The theory that “big emerging markets” (BEMs) m the Third Worid will be the driving force of the world economy, and thus of worid politics, has been at the core of the Clinton administration’s foreign policy. As Undersecretary of Commerce for International Trade during President Clinton’s first term, Jeffrey E. Garten was the principal author of this theory, Garten is now dean of the Yale School of Management; before his government service, he was a managing director of the Blackstone Croup, the Wall Street investment firm that also provided Clinton with his first Treasury Secretary, Roger Altman. The Blackstone Croup specializes in transnational acquisitions and is partially owned by Nikko Securities of Japan.

Garten’s “big ten” are Argentina, Brazil, China, India, Indonesia, Mexico, Poland, South Africa, South Korea, and Turkey. Geography and demographics indicate that this is also a list of potential regional powers, and Garten does warn that “it would be dangerous to assume that just because the BEMs are currently preoccupied with economic development . . . they have permanently forgone the militarism that has characterized political entities—cities, city-states, empires, and nations—throughout history.” Yet his choice in calling them “markets,” not “powers,” reveals his expectations. He adheres to the standard liberal view that economic progress and democracy go hand in hand, stating without bcneht of historical evidence that “strong democracies will be much less likely to precipitate war.”

The shallow nature of Garten’s approach can be demonstrated by imagining how much of the 20th century would have been missed by an analyst who thought of the then-emerging states of Germany, Japan, Italy, and the United States primarily as “markets” a century ago. Of course there were such people, operating from the same basis of classical liberalism as Garten: Norman Angell, for instance, who argued in his 1910 bestseller. The Great Illusion, that global economic interdependence had already made war unthinkable and geopolitics irrelevant. A century before Angell, French economist Jean-Baptiste Say recommended that ambassadors be eliminated and replaced by consuls whose only mission would be to promote trade.

But Garten’s optimism for the long term cannot hide the grim picture he paints of the near one. He calls the 1.5 billion Third World workers expected to enter the global labor market in the next decade “a freight train.” These laborers will work at one-tenth the cost of American workers yet be only slightly less productive, owing to the technology, capital, and management skills that the transnational corporations will provide. Garten foresees “a long period of downward pressure on American wages” and a continuing “trend for more American firms to be forced to move some of their manufacturing plants abroad in search of lower costs.” The term “forced” in this case is hardly applicable since the Fortune 100 are driving the process, exploiting the “open” worid system that officials like Garten have designed to business specifications.

Garten thinks the main challenge will be to get through this period without the emergence of “a charismatic populist leader who fires up disaffected workers and the Congress, leading to a swing toward protectionism. . . . Any protectionism in the West would be a hammer blow to the big emerging markets because of their heavy dependency on exports.” As Garten notes, “America will be the prime destination [for BEM exports], for ours is by far the most open economy.” Suddenly, the BEMs appear not as customers for American-produced goods but as pools of cheap labor from which to staff the “global factory” in competition with American-based industry. Garten admits that “over the next decade the greatest source of competition for the United States would come from China, South Korea, India, Brazil, and Mexico.”

The case for the BEM strategy rests on a highly pessimistic view of the American situation. According to the annual report of the U.S. Trade Representative, “as a mature economy with few domestic opportunities for growth, we must reach the 96 percent of our customers who live outside the United States.” Garten himself stated in a Foreign Affairs essay published concurrently with his book that, “The country can no longer generate enough growth, jobs, profits, and savings from domestic sources”—following the official line that the United States will become dependent on the BEMs for its future prosperity. In his book, Garten denigrates “an outmoded concept that others need us more than we need them.” This is part of his general argument for an appeasement policy toward the BEMs on issues across the board, political and moral as well as economic. The balance of power has already shifted from Washington to Beijing, Jakarta, and Brasilia.

There are a number of flaws in this argument, starting with the simplistic equation of wealth with straight demographies. Americans may only be four percent of the world’s population, but they account for a quarter of the world’s economy. Contrary to left-wing critics, Americans did not become rich by exploiting everyone else; indeed, the country’s growth rates and relative position internationally were stronger when trade played less of a role in its economy than it does now. The very slowdown in economic growth of which Garten complains is related to the “free trade” policies and the corporate strategy Garten champions.

The American economy is not inherently weak. It continues to be a large and growing market, importing $795.8 billion worth of manufactured goods in 1996—a 48.3 percent increase over the value imported in 1992. The trade deficit, however, has increased every year under Clinton despite (or because of) his administration’s commitment to BEM theory. Americans now import half the manufactured goods they use. The American market is serving more as the engine for the accelerated growth of other countries than it is for the growth of the United States.

The United States is deindustrializing on the supply, not on the demand, side. Rising imports are substituting for the expansion of domestic capacity, closing off job opportunities during the cyclical upturn and short-circuiting the longterm growth process. Two dire results follow: slower growth, which does not spread its benefits as widely through society; and a shift in industrial capabilities, which will alter the world balance of power.

Neither of these effects is the concern of the transnational corporations driving economic policy. Their agenda is advanced by the view that, as a nation, the United States is finished, leaving the corporations alone with the capacity to act—which they can do only in a “world without borders.” The sole valid function of Washington, in this view, is to convince other governments to follow its lead and abandon any national economic or foreign policy that could hinder elite private interests.

Governments may not, however, shed their responsibility to maximize the prosperity and security of their national territories and citizens; they can only succeed or fail in doing so. The Garten approach is a recipe for failure: there is no necessity to surrender the home market in the pursuit of foreign customers. Garten constantly bemoans leverage by BEMs, and by European and Asian rivals who possess far less power than does the United States. These foreign states do not practice “free trade,” yet they have increased their market shares and generated high growth rates. They require companies to locate factories in their territories and to transfer technology to native firms. They run trade surpluses and amass international monetary reserves.

This is how business contributes to national advancement, as the United States itself proved in an earlier era. What those in government need to rediscover is both their own sovereign strength and the underlying strength of the American people. But this will happen only when government is staffed by those whose primary attachment is to the country, not to Wall Street.


[The Big Ten: The Big Emerging Markets and How They Will Change Our Lives, by Jeffrey E. Garten (New York: Basic Books) 2S6 pp., $24.00]