Robert HormatsVice Chairman, Goldman Sachs, International
Schechter: How would you describe the role you play and the role your firm plays in the global economy? Hormats: Our role in the global economy is to help countries, corporations, and various entities to raise capital for various kinds of investment. We help companies to float stock on international markets. We help companies to merge and acquire one another. Across the board we try to help to strengthen the ability of companies, corporations and various entities to utilize capital, raise capital, develop strategies for international capital markets. Schechter: And you're a big player. Hormats: We are a significant player in global capital markets and we think that in that role we help to facilitate the efficient allocation of capital around the world. We're a major participant in almost all the major global markets. Schechter: How has globalization changed the way the world works? It's a big question, I know, but you know commerce and capital has become a driving force, perhaps more than ever today, even eclipsing the role of governments today. Hormats: In my view, globalization is primarily about opportunity. It's about the opportunity to sell in many markets. It's about the opportunity to raise capital in many markets. It's about the opportunity to acquire knowledge and information, across borders throughout the world. It's about the opportunity for people using the Internet and other telecommunications, instruments to communicate and convey scientific information, cultural information across borders. Schechter: Is anybody in control of all this? Hormats: The great beauty of globalization is that no one is control. The great beauty of globalization is that it is not controlled by any individual, any government, any institution. It provides people with the ability to communicate across borders, trade across borders, and raise capital across borders. It's an enormously expansive kind of evolution, which is, I think, very exciting for people and … is very beneficial for large numbers of people in many parts of the world. Schechter: Is it a car without a driver? Hormats: No, I think globalization is not a car without a driver. I think globalization is an opportunity for more communication, more trade, more finance and, particularly for younger people, an opportunity to enable them to communicate with their colleagues around the world, to do business around the world and to travel more around the world. The opportunity for someone born today to have friends in various parts of the world, to do business in various parts of the world, to sample the cultures in various parts of the world, to learn from various parts of the world, is far greater than it was when I grew up and certainly when my parents grew up. Schechter: What's the downside? Hormats: The downside of globalization is that there are more risks involved. When you were living in a little town in the middle part of the United States at the turn of the last century, life was relatively self-contained. There were relatively few risks and there were relatively few opportunities. Change was very slow. Globalization provides enormous opportunities for international business, for international communication, for international finance but it also means that individuals, corporations [and] countries are subject to greater risk. Global trade can change. Global capital markets can change. New cultures come in and that changes the nature of society at a very rapid pace. So, some people can adjust and do very well and others find it more difficult to adjust to globalization and new technologies. Schechter: Would you say that this is a fair economy? Or is that even a fair way of asking the question? Is there fairness built into the global economy or is it every man, woman for themselves? Hormats: I think the global economy provides great opportunities for large numbers of people but it also entails certain risks because the rate of change is so great. Some people will benefit from that rate of change. Some people will capitalize on it. Some people will adapt very well to it. Others will find that it is very disruptive to their ways of life, to their businesses, to their workplace. I think it's important for governments and communities and non-governmental organizations to work with people who can't adapt as easily to globalization, who find their lives disrupted, help them through training, education-- a greater sense of community --to get their bearings in this fast-changing global environment. Schechter: There are a lot of people who look at all this and say, "Well, it's great for a few, but that there's a tremendous gap of inequality around the world and that the poor are getting poorer and the rich are getting richer, and that the spread is bigger, and that the rights of ordinary people are more at risk today than they were before." Hormats: I think that the argument that globalization is unfair or is harmful to large numbers of people really doesn't stand up to scrutiny. I think that globalization has dramatically increased the opportunities of people around the world. In Asia, people have been raised from poverty to prosperity in a relatively short period of time in part because they can sell the goods in global markets. I think if you look at the prosperity of the American agricultural community it has been enhanced dramatically by globalization. In many parts of the world a lot of people are a lot better [off] because of a global market in which they can sell their goods. And consumers