Davos Listens to the World

The organizers of the World Economic Forum are fond of pointing out that this year's meeting was "carbon neutral." As fleets of gasoline-guzzling limousines and chartered helicopters ferried the world's business and political elite to their annual week of conferences, career networking and caviar in the exclusive Swiss resort of Davos, an environmental group called Green Globe 21 planted trees in Mexico to help compensate for all those greenhouse gases poisoning the environment half a world away.

Call it sensitivity training for the world's rich. The meeting in Davos was the first big international economic gabfest since a World Trade Organization meeting in Seattle ended in abject failure last December after being disrupted by environmental and labor protests. The Seattle fiasco left many business leaders wondering whether international trade is in danger or whether the process of economic integration known as globalization would come to a sputtering halt. The overriding message at Davos was that the fears raised by Seattle were exaggerated. Developing countries as well as rich ones want more trade, not less. But nearly everyone in Davos agreed that globalization has an image problem.

As British Prime Minister Tony Blair told the Davos gathering, while Seattle was an undeniable setback, "our conclusion should not be that open markets and free trade are wrong, but that we have to make a sincere effort to convince the world of their benefits." Even Mike Moore, the New Zealander who became director general of the wto last year after a lengthy succession battle, acknowledged Seattle's communications failures. "I know we're not getting the message of truth out,'' Moore said. "This is not a case of a few wealthy white guys trying to fix the rules for the rest of the world.''

The result was that many of the world's richest tycoons found themselves not only talking about new business strategies in Davos, but sounding like New Age guys, expressing a need to remain open, transparent and ethical. "Two years ago the notion of corporate social responsibility would not have been heard," says Claude Smadja, the Swiss managing director of the annual economic forum. "Back then, people were saying 'Our issue is maximizing shareholder return.' Now, this element of social responsibility is coming up more and more, and it's not just lip service."

The pitched street battles between police and demonstrators in Seattle were not repeated in Davos, thanks in part to the town's remote location but also to an overwhelming Swiss police presence. Hooded demonstrators smashed windows at the local McDonald's and injured two policemen, but were not able to disrupt the meetings. The ferocity of the demonstrators in Seattle had raised concerns about the popularity of global trade in underdeveloped countries, where the impact on labor and the environment was questioned. Many of the guests visiting Davos from Third World countries said they felt that such fears were unrepresentative.

Mexican President Ernesto Zedillo, for example, complained that an alliance of "globaphobes" comprising the extreme left, extreme right, organized labor and "self-appointed representatives of civil society" is trying "to save the people of the developing countries from development." Isher J. Ahluwalia, director of the Indian Council for Research on International Relations, decried efforts by organizations such as labor unions in rich countries to attempt to speak for less developed nations. "As our exports do better, this talk about labor standards and environment standards is really about erecting non-tariff barriers to trade," Ahluwalia said.

Moises Naim, editor of Foreign Policy magazine, told a meeting of the TIME Board of Economists in Davos that the central lesson of Seattle was not a backlash against trade but that globalization is creating issues at a pace faster than international institutions can handle them. "The wto has ended up being a dumping ground for important global issues that don't have a home," Naim said.

But Naim also argued that despite concerns that boom-and-bust cycles have been amplified by globalization, recent financial crises had not created a serious political backlash against economic reforms. He noted that in Russia, Venezuela and even Malaysia, one of the sharpest critics of the power of global financial markets, free market reforms were still being implemented. What's more, he said, for all the talk of protectionist sympathy in the U.S., all of the main presidential candidates were committed to a global agenda.

The Seattle conference had been called by the 135-nation wto in hopes of deciding on a new agenda for the next round of trade negotiations, following up on the global trade treaty adopted in 1994. It was primarily disputes between the U.S. and Europe over agricultural imports that left the talks stalled even before the street violence underscored uncertainty in the U.S. and other developed countries about the future direction of world trade. Lewis B. Campbell, chairman of the U.S. conglomerate Textron, said the message of the protestors in Seattle came across as clearer and more coherent than those of trade advocates. "We have not created an international coalition sufficient to make global free trade a reality in the near future," Campbell said.

Some participants said it was a mistake to oppose globalization because the process was impossible to stop once it got underway. Globalization is combining with specialization to reduce the number of players in many industries, noted Leif Johannson, president of Volvo, which last year sold its car division to Ford and decided to concentrate on the truck business. "Small may be beautiful, but there are no examples of small companies doing well," he said. "The challenge is that the benefits of globalization come slowly and are difficult to identify, while the disadvantages are abrupt, like factory closures."

Not everyone agreed. Brent Blackwelder, president of Friends of the Earth USA, attended Davos as a guest, one of a number of social activists invited, but he made clear that what had happened in Seattle was only the beginning unless governments and business both become more sensitive to labor and environmental issues. "Globalization," he said, "is smashing good jobs in one place and setting up pathetic conditions in others." Blackwelder himself came under fire for joining forces with labor activists in Seattle, which some critics said caused the environmental movement to embrace alien issues.

While the labor issue was clearly the most sensitive among executives in Davos, a surprising number of companies were happy to talk about making improvements in their record on preserving the environment. Nicholas Butler, group policy adviser at BP Amoco, said that because of the recently merged oil giant's size, the company recognized that it had to do more to safeguard the environment and be able to prove its accomplishments. At a symposium on corporate responsibility, executives said they felt increased pressure to act ethically. Raymond Gilmartin, CEO of the drug company Merck, said his firm had set up a committee to help it work through ethical dilemmas. "The process of globalization can only be constructed if public opinion is included," Gilmartin said.

In an effort to address some of the concerns raised at Seattle, organizers of the World Economic Forum arranged a meeting between representatives of non-government organizations concerned about globalization and people from the Davos meeting. "If globalization is creating some jobs, it is also ruining the lives of millions more," said Vandana Shiva, an Indian scientist. Chosen to represent the business side of the debate was Gran Lindahl, ceo of the Swiss-Swedish engineering group ABB. "Concerns for employees and customers were joined five years ago by a new emphasis on shareholder value," Lindahl said. "Now we have a fourth constituency: the world at large."

While the advocacy groups said they were unhappy with the results of Davos, because the meeting is private and discussions are held behind closed doors, they may have been more successful than they realized. Many of the issues they raised at Seattle were discussed at those private meetings. While some, like setting international labor standards, proved unpopular, other topics, such as measures to protect the environment, were embraced by a surprisingly large number of executives, whose eyes are supposedly only fixed only on the bottom line. Of course, raising such concerns is good public relations. Such discussions probably won't affect the direction of globalization, but they have already found a place on the trading world's agenda for the future.

With reporting by James Graff and Thomas Sancton/Davos