Beware of global backlash - Editor's Note

Chief Executive, The, March, 2003 by William J. Holstein

For probably 20 years, chief executives have been able to count on a steady pace of globalization. Companies could assume that the barriers against the movement of people, goods, services and money across national borders would keep eroding. That clearly contributed to their bottom lines.

Now we are threatened with a slowing pace of globalization and perhaps even a reversal. This is not some airy-fairy issue for academicians and other assorted thumb-suckers. It affects everybody who runs a company.

It isn't just the protesters in masks at international gatherings who are threatening globalization. The war against terror has led the U.S. government, for example, to make it more difficult for companies to import technical talent.

We also must acknowledge that the wave of corporate scandals here has made it much harder to argue to foreign governments that they somehow ought to embrace a glistening American model of capitalism. We have lost the intellectual high ground, or at least the willingness to take it.

Another obvious source of backlash has been against the International Monetary Fund's ham-fisted conduct in Latin America and our overall inattention to what has been happening there. Several populist governments have taken power. The single event that should send chills down corporate spines was the decision by Venezuelan authorities in January to break into a Coca-Cola plant and seize the company's goods for distribution. Does the word "expropriation" ring any bells?

The biggest and most sustained backlash, however, could be against the Bush Administration's approach to Iraq and North Korea. Let us not debate whether it is a right or a wrong strategy, just acknowledge that it exists. In response, we are seeing that governments Washington could once count on -- such as those in Canada, Germany and South Korea -- are refusing to go along for the ride, or at least not at this writing.

The risk isn't just cranky French farmers trashing a McDonald's. It's much broader than that. Put yourself in the shoes of DuPont Chairman Charles O. Holliday Jr. as he appeared at the Davos world economic lovefest on a panel with Malaysian Prime Minister Mahathir Mohammad. When Mahathir went on a rant about U.S. policy toward Iraq, Holiday pointed out that DuPont has a plant in Malaysia. Implication: Don't bite the hand that's feeding your people.

The question is, what happens when Holiday approaches Malaysian officials asking for more deregulation or for a waiver of import duties? What will run through their minds or the minds of many government officials around the world? "Should we liberalize to allow these American companies to expand and prosper? Or should we stick it to them?"

There are some positive market openings in the world, particularly in China. But if one adds up all the sources of potential difficulty the negative could far outweigh the positive.

Are American CEOs going to be just hapless victims of a train wreck? I'd appreciate hearing your thoughts at bholstein@chiefexecutive.net.