Episode One | Episode Two | Episode Three

Episode Three: The New Rules of the Game

Chapters
1. Chapter 1: Prologue [6:14]
2. Chapter 2: The Global Idea [3:52]
3. Chapter 3: NAFTA: The First Test [5:28]
4. Chapter 4: Crossing Borders [3:30]
5. Chapter 5: The Global Market [3:48]
6. Chapter 6: Emerging Market Hunters [5:01]
7. Chapter 7: Averting a Meltdown: 1994 [4:56]
8. Chapter 8: The Global Village [6:47]
9. Chapter 9: China and the Tigers [5:35]
10. Chapter 10: The Japanese Paradox [3:01]
11. Chapter 11: Global Contagion Begins [7:55]
12. Chapter 12: Contagion Engulfs Asia [7:13]
13. Chapter 13: Russia Defaults [2:31]
14. Chapter 14: The Crisis Reaches America [7:07]
15. Chapter 15: The Global Debate [2:49]
16. Chapter 16: The Battle Joined [5:08]
17. Chapter 17: Failure at the Summit [4:58]
18. Chapter 18: The Global Divide [2:33]
19. Chapter 19: Capitalism Redefined [7:00]
20. Chapter 20: The Bottom End of Globalism [4:46]
21. Chapter 21: Changing of the Guard [3:04]
22. Chapter 22: The Battle Resumed [6:38]
23. Chapter 23: 9/11 [4:27]

Chapter 1: Prologue [6:14]

NARRATOR: The attack on America raised so many

questions, among them, questions about the dangers of
the new world economy. Is terrorism the dark side of
globalization?

DANIEL YERGIN, Author, Commanding Heights: Up until

September 11, there was a sense that this movement
toward globalization really was irreversible. And since
then there's been this recognition that things can go in
another direction.

NARRATOR: Can our deeply interconnected world deliver

prosperity to everyone?

BILL CLINTON, U.S. President, 1993-2001: And that's

basically the next big challenge, is making this
interdependent world of ours, on balance, far more
positive than negative. And the extent to which we do
that will depend on whether the 21st century is marred
by terrorism of all kinds or whether it becomes the most
peaceful and prosperous time the world has ever
known.

NARRATOR: This is the story of how the new global

economy was born, the story of a century-long battle of
ideas to determine who would control the "commanding
heights" of the economy -- central governments or free
markets.

In the 1990s, a worldwide capitalist revolution fueled

the new era of globalization, the greatest expansion of
world trade in history.

RICHARD CHENEY, U.S. Vice President: Millions of

people a day are better off than they would have been
without globalization, and very few people have been
harmed by it.
 NARRATOR: But with the promise came a debate about
the impact of globalization.

GRETCHEN KING, Media Activist, Independent Media

Center: And should the world's wealthiest people really
dictate how the world's economy is going to run?

NARRATOR: Tonight, the battle over who should write

the new rules of the game for the global economy.

GEORGE W. BUSH, U.S. President: Out of the sorrow of

September 11, I see opportunity, a chance for nations
to strengthen and rethink and reinvigorate their
relationships. When nations open their markets to the
world, they find in America trading partners, an investor,
and a friend.

NARRATOR: We are living through a revolution. The

1990s saw the creation of a new kind of global
economy, a single market in which everyone has a
stake, but no one has control.

Globalization has brought unprecedented prosperity, but

it has also brought crises and risks we are only
beginning to understand. It has unleashed a worldwide
debate about wealth and poverty, about the "rules of
the game" for this new era of globalization.

DANIEL YERGIN: Historians may well say that a new era

began at the beginning of the 1990s with the end of the
Cold War and the Gulf crises. It was this new era of
globalization, of a world being tied together by flows of
investment, of trade, of ideas, of culture, of people
travelling all the time. And it happened very fast. And as
so often happens, the change came more quickly than
the ability of thinking to catch up and understand the
change. But to understand where we are today and
where we're going, we have to understand this recent
past.

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Chapter 2: The Global Idea [3:52]

NARRATOR: No economic idea has shaped the era of

globalization more profoundly than a belief in free, open
markets. Free trade has been a fundamental tenet of
capitalism for over 200 years. But in the 1990s, the
global market created a new reality that no government,
no politician could afford to ignore.

Our story begins in 1992. The global economy was

changing rapidly, but America seemed adrift. A
recession had left 10 million workers unemployed.
Industries struggled against intense foreign competition.
Europe had formed a single trading bloc. Japan looked
invincible. Japanese companies were buying up
American icons, like Rockefeller Center and Universal
Studios.

In the 1992 presidential campaign, Arkansas governor

Bill Clinton claimed he could get America back on track.
He drew crucial support from America's labor unions and
seemed to promise workers' protection against global
competition.

BILL CLINTON: Look at what our competitors do. Look

at what Japan does. Look at what Germany does. We
have to keep investment at home so jobs don't go
offshore.

