The Commanding Heights (Part 3): The New Rules of the Game (cont.)

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Chapter 17: Failure at the Summit [ 4:58 ]

NARRATOR: Bill Clinton had been a leading proponent of expanded trade, but the protests forced him into a political corner. A presidential election was about to begin, and Democrats needed union support. In a speech to WTO delegates, Clinton appeared to side with the protestors on the streets.

BILL CLINTON: I condemn the small number who were violent and who tried to prevent you from meeting, but I'm glad the others showed up, because they represent millions of people who are now asking questions about whether this enterprise will in fact take us all where we want to go.

NEWT GINGRICH: I think his speech at Seattle was an absolute disgrace and an act of strategic defeat for him. I think they were gearing up for the election, and appeasing the unions to elect Gore was more important than standing for free trade.

NARRATOR: Clinton instructed American WTO negotiators to keep protections for key U.S. industries. The summit ended in failure. Leaders across the developing world vowed to block the next round of trade negotiations unless their demands were taken seriously.

MAHATHIR BIN MOHAMAD: We believe in trade, but we didn't believe in just being a market for other people. So when you talk about opening markets, you talk about the rich people who can manufacture goods with added value and sell them in our markets, not the other way round.

NARRATOR: Countries like Tanzania that rely on foreign aid claimed they wouldn't need the aid, if they could only sell their products to the West.

BENJAMIN MKAPA, President of Tanzania: You see, we talk about a level playing field, but in fact it is very much tilted in their favor. We would earn so much more than we are possibly getting by bilateral aid if those markets were just open to us, literally by billions.

NARRATOR: Global poverty soon became the galvanizing issue among globalization's opponents. In the wake of Seattle , control of the protest movement began to shift from unions to a disparate network of grassroots activists.

JAGGI SINGH, Activist, Canada : We're trying to move from the politics of protest to the politics of liberation. It's not simply trying to create a kinder, gentler capitalism. It's not simply trying to negotiate the terms of our misery, to make our misery less miserable. It's about changing the world; it's about creating institutions, structures, and frameworks, communities and neighborhoods that are based on our values, which are values of social justice, of mutual aid, of solidarity, of direct democracy. And we're a long way from where we want to go, but we have to start now.

Onscreen caption: World Bank/IMF meeting
Washington , D.C. , April 2000

NARRATOR: One of the protestors' next targets was the World Bank, an institution whose sole purpose is to reduce poverty in developing countries.

JAMES WOLFENSOHN, President, The World Bank: When you see someone outside a barricade attacking you vehemently because of something called globalization, you have to wonder what it is they're getting at. It enrages me when you have people who assume they have the moral high ground against a team of people here who are devoting their lives to addressing the very questions that these people claim to be addressing.

NARRATOR: But the protests had become impossible to ignore. Inside the World Bank and other institutions, officials struggled to make sense of the growing debate.

NEMAT SHAFIK, Vice President, The World Bank: Well, the protest movement is multifaceted, and the anger is multifaceted, but there clearly is a sense of losing control and a sense of alienation. The old structures and the old institutions and the old lines aren't working anymore, and I think we're at a stage where is this extraordinary chaos in international organizations, in international rules of the game, that we're trying to define, and we're not there yet. And I think, like in any chaotic situation when you're in the middle of it, you don't see the way out, but I think what we're observing -- the series of protests, the series of engagements -- is part of the process of coming towards some new structure for managing a global economy.

Chapter 18: The Global Divide [ 2:33 ]

NARRATOR: Globalization did not cause global poverty, but it did make us more aware of it. And by creating a single global market, it raised the question of how that market benefits the world's poorest nations.

DANIEL YERGIN: We are seeing around the world a movement towards greater reliance on markets, greater confidence in markets. But for that confidence to last it has to be seen that these markets are fair, that they are delivering the benefits widely, that people are benefiting from them. And if they don't have that kind of legitimacy, then the confidence is not going to remain, and the markets will be vulnerable to disruption and be replaced by other kinds of controls. So every day the market has to earn and prove its legitimacy, and that's a big test, particularly in the developing world, where the number-one issue, the central preoccupational concern, is the issue of poverty, and delivering the goods means lifting people out of poverty. And that more than anything else is what these markets would be judged by.

