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CASWANAME 3,811,800
World economy might not revolve USA TODAY
Americas 1,035,900 Globalization long has been regarded as a made-in-America phenomenon, driven
Asia and
by Silicon Valley's technology, Hollywood's movies and Wall Street's cash. But
Pacific 875,100 suddenly, countries formerly on the periphery of world events seem poised to
Note: CASWANAME comprises Central Asia,
Southwest Asia, North Africa and the Middle East challenge American dominance of this age of global integration.
Source: UNHCR By David Stuckey and Marcy E. Mullins, USA TODAY
© Copyright 2007 USA TODAY, a division of Gannett Co., Inc. All rights reser ved.
AS SEEN IN USA TODAY’S MONEY SECTION, FEBRUARY 8, 2007
It's not only that developing countries are proving to be Consequences in the USA
white-hot investment opportunities, though they are: the
Morgan Stanley Emerging Markets index gained 242% the past For more than half a century, Americans could take for
four years. It's also that emerging markets, once known granted that the world economy would orbit around them. No
dismissively as the Third World, are now central to Americans' longer. The USA today produces about 30% of world output at
lives. market prices. That figure already is down significantly from
about 46% in the aftermath of World War II, when European
Not long ago, these countries were of interest only to the and Japanese factories lay in ruins. And it is headed lower still
Peace Corps. Now, everything from the financial lifeline that as China and India continue their ascent.
makes possible the modern American lifestyle to the identity
of your next boss, customer, competitor or cultural trendsetter Over the next generation, fast-growing developing nations are
likely can be found in the developing world. expected to see a significant uptick in their share of world
output from 23% today to about 33% in 2030, according to a
"We're in the middle of the biggest shift in 200 years — since recent World Bank study.
the Industrial Revolution. It's really that big," said Antoine van
Agtmael, the investment manager credited with coining the That shift has enormous consequences for Corporate
term "emerging markets" in 1981. America. "The change is from globalization going one way to
globalization going every way. It's as much about what
The new prominence of emerging markets represents a sharp developing countries are doing as developed countries," said
departure from the flurry of financial crises that tore through Mark Foster, a London-based Accenture consultant.
Mexico, Asia and Russia in the 1990s. Since then, scores of
developing countries have cleaned up their balance sheets, Assuming continued economic growth in the developing
slashed inflation rates and accumulated enormous stockpiles of world, the ranks of the global middle class are expected to
hard-currency reserves. China alone sits atop a $1 trillion triple by 2030 to 1.2 billion, according to the World Bank. Today,
mountain of cash. Russia, Mexico, India and South Korea also a bit more than half of that free-spending group resides in
are swiftly building their cash hoards, according to Treasury developing countries. By 2030, almost all of it, 92%, will call the
Department data. developing world home.
Developing nations have gone from beggar to banker. The U.S. For multinational corporations, that means paying ever more
must borrow enormous sums each day to finance the gap attention to what's happening outside the United States and
between its anemic national savings rate and its consumption. especially in Asia, Latin America, parts of the Middle East and
Increasingly, those funds — largely raised by selling Treasury Africa. Procter & Gamble CEO A.G. Lafley said in a Jan. 30
securities — come from poorer nations. conference call that in the past several years, the company has
"added about 1 billion consumers" to the ranks of those who
Through November, the most recent data available, more have ever used or purchased its products. "We think we can
than 29% of the $806 billion in net securities purchases came add another 1 billion consumers over the next three to five
from developing countries compared with just 5% in 1998, years, and most of them are going to come from developing
according to Bank of America. The river of capital flowing into markets," Lafley added.
the U.S. economy enables Americans to continue consuming
beyond their means. But some analysts find it worrisome that In the most recent quarter, P&G's developing-country sales
the world's wealthiest nation now depends on loans from outpaced its overall 8% sales growth. Examples: Sales of Crest
some of the globe's poorest countries. toothpaste rose more than 10% in Russia, while Duracell
batteries posted a 20% gain in Latin America.
"The average American doesn't realize where this liquidity
comes from. Capital is supposed to flow from rich to the poor," Likewise, at PepsiCo, two-thirds of revenue growth is coming
says Joseph Quinlan, chief market strategist for Bank of from the company's international operations and 60% of that
America. from emerging markets, says Michael White, chief executive of
PepsiCo International. "We've seen a real, material change in
For the USA, the danger is that an unexpected development the performance of our emerging markets, and I expect it to
could cause emerging nations to retrench on purchases of continue," White told a recent panel at the World Economic
dollar-denominated assets. What could trigger such a pullback? Forum in Davos, Switzerland.