WORKER: You'll stand up against the good old boys to

do that?
 BILL CLINTON: Absolutely. What's the good of having a
country if you're going to let it go down the drain?

WORKER: I don't know. Why have we been doing that?

NARRATOR: But at a meeting with Wall Street

financiers, Clinton had discussed a different agenda, an
agenda some of his core supporters adamantly opposed.
Financial markets wanted to rein in government
spending, cut the deficit, and embrace free trade.
Without these policies, they thought America's economy
wouldn't recover. Over dinner in an exclusive restaurant,
Clinton tried to persuade some of Wall Street's most
seasoned executives that he saw the world as they did.

ROBERT RUBIN, Co-chairman, Goldman Sachs, 1990-

1992; U.S. Secretary of the Treasury, 1995-1999: My
view was that the threshold economic issue for our
country was to restore fiscal discipline after a long, long
time during which fiscal discipline had eroded.

Onscreen caption: The U.S. government was $4

trillion in debt.

BILL CLINTON: I could see that Rubin and the others

that were there in this rather dark place where we had
dinner at night were kind of looking and saying, "Well,
you know, can this guy from Arkansas be president?
Could he possibly know enough about the economy to
do it?"

ROBERT RUBIN: After that meeting I thought to myself

that this was a man who cared about what I at least
thought we needed to care a great deal about. Now, on
the issue of trade, he clearly believed in trade
liberalization, and that clearly has been a dividing line in
the Democratic Party. It was then, and it is now.

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Chapter 3: NAFTA: The First Test [5:28]

NARRATOR: Trade became an issue in the 1992

presidential campaign. Republican president George
Bush had negotiated a treaty that would allow
unrestricted flows of trade and investment between the
U.S., Canada, and Mexico.

Onscreen title: NAFTA: North American Free Trade

Agreement

For its supporters, trade embodies an idea: that open

markets create wealth, bind nations together, and help
construct a more prosperous -- and a more secure --
world. NAFTA put that idea to a political test. In
America, it was the first great debate of the
globalization era.

Onscreen title: 1992 presidential debate

ROSS PEROT, Reform Party Presidential Candidate,

1992: You have to admit that NAFTA, the Mexican trade
agreement, where they pay people a dollar an hour,
have no health care, no retirement, no pollution
controls, etc., etc., etc., you're going to hear a giant
sucking sound of jobs being pulled out of this country.

GEORGE BUSH, U.S. President, 1989-1993: Ross says

with great conviction that he opposes the North
American Free Trade Agreement. I am for the North
American Free Trade Agreement. My problem with
Governor Clinton is that one day he says he's for it, the
other he wants to make some changes. When you're
president of the United States, you cannot have this
pattern of saying "I'm for it, but I'm on the other side."

BILL CLINTON: I am the one who's on the middle on

this. Mr. Perot says it's a bad deal; Mr. Bush says it's a
hunky-dory deal. I say it does more good than harm if
we can get the Mexicans to live up to their own labor
standards, their own environmental standards, and if we
have genuine protection for workers displaced in
America.

NARRATOR: Once in office, Bill Clinton's economic policy

was aimed squarely at restoring the confidence of
financial markets. His first term was dominated by the
battle to reduce the deficit.

On trade, the president changed his position, and

announced he would wholeheartedly support NAFTA as
it stood.

ROBERT RUBIN: President Clinton gave a speech in the

East Room at the White House that set out how he
wanted to discuss NAFTA with the American people. It
was really quite a remarkable speech. He talked about
NAFTA in a much broader context. He talked about
NAFTA in the context of the rapid changes taking place
in the global economy, not only from trade, but from
technological development, spread of market-based
economics.

BILL CLINTON: This debate about NAFTA is a debate

about whether we will embrace these changes and
create the jobs of tomorrow, or try to resist these
changes hoping we can preserve the economic
structures of yesterday. Nothing we do in this great
Capitol can change the fact that people can move
money around in the blink of an eye. I tell you, my
fellow Americans, that if we learned anything from the
collapse of the Berlin Wall and the fall of the
governments of Eastern Europe, even a totally
controlled society cannot resist the winds of change that
economics and technology and information flow have
imposed in this world of ours.

NARRATOR: To some of his supporters, the president's

change of heart on NAFTA was nothing less than a
sellout.

THEA LEE, Assistant Director for International

Economics, AFL-CIO: The AFL-CIO, the labor movement
in the United States, opposed NAFTA as it stood because
we saw that as a corporate-dominated trade and
investment agreement, one that served the interests of
multinational corporations, that improved their
flexibility, their mobility, their clout. And at the same
time NAFTA did nothing to protect the rights of workers
to form unions, to bargain collectively, and to really
raise their voices in the political system so that workers
could be formidable countervailing power to
multinational corporations. I think Clinton did sell out
his traditional blue-collar supporters on the NAFTA
issue, and a lot of people haven't forgiven him for that.

