Quotes of the Day

William F. Browder was born in Princeton, New Jersey, grew up in Chicago, and studied at Stanford University in California. But don't call him an American. For the past 16 of his 40 years he has lived outside the U.S., first in London and then, from 1996, in Moscow, where he runs his own investment firm, Hermitage Capital Management. Browder now manages $1.6 billion in assets and has made a name for himself locally by campaigning against opaque and corrupt business practices at Russian companies. In 1998 he gave up his American passport to become a British citizen, since his life is now centered in Europe. "National identity makes no difference for me," he says. "I feel completely international. If you have four good friends and you like what you are doing, it doesn't matter where you are. That's globalization."

Alex J. Mandl is also a fervent believer in globalization, but he views himself very differently. A veteran telecommunications executive and former president of AT&T, Mandl, 61, was born in Austria and now runs a French technology company called Gemplus International, which is doing more and more business in China.

He reckons he spends about 90% of his time traveling on business. But despite all that globetrotting, Mandl — who has been a U.S. citizen for 45 years — still identifies himself as an American. "I see myself as American without any hesitation. The fact that I spend a lot of time in other places doesn't change that," he says.

Although Browder and Mandl define their nationality differently, both see their identity as a matter of personal choice, not an accident of birth. And not incidentally, both are Davos Men — members of the international business élite who trek each year to the Swiss Alpine town for the annual meeting of the World Economic Forum (WEF), founded in 1971. This week, Browder and Mandl will join more than 2,200 executives, politicians, academics, journalists, writers and a handful of Hollywood stars for five days of networking, parties and endless earnest discussions about everything from postelection Iraq and hiv in Africa to the global supply of oil and the implications of nanotechnology. Yet this year, perhaps more than ever, a hot topic at Davos is Davos itself. Whatever their considerable differences, most Davos Men and Women share at least one belief: that globalization — the unimpeded flows of capital, labor and technology across national borders — is both welcome and unstoppable. They see the world increasingly as one vast, interconnected marketplace in which corporations search for the most advantageous locations to buy, produce and sell their goods and services.

As borders and national identities become less important, some find that threatening and even dangerous. In an essay last year in The National Interest entitled "Dead Souls: The Denationalization of the American Elite," Harvard Professor Samuel P. Huntington described Davos Man (a phrase that first got widespread attention in the 1990s) as an emerging global superspecies — and a threat. The members of this class, he wrote, are people who "have little need for national loyalty, view national boundaries as obstacles that thankfully are vanishing, and see national governments as residues from the past whose only useful function is to facilitate the élite's global operations." Huntington argues that Davos Man's global-citizen self-image is starkly at odds with the values of most Americans, who remain deeply committed to their nation. This disconnect, he says, creates "a major cultural fault line … In a variety of ways, the American establishment, governmental and private, has become increasingly divorced from the American people."

While his essay (and a subsequent book, Who Are We? The Challenges to America's National Identity) focused on the U.S., Huntington says his point is equally valid elsewhere. "The disconnect in other countries is greater because, to a much larger extent, the populace doesn't share these values," especially in non-Western societies, he told Time. The implications of this for business, public policy and society are profound. If individuals feel no loyalty to any particular country, they could eventually seek to avoid paying taxes in a particular jurisdiction. They might become increasingly disinterested and withdraw from their local communities. And their business decisions could even be harmful to their countrymen.

Some say they already are. Among people who aren't Davos Men and Women — that is, the overwhelming majority of the world's population — a backlash against the global élite can already be seen. In the U.S., it has taken the form of a vociferous debate about the outsourcing of call centers and technology jobs to Asia. In Continental Europe, it's giving rise to new anxieties about a loss of economic and political control; in just the past few days, the Italian government and its central bank agreed to bar foreign takeovers of Italian banks, and the French daily Le Monde ran a front-page article fretting about a Chinese firm's purchase of a leading French perfume store chain.

In a new Time/cnn poll, 46% of those surveyed in France and 40% of those surveyed in Germany said globalization has been "mainly bad" for their country's economy. And 62% of respondents in Britain, France and Germany agreed that some international businessmen and women "have profited unfairly from globalization." The opponents of globalization "used to be hippies with a bunch of signs," says Nathalie Kleinschmit, a Canadian-born consultant with a German passport who helps big companies deal with international operations. "Now the feeling is that anti-globalization is more focused, more organized and more widespread." In other words, globalization — once perceived as something that makes poor countries poorer — is now seen as a phenomenon that makes rich countries poorer.

