12 September 2000
At the last World Economic Forum meeting, in the Swiss alpine town of Davos, a wave of optimism washed over delegates. Bullish forecasts were made about economic growth, powered by the blistering pace of globalisation, the Internet revolution, and leaps in productivity.
Taken together, these three elements performed a sort of economic alchemy, the high-powered speech makers, including US President Bill Clinton, told delegates, in speeches redolent with such phrases as ``historic opportunity" and ``the new economic paradigm".
In the intervening nine months the world has, by and large, delivered - and more.
Internet growth, particularly in Asia, is staggering, with dramatic statistics like half the stockmarket trades in South Korea being executed online. The Net's most recent development, Wireless Application Protocol, accessing the Internet through mobile phones, has taken off in Japan. Ten million i-mode WAP phones, expected to be sold in Asia by Christmas, will carry more digital memory than the total currently existing in Australia, Sun Microsystems chief researcher and director of science, John Gage, told delegates.
The US has powered on to new heights, its dazzling array of new economy companies and dramatically re-configured old corporate powerhouses sucking in shiploads of money from Europe and Asia trying to hitch a ride on the new alchemy.
``There really is something real here. It's not just hype," a leading US economist, Joseph Stiglitz, told the first plenary session of the WEF's Asia Pacific Economic Summit.
And yet the mood at the meeting in Melbourne yesterday was subdued and qualified. Sure, globalisation brings benefits but as Mr Stiglitz said: ``We need to remember that markets are not ends in themselves." Companies needed to extend the benefits of globalisation, ``otherwise there is a danger of backlash".
Not that the 750 delegates really required such a warning. Many had been blocked out, journalists had gone missing, paint had been thrown over premiers' cars, police had been injured, arrests made.
But the presence of the demonstrators, so palpable and pervasive, was not the only factor in this more subdued mood in Crown Casino's conference rooms. A host of other issues - the IMF making some disastrous calls in Asia; more awareness of the ``digital divide"; and a renewed consensus among the Americans present that, as Jesus Christ once said, ``man cannot live by bread alone".
Even one of the masters of the universe from Goldman Sachs, investment banking's champion of the global deal, acknowledged that while the globalisation process was ``inevitable", there was widespread ``anxiety, uncertainty and confusion" around. ``It's too simple to say `It's the markets, stupid'," said Kenneth Courtis, Goldman Sachs' vice-chairman for Asia.
Clyde Prestowitz, president of the Economic Strategy Institute in the US, and a leading expert on Asian economic developments, also threw a dampener on Asian optimism. He said, in answer to the question of whether Asian could regain its former growth rates of the 1980s and early '90's: ``Do you want Asia to return to that level of growth?"
Those years of Asian super-growth turned out to be a ``bubble", Mr Prestowitz said, and ``we don't want to go back to that". Further, there were ``some real question marks" about whether Asia's present recovery was sustainable. Fundamental decisions about the structure of Asian economies, debt levels, and bad loans, had still not been taken.
But even the US wasn't immune from the tough Prestowitzian analysis. There was a ``large distortion" in the world where European, Asian and South American economies were export-based while the US consumed more than it produced. Asia lent money to America to consume more and ``the sustainability of that cycle is very much in question".
``Can and should the Americans consume more than they produce and can and should the Asians produce more than they consume?" Mr Prestowitz, a man who seems to speak with the weight of the world on his shoulders, asked delegates.
Goldman's Mr Courtis was more mixed. There was ``blistering growth", particularly in the US and Asia, with 133 interest rate cuts around the world in the past two years driving away the Asian contagion. However, there was a lot of debt around and even America's debt-laden finances were ``more fragile than in the early 1990s".
Treasurer Peter Costello was in a sombre, reflective mood. He referred to Japan's proposal for an Asian IMF, but said the Washington-based body preferred to concentrate on Russia and Latin America.
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