A sustained oil price decline that pinches Middle Eastern oil
producers, a global economic slump or an outbreak of Those aren't isolated examples. FedEx, Manpower and
protectionism in the USA, says Quinlan. Caterpillar all report impressive growth in their developing-
world business. By 2010, GE wants emerging markets to
account for 30% of its sales, twice the current level. "America is Banorte snapped up INB Financial of McAllen, Texas. Russia's
realizing for the first time that globalization is a two-way Evraz coal and steel producer in January completed its
traffic," says Azim Premji, the billionaire chairman of Indian takeover of Oregon Steel Mills of Portland, Ore. And in June,
software firm Wipro. Brazil's Gerdau Group acquired Sheffield Steel of Sand Springs,
Okla. European companies, too, are in the cross hairs: India's
Trends from China? Tata Steel earlier this month purchased London-based Corus.
As the developing world's purchasing power grows, it is likely The dealmaking is among the first visible signs of the growing
to exercise greater influence over global tastes. To date, U.S. clout of emerging-market multinationals. In his new book, The
brands such as McDonald's, Nike or Apple mesmerize overseas Emerging Markets Century, van Agtmael profiles 25 companies
consumers. By 2030, when the World Bank estimates that the — such as Mexican cement maker Cemex, whose U.S.
number of middle-class consumers in China will exceed the operations produce more cement in the USA than any other
entire U.S. population, Americans might be on the receiving company, and Indian generic-drug maker Ranbaxy — that
end of as many trends as they start. Zhang Yimou, not Clint qualify as genuine global powers.
Eastwood, might direct the world's most-popular movies. Fast-
food dumplings might rival burgers and fries. "New fashions, To many Americans, the notion of innovative, market-leading
new trends … are just as likely, indeed more likely, to start in companies based in areas where widespread poverty and
China and India or Brazil as they are today (to start) in Europe disease still hold sway might seem extraordinary. But van
or the United States," says Uri Dadush, director of the World Agtmael notes that, in fact, it was the Western world's 20th-
Bank's international trade department. century economic dominance that was unusual.
That's in the future. But already, Americans are being affected For centuries, trade and commerce were rooted, not in the
by the rise of multinational corporations based in the USA or Europe, but in more distant parts of the globe. In 1820,
developing world. Once regarded as second-tier manufacturers for example, today's "developing" countries were the
of shoddy goods, companies in the most mature developing acknowledged economic powers, accounting for 68% of the
countries are making their presence felt by acquiring world economy, according to economic historian Angus
companies in the developed world. From computer research Maddison. As late as 1870, the Chinese economy was almost
centers in North Carolina to steel mills in Oklahoma, American twice as large as that of the United States.
workers are finding their new boss often hails from far, far away.
Viewed from this vantage point, the contemporar y
Among the best-known acquisitions: Chinese computer emergence of countries such as China or Brazil represents less a
maker Lenovo's 2005 purchase of IBM's personal computer new phenomenon than a reversion to history's norm.
business. But there have been plenty of other deals.
"We still hold onto notions that are dear to us but wrong,"
Last month, Mexican bank Banorte bought UniTeller, a U.S.- says van Agtmael. "We will not always be the center of the
based remittances company. That deal came two months after world."
that Bolton intervenes on issues, such as the Human Rights so has helped to shape the international community's
Council, after difficult compromises have been made and response."
countries are reluctant to make further changes. Bolton has
shown "bursts of energy but not the consistent effort" needed The United States has long tried to get the United Nations to
to persuade other countries to support U.S. views, Feinstein be more efficient and to trim its bureaucracy. Those efforts took
said. on new energy after the worst financial scandal in U.N. history.