BILL CLINTON: Our adversaries tried to make it look like

the whole American establishment's on one side and the
little guys are on the other. And they could, you know,
stir that fear factor, and it was a tough sell. It was a
tough sell.

NEWT GINGRICH, Speaker, U.S. House of

Representatives, 1995-1999: I thought it was the most
 of courageous act of his presidency, and we worked with
him very hard. The Republicans in the House provided a
much bigger percentage of the votes than the
Democrats did.

NARRATOR: Sixty percent of congressional Democrats

voted against NAFTA. It passed only with Republican
support.

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Chapter 4: Crossing Borders [3:30]

Onscreen caption: Tijuana, Mexico

After NAFTA became law, thousands of foreign

companies built factories in Northern Mexico, exporting
goods to the American market just a few miles away.
Eighty percent of all televisions sold in the U.S. are now
made here. Nearly a million workers found new jobs
along the border in Northern Mexico.

MARIA ISABEL, Factory Worker, Tijuana, Mexico: I have

two children. In the South I didn't have a job and
couldn't give my children what they need. I left them
behind with relatives and came here to find work. I
found a job in a television factory. I earn enough to
send some money home to my children. I couldn't do
that before.

JORGE CASTANEDA, Foreign Minister of Mexico: This is a

country of about over 100 million people. There is no
question that those 10 to 12 million people who live in
the North and the border area are not doing badly by
Mexican standards. And it has become more
industrialized, with more jobs, higher wages, better
social indicators, etc. The North has benefited
undoubtedly. The people in the South are doing very
badly by Mexican, or by anybody's, standards.

NARRATOR: Forty percent of Mexico's population lives in

poverty. Mexico's embrace of NAFTA and free trade was
part of a broader change in thinking within developing
countries. Their governments increasingly saw open
markets as the key to economic growth.

VICENTE FOX, President of Mexico: I worked 15 years

for Coca-Cola. I started as a route salesman. I started
right from the bottom. And I learned that discipline, that
hard work, that talent is the way to succeed. I have
always seen globalization as an opportunity. Just the
trade agreement with the United States has moved our
total trading, which was six years ago US$40 billion,
today is US$280 billion in just six years. Nobody loses.
Everybody can win.

THEA LEE: Obviously trade has increased; investment

has increased. And if the only metric you use to
measure whether NAFTA has been a success or not is
the volume of trade, then NAFTA is tremendously
successful. And yet most normal working people, most
normal citizens don't watch the volume of trade.
Companies have been more aggressive and threatening
to move production to Mexico. They've succeeded in
bargaining down wages and opposing unions. And so in
a lot of different fronts we think that NAFTA has shifted
the balance of bargaining power in the continent of
North America towards multinational corporations.

NARRATOR: Since NAFTA came into effect, about

400,000 American jobs have been "adversely affected"
by trade with Canada and Mexico, according to the U.S.
 government. Exports to these countries have created
more than a million new jobs, and over the '90s, global
trade nearly doubled.

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Chapter 5: The Global Market [3:48]

NARRATOR: We tend to think of trade as products and

goods moving across borders. In fact, the biggest trade
of all can't be seen. It is money, the continuous, 24-
hour worldwide flows of stocks, bonds, and currencies.
In the 1990s, practically anyone with savings in a
pension or mutual fund became an investor in the global
market.

Onscreen caption: Trade in goods and services: $8

trillion
Trade in currencies: $288 trillion

DANIEL YERGIN: I was at a dinner, a so-called thinkers'

dinner at the White House before one of the State of the
Union addresses, and there's this great discussion
among all the people around the table about markets,
about "them out there," that it's somebody different.
Finally I raised my hand and said: "With all due respect,
the market isn't just them; it's us. It's our aggregated
retirement savings; it's our pension plans. That's what
the markets are."

Onscreen caption: Sacramento, California

NARRATOR: The state of California runs one of

America's largest pension funds. The fund, known as
CalPERS, manages the retirement savings of over a
million state employees.

Onscreen caption: CalPERS

California Public Employees' Retirement System
Assets: $150 billion

For decades, CalPERS invested only in America. But in

the era of globalization, that changed. A quarter of its
money was invested overseas. At one point, CalPERS
controlled 5 percent of France's entire stock market.

French television sent a crew to investigate.

MARY COTTRILL, Principal Investment Officer, CalPERS:

They were filming in my office, and I had a salad on my
desk because it'd been just a very hectic day. We were
talking about some figures on my computer, but they
kept filming this salad, and I got the feeling that, you
know, the story was going to be, "The Americans are
coming, and they're going to ruin the French way of life.
We're all going to be eating salads at our desk and
working 12 or 14 hours," which, of course, is not true at
all. But I think it was just a fear, I think, that we've see
in the news that globalization means Americanization.

NARRATOR: Pension funds became the powerhouses of

the global economy because they had the money.

