Robert Hormats

Hormats: Financial markets have become, as we've seen, highly volatile. There are large amounts of money in the hands of big institutions. There's a lot of money that's leveraged. Money can go in very large amounts to a country, boosting its stock market, boosting asset values, maybe over-inflating them. The other side of the coin is it can move out very quickly. And that can take a situation, which is bad in a country, and make it a lot worse as the currency collapses. Now I don't know if there are any foolproof ways of avoiding this. I think there are a number of ways of reducing the chances -- improved information flows, clearer guidelines to limit the leverage of borrowers, to limit their short-term borrowing relative to their long-term borrowing …

Hormats: I think global regulation is probably not likely to occur, but I think clearer guidelines on prudent bank exposure by borrowing countries is a good idea. Clearer guidelines on the information should be provided by borrowers in emerging markets, indeed all markets [and] better supervision by local banking authorities so they don't get into these difficult positions and good domestic policies in these countries also would help. I don't think global regulation is likely or is the answer but I do think there are a lot of measures that could be taken to reduce the prospects and chances of this disruptive volatility.

Hormats: I'm a great admirer of George Soros. I think he's a brilliant guy and I think he's really been one of the great people of our time, in terms of, particularly, Eastern Europe and other parts of the world as well. I think there are concerns about volatility in markets. They can be very disruptive. The volatility can take a problem that is bad and make it a lot worse. And I think there are institutions like the International Monetary Fund and others which should be working to try to reduce the volatility by better information flows, better guidelines for risk -- a whole range of things that needs to be done. So I think there is going to be, and should be, a more focused discussion on how to avoid the disruptive volatility we've seen because it can be very destabilizing.

Hormats: Markets can be very volatile and I'm not worried about a global crisis at this point but I do think enough countries have suffered recent volatility that it requires us to think more clearly about how to avoid it. What role global institutions should play, how markets can be made more stable as a result of better information flows, clearer borrowing guidelines -- there are a whole range of things that can be done to reduce this disruptive kind of environment we've seen.

Hormats: I'm not a good one to ask about that. I don't know much about that market.

Hormats: I think globalization has created an environment where it's much harder for any one government to control its fate. There are powerful forces of trade, of finance, of cross-border information flows, of cross-border, cultural information [like] television, movies, films -- all these things that happen -- and give a lot of people a sense that the world they knew has changed, that the world they felt comfortable in has changed, that they don't have as much control over their lives, over their workplaces, over their futures. That is one factor that has been perused by globalization. The other side of that is globalization has also provided enormous opportunities for more trade; for attracting investment from around the world; for finding out what's going on in various parts of the world; for obtaining movies and TV and information from around the world; from chatting with someone in a different part of the world. All these are benefits too.

Hormats: I think clearly financial markets have increased their influence over what happens in various parts of the world. And governments in many senses have to adopt their policies to attract investment capital and to maintain a stable market, so it certainly has caused governments to have to respond to the requirements of financial markets. But I also think that globalization is probably one of the great new technologies of democracy. I think the Internet, international television, international radio [and] international communications, are wonderful things for democracy. They give people access to information around the world. They enable people to have a global stage for conveying their views. And I think anything that gives people more information, more access to information [and] more access to the global environment is a plus for democracy.

Hormats: Clearly the global trading and financial information flow system means that there are forces in the world that transcend national borders and it means that governments have to adapt to that new environment. Governments have to do things that accommodate the needs of financial markets, to obtain capital and to insure that their own currency and their own financial environment is stable. So there are external pressures that governments have to address now that they didn't have to address years ago. The other side of the coin, however, is that information and democracy, in my judgment, are very close handmaidens, that the more informed a society is the better able it, it … Let me start again. There are two issues: One, clearly is that governments today have to respond to the forces of the global economy. They have to maintain markets that are open if they want others to open their markets to them. They have to do things that will help to attract foreign capital. They have to maintain monetary and fiscal policies that the markets find appealing. Otherwise there'll be disruption in their currencies or in their own financial markets. The other side of that, however, is that globalization provides enormous opportunities for individuals to obtain information from around the world and, in my judgment, the availability of information and a thriving democracy really go hand in hand.

