Globalization and the Atlantic Community
Speech by Ambassador John Kornblum

How did Marx and Engels put it? "A specter is haunting Europe -- the specter of Communism."  Is history repeating itself?  Fear seems to be everywhere: outsourcing, hostile takeovers, illegal immigrants, and of course the infamous "Heuschrecken" of the German election campaign.

But just as 150 years ago, the real specter is not capitalism or globalization. Globalization is only the most recent embodiment of one of life's most enduring features - rapid and often unsettling change. 

Nearly 2,500 years ago, the Greek philosopher Heraclitus argued that the constant of life, his famous Logos, was the strength mankind could draw from the changing currents of existence. 

But most of us are not philosophers. Sometimes too much change can be confusing and disorienting. Our era is as revolutionary and unsettling as was the industrial revolution of the 19th century.

We didn't manage that one very well. The old order hung on bitterly.  The result was two catastrophic wars, a great depression, and the collapse of the world as we knew it. 

Another new order is rapidly approaching. Letting go is hard, especially in Germany, where hard-won stability serves almost as an ersatz national identity. But our own society has undermined stability by churning out discoveries such as the microprocessor, the personal computer, medical advances, etc. which are changing the world.

These changes have undermined traditional patterns of industry and society. They helped bring down command economies such as that of the Soviet Union and opened the world to a promising but often unsettling era of competition and democratization. 

In other words, we are leaving an era characterized by a stable, but undemocratic world order, and entering an era of growing freedom, accentuated by unsettling change.

There is no such thing as a tidy revolution, but revolutions can be used for positive purposes.  Here are three implications I believe we should keep in mind: 

Our democratic Atlantic Community is at the threshold of the most exciting era in its history.  We can achieve unprecedented freedom and prosperity at home and provide the essential framework for global peaceful change.  But to do so, we must get our partnership in better shape. We are spinning our wheels; our strategy has been overtaken by events.

First of all, we must harmonize our visions with reality.  For some very good reasons, post-war Atlantic visions were based on the expectation that the results of two world wars could be undone and that European nations would return to global power.

Rather than restoring the pre-1914 transatlantic balance, the post-war period confirmed a dramatic transfer of the center of gravity of European civilization from Europe to North America. And despite immense gains since 1945, the gap between European and American influence in the world is growing larger. 

For more than fifty years, we have sought to avoid this truth by blaming this gap either on Europe's inability to speak with one voice or on America's unwillingness to share power. 

Neither assumption is correct. The world has progressed beyond the traditional European balance of power.  Europe's former role has been strengthened by a larger Atlantic community which depends on the power and influence of the United States, but which is not dominated by America in the same fashion as it was by the European powers in the 19th century.

We should follow Heraclitus' advice and draw strength from the democratic power of the new Atlantic world.  But if truth be told, both Europeans and Americans would probably be happier with the old setup.  We are forever searching for the golden egg which will return us to the old world; it will not be found. 

The fall of communism gave us the tools for success. For the first time in history, there is a chance for a truly united Europe within an Atlantic community of democratic nations, one that stretches from the Russian border in Europe to the Russian border with Alaska.

In traditional national terms, the United States will remain the dominant power in this community.  But increasingly, its power will be dispersed. Our framework will be a common economic and social space that draws upon a patchwork of goals and methods.  A new equation of power will emerge - it will not be the consensual soft power often favored by some German politicians, it will be tough and competitive. But it will also be open to those who learn how to use it.

A globalized world will increasingly operate on a tougher set of rules, and there will be winners and losers. As in every era of radical upheaval, not everyone will prosper. Our post-war world was designed to smooth over highs and lows.  It was a strategy for recovery and it worked well, but the dream of predictability is gone forever.

This fact has been tearing at American industrial culture for more than 20 years.  There have been losers in the U.S., but we have also been able to build new industries to replace the old ones.

Europeans have not been so successful.  Both business and government have put up a strong defense of the old order.  Government projects seem to be preferred over flexible new industries.

With the single market and a common currency, European economies will no longer be able to hide behind national borders or financial regulations. Even among themselves, Europeans will face a sort of conflict of cultures.  Not every European country will be a winner.

Europe is not ready for such challenges. European political systems have little experience with transparency or peaceful change.  In the past, war and depression were the motors of change.

Events in coming years will tear at the very spirit of today's EU.  The strains are already showing, as seen in the debates over taxation or the growing battles over intra-European mergers and acquisitions.  These conflicts will upset voters and politicians alike. But the Logos of Heraclitus will rule.  Change will make Europe stronger, more productive and more democratic.

Corporations must assume a growing responsibility for managing change in this new world.  Dispersion of governmental power will place burdens on non-governmental players. There will be opportunities, but also dangers.  Note the ideological fervor against so-called globalization.  These critics reflect the same sorts of arguments that motivated Marx and Engels.  They will focus on the losers rather than on the winners.  They will paint change as the product of an evil ideology.  Capitalism will return as a specter, and global corporations will be the villains.

Listen to Pierre Sané, Secretary General of Amnesty International, writing in the annual report of 2001:

"Capital has always been mobile; what has changed is that the reliance of corporations on national states has become less and less important... Globalization has been accompanied by debt and poverty... Deregulation, privatization and the dismantling of social welfare provision have led to widening inequalities in many countries. The Berlin Wall may have crumbled, but the walls of poverty, intolerance and hypocrisy still stand."

Notice the lament about the decline of the state. Sané is unhappy that governments can no longer inhibit openness; his solution is to redefine human rights as the tool of the state rather than the individual.

At stake here is the liberal economic order, which ultimately is the only hope for justice and prosperity throughout the world.  But we can hardly argue that this view is shared universally. Recall the recent letter of the Iranian President to President Bush:

"Liberalism and Western-style democracy have not been able to help realize the ideals of humanity.  Today, these two concepts have failed.  Those with insight can already hear the sounds of the shattering and fall of the ideology and the thoughts of the liberal democratic systems."

There is considerable evidence that a good percentage of Iranians would prefer liberal democracy to the dictatorial theocracy under which they are now forced to live. But there is almost as much evidence to demonstrate that many Europeans and Americans would probably agree with the Iranian President.  If Amnesty International decides that it will now ignore the individual rights of millions of Iranians in favor of some vague concept of collective rights, we can see the danger approaching. 

The ideological and practical challenges are great. Western politicians face growing pressure to protect jobs from the whims of globalization. Examples in Latin America, Africa, and the Middle East demonstrate that emerging economies are not safe from counter reactions.

Global businesses will be called upon to defend their methods.  Increasingly governments will ask them to demonstrate that integrated multinational corporations can provide a sense of progress and security similar to that which governments previously guaranteed.

This "global corporate citizenship" will not replace governments, but it will require a new sense of cooperation between managers and politicians.  No longer will it be sufficient to demonstrate social consciousness through building schools or sponsoring football teams.  Instead, government and business will be forced better to understand what the other is trying to achieve. 

Old concepts of "capital versus welfare" or "jobs in exchange for tax breaks" will no longer suffice.  In both home countries and overseas corporations will increasingly become part of the fabric of political society. 

This is a lot of heavy content for one dinner speech.  But I believe the message deserves a full treatment.  There is no stopping the locomotive coming down the tracks; nothing will stay as it is.  Our responsibility is to be among the winners - both for our companies, but also for the cause of liberal democracy throughout the world. 

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Ambassador John Kornblum is the Chairman of Lazard & Co. GmbH and a member of the AICGS Board of Trustees.

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This transcript appeared in the May 26, 2006 AICGS Advisor.