BILL CRIST, President, CalPERS: Because the world is

getting smaller and smaller, as we say, and the growth
of the global economy, as we say, this is... The real
source of change in today's world, whether anybody
likes it or not, increasingly are large pension funds.
 Onscreen caption: Americans have $11.5 trillion
invested in pension funds.

INVESTOR: I have some of my own mutual funds

overseas, and they seem to be doing pretty well right
now.

INVESTOR: I think with respect to CalPERS, they have a

fiduciary responsibility to seek those markets out and
get the best return for their shareholders.

INVESTOR: We can't keep everything in the United

States. You keep things in the United States, it's still not
in the United States, because so many companies are
global. Everything is global; everything is
interconnected.

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Chapter 6: Emerging Market Hunters [5:01]

NARRATOR: With the end of the Cold War, many nations

opened their markets to foreign investment for the first
time. Funds like CalPERS saw new opportunities and
hired money managers to scour the Third World, now
renamed "emerging markets."

Onscreen caption: Mark Mobius

Templeton Emerging Markets Fund
Travels to 15 countries per month
Manages $6 billion

MARK MOBIUS, Manager, Templeton Emerging Markets

Fund: The whole rationale is that these emerging
countries grow faster, so what we're trying to do is
capture that growth, and of course make money for
investors. But of course the risks are very great,
because there's no free lunch. If you want to capture
that growth you've got to take many more risks. So
there's a balance, and of course it's our job to try and
minimize the risks and maximize the returns. It doesn't
always work out that way, but that's the objective.

NARRATOR: As investment flowed around the world, the

Clinton administration expanded the trade agenda it
adopted with NAFTA. The U.S. encouraged developing
countries to continue opening their economies to the
global market.

BILL CLINTON: I favored a very aggressive policy. I

thought the emerging countries -- both emerging
economically and those that were new democracies --
had a better chance to do well economically and
politically if the wealthier countries opened our borders
and made trade agreements with them, and if in turn
they opened their borders not only to trade, but to
investment. I thought that economic policy and
traditional foreign policy would tend to merge.

LAURA TYSON, Chair of the U.S. National Economic

Council, 1993-1995: This is how it worked. If you go
back to the first term, a lot of the international approach
of the administration on economic issues was to break
down barriers to U.S. firms. We are going to engage our
trading partners and encourage, cajole, or convince
them to bring down their barriers.

NARRATOR: Many developing countries had been

colonies of the West. Although they now wanted long-
term foreign investment, some saw fast-moving flows of
money as a new threat to their independence.
 MAHATHIR BIN MOHAMAD, Prime Minister of Malaysia:
Once communism was defeated, then capitalism could
expand and show its true self. It's no longer constrained
by the need to be nice, so that people will choose their
so-called free-market system as opposed to the
centrally planned system. So because of that, nowadays
there is nothing to restrain capital, and capital is
demanding that it should be able to go anywhere and do
whatever it likes.

NARRATOR: Some called it "the triumph of capitalism."

During the 1990s, more countries than ever adopted
market economics.

As an economics professor, Bill Crist had taught a course

comparing Marxist and capitalist theory. As president of
CalPERS, the California state pension fund, Crist came
to believe that only open markets could ensure global
stability.

BILL CRIST: If we don't reach out to these emerging

markets, if we don't be evangelists, if you will, and try
to encourage them to reform and invest some of our
capital funds into these markets, taking advantage of
those opportunities, if we don't do that, I'm afraid that
some of the predictions that were made a long time ago
by Karl Marx and Mr. Engels and others [will come true,
and] that there will indeed be a confrontation between
the haves and the have-nots that can bring the entire
system down.

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Chapter 7: Averting a Meltdown: 1994 [4:56]

Onscreen caption: Mexico, January 1994

NARRATOR: The very day NAFTA came into effect,

Zapatista rebels launched an uprising in Southern
Mexico. Shortly afterward, the leading presidential
candidate was assassinated.

Worried about stability, foreign investment began to

flee. The global economy was about to face a new kind
of crisis.

Onscreen caption: Washington, December 1994

ROBERT RUBIN: Christmas vacation, I was fishing down

in the British Virgin Islands, and Larry Summers [U.S.
Secretary of the Treasury, 1999-2001] called me, and
he said, "There's some problems in Mexico I'd like you
to know about." And I thought to myself that it was nice
of Larry to call on the one hand; on the other hand I'm
on vacation, and, you know, Mexico today, it'll be some
other country tomorrow, and I don't know why this can't
wait till I get back. Well, it turned out that this was not
just another country. It was a very, very serious matter.

NEWT GINGRICH: I was at a restaurant, and they came

and said, "The secretary of the Treasury is on the line,"
and I got on the line, and he said: "Greenspan and I
have a problem. (laughs) And we believe if we don't
move very decisively that the Mexican peso will
implode. If it implodes, the Mexican government will
become very unstable, and we believe you could have a
wave of five to nine million people walking north to find
jobs."

ROBERT RUBIN: He understood it very quickly, and I

remember his saying, "This is the first financial crisis of
 the 21st century."