are a lot better off because they have access to goods from all around the world. It is also true of course that whenever there is change some people gain and some people lose in the sense that there is always a redistribution of opportunity, a redistribution of wealth for a period of time because globalization, technological change cause disruptions. I think there are groups of people in society, in all societies, who find themselves worse off, or at least they're not keeping up with those who do especially well. Schechter: How does human rights factor into all this because in a number of countries that have rapid economic growth and are benefiting by globalization. Let's look at China or Vietnam to some degree or Indonesia before the crash. You had economic prosperity, certainly for some, but you also had political repression, human rights abuses and the like. How do you see that equation between, in a sense, democracy and human rights and economic globalization? Hormats: Well I think there has been a lot of improvement in human rights around the world which is not to say there is perfection and it's not to say there are no problems. But I think one of the great benefits that globalization has provided to the world is improvements in human well being. Globalization means more opportunity for people to sell the goods they make in international markets which has raised living standards in many parts of the world, particularly in Asia, and Latin America as well, and in other industrialized countries as well. But the other part of globalization, which I think is helpful to human rights is that there’s a lot more information that goes across borders. And, if you look at one of the big reasons for change in Eastern Europe and Central Europe, [it is that] they had access to international telecommunications, the internet, fax, television, all these things played a role in improving the process of democratization in the region. I think now that the world can look at human rights problems and human rights issues around the world. There's more focus on this. I think it enables people who feel their human rights are not being given proper treatment, to have a global audience. Schechter: I know that you were talking -- when we met in Davos -- with John Sweeney of the AFL-CI, who gave a speech -- really quite critical of the dangers of globalization -- pointing to the lack of free speech and free organizing ability for trade unions. Workers in many countries, he argued, are losing out and that many trade unionists are in prison in places like China or Indonesia. Hormats: I don't think that the problems that trade unionists have in various parts of the world can be attributed to globalization. Globalization is really not the cause of them. In fact, globalization gives people who feel that they have problems in various countries-trade unionists, for instance, a global stage to project their point of view [to] a global audience. So, I think globalization provides through the exchange of information, ideas, communications an opportunity for people to have a global audience to hear their complaints and that can only be a plus. Schechter: Let's take Indonesia, for example, where we've had an economic downturn [or] a crisis or whatever you want to call it, and there's been a lot of activity by the international monetary fund (IMF) trying to rectify the economic situation, encouraging the government there to rectify it. But there hasn't been any pressure really to open up the political process there -- for example, to bring independence to a place like East Timor. In other words, there's a willingness to intervene economically where people's interests are at stake, but not to intervene politically where human rights are at stake. Hormats: Well I think there's been a lot of progress on human rights. We can't remake the world in our image. I mean, different countries have different cultures . . . different societies. I think human rights has been and continues to be an important aspect of American policy, but we're not able to make dramatic changes in the way other countries do business and the way other countries treat their people -- and, I don't think you can use the leverage of a financial crisis to get them to do that. I think they have to do that more on their own. But American diplomacy has been very supportive of improvements in human rights around the world. Schechter: Look, when we talk about the private sector, if you go back a few years to the whole South African situation: economic sanctions -- which included businesses, in some cases, refusing to roll over loans to the South African government -- that helped [to] bring about a change in that country. In other words, there was an active-pro-active leverage. We have a situation elsewhere in Africa -- in Nigeria -- where you have big oil companies, military dictatorship and the oil companies are saying, "Look, we're here to pump out the oil. We can't [intervene]. This is our host government. We can't say anything about the situation. We are unwilling to criticize." So aren't they, in a sense, collaborating with the dictatorship in that instance? Hormats: No, I don't think that. I think that there, companies are supposed to be doing business and they do business in various parts of the world. In some cases -- in parts of the world where they don't approve [of] the policies of the government -- they obviously find the policies of governments unattractive. But I will say I think that over a period of time governments themselves, the United States government