A Future Perfect: The Challenge and Promise of Globalization

by John Micklethwait

  And in fact, the only subject that seems to make Bobo’s blood boil is executive pay. The last time the men at Flint had made concessions, GM’s then boss had picked up a multimillion-dollar paycheck. Bobo has no problem with managers being paid well or with workers being replaced, when necessary, by machines. He does, however, think a lot of the struggle between labor and management comes down to a difference of attitudes as fundamental as the one separating him from the people who protested Vietnam thirty years ago. “I think about how things will be when I’m dead; the guys in the boardroom don’t. I’m not worried about my job; I’m worried about my children’s, and the towns around here. They just care about bonuses.”

  p. 247 Perhaps the saddest thing about Dwight Bobo is the fact that he is a decent man who must surrender to the inevitable. A bit like the deer that he hunts so selectively, he is simply being culled. The wonder years for the people of Flint are long gone, brought to an end by forces beyond Bobo’s control, forces that he does not always understand but whose result is as final as an arrow through the neck.

  Storm Damage

  In many ways, Sergei Orelsky is Bobo’s opposite. The jaunty young Russian is still at the beginning of his career and remains, at least on the surface, an optimist—or as much of one as you could be in Saint Petersburg at the end of the twentieth century. A typical product of the ambitious Russian middle classes, the twenty-eight-year-old marketing executive boasts about the things that he has learned, the countries he has been to, and the things he plans to do. All the same, one does not have to dig far to find pockets of bitterness. The differences between Orelsky and Bobo arise not just from character or age or even from the gap between advertising chutzpah and blue-collar phlegm. Rather, their attitudes are defined by what has been done to them by the outside world—by capitalism. Bobo at least has some good years to look back on. In Saint Petersburg, however, there were no real wonder years, just the brief promise in the mid-1990s of a much better life, a promise that was blown away in a matter of weeks.

  Until the storm hit in August 1998, Orelsky would have called himself a winner from globalization. At that time, he was the manager of the Saint Petersburg office of a Swedish supplier of ceramic roof tiles, in the center of the city on Vasily Island. Orelsky had a big office in a newly renovated building where many foreign firms were represented. For Orelsky, getting to the ceramic-tiles firm had been a simple matter of hard work and application. A Saint Petersburg native, Orelsky graduated from the Dnepropetrovsk Engineering and Construction Institute in Ukraine. He specialized as a construction engineer, but he also completed courses in management and marketing. He joined the ceramic-tiles company in 1996. Like many young Russians, he was always looking for ways to travel, so he cheerfully took part in numerous training courses in Latvia, Norway, Sweden, and Finland. Of course, there were problems, but Russia, he sensed, was gradually if unevenly joining the market economy. The mid-1990s were a good time to be a young, clever man in Saint Petersburg. Orelsky settled down with his wife, Xenia, in a comfortable apartment.

  p. 248 That same August, however, Russia’s financial crisis broke and the ruble plunged. The assets that Orelsky had carefully amassed for just such a rainy day disappeared. Unfortunately for Orelsky, his firm’s license to do business in Russia expired at almost the same time, and the Swedes decided not to extend it. Orelsky does not quarrel with that decision and even praises the Swedes for giving the workers three months’ notice. Instead, he counts his blessings (“Thank God our company never played any games with the state: It never bought government bonds or shares.”) The fact that so many of Orelsky’s friends were in more or less identical positions seems to have softened the blow. They all argued that it was a form of release, a chance to start again. Orelsky and a few friends immediately set up an advertising company in his office.

  Orelsky’s young firm is still going, and he talks about expanding it. All the same, looking at Orelsky, surrounded by ceramic roof tiles that were left behind by his previous employer, it is plain that his path upward has met a considerable obstacle. As he readily admits, starting the company was a real struggle. To begin with, he and his partners fantasized about renting a new office and buying some new computers. The crisis soon put paid to that idea. Nearly all the smaller foreign companies that might have been clients have either left or, as he puts it, frozen their activities.