NEWT GINGRICH: I said to him, "This is the first real-

time, worldwide financial crisis of a kind that will
become very normal." And so I said, instinctively, "I'll
back you."

Onscreen caption: Robert Rubin called an urgent

meeting at the Treasury.
Mexico was about to default on its foreign debt.

ROBERT RUBIN: It was fascinating, because we had

Mexico, which we really did think was facing default,
and we had enormous political problems accomplishing
what we felt we needed to accomplish to support
Mexico, to try to prevent this from happening, and we
all knew that while we believed the program we were
recommending was right, there was some risk it
wouldn't work.

LAURA TYSON: You go in and say to the president:

"Here is a big crisis that could happen. We can tell you
something to do about it. We can't tell you it's going to
work. It's very risky, and we know it's extremely
unpopular, but we think you should do it anyway."

Onscreen caption: The president's advisors

recommended a loan package to Mexico: $50
billion.

BILL CLINTON: Somewhere between five and 10

minutes I listened to all of this. I say: "Well, this is a no-
brainer. We've got to do this. If we don't do this, Mexico
will certainly fail. Then the borders will be flooded with
illegal immigrants who are starving and need food and a
job. We'll have an enemy on our Southern border,
people that will remember when they were down and
they were in need [and that] we were not a good
neighbor, and we will pay hugely for that. All over the
developing world, people who look at us and think that
we are smug and rich and unresponsive and don't care
about anybody else will have all that confirmed. If we
help, at least people will know we tried in a good cause,
and it will resonate throughout the developing world."

NARRATOR: The bailout worked. Mexico paid back the

loan -- early.

For some, the intervention set a dangerous precedent:

protecting big investors from risks they had willingly
taken.

LARRY LINDSEY, Assistant to the U.S. President for

Economic Policy: Remember, the people that got bailed
out were foreign holders of Mexican obligations, so in a
sense we were trying to bail out our own citizens. But it
signaled to banks and other rich investors that the U.S.
Treasury at that time was going to adopt a bailout
policy. People who take risks should bear those risks.
They got the reward for them; they should take the
downside.

NARRATOR: As the Mexican crisis made clear,

technology had transformed financial markets: Money
could literally be moved across borders in seconds.

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Chapter 8: The Global Village [6:47]

NARRATOR: During the 1990s, technology, too, leapt
over national borders, spreading commerce and ideas.

DANIEL YERGIN: It's hard to believe that at the

beginning of the 1990s, e-mail was virtually unknown;
most people didn't have it. And a decade later it was
everywhere, and it would just become part of people's
lives. And so this communications network is so
powerful. The price of telephone calls plummeted. The
number of telephone calls around the world
skyrocketed. And people are in contact and connected in
a way that had never happened before.

NARRATOR: In two decades, the number of international

phone calls from the U.S. increased from 200 million to
5.2 billion.

This AT&T control center handles 300 million calls each

day.

Americans were often connected to the developing world

without even knowing it. Consumers checking their
credit-card balance could be routed seamlessly to call
centers like this one in India, where operators identify
themselves with made-up American names.

OPERATOR, Call Center, India: Good evening. My name

is Tracy. How can I help you?

NARRATOR: In a remote Indian village, farmers took

their crop to market as they had for generations, But an
Internet connection ensured they were now paid the
world price for their crop, a price set at the Chicago
Mercantile Exchange 8,000 miles away.

This borderless world created a new kind of

businessperson. Entrepreneurs could now think like
multinationals, and see the entire world as a single
market. Narayana Murthy understood this revolution
earlier than most.

NARAYANA MURTHY, Founder and CEO of Infosys

Technology: We were all children of a different
generation. We were all mesmerized by the charisma of
Nehru. Nehru believed in central planning; Nehru
believed in socialism. But then I realized that if you
want to eradicate poverty, you don't do it by
redistribution of existing wealth; you have to create
more wealth. And that's when I got somewhat
disillusioned by the socialism as is practiced in India.

NARRATOR: With only $250, Murthy helped found a

computer software company. His headquarters in
Bangalore became the world's second largest software
campus. Only Microsoft's was bigger.

Thirty percent of the world's software engineers are

from India.

NARAYANA MURTHY: You know, I define globalization as

producing where it is most cost-effective, selling where
it is most profitable, sourcing capital from where it is
without worrying about national boundaries.

Onscreen caption: Silicon Valley, California

NARRATOR: People as well were becoming increasingly

mobile. America relaxed its immigration laws, attracting
a huge influx of high-tech workers from across the
developing world.

PROGRAMMER, Silicon Valley: This is the land of

opportunity. This is the place; this is the happening
place, so many people come here.
 PROGRAMMER, Silicon Valley: This is a place of
opportunity. We get a chance to prove ourselves. We get
a chance to prove ourselves, to show our skills.

Onscreen caption: Two hundred thousand Indians

found jobs in Silicon Valley.