Knowledge, information and democracy are very closely interlinked so that the more informed a society is, the more able its people are to get access to information and knowledge [and] the better citizens they are going to be.

Hormats: There is a problem with global information and that is that there is more information about the world but the media in this country and indeed around the world tend to cover the world less. So the average citizen gets less information about the world in national, TV media, or newspapers for that matter, or even if it's available, sometimes can tune out and simply not pay much attention. There's no more cold war. There are very few things that excite the average viewer to pay attention to the global environment. But the other side of that is that there are through the Internet and through various new technologies opportunities to have chat groups of people from around the world, to get information through your computer around the world. I can sit down at my computer and get the Chinese newspaper that was published today. I can get information about what's going on in India. I can get information about what's going on in Europe just by turning my computer on. The problem is that there may be a division in this country between those who want to do that and are interested in doing that , and those who are not. That may mean that we get a lot more people who are not as conversant about what's going on in the world and tend to turn away from it.

Hormats: I think that more and more Americans will be exposed to computer technology and that will enhance the scope of their knowledge about what's going on in this country and around the world. But it's clearly true that the post-cold-war environment has meant that a lot of Americans have turned away from the world. It's also true there are a number of Americans who do not see that they have an interest in globalization or in rapid technological change. And I think one of the great challenges for the American democracy over the next several decades is going to be to help those people who see themselves as disadvantaged by technological change, disadvantaged by globalization, to be able to participate more in the benefits that technology and globalization have to offer. The worst thing for our society to have is a division--a division between those who see themselves as benefiting from the world economy and technology and those who feel themselves disadvantaged because that will mean the alienation of large numbers of people from the world and from technology and growing resistance to globalization and technological change. That's not a good thing and somehow our society has to bridge that gap and enable people who feel disadvantaged to feel more accomodative toward these new changes.

Hormats: I think the debate over fast track was in part a debate over globalization … and a debate over the International Monetary Fund is in part the debate over globalization. It's very important if we want to retain support by the majority of Americans for America's global leadership to demonstrate to Americans the interest they have in American leadership in the global economy and also to reassure them that the government and society are helping those who feel themselves disadvantaged by globalization, disadvantaged by technological change to adjust, to do better, to prosper in this new environment.

Hormats: I think business understands very well the importance of helping social and community programs to prosper. We work very actively with community programs in the New York area, and indeed in other cities where we're located. I know a lot of businesses that are spending a great deal of time on developing community relations, supporting school systems, supporting education and supporting neighborhood programs. I think the, the really constructive response to globalization by those who feel that they benefit from it is to devote more energy to strengthen local communities, cohesion in the local community, prosperity in the local community, education and training in the local community. The roots of American companies in their communities are very important to their ability to prosper at home and their ability to gain public support for more active global business environment as well.

Hormats: I don't know about about that case but I think if you look at business--at least businesses I know -- there has, over the last 20 years, been a much greater commitment by American business to sell environmental principles and practices. I think it has been an extraordinary improvement. Does it have a way to go? In certain areas, probably so. But I would say that that has been a big big change over the last 20 years in environmental commitment. A lot of the companies I know spend a lot of time on this. I know CEO's who say they're the chief environmental officer of their company. It is important to their relations with the community and I think it’s an investment in their own children’s well-being. I think there’s been a lot of progress on this.

Hormats: I say globalization presents enormous opportunities for more trade, for more investment and for increased availability of information. But it also presents new challenges. A global world will have greater risk of massive movements of capital, which can be a positive or a negative depending on how they work out. Greater globalization exposes communities to international forces over which they have much less control than they would like. And it also makes people feel more vulnerable about their jobs and their societies. To make globalization really work, it has to work for a very large number of people -- which means governments and corporations have responsibility for helping people -- particularly at a community level, to get more training, more education and more support so they can adapt to this fast-moving, highly charged, global, technological environment that they face. To the extent we can do that, we can make globalization work for a large number of people and it can be a success, but the challenge is there to make it work. It just won't happen. It needs people to make an effort to support those whose support we need politically to enable these things to continue.

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