JEFFREY SACHS: Professor of Economics, Harvard University : The world is more unequal than at any time in world history. There's a basic reason for that, which is that 200 years ago everybody was poor. A relatively small part of the world achieved what the economists call a modern economic growth. Those countries represent only about one-sixth of humanity, and five-sixths of humanity is what we call the developing world. It's the vast majority of the world. The gap can be 100-1, maybe a gap of $30,000 per person and $300 per person. And that's absolutely astounding to be on the same planet and to have that extreme variation in material well being.

Chapter 19: Capitalism Redefined [ 7:00 ]

HERNANDO DE SOTO, Founder and Director, Institute for Liberty and Democracy, Peru: The problem that's happened over these last years is that somehow or other people who are capitalists in countries like the United States considered the real interlocutors are rich people from developing countries, so they've been touching the wrong constituency. The constituency of capitalism has always been poor people that are outside the system. Capitalism is essentially a tool for poor people to prosper.

NARRATOR: Hernando de Soto is one of the most original economists in the developing world. An advisor to Mexico , Peru , Egypt , and other countries, he seeks to cut through the old debate about wealth and poverty and reinvent capitalism in the name of the poor.

CHARLIE ROSE, Journalist and Talk Show Host: Hernando de Soto has been called the most important economist in the Third World . He's a champion of market economics and property rights in Latin America . His new book, The Mystery of Capital, talks about the question of why capitalism triumphs in the West and fails everywhere else. Welcome.

HERNANDO DE SOTO: So the important thing about a capitalist system is that it's a system of representations. Therefore it's a little bit like when I go to the United States . People ask me for my identity, and I say: "My identity is me. I mean, look at my face. I am Hernando de Soto ." But the man at the U.S. immigrations just says, "Look, give me your passport."

The reason that things travel so well in the market economy of the United States , and values travel from one place to another, is because they all have passports. And the real value is like my identity. It's not in me; it's in my passport. Real value to pay the hotel room is not in me; it's in the credit card. And so what happens is that this system by representation, it requires of course that all the representations -- the credit cards, the passports, the IDs, the property titles, and the shares -- be organized by a system of law that allows people to be able to trust what they're dealing with.

NARRATOR: In September 2000, de Soto published his explanation of why capitalism hasn't worked for the poor. He took his message directly to some of Latin America 's most remote regions.

HERNANDO DE SOTO: The reason I'm going to Cajamarca now is because 12 years after the fall of the Berlin Wall and 11 years after Peru adopted pro-market policies, their situation hasn't got much better, and they want to know why. The Mystery of Capital offers an explanation. It says that the system per se works in the West, but that in our country, like in much of the Third World , it isn't functioning because we have missed some of the crucial elements that the Westerners added in the 18th and 19th centuries, like property rights, without which the system cannot function.

Onscreen caption: Cajamarca , Peru

NARRATOR: De Soto 's book had become the number one bestseller in Peru 's history. And in poor neighborhoods across the country, this economist had become a celebrity.

De Soto believes that people are capitalists by nature, but that in the developing world, most are locked out of the capitalist system.

HERNANDO DE SOTO: Peru , like in every other developing and former communist nation, people on the ground, with or without a property law, have basically agreed on the distribution of assets among themselves. You go to any of the places we've been to -- the hinterland of Egypt, of the Philippines, of Haiti, where there is no official law that is actually in place or being enforced, but there is another law in place: You step on somebody's territory, and somebody comes up and says, "Get off my territory," where there's a law or no law. You walk down the street, and you walk into a garden, and the dog starts barking, and you start finding out that that dog is defending a consensually agreed determination of possession rights throughout a certain area. So there are property systems in place. The question, I think, the important thing is that they're illegal. They're extra-legal, to be more precise.

Onscreen caption: Kilimanjaro , Tanzania

NARrATOR: In the West, property rights are taken so for granted, they rarely cross our minds. But in many countries, these crucial "tools of capitalism" simply aren't available.

In the foothills of Mt. Kilimanjaro , Philip Tesha's family has grown coffee for generations. He sells directly into the global market, yet like many in the developing world, he can't prove that what he owns is actually his.