  The crisis has also changed Orelsky’s lifestyle. Like most of his upwardly mobile friends, Orelsky had been taking home between seven hundred and one thousand dollars a month at Braas. In 1999, even after a year and a half of hard work, he makes less than half that amount. “I had planned to completely renovate my flat during the winter, but now it will have to wait until the summer. Before the crisis, we spent more time going out and had free time. Now I have no free time at all.” He points gloomily to the number of lights burning in his offices late on Saturdays and Sundays.

  Orelsky is living evidence that financial domino theory—according to which Thailand knocked over Korea, which knocked over Wall Street, which knocked over Russia—actually worked in a way that political domino theory, the creed of the cold war, never did. The storm that blew away Orelsky’s first stab at capitalism threw many emerging markets into their worst recession since the war. In the countries hit by the Asian contagion, the jobless rate, having been practically nonexistent, tripled to around 10 percent. Roads soon clogged with the migrants who had been summoned to do the “three d” work (dangerous, difficult, or dirty) now returning to their homelands. Children, particularly girls, dropped out of Indonesian schools by the thousands. In some cases, the contagion seemed to have all the discriminap. 249tion of a machine gunner at the Somme. In July 1998, in a decision that was barely reported in the Western press, Chinese officials said that the state-owned textile factories were to lay off six hundred thousand of their 4.3 million employees during the next year because of competition from Asian countries whose costs had dropped.

  At times, Orelsky can almost force himself to argue that the crisis has been good for Russia: It has taught people that capitalism is not easy. The mass exodus of foreigners has also made it easier for domestic firms such as his own. Yet the way that money flowed in and then abruptly retreated has left some scars. “As the Japanese say, life is always most difficult in times of change. These constant changes reflect badly on people’s psyche and result in bitterness and negative changes in behavior.” Russians, he thinks, have become more like their stereotypes and do not trust their government or foreigners. “Practically every day, in the papers or on television, we see reports about murders. If we stopped and thought about it even for a moment we would be angry.” But he repeats, with a note of professionalism, that “showing feelings is unacceptable when working with Russian clients.”

  This odd mixture—a determination to get on with life mixed with sporadic bouts of recrimination and pessimism—is typical of the Russian middle class. After the collapse of the ruble, Western newspapers filled with pictures of impoverished old peasant women hawking vegetables. There was talk of famine. Yet driving through the Russian countryside that winter, a visitor was left with a more callous conclusion: Russia’s poor and hungry had got a little hungrier and poorer, but they were not starving. The subsistence barter economy, which had never gone away, expanded.

  Meanwhile, at the other end of the scale, Russia’s rich—the localcrats—also picked themselves up off the floor. In August there had been plenty of stories of fallen billionaires, of houses sold in Saint John’s Wood and perilous meetings with Western bankers demanding their money back. All these things happened, too, as many investment bankers will tell you with ill-disguised glee. Yet despite these humiliations, well-connected entrepreneurs tended to survive, just as their peers did in Asia.

  The real losers from Russia’s disastrous initial flirtation with global capitalism were its middle classes. Not quite rich enough nor quite dishonest enough to squirrel their money away in, say, Cyprus, their hard work
was destroyed by devaluation. By one estimate, within a month of the crash, sixty thousand professionals in Moscow were either laid off, sent home on “temporary unpaid leave,” or forced to take salary cuts of one third.[4] And such figures take no account of the entrepreneurs—people like the profesp. 250sor’s wife who made some money from buying and renovating one apartment and then borrowed money to do another, bigger one. She had suddenly found that her bank, run by one of Russia’s more unpleasant kleptocrats, was trying to foreclose on her, while prospective tenants scuttled back overseas; meanwhile, her savings disappeared at another bank. Unsurprisingly, she wants to leave.

