalist movements, and ultimately leading to World War II. The Second World War's death toll totaled between 50 and 70 million including fatalities from famine and disease. More than $1 trillion was spent by countries in combat and an estimated $3 trillion in property was destroyed. Not until well after World War II did trade begin to approximate the late nineteenth-century volume.

The Postwar Period: An Uneasy Peace, an Uneven Global Economy

After the destruction, chaos, and economic stagnation of the two world wars, a new era of stability dawned. The United States emerged as a superpower, leading unprecedented multilateral efforts across the realms of trade, security, and finance. In the years following World War II, the United States engineered multilateral hallmarks, including the Bretton Woods Agreement on monetary and financial coordination, the United Nations, the World Bank group, the International Court of Justice, the General Agreement on Tariffs and Trade/World Trade Organization (GATT/WTO), the predecessor to the Organization for Economic Cooperation and Development (OECD), and the North Atlantic Treaty Organization (NATO). Whereas the late nineteenth-century trade boom had been largely unregulated, these neoliberal, free-market-oriented institutions shined as beacons of hope to counter the postwar socialist, centrally planned approaches of the Soviet Union and much of Asia (including China), Latin America, and Africa. By setting protocols for the orderly exchange of goods apart from the authority of any single ruling country, they insured mutual prosperity and security. A quantum leap in living standards resulted, creating a massive socio-economic gap between the Western camp and the rest of the world. Between 1945 and 2000, not only did the per capita gross domestic product (GDP) of the United States and Western European countries grow several times faster than that of the socialist/communist world, but Westerners were living longer and were generally healthier as well.

In 1974, the United States took multilateralism to the next step, creating the Library Group, an informal gathering of senior financial officials from the United States, the United Kingdom, West Germany, Japan, and France. This casual forum for the world's leading industrialized democracies was to become a steering group for global policy. The countries agreed to an annual meeting under a rotating presidency, forming the Group of 6, or G6, which later added Canada to become the G7. For the next 20 years this forum would manage economic and financial interactions but also touched on defense and security issues.

During the 1970s and 1980s, the G7 was the world's dominant economic and political power bloc, with several smaller trading nations slowly grafting themselves to the system including the four "Asian Tigers": Hong Kong, Singapore, Taiwan, and South Korea. These countries had adopted similar policies to Japan's "educate and export" model. It took the Japanese only 50 years to cultivate mandatory universal education (versus 150 years in the United Kingdom and 100 years in the United States), but South Korea cut this to roughly 30 years. All the Tigers focused on education. (See Figure 1.1.) By leveraging their relatively cheap but skilled workforces, they posted unprecedented double-digit growth and trade integration for nearly three decades.

For much of the postwar period, authoritarian nations like the former Soviet Union and Communist China opted for central planning and domestic protectionist policies over free trade. When the Soviet Union finally collapsed in 1991, it tolled the death knell of centrally planned economies. Then China generated dramatic momentum in the 1980s with Deng Xiaoping's vision of a "socialist market economy." With a large population and nearly 80 percent literacy, China didn't have 12-year compulsory education like the Tigers or Japan, but its sheer size allowed its economy to integrate into the global economy. By accepting more than $250 billion in private foreign direct investment from U.S. and other G7 multinational corporations, China used the 1990s to build up world-class manufacturing capabilities as the Four Tigers did in previous decades, posting similar double-digit growth rates that continue today.

In Latin America, reform and privatization in Chile, Mexico, and Brazil, along with massive debt cancellation and restructurings through the Brady Plan, helped restore sovereign solvency and paved the way for greater global integration. Similar progress in statist South Asia-particularly India-could be witnessed. Africa, while slower than other regions, also trended toward privatization and integration programs, with South Africa emerging successfully after apartheid ended in the early 1990s.

Several free trade converts, such as China and India, rapidly closed postwar living standard gaps in one of the greatest socio-economic convergences of all time. In developing countries, many indicators-education, life expectancy, daily caloric intake-began approaching G7 levels and will catch up sometime this century (see Table 1.2).

New Multipolar Power

After the Soviet Union's 1991 collapse many critics proclaimed the United States as the world's sole "hyperpower," the dominant global leader on all fronts. However, power by any definition has shifted in the twenty-first century. Consider economic power: the United States may be at the top, but other nations are nipping at its heels. Japan is one of the largest world economies, dominating industries from automobiles to electronics. Much of Europe has evolved into the European Union (EU), a potent free-trade zone-cum-political union. The eastern European countries once left to languish under Soviet auspices have experienced rapid trade growth-many will eventually merge into the growing EU marketplace. China, after nearly 20 years of reform, now wields growing international political and economic clout and is on target to be the largest economy later this century. India, too, has shed its statist development model and emerged as a rising star. Elsewhere, Brazil, Mexico, Turkey, South Korea, and others in Asia have become major global trade participants. South Africa, Egypt, and Nigeria have become regional power brokers. With the spike in global economic activity, demand for energy has vaulted many Middle Eastern petro-states into the world's center ring along with Russia. In short, the United States and the other G7 members are no longer the locus of economic activity.

Dramatic advances in technology (particularly in telecoms and computing), the abandonment of centrally planned statist philosophies, the adoption of free market policies, and the cultivation of relatively youthful, better-fed and better-educated populations in developing countries have led to the success of many emerging states. Better human capital in developing countries-growing populations with improving living standards-is narrowing the West's lead. According to the United Nations Human Development Index (HDI), in 1960, lower and middle income countries posted HDI levels of only 20 percent and 32 percent of high income nations. By 1993, these indicators grew to 34 percent and 62 percent, and in the latest spurt of globalization, by 2006, they had climbed to more than 65 percent and 85 percent, respectively. Already, the nations of what I have termed the "Emerging 7" (E7)-China, Russia, India, Indonesia, Mexico, Brazil, and South Korea-have a combined population of more than four times that of the G7 nations. By 2050, their populations will be more than five times greater, as birth rates slow in the G7. Some countries, like Germany, Italy, and Japan may even shrink in population. In the same period, the aggregate GDP of the E7 nations will be twice as large as the G7, as Table 1.3 shows.

These E7 nations are by no means the only emerging markets worth watching, but they do offer an interesting mix of risk and reward that demands serious attention for longer-term public policy formulation. The prosperity that these and other formerly poor countries have gained thanks to globalization offer the United States and the G7 novel opportunities-but only if we understand the trends and engage emerging powers constructively.

(Continues...)

Excerpted from Seeing the Elephantby Peter Marber Copyright © 2009 by Peter Marber. Excerpted by permission.
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Edition details

• Publisher: John Wiley & Sons
• Publication date: 2009
• Language: English
• ISBN 10: 0470283858
• ISBN 13: 9780470283851
• Binding: Hardcover
• Number of pages: 420