and other governments have an interest in utilizing whatever influence they have to encourage better human rights performance. I think it’s a better, clearer answer. I think it's very difficult to ask companies to play the role of the global policeman about human rights or about whether a county has a system of government that is distasteful to them. Corporations around the world play a role that is primarily an economic role. This doesn't mean that you don't have views on political issues or human rights issues. But I think it's very hard to ask them to play the role of policeman for systems of government or human rights or other things in a systematic way. Schechter: Trade and human rights . . . there was a movement to argue for linkage. Governments rejected that -- for example, the MFN debate about China. Where do you come down on that? Don't you think that companies and governments can use the leverage of trade to try to insist on a higher standard of human rights reforms? Hormats: I don't think linking trade and human rights is a very productive process. Clearly American trade interests have to be brought to bear in any trade negotiation. There are human rights interests but they ought to be part of a separate discussion with other governments. Linking the two in my judgment doesn't work. Very few other countries do it. The United States, it seems to me, if it gets locked into this kind of rigid position, we're not going to make much progress on trade or on human rights. They're separate issues. Obviously in the minds of members of Congress and in the minds of Americans, it's important to proceed on both tracks but I don't think linking the tracks together makes much sense. I do think that there are opportunities for dialogue in both areas and for progress in both areas. Schechter: What about codes of conduct for companies? Should companies be held to a certain standard in terms of their labor practices and other practices in most countries? Hormats: I think the example of the Sullivan principles in South Africa was a very constructive effort and obviously had a significant impact on the process there. I think there are clearly times when companies should feel that they have an interest in working together with respect to things like Sullivan principles and if that is the case that can be very useful. But there’re not a lot of opportunities for doing that and there are not a lot of areas where that is likely to work. Schechter: Well, you know the apparel industry, [including] Nike, has been the target of a lot of protest over the practices of young women working in sweat shop conditions for very small wages in various countries. Does this upset you as a businessman? Hormats: Well, I think we in the United States should be a little bit modest about trying to impose working conditions. We in the United States should be a little bit modest in what we attempt to do to influence workplace practices in other countries. I was in Pakistan several years ago and saw an example of very young kids -- I don't know -- 10- or 11-year-old kids who were working, helping their mothers to make rugs during the day. They did this after school. They went to school six hours and they worked for four hours with their mother to help their mothers make rugs, which is their only source of income. Well, to me, that was not abuse of those children. That was the only way their parents were going to get money and they were going to eat was if the kids helped their mothers make rugs. There are a number of societies where the only way people can earn enough money to live is to work at menial jobs, jobs in very large factories. They don't get paid much, that's, that's true. But are we going to go in there and try to legislate what the workplace should be like or what wages should be like in these other countries? It would be nice if their lives could improve, if they could get more money but I don't think that's proper for American legislation or coercive pressures. Schechter: You know the U.N. has a Universal Declaration of Human Rights. It says people in all countries irrespective of their economic conditions are entitled to certain rights and those include social and economic rights. The point is that child labor is a practice that seems to have been abhorred everywhere. I don't know if you're justifying it or how do you feel about it? Hormats: Child labor obviously presents a lot of moral problems. Having little kids do hard work is something that is very troublesome to me. But the question is, in some cases, what is the alternative? If you're in a little village in Northern Pakistan, where I visited a while ago, the only livelihood these people had was making rugs that these kids, [these] young kids helped their mothers make. I don't know whether you could say that's immoral that those kids were doing this. Maybe that's the only way you could get the rugs made and the only way they could eat. So, yes, in principle, child labor is troublesome but different societies have different needs and it seems to me that maybe areas where having younger kids work is the only way they can eat. So are you gonna say, well, the kids can't work? If that's the case and the kids don't work and they don't have enough income, what do they do then? So, we should be a little bit cautious about trying to have one doctrine that fits all, because there are societies with very different requirements than our own. Continue to part 2 of Hormats interview.Go back to the list of interviewees.
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