  But most Russians are like Orelsky and either want to stay or have nowhere else to go. In many ways, the biggest hit has been to their pride. Many of them believed that they were helping to build a better country. They knew, as everyone did, that their capitalism was of a rough-and-ready sort, but America, they reminded themselves, had also had a Wild West and robber barons. Now, Russia’s entrepreneurs have woken up to discover that the real comparison for Russia is often Africa rather than the United States. Russia has become a banana republic, except that it grows energy instead of fruit. Oil and gas account for nearly all its exports, and the revenues they earn are looted with Nigerian finesse by a group of kleptocrats who, unlike America’s robber barons, have built only connections, not businesses. All the values associated with an emerging middle class—hard work, respect for the law, education—count for little. That is not a country to which one should sell ceramic tiles—or, indeed, anything else.

  Hope Is the Last Thing That Dies

  For Reginaldo and Rose Marie Gobetti and their two-month-old son, Filipe, the sort of calculations by which Orelsky and Bobo measure globalization are fantastic things: salaries, benefits, travel. They live in the Villa Prudente, one of São Paulo’s 2,500 favelas, the most beautifully named slums in the world. Though Brazil overall is a middle-income country, nearly two thirds of its total household income goes to the richest fifth of the population, with a mere 2.5 percent for the poorest fifth. Some fifty-three million people—around a third of the population—are poor. Many of them live in favelas—shantytowns that take shape under roads, on hillsides, and near dumps.[5]

  It should be said immediately that Villa Prudente is one of the nicer favelas. The first squatters arrived nearly half a century ago. Most of its houses include some sort of brick. It is reasonably near the center of town and built on flat land, not perched on the edge of a hillside. Unlike in many favelas, there is a water supply and electricity. And although nobody officially owns anything, there is an informal system of property rights that usually allows people to inherit and buy and sell places. But it is still recognizably a slum, p. 251 with twenty thousand people crammed into a space about half a mile long, partly divided by a freeway. It appears that most of the inhabitants are women and children. Unemployment is the norm. Gang-related violence and drug abuse are both on the rise. AIDS is spreading.

  Reginaldo, who is twenty-two, was born here and has done his level best to get out of it. A scrawny young man with a gap between his front teeth, he exudes an almost childish good nature. It is easy to imagine him as a circus clown—which in fact was one of his early jobs. Rose Marie, however, is warier.

  Like two out of three Brazilian workers, Reginaldo did not finish secondary school; as the oldest of seven, he had to leave at fourteen. He briefly landed a good job as an assistant in an electrical store, getting paid five hundred reals (then about four hundred dollars) a month, but when the economy began to turn down in 1998, he was laid off. He now works in what is loosely known as the informal sector. From Monday to Thursday (there is no point trying on Fridays), he takes a bus to one of the industrial areas and then begins a long, meandering walk back to the favela, asking for work as he goes. It is a lonely, dispiriting business. (He would go with a friend, but that would only frighten potential employers.) If he is lucky, he will get hired lifting, pushing, or washing something for a few hours.

  Between this and the household jobs that Rose Marie sometimes picks up, the Gobettis hope to bring in one hundred reals a month—about sixty dollars at the new devalued exchange rate. But it does not always work out, and sometimes they have to buy bread on credit. Thus, Reginaldo’s main search is for permanent work. One of his friends has a telephone and lets Reginaldo use the number. The biggest problem, Reginaldo admits shyly, bitterness finally working into his voice, is his address. When he fills out the form, the excuses come out: Jobs suddenly require him to have a driver’s license or three years’ experience.

  The favela in Brazil has its counterparts worldwide—a barrio in Venezuela or a jhuggie settlement in India. In places such as Dar es Salaam and Caracas, roughly half the housing stock is squatter level. Every continent has its nonstarters: woefully underequipped people living miserable lives that, it seems, globalization has done little to improve. By any measure, an unacceptably large group of people is poor, indebted, malnourished, and without aid. Around one in four of us—1.3 billion people—lives on less than a dollar a day; one in five is illiterate.