NARRATOR: In many ways, Silicon Valley was the

spiritual center of the new global village -- the source
not only of its technology, but of its entrepreneurial
ethos.

The Draper family had invested in entrepreneurs since

the 1950s, when they brought venture capital to Silicon
Valley. In the early '90s, Bill Draper's son Tim funded
Hotmail. Its instant global success convinced him that
the world was fundamentally changing.

TIM DRAPER, Venture Capitalist: We knew the Internet

was going to change the whole way the world worked.
You could do commerce; you could do communication;
you could do all these things over the Web. India and
Africa, Pakistan, China had all been trapped, and they
were not really participating in the world economy. They
could now. They could because now they could
communicate with the rest of the world through this
Internet. It was a big opportunity, and we saw it; we
jumped on it.

I think entrepreneurship can happen anywhere. All it

takes is someone with a vision and an idea for how to
do something better.

NARRATOR: One of the Drapers' best investments was

in David Lee, the first foreign-born American to take a
high-tech company public.

DAVID LEE, Entrepreneur: When we came over we had

nothing -- $600, 20 kilos of clothes. And this society
provided, gave us opportunity and everything.

CECILIA LEE, Wife of David Lee: Being an entrepreneur

sounds very good, but being a spouse is very difficult,
because most of the time he's traveling or he's not
home. I raised my three children by myself. And
sometimes he doesn't remember how old they are.

NARRATOR: David Lee manufactures high-end

telephones. He embodies the new breed of global
entrepreneur.

CECILIA LEE: Don't eat too much.

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Chapter 9: China and the Tigers [5:35]

NARRATOR: In the early '90s, David Lee returned to his

homeland for the first time in over four decades.

Onscreen caption: Shanghai, China

DAVID LEE: I was always afraid to go back to a

communist country. I was born in Beijing, actually right
in Tiananmen Square. And we left there after the
revolution in 1949. We were very lucky we were able to
leave the country. We were like the boat people on top
of a cargo ship. We left everything. The only thing [we
had] is whatever we could carry.
This is a free-trade zone. Anything you do in here you
don't have to pay tariff, or you can build the thing and
then ship it out for export purposes.

NARRATOR: David Lee set up a joint venture in a free-

trade zone near Shanghai. Lee saw firsthand a China in
the midst of epic economic transformation.

China's Communist leadership had embraced markets

and welcomed hundreds of billions of dollars of foreign
investment. Almost one-quarter of the world's
population was entering the global market for the first
time.

Onscreen caption: Economic reforms lifted 300

million Chinese out of poverty.

In villages across China and throughout the developing

world, people left their rural homes. They traveled to
industrial towns, seeking work in new factories built to
serve the global market.

The era of globalization saw the largest wave of human

migration in history. Eighty percent of the world's future
economic growth is expected to occur in cities rather
than the countryside.

LIN SHENGXIN, Factory Worker, China: I was a

schoolteacher in the countryside. At that time I only
earned 100 a month. My parents are both farmers, so
we lived a very poor life. But now I'm earning 3,000 a
month. My life is totally different. My child is going to
school here, near the factory. So we are living a much,
much better life now.

Onscreen caption: Singapore

NARRATOR: China's leaders hoped to emulate the "tiger

economies" of Southeast Asia, where trade and
investment had transformed once-impoverished nations.

LEE KUAN YEW, Senior Minister of Singapore: When the

British came here in 1819, they found a fishing village
of about 120 people. When the empire broke up,
everybody wanted to do their own trading, and we could
easily have withered on the vine. So we just had to
make ourselves relevant to the world. And the countries
that make themselves relevant become better off; their
people become better off. Those who opt out, they
suffer.

NARRATOR: Since the 1970s, the countries of Southeast

Asia had become became world-class exporters,
shipping everything from cars to computers across the
globe.

DANIEL YERGIN: They called it the Asian economic

miracle because the world had not really seen that kind
of economic growth, that many people brought out of
poverty, that rapid a creation of a middle class so
quickly anywhere in the history of the world.

NARRATOR: By the mid-90s, many Asian economies

were growing at the astonishing rate of 10 percent or
more each year.

LEE HSIEN LOONG, Deputy Prime Minister of Singapore:

There was a tremendous confidence and hope that this
was the Asian century, and the place was being
transformed, and you just had to put money there and
it would grow on trees.

DANIEL YERGIN: I remember the CEO of one major

 company in about 1995 or so saying, "If we're not
investing in Asia tomorrow, we're too late."

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Chapter 10: The Japanese Paradox [3:01]

Onscreen caption: Tokyo, Japan

NARRATOR: Yet there was one big exception. Japan, the

world's second largest economy, had fallen into a deep,
unexpected slump that shook the confidence of its
people.

KAORI MARUYA, Parliamentary Secretary for Foreign

Affairs, Japan: Japan was in the so-called bubble
economy, and at that time the Japanese people were
not very careful about debt. After the collapse of the
bubble economy, people came back to reality and came
down from their dreams.