Of course, Davos makes a tempting target for anti-élitists. It's easy to feel suspicious about an event that gathers the world's business and political leaders around tables of wine and fondue and asks them to solve other people's problems. And naturally, many Davos Men don't accept Huntington's terms. "Huntington forgets that there is a difference between culture on the one hand, and attitudes and lifestyle on the other," contends Klaus Schwab, the founder and executive chairman of the World Economic Forum, arguing that endorsing a global outlook does not mean erasing national identity. "Globalization can never provide us with cultural identity, which needs to be local and national in nature."

A.C. Grayling, the British philosopher and essayist, is more outspoken. The transcending of national boundaries "is a very good thing," he contends, pointing to the postwar integration of Western Europe into the European Union as a model. "In the last 250 years, nation-states have been the problem, not the solution, to world affairs." Others see Huntington's depiction of Davos Man as a caricature that ignores key nuances about the nature of world business. "It's a false dichotomy," says James F. Hoge Jr., editor of Foreign Affairs and, like Huntington, a frequent Davos attendee. "Globalization is a child of the nation-states of the developed world. So in a sense it can't stand in opposition to nationhood." While nations are willingly ceding some aspects of sovereignty, he points out that they are hanging onto tax laws and, in the post-9/11 era, security and immigration.

Nonetheless, Huntington's argument does strike a chord. "Lacking sensitivity to local issues is dangerous," says Martin Sorrell, chief executive of the advertising and marketing services giant WPP, which does about 40% of its business in the U.S., 40% in Europe and 20% in the Asia-Pacific region. "To think of the world as a marketplace doesn't mean that national identity is not important. People are more different than we thought they'd be." The trick for companies, Sorrell says, is to be "ambidextrous" — to position themselves as efficient global organizations that nonetheless present themselves in each national market as being a local player.

For corporations looking to peddle consumer goods, that's good and familiar advice. The food behemoth Nestlé, for one, tries to achieve it by tailoring its worldwide businesses to national taste: buy one of its best-selling KitKat candy bars in Russia and it will have a slightly different mix of sugar and other ingredients from a KitKat bought in Britain, which in turn is different from the ones on sale in Germany.

Bespoke chocolate bars won't resolve the broader economic questions raised by Davos Man's critics. Global trade has been around for centuries; the corporations and countries that benefited from it were largely content to treat vast parts of the world as places to mine natural resources or sell finished products. Even as the globalization of capital accelerated in the 1980s, most foreign investment was between relatively wealthy countries, not from wealthy countries into poorer ones. U.S. technology, companies and money were often at the forefront of this movement. "The U.S. was an early adopter [of globalization], but that's not a place it can retain," says Laura D'Andrea Tyson, the former Clinton economic adviser who is now dean of the London Business School. "We'll see the rise of other significant players."

It's happening. Already the developed world is beating a path to China's and India's door — and Chinese and Indian companies, in turn, have started to look overseas for some of their future growth. Beijing has even started what it calls a "Going Out" policy that encourages Chinese firms to buy assets overseas. Last year, the world economy grew at its fastest pace in decades, largely due to the dynamism of China. Cross-border direct investment has been falling sharply in the U.S., Western Europe and other developed countries since 2000, while it has risen strongly in developing countries, most notably China. In 2004, it received some $60 billion in investment. Add in the $13 billion that flowed into Hong Kong, and the total is more than double the amount foreigners invested in the U.S., the world's largest economy.

But Asian nations are also making some smart moves of their own. They're are creating "a remarkable environment of innovation," says John Chambers, chief executive of Cisco Systems in San Jose, California. "China and India are graduating currently more than five times the number of engineers that we are here in the U.S." That means that U.S. and European companies are now facing high-quality, low-cost competition from overseas. Late last year, for example, the U.S. telecom firm 3Com introduced advanced networking gear manufactured in China by Huawei Technologies — 25% cheaper than Cisco's routers yet claiming much better performance. No wonder so many Western workers worry about losing their jobs. "If the issue is the size of the total pie, globalization has proved a good thing," says Orit Gadiesh, chairman of consultants Bain & Co. "If the issue is how the pie is divided, if you're in the Western world you could question that."

The biggest shift may just be starting. A landmark 2003 study by Goldman Sachs predicted that four economies — Russia, Brazil, India and China — will become a much larger force in the world economy than widely expected, based on projections of demographic and economic growth, with China potentially overtaking Germany this decade. By 2050, Goldman Sachs suggested, these four newcomers will likely have displaced all but the U.S. and Japan from the top six economies in the world. Few economists would argue that such predictions are a reason to put the brakes on globalization — even if that were possible. But it's no longer disgraceful in the academy to argue that globalization threatens to take a toll on advanced economies.