A $64billion program under which Saddam Hussein's Iraq was
The previous U.N. Human Rights Commission had been allowed to sell oil to pay for humanitarian supplies led to nearly
criticized by the United States and other countries because its $2 billion in kickbacks from foreign companies to Iraqi officials.
membership included nations with dismal human rights U.N. Secretary-General Kofi Annan's son got a contract under
records, such as Zimbabwe and North Korea. The new council the program.
excludes some of the worst offenders, but it still includes China,
Cuba, Russia and Saudi Arabia. In response to the scandal, Annan submitted to an
independent investigation led by former Federal Reserve
Peru's ambassador, Oswaldo de Rivero, told Bloomberg News chairman Paul Volcker. Annan also created an ethics office and
that Bolton was "isolated. He lives in another world, with this is requiring U.N. employees to submit financial disclosure
belief that he is morally superior." forms. But he has failed so far to eliminate old programs. Time is
running out: Annan's second five-year term expires in
Rivero said Bolton tried to get his way by "flagellating" other December.
U.N. members.
By then, Bolton may also be gone. The White House has to
Interests, not personalities resubmit his nomination to the Senate before January, when his
term expires. Bolton is serving under a temporary appointment
Bolton declined requests for an interview. Speaking to Bush made during a congressional recess because there wasn't
reporters outside the Security Council last month, he denied enough support in the Senate to bring the nomination to a vote.
that his brusque manner had set back U.S. goals. At the United
Nations, "countries vote their interests, not their personalities," The administration has not said whether it will resubmit his
he said. name for nomination.
Frederick Jones, a White House spokesman, said Bush Sen. George Voinovich, R-Ohio, who last year called Bolton
believes Bolton is doing a "great job." "the poster child of what someone in the diplomatic corps
should not be," said last month that he had not yet decided
Bolton "has made significant progress in furthering our whether he would support Bolton if the nomination was
agenda for U.N. reform," Jones said. "He is also carrying out the resubmitted. "He's a smart guy. He's got a personality that
president's agenda in the U.N. Security Council at a time when sometimes rubs people the wrong way."
many critical matters are before it, such as Iran and Sudan, and
2. Free trade has long been thought to be the answer to reducing poverty in developing nations. This case study discuss-
es possible drawbacks to free trade and advantages for the use of tariffs. On a sheet of paper, make two columns and
list the pros and cons of free trade. Choose a side to debate and do a 2-minute quick-write describing your stand on
the free trade issue. Find a peer with an opposing view and share your writings with each other.
3. Why have Asia’s poorest countries been left behind in the world economy? In small groups, list the factors cited in the
case study and then share your findings with the class as a whole. As an extension, use a current issue of USA TODAY
to report on the status of one the countries mentioned in the case study.
4. Summarize the findings of the World Health Report concerning maternal and child health. Use a current issue of USA
TODAY to learn the current status of child and maternal mortality rates. Are improvements being made? What conclu-
sions can you draw? Write a brief two-page essay describing the current status of this issue.
5. Business leaders, celebrities, politicians and other individuals seem to be getting more involved in many of the issues
addressed by the Millennium Development Goals. For example, the Bill and Melinda Gates Foundation, Bono’s Product
Red, UN Goodwill Ambassador Angelina Jolie, Oprah Winfrey’s Leadership Academy have all been featured promi-
nently in the news. Using current issues of USA TODAY, track the progress of the work of a known leader in this area
and compare the work of individuals vs. the work of government organizations and the impact of each. Create a 2-3
minute oral presentation to share with your class.
2. Research the coverage of the global AIDS issue in current issues of USA TODAY. What is the current status in regards to
eradicating AIDS around the world? What is your opinion of the coverage? Write a brief 2-page report describing the
status of this particular Millennium Development Goal and how is it portrayed in the media.
3. Choose a developing country mentioned in this case study and report on its progress towards meeting one or more of
the Millennium Development Goals. Using current issues USA TODAY, create a presentation for your class.
4. In groups of 3-4, brainstorm ideas for solutions to global health-related issues. Choose an issue and come up with a
creative solution to share with the class. Include a description of the issue, your solution, and how you would imple-
ment it. Elect a panel in the class to serve as judges to choose the best presentation/solution.
5. How best can individual citizens get involved to help with the achievement of the Millennium Development Goals?
Choose one of the MDGs that interest you most and explore resources and opportunities for how you can get involved
in helping with that goal. Summarize your findings in a brief 2-3 page report and share with the class.
Additional Resources
v United Nations Millennium Development Goals v The World Health Organization’s Site for MDGs
www.un.org/millenniumgoals www.who.int/mdg/en