Onscreen caption: Japanese banks hold $1 trillion

in bad debts.

NARRATOR: Japan's economy once looked unstoppable,

but it was slow to adapt to the rapid changes of a fast-
moving, interconnected world.

EISUKE SAKAKIBARA, Vice Minister of Finance, Japan,

1997-1999: Japan is a very sort of parochial and very
closed economy; there's no question about it. Walk
around the Japanese cities, you don't see many
foreigners.

NARRATOR: Japan, the great exporter, protected its

domestic industries. At the heart of the country's
economic problems lay a contradiction.

EISUKE SAKAKIBARA: One sector of the Japanese

economy is an export-oriented sector which is highly
competitive, consisting of Toyotas and Sonys. And the
other is domestic manufacturing sector which is
extremely uncompetitive. We have a market-oriented
capitalistic system on the one hand; we have a very
socialistic, egalitarian sector on the other.

NARRATOR: In Japan, government bureaucrats

managed a highly regulated economy. As Masahisa
Naitoh was to learn, ideas about change met with
profound skepticism.

MASAHISA NAITOH, Ministry of Trade and Industry,

Japan, 1961-1993: I wanted to deregulate our financial
system. The new global markets of the 1990s created a
new reality. I said we had to change for Japan to thrive
in the new world economy. My colleagues in the
government criticized me. They said that it was in the
best interest of Japan that my ideas be destroyed.

NARRATOR: Naitoh was fired without warning. Japan

stuck to its old ways, and the nation's economic slump
continued. For the first time, an Asian "economic
miracle" was in trouble.

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Chapter 11: Global Contagion Begins [7:55]

Onscreen caption: Bangkok, Thailand

By early 1997, Southeast Asia's rapid economic boom
was overheating. Sirivat Voravetvuthikun was one of
many who thought the good times would never end.

SIRIVAT VORAVETVUTHIKUN, Former Real Estate

Developer, Thailand: Ever since I was a child, I have
been wanting to be a multimillionaire. I wanted to be
rich. I wanted to do something that no one has done --
build a luxurious condominium. I knew a lot of rich
people and multimillionaires would like to take time off
to play golf, to enjoy the fresh air in the mountains,
which you cannot find in Bangkok.

I looked at the golf course. It's designed by Jack

Nicklaus. I put my effort into making it one of the most
beautiful condominiums in Thailand. Still today, with the
mountains in the background, with a fairway and a lake
in front of the condominium, it's really beautiful.

ANAND PANYARACHUN, Prime Minister of Thailand,

1991-1993: People were just buying apartments and
condominiums like they were gambling. And they were
tempted by this easy money, tempted by this easy
profit.

NARRATOR: During the '90s, Thailand had opened up its

capital markets. For the first time, local businesses
could borrow money from foreign banks which offered
lower interest rates.

ANAND PANYARACHUN: People would come and knock

on your door and plead with you to borrow, be they
European or Japanese banks. The Western financial
world, the banks or the financial companies, they came
and begged us to borrow from them.

NARRATOR: In just four years, loans to Thai businesses

had tripled to over $200 billion. American and European
governments encouraged the inflow of money.

ROBERT RUBIN: Oh, yeah. We were very strong

advocates of opening up capital markets and the
benefits that could flow there from, but we were also
strong advocates at the same time, because we
recognized the tie of developing the banking systems,
the capital markets, and developing regulatory systems,
none of which is easy.

DANIEL YERGIN: And there was an underlying flaw in

the system that people really didn't focus very much on,
which was the institutional weakness. What that meant
is the banking systems were not well developed;
securities laws were not well developed. They had not
kept up with the development of these economies and
their integration into the world economy.

NARRATOR: Thailand's Central Bank had kept its

currency artificially high, fueling the speculative bubble.

The International Monetary Fund, which acts as a bank

of last resort to countries in financial trouble, began to
worry that Thailand was heading for a fall.

STANLEY FISCHER, First Deputy Managing Director,

International Monetary Fund, 1994-2001: I went to
Bangkok in May 1997. It was full of cranes everywhere,
and it looked like the boom would never end. But they
were very weak banks who were lending against
buildings which were never going to be filled.

NARRATOR: Muang Thong Thani was a sign of the times

-- a "new city" built from scratch for 700,000 people. It
was meant to be bigger than Boston. But almost no one
was moving in.
 MARK MOBIUS: The vision was great. The vision was to
take this huge tract of land and build a city, basically.
between the downtown congested Bangkok and the
airport. So the concept was excellent. The problem was
it was financed by U.S. dollars.

NARRATOR: Thailand's currency, known as the baht,

was pegged to the dollar. As the Thai economy
weakened, financial markets sensed this policy couldn't
last.