INTERVIEWER: So who owns the land around here?

PHILIP TESHA, Coffee Farmer, Tanzania : The land is our property. We brought it from the farmer who was willing to sell to us. So we brought this land, although we don't hold any title for the ownership. But it's our property.

INTERVIEWER: So how can you prove that's your property?

PHILIP TESHA: Because I'm here. I was the person who brought it, and the person who sold it to me is also around here.

HERNANDO DE SOTO: So what we've been discovering is that there's a real huge paper wall that stops the poor from actually being able to develop private legal enterprise.

NARRATOR: Without property rights, ordinary people in developing countries can't get a loan, a mortgage, or credit. They are excluded from the capitalist system, and the global market simply passes them by.

HERNANDO DE SOTO: So this is a time of crisis for the cause of capitalism worldwide, because for the moment it has only meant giving the elite of developing countries additional opportunities, and not being able to get down deep, deep into where the real majority interests of people in any developing country are, which is among the poor.

Chapter 20: The Bottom End of Globalism [ 4:46 ]

JEFFREY SACHS: It is an incredible moral problem how to live together with this vast gap in wealth. It's also an incredible intellectual problem. It's what development economists such as myself spend all our time thinking about. Why is the gap so large? What can be done to help the poorer countries narrow the gap? It's a very tough question.

NARRATOR: Places like Merelani, in Northern Tanzania , are the bottom end of the global economy. Miners hunt for gemstones -- tanzanite -- that will eventually sell for over $1,000 per stone.

Some mines are too narrow for grown men to navigate. Those mines are left to children as young as 10, known as "snake kids." For each stone, they receive less than one dollar.

HERNANDO DE SOTO: Oliver Twist has come to town, and he's poor, and he's got a TV set, and he's able to see how you live as compared to how he lives, and he's going to get very angry. So either you show him a capitalist route to do it and integrate him, or he's going to find another ideology. And the fact that today there is no more Kremlin that is organizing a revolt doesn't mean that they're not going to find another capital, because when these things happen, when people are unhappy and rebel against a system, they'll find another locus of power very, very quickly.

BILL CLINTON: I'm not one of these people that believes that economics solves all problems, but if people know they're taking care of their children, and if they have a personal interest in maintaining the peace, it's just easier for them to manage life's difficulties. You know, it's no accident that the Nazi Party arose in Germany . Everybody who was alive at the time remembers people in the Weimar Republic , after the harsh peace of Versailles after World War I, carrying wheelbarrows full of worthless Marks to the bakery to buy a loaf of bread. So I don't want to oversell this: It is not sufficient to build a peaceful, free world, but it is absolutely necessary. What is? Trade.

Onscreen caption: Warwick , England , December 2000

NARRATOR: In his final foreign policy address before leaving office, Bill Clinton sought to define the challenges of globalization. He had come to the presidency saying that free trade would benefit America . He left arguing it was crucial to maintaining the peace in an interconnected world.

BILL CLINTON: First let me say I think it's quite important that we unapologetically reaffirm a conviction that open markets and rule-based trade are necessary, proven engines of economic growth. Now I know that many people don't believe that, and I know that inequality, as I said in the last few years, has increased in many nations, but the answer is not to abandon the path of expanded trade, but instead to do whatever is necessary to build a new consensus on trade. And it's easy for me to say -- you can see how successful I was in Seattle at doing that. No generation has ever had the opportunity that all of us now have to build a global economy that leaves no one behind. For eight years I have done what I could to lead my country down that path. I think for the rest of our lives we had all better stay on it. Thank you very much.

Chapter 21: Changing of the Guard [ 3:04 ]

NARRATOR: Washington 's free-trade agenda passed seamlessly from the Clinton to the Bush administration.

GEORGE W. BUSH: Conquering poverty creates new customers. What some call globalization is in fact the triumph of human liberty stretching across national borders, and it holds the promise of delivering billions of the world's citizens from disease and hunger and want.