  There are more extremely poor people in rich countries than many people would like to admit. In 1998, the World Bank offered one million dollars’ p. 252 worth of support to the capital of the new world order, Washington, D.C. Although it was dressed up as a piece of good citizenship by the Beltway-based bank, critics such as The Wall Street Journal pointed out that the city, where 39 percent of the children live in families below the poverty line, had more in common with the bank’s regular customers than it would like to admit: Washington’s infant mortality rate of 16.2 per 1,000 births (more than double the American average) is about the same as Sri Lanka’s; the number of babies born underweight is a little higher than the figure for Zambia.[6]

  All the same, most nonstarters live in developing countries. Almost all of Africa’s 750 million people qualify. Most of the forty-five countries at the bottom of the United Nations’ Human Development Program are African. The average African home consumes 20 percent less than it did a quarter century ago, and it is the only place where the proportion of children not attending school is rising. It is difficult to see how things are likely to change, given the continent’s neglect of education and penchant for incompetent governments. What can we offer, say, Niger, where more than 90 percent of the population live on less than two dollars a day, life expectancy is forty-seven years, and thousands of children die every year of curable diseases?[7]

  The easiest way to illustrate the backwardness of some countries is simply to look at the people. A modern Bangladeshi weighs about the same as a Western great-great-great-great-great-grandfather did for the simple reason that he eats just as badly. The French citoyens who stormed the Bastille consumed about 2,700 calories a day and averaged about five feet two inches in height. Now that French people get 4,000 calories a day, they have grown to about five foot ten.[8]

  Wade through the literature about the nonstarters, and four gruesome things stand out.[9] The first is the pathetic vulnerability of children such as Filipe Gobetti. More than eight million die each year because of polluted water or dirty air; six million die from malnutrition; two million die from diarrhea-related diseases. In Africa, 174 out of every 1,000 children fail to reach age five, against an average of 89 for the world.

  Second, it is the very poor who tend to suffer most from human violence. Most of the seven hundred murders that happen each month in São Paulo are committed in places like Villa Prudente. Reginaldo Gobetti says that the police come into the favela rarely, and when they do, they then leave in a blink of an eye. He would willingly go through a few stop-and-frisk ordeals if it meant that the police were around more. More generally, the nonstarters tend to be gathered in places where the forces of law and order are often themselves great threats to safety. Poor countries account for almost all the p. 253 116 countries that Amnesty International accuses of practicing torture. In 1998, for example, Laurent Kabila’s radio station b
roadcast the following public-service announcement: “People must bring a machete, a spear, an arrow, a hoe, spades, rakes, nails, truncheons, electric irons, barbed wire, stones and the like, in order, dear listeners, to kill Rwandan Tutsis.”

  Third, the same sort of inequality that irks Dwight Bobo reaches epidemic proportions when you consider the nonstarters. Brazil, as its former president, Fernando Henrique Cardoso, once remarked, is not so much an underdeveloped country as an unjust one. Half its farmland is occupied by just 1 percent of its landowners. When you begin to examine inequality on a global scale, it becomes still more unfathomable. In 1999, the UNDP estimated that the assets of the world’s three leading billionaires were greater than the combined GNPs of all the least developed countries, which contain six hundred million people. In the 1960s, the richest fifth of the world enjoyed an income only thirty times that of the poorest fifth; in 1998, the ratio had risen to 74:1. Even that figure is open to interpretation since it tends to sort whole countries by category (for instance, there are no Chinese people in the bottom quintile). Adjust the figure for inequality within countries, and the disparity jumps to 135:1. And as Raymond Baker and Jennifer Nordin, two academics who have pored through the World Bank’s figures, point out, even that figure is probably too low since it relies on the rich reporting their income accurately. They estimate the figure for 2000 to be around 150:1.[10]