STANLEY FISCHER: Thailand had fixed the value of its

currency in terms of dollars. It had a fixed exchange
rate. And as people began to wonder, "Well, do they
actually have enough dollars to always be able to give
me dollars in exchange for the baht, the Thai currency I
have?," and when they begin to wonder about that, they
start asking for the dollars, and then they attack the
currency.

MARK MOBIUS: The Central Bank kept saying no, no,

no. And they were shelling out the U.S. dollars to
protect the currency. So their foreign reserves were
dwindling, and of course any hedge fund manager
looking at that would say, "Hey, these guys are going to
be in trouble, and I'm going to short the Thai baht."

NARRATOR: The baht came under relentless market

pressure. In July 1997, the Thai government was forced
to devalue.

The bubble had burst. The Asian financial crisis was

about to begin.

SIRVAT VORAVETVUTHIKUN: When the crisis hit, I

realized my fate. I could not sell a single unit when the
crisis hit.

My condominium is called the American dream home,

dream condominium. But we are broke. Even my clients
who were multibillionaires are broke also.

NARRATOR: The economic shock reverberated

throughout all levels of Thai society.

PANJIT NIYOMDET, Factory Worker, Bangkok. Thailand:

When the economy went bad, my husband's salary was
cut 30 percent. I was lucky; I kept my job, but I didn't
get a raise. To support our family, my husband had to
find other work.

NARRATOR: The cost of living was rising. Everything

was going up -- water, electricity, even soap. But the
salaries were staying the same, or going down.

With its economy in a virtual free fall, Thailand received

an emergency rescue loan from the International
Monetary Fund. When that didn't work, the Thai
government asked Washington for even more help.

No one imagined that an economy as small as

Thailand's could spark a global crisis.

back to top

Chapter 12: Contagion Engulfs Asia [7:13]

LAURA TYSON: Thailand is a very small economy. It

didn't have a lot of links, and it's not exactly in your
backyard. So in any event, the U.S. chose not to
intervene in Thailand, thinking it was not going to spill
over. Why would it? The contagion effects were not
apparent to anybody, not just the administration.

LEE HSIEN LOONG: I think they misjudged the

situation. They misjudged the situation, probably
because it was seen too much as a financial issue rather
than an overall strategic issue.

NARRATOR: Global markets worried that other Asian

countries might have similar hidden flaws. Like a classic
run on the bank, money began to pull out of the entire
region. They called it contagion.

Onscreen caption: $116 billion flowed out of

Southeast Asian markets.

DANIEL YERGIN: And at each stage, the crisis turned

out to have a virulence that became known as
contagion, much greater than anticipated. And what
that really reflected was indeed globalization, was the
way these economies had become locked together and
investors looked at emerging markets. They said there
was a problem in Thailand; well, then there's a problem
in these other countries. And so each step of the crisis
created these shock waves that carried on into the next.

Onscreen caption: Kuala Lumpur, Malaysia, July

1997

NARRATOR: Contagion spread to Thailand's neighbors.

Malaysia's economy had seemed stable. Suddenly, it,
too, was facing relentless pressure from global markets.

MAHATHIR BIN MOHAMAD: We have the currency going

down and down and down, and we have the stock
market doing the same. The index kept on going down,
no matter what we do. And we felt totally helpless. We
felt that there was no way we could recover. So, I mean,
the feeling was very bad, very frightening.

Onscreen caption: Jakarta, Indonesia

NARRATOR: Contagion next hit Indonesia, the most

populous country in the region. Its government
collapsed; its cities descended into chaos.

LEE KUAN YEW: The fund managers didn't know the

difference between Indonesia and Malaysia, Thailand,
Singapore. They just said, "I want out." Property prices
collapsed; companies collapsed. And in the case of
Indonesia, the social fabric collapsed. Churches have
been burnt; mosques have been attacked; they have
killed each other. This will take years to heal. And it's all
the fallout of an economic collapse.

NARRATOR: This was a new kind of financial crisis,

unlike anything the International Monetary Fund had
ever encountered. The IMF organized huge loans for
Indonesia and other Asian nations, on the condition they
cut government spending, raise interest rates, and
eliminate corruption.

STANLEY FISCHER: You're the doctor going in to deal

with a very sick patient. The public blames the doctor
for the fact that the patient is sick, but the patient was
sick to begin with. But these things are societally
wrenching, and there are huge vested interests, and
you wouldn't get into these crises if the vested interests
weren't that important. That I think is why it takes
political change to deal with a crisis as big as this.

NARRATOR: To some of the region's entrenched leaders,

the IMF's conditions smacked of a new kind of
 colonialism.

MAHATHIR BIN MOHAMAD: Presently we see a well-

planned effort to undermine the economies of all the
Asian countries by destabilizing their currencies.

In the old days you needed to conquer a country with

military force, and then you could control that country.
Today it is not necessary at all. You can destabilize a
country, make it poor, and then make a request for help,
and for the help that is given, you gain control over the
policies of the country, and when you gain control over
the policies of a country, effectively you have colonized
that country.