A Globalization for Poor Countries Too

The more than 2,000 political leaders, company chief executives, economists, bankers, investment advisors, consultants and commentators gathered this weekend in this snow-clad Swiss ski resort are doing an act of contrition for the global economy.

The main theme heard repeatedly at this 1999 meeting of the World Economic Forum, a private group based in Geneva, is to spread the wealth. In a world frightened by glaring imbalances and the weakness of economies from Indonesia to Russia, the talk is no longer of a new world economy getting stronger but of ways to “keep the engine going,” as the title of one panel discussion puts it.

These conferences of government, business and academic experts discussing economic problems are not greatly different from innumerable other talkfests on global economics. But Davos attracts a significant international crowd and is an excellent guide to what lies ahead for economic policies and world markets.

International leaders are here to stress the need for action to keep economies growing in industrial countries and capital flowing to developing nations. Vice President Al Gore made a speech Friday on the international economy that surely is an early indicator for his future presidential campaign.

Gore called on all countries to spur economic growth, and he pledged a new U.S.-led initiative to eliminate the debt burdens of developing countries. The initiative, to be formally announced in Washington on Monday, would enable poor countries from Southeast Asia to Africa to Latin America to make new investments in their economies, because they would be relieved of their current burden of interest payments.

President Nelson Mandela of South Africa is here to remind the assembled financiers that the global economy is interdependent. “Is globalization only for the powerful?” Mandela asked a packed conference hall in a ringing voice. “Does it offer nothing to the men, women and children who are ravaged by the violence of poverty?”

But his message was to goad, not to condemn. Two-thirds of South Africa’s people have electricity now, whereas only one-third had it five years ago, he said. With investment, Mandela said, the time will come “when Africa can re-integrate to the world economy.”

There is a humility rare among financial experts in this year’s Davos conference. Time and again speakers issue optimistic forecasts--that Asian economies are recovering and that Brazil and Latin America may stay out of recession. But then they add that “some economic wild cards,” such as Asia, Brazil, Russia, even the highly charged U.S. economy, could collapse and throw the world into a terrible recession.

The speakers are not really confused. It’s just that global economic problems, always solvable in theory, are intractable in practice. Basically, the world has too many poor people and too few well-off people.

Brazil, for example, source of concern at the moment, “has 160 million people but only 32 million of them with any real purchasing power,” said George Kastner, a Venezuela-based consultant with the Arthur D. Little firm.

Eighty percent of China’s people are rural and poor, says professor Justin Lin Yi Fu, director of Peking University’s Center for China Research. If China’s surplus production could be spread around to those rural people, China would not have an economic problem, Lin observed.

Pay attention to such comments. They hold meaning for the direction of economic policies and global markets this year. They say that the emphasis of all countries will be to keep capital flowing to business, and to lower interest rates and taxes. Worries about inflation will take a back seat to the need for boosting economic activity.

“Deflation was last year’s fear. This year the economies are going to reflate,” said Kenneth Courtis, chief international economist of Deutsche Bank. Europe will lower interest rates and taxes, he explained. Japan is pouring money into rescuing banks and trying to revive its economy, and the United States continues to keep money flowing to business.

Courtis predicts another year of expansion in stock markets and economies. And finance ministers from Germany, France and Japan seconded Courtis’ comments.

French Finance Minister Dominique Strauss-Kahn spoke of the world economy being propelled “by two engines,” Europe and the United States, with hopes that a third engine, Japan, would join in the effort this year.

And Japanese Deputy Finance Minister Eisuke Sakakibara said that Japan would do just that. “The Japanese crisis is over--or almost over,” Sakakibara said.

Still, what can a conference of some of the world’s smartest and richest people do to boost the world economy? They can change thinking. There is no simple praise of capitalism at this conference. In fact, there is impatience. Canadian Prime Minister Jean Chretien decried the power of currency traders to affect economies, saying “boys in red suspenders working in financial markets in New York can pull the plug on your whole economy.”

Yet there is a sense that the future can be better. “Capitalism must be a popular crusade that benefits every level of society,” said Jon Corzine, senior partner of the Goldman Sachs investment firm.

And Gore said it powerfully at the close of his speech. In the developing world, “there are 125 million primary-school-age children who are not in school--and two out of three are girls,” Gore said. “Yet study after study has taught us that educating girls brings a higher return than any single investment we can make in the developing world.” Applause greeted that line.

Gore proposed a new “practical idealism--grounded in self-interest, but uplifted by what is right.” Remember the phrase: practical idealism. You’ll hear it again in next year’s presidential campaign.

James Flanigan can be reached by e-mail at jim.flanigan@latimes.com.