The year the globalisation dream died

TEN YEARS ago I spent a week in Korea researching a story called "Inside Daewoo". I had virtually free run of the chaebol's financial services unit because it wanted to raise its profile in the West. Each morning at 7.30 I attended the kick-off meeting of the firm's bosses and, since I could not understand a word of what was being said, I would sit in the room, which resembled a barracks, and daydream about The Manchurian Candidate (the classic Fifties thriller in which an American soldier captured during the Korean War is brainwashed into becoming an automoton programmed to assassinate the President).

In the evenings I was shown around Seoul. As I got to know the Daewoo executives better, they dropped increasingly heavy hints about the Korean equivalent of Japan's geisha girls. But I was paranoid. I worried that photographs would be taken. On my last night in Seoul, instead of bonding with Daewoo's bosses in bath house fashion, I attended a dinner for the firm's trainees, many of them Korean-Americans, and was presented with a celadon vase - kicking myself all the while for passing up the geisha experience.

My main impression of Seoul and Daewoo in 1989, however, was this: except for the sums of money involved, there was essentially no difference between Korean securities houses and City or Wall Street securities houses. There was essentially no difference between the men at Daewoo and those at Warburg and Goldman Sachs, except that the bankers at Daewoo were working harder for less money and had more to prove.

My God, I thought. The distinctions between first and third worlds I have lived with all my life are gone, if they were not false to begin with. It is only a matter of time before the world becomes one big commercial stew - 5 billion souls vying with each other on increasingly democratic terms for prestige, power and wealth. It is only a matter of time before we all become Koreans.

Globalisation appeared to prove me wrong. As the Nineties progressed, advancing communications technology, the integration of financial markets, and a surge in international trade appeared parts of a process destined to lift emerging market nations to an industrial world standard of living.

But then, in August, the financial panic triggered by the collapse of Russia laid waste to the globalisation dream. The post-Cold War blueprint of the world that had been drafted in Washington - showing capital flowing from the West to emerging markets where it created increasing demand to fuel Western economic engines - was hastily withdrawn after the real-world edifice built from it was shown to have deep structural flaws.

On 20 February, we shall get a revised globalisation blueprint when Group of Seven finance ministers meet to discuss the report on supervision of financial institutions and hedge funds commissioned at the IMF annual meeting. By then, however, the talk about a "new world architecture" could sound dated and marginal. Indeed, many of us are already reconciled to a world facing deep and frightening economic imbalances.

The past 12 months will almost certainly prove the year the globalisation dream died. The notion that the whole world was rushing pell-mell toward the sunny uplands of American consumerism now look as fantastic as my fears that Daewoo would blackmail me into writing a positive story about them with photographs of me in a sarong in a Seoul bath house.

NEXT YEAR is likely to prove the year we finally begin to shape a sustainable post-Cold War world or let events swamp us. The omens are not encouraging. The attacks on Iraq last week suggest we have sunk into the mud with Saddam. We are not only all Koreans now, we are all Iraqis.

Clinton bears a heavy responsibility for this. He was the first of the Sixties generation to come to power. Participatory democracy was one rallying cry of our generation. Self-gratification was another. Once established in the White House, the first Sixties generation head of state made his preference known.

Blair is Britain's Sixties generation leader. He can be faulted for being Clinton's poodle on Iraq. The Chancellor of the Exchequer, Gordon Brown, can be faulted for being the US Treasury's poodle in pursuing the globalisation dream. But Blair and Brown are still new in office. They are uncompromised personally. Their potential is the key to their continuing popularity. I am reasonably optimistic they will move on to better policies.

These will include taking Britain into European Monetary Union. Brussels is profoundly undemocratic. It poses a real threat to British sovereignty. But the alternative to getting inside the beast and trying to tame it is marginalisation in an economically chaotic world.

I am less sure what Blair and Brown will do about class - or even if they agree on class issues. The infinity of rancorous divisions here - and the perverse inclination to relish their rococo permutations rather than close them - is an economic issue. Among other things, it helps explain Britain's high interest rates. Money costs more here because whenever it is cheap our divided society spends in spite - in defiance - of one another. Unity would bring collective self-restraint. Collective self- restraint would allow for the entrepreneurial society New Labour wants.

The point is that 1998 has ended badly, even frighteningly. But the binary debates about what lies ahead in 1999 are superficial. Stripped of illusions, next year will be what we make of it. If businessmen deal with excess capacity by wisely consolidating through mergers and acquisitions, we need not fear deflation.

If investors rationally adjust to the prospect of lower returns, we can let the air out of asset bubbles without financial meltdown. If leaders replace the dream of globalisation with sound policies, the depression dragging down emerging markets need not spread to the industrial world.

We are all Koreans now, after all. What this means, however, has yet to be revealed. Copyright: IOS & Bloomberg