The best case for such a reassessment was made last year by Paul Samuelson, a Nobel prizewinner and a professor emeritus at M.I.T. Samuelson took aim at the theoretical underpinning of globalization and the virtues of free trade, for which the case was first made in 1817 by David Ricardo, the British economist. Ricardo argued that trade is always beneficial because it encourages nations to specialize in the products they are best at and import those they are less good at. So if a rich country like the U.S. is much better at making computers than a poor country like China but only a little better at making sweatshirts, the U.S. should concentrate on making computers, and U.S. colleges should source their goods with logos in Guangdong province. Both the U.S. and China would benefit. Samuelson argued, however, that if the poor country suddenly learned how to make more efficiently the goods in which the rich country specialized, then the rich country would no longer benefit from free trade. In fact, wages in the rich country would fall.

Globalization's defenders reply by saying, Relax: the doomsday scenario will never happen. This counterblast (much of it in a paper co-authored by Columbia University's Jagdish Bhagwati) has two parts. First, free trade's defenders say, it is unrealistic to assume that China or India will suddenly develop a monstrous capacity in high-end, high-technology innovation. "The oft-repeated argument that India and China will quickly educate 300 million of their citizens to acquire sophisticated and complex skills," write Bhagwati and his colleagues, "borders on the ludicrous." Indeed, for the past few months, there have been reports of skilled-labor shortages in the most economically advanced areas of China. Second, free traders argue that even if China and India become advanced economies almost overnight, they will look just like Germany and Japan.

A vast majority of economists would accept that trade between rich economies has wide-reaching benefits. C. Fred Bergsten and Gary Clyde Hufbauer of the Institute for International Economics in Washington estimate that global trade brings $1 trillion in benefits to the U.S. annually, or roughly $9,000 per U.S. household. "The permanent gains from past and potential liberalization are so enormous that the United States can easily afford the modest sums necessary to alleviate the temporary pains of adjustment," they write.

"Temporary pains of adjustment" sounds bitterly euphemistic among the jobless programmers of northern Virginia. But there's no sympathy from Chinese businesses. "Americans might see a threat to their workers, but consumers in America also benefit from globalization because they enjoy low prices," says Li Dongsheng, the 48-year-old chairman and CEO of Chinese firm TCL, which recently acquired the TV operations of France's Thomson. And even some in the labor movement now see globalization as a tool that can be used to unions' advantage, especially in pushing for global rules of corporate behavior. "I'm strongly opposed to naive deregulation, the idea that you should leave everything to the markets," says John Evans, a Paris-based international union official who is a regular attendee at Davos. "I think we need more globalization of labor standards, not less. I don't want to leave decisions on labor standards to the Burmese military regime."

It's also entirely possible that the near future may see the pendulum of capital swing away from Davos Man-style globalization. One counterpoint is Manila Woman — low-paid migrant workers from Asia and elsewhere who are increasingly providing key services around the world. Valerie Gooding, the chief executive of British health care company BUPA, says the British and U.S. health care system would break down without immigrant nurses from the Philippines, India, Nigeria and elsewhere. While BUPA employs about 300 people in India to handle its outsourced information technology needs, about 10% of the nurses and health care assistants in its nursing homes and hospitals are from overseas — and, unlike Davos Man, she says, they're not ambivalent about being strongly patriotic.

Not all Davos Men seek global markets, either. Patrick Sayer runs a private equity firm in France called Eurazeo, and complains there are still too many barriers to cross-border business in Europe, let alone the world. So he's focused Eurazeo on its domestic market. "I profit from being French in France. It's easier for me to do deals," Sayer says. "It's the same elsewhere. If you're not Italian in Italy, you won't succeed."

That may sound like a narrow nationalism, yet it contains a hidden wisdom. Recall that Italy itself was, until 1861, not a unified nation but an aggregation of city-states. Despite tension between its north and south, there's no contradiction between maintaining a regional identity and a national one. Marco Tronchetti Provera, chairman of Telecom Italia, for example, can feel both Milanese and Italian at once, even as he runs a company that is aspiring to become a bigger international presence. The question is whether it will take another 140 years for Davos Man to figure out how to strike the same balance on a global scale.

• PETER GUMBEL
• Have business élites lost touch with their national roots? The WEF annual meeting in Davos this week crystallizes the debate over globalization