RICHARD CHENEY: At this stage I don't find in my travels around the country or even around the world that there is widespread opposition to the basic fundamental trends that have been there for the last 40 or 50 years. Millions of people a day are better off than they would have been without those trends and development, without globalization, without the developments of the increased international commerce, and that's all of the good. And very few people have been harmed by it.

Onscreen caption: San Cristobal , Mexico , February 2001

NARRATOR: On his first foreign trip, President Bush came to Mexico . His friend Vicente Fox wanted to use the global market to relieve his nation's endemic poverty.

VICENTE FOX: Mexico has been one of the losers of the 20th century. We tried many different alternatives to development, and unfortunately we have 40 percent of the population poor; we have a per capita income that is extremely low. It is the same per capita income we had 25 years ago, so we must change things.

NARRATOR: Presidents Bush and Fox hoped to expand the North American Free Trade Agreement to the entire Western Hemisphere .

VICENTE FOX: Now we want to go further. I'm taking about a NAFTA-plus, a NAFTA that takes us to a further integration. I've been talking this with President Bush, and fortunately he's seeing it the same way.

NARRATOR: But as his foreign minister, Fox chose a leading voice of the left: a onetime friend of Fidel Castro, and critic of global capitalism.

JORGE CASTANEDA: The left's main issue since the middle of the 19th century has been inequality that accompanies capitalism. There is probably more inequality pressing against society today than before within rich countries, within poor countries, and between rich countries and poor countries. So on this score, for example, the left has more of a cause, more of a raison d'etre, than perhaps in any time recently.

Chapter 22: The Battle Resumed [ 6:38 ]

Onscreen caption: Quebec City , Canada

NARRATOR: Presidents Fox and Bush were set to meet again in Quebec City at a summit for 34 democratically elected presidents from North and South America . Anti-globalization activists made the summit their next target.

ACTIVIST: No matter what anybody says, there's going to be some kind of property destruction.

ACTIVIST: So far the way the debate has been played out is violence, nonviolence. But for me that's not the issue. Our goal is to disrupt the summit as best we can with the largest possible mobilization on the 20th and 21st.

Onscreen caption: Summit of the Americas , April 2001

NARRATOR: The summit's agenda was to be trade, poverty, and the new rules of the game. Organizers sealed off the city center. As President Bush and other leaders arrived, the demonstrators tried to break through. Inside the barricades, Mexico 's foreign minister was now a part of the system he'd once criticized.

JORGE CASTANEDA: They never mention the Americans. They said, "We need leeway to show that we can get results," and that's true.

This is my first big summit as foreign minister, and it's fun. Everybody's here.

INTERVIEWER: If you were 25 today, where would you be?

JORGE CASTANEDA: On the streets. I would think that's certainly a hell of a lot more fun.

NARRATOR: Like Jorge Castaneda, most of the delegates were from developing countries that had embraced globalization. Casteneda wanted more trade. He also hoped to narrow the gap between the rich and the poor of the developing world.

JORGE CASTANEDA: The issue that's been coming up constantly in the speeches is that the small countries, the poorer sectors of each society need a special deal; that they cannot just be left out, because if they are, they'll never be brought in. There is, I would say, a growing consensus on that, but there isn't necessarily a consensus on what to do.

GEORGE W. BUSH: I'm here to learn and to listen from voices, to those inside this hall and to those outside this hall who want to join us in constructive dialogue.

NARRATOR: By now, the street demonstrations had become a routine feature of major international meetings. Protest organizers were increasingly sophisticated, using the Internet and other "tools of globalization" to try to bring the system down.

GRETCHEN KING: So we travel around the country, and we set up these Web streams wherever there's a minor or a major demonstration. Wherever people want this to be set up, we'll help them. If we can provide alternatives, if we can provide criticisms that come from the streets and represent a diversity of people, then I think there's a possibility of success. And that success would be, you know, burning the free-trade agreement of the Americas ; that success would be disbanding the WTO; that success would be removing the power from the top one percent of the world's population.

JORGE CASTANEDA: The protestors, by staking out an extremist position, make a more regulatory position more centrist, and that's fine. Perhaps that's not what they want, but that's too bad. You don't always get what you want, and you don't always know who you're working for. But I do think that the protestors are natural allies of people who believe that there are things that should be done to manage world trade a certain way.

NARRATOR: The lasting impact of the protest movement was subtle, but real. Since Seattle , the terms of the global debate had shifted.

NEMAT SHAFIK: In the early days, when the first protests started, I remember feeling very frustrated, because their rhetoric was so abstract. It was, you know, it was about economic justice; they had no alternative program. And the more I thought about it, the more I realized that if one looks historically, the role of protest movement isn't to provide solutions; it's their job to be critical, and then it's the job of the insiders, the people in the system, in their response to those protests to come up with new solutions. And I think that's where we're at now. And so I do think it's healthy that we have them banging at the gates.

BILL CLINTON: They care about legitimate problems, but they have the wrong diagnosis. Their diagnosis is that the global economy has produced all the misery that they're protesting against. On the other hand, you cannot have a global economy without a global social response, without a global environmental response, without a global security response. It's just... it's unrealistic to think you can. And that's basically the next big challenge, is making this interdependent world of ours, on balance, far more positive than negative. And the extent to which we succeed in doing that will determine whether the 21st century is either marred in its first 50 years by terrorism of all kinds across national borders, and more racial and religious and ethnic strife, and tribal strife in Africa, or whether it becomes the most peaceful and prosperous and interesting time the world's ever known.

Chapter 23: 9/11 [ 4:27 ]

NARRATOR: In the first decade of the 20th century, the global economy was in many ways as integrated as ours today. That era of globalization ended in Sarajevo in 1914, when a bullet fired by a terrorist triggered the first world war. In the aftermath of September 11, it seemed possible that history could repeat itself.

DANIEL YERGIN: Up until September 11, there was a sense that with the crisis and the risks, that nevertheless this movement towards globalization really was irreversible. And since then there's a recognition of that you can't turn back the clock; we're not going to abolish e-mail, or computers aren't going to get slower, but things can go in another direction. Markets do best and work best and deliver what they can do during times of peace. And if you're not in a time of peace, but you're in some other kind of time, then things won't work as well, and priorities will be elsewhere as well.

NARRATOR: The U.S. economy was already in recession. As the war against terrorism progressed, the Bush administration sought to rebuild economic confidence.

GEORGE W. BUSH: Out of the sorrow of September 11, I see opportunity, a chance for nations to strengthen and rethink and reinvigorate their relationships. When nations open their markets to the world, they find in America a trading partner, an investor, and a friend.

NARRATOR: In November 2001, the World Trade Organization gathered as planned in the Middle East . The remote city of Doha had been chosen to keep protestors away, but September 11 had dampened the anti-globalization movement. Delegates reached the compromise that had eluded them in Seattle . A new round of trade negotiations was launched, and the concerns of the developing world will be at the top of the agenda.

ROBERT RUBIN: I think that the new technologies, that the breaking down of trade and capital market barriers, the spread of market-based economics, that all of this has contributed greatly to global economic well-being, and it will contribute enormously for a long, long time to come. I think the potential is tremendous. But the people in those countries who feel that they are left out and the system isn't working for them have merit on their side of the case. And I think it's not only an issue of being helpful to them; I think it's enormously in our interest that they become part of the system.

RICHARD CHENEY: I don't think there is any one overnight solution. I don't know anyone who's smart enough to sit down and write a brand-new set of rules that we should all then adhere to. I think it is a process for negotiation among solvent and independent nations, and that's probably as it should be. And it will evolve over time. And I do think we learn from our mistakes. But I the idea that there's some sort of basic right way to do it out there, and there's one individual or group that have got all the answers, I'd be deeply suspicious of that notion.

NARRATOR: Months later, the American economy seemed on the road to recovery. While threats remained, the system itself seemed more robust than many had feared.

The era of globalization looks set to continue, as does the debate over the new rules of the global game.

DANIEL YERGIN: The belief that trade increases the odds for peace and also leads to higher standards of living is something that has been part of the American political tradition. And looking back on the Depression, looking back on the first or second world war, it became very deep seated, and it's not just a question of specific trade agreements, but it's really a broad consensus about the importance of trade to the American economy, to what it does for economic development around the world, and also as one of the foundations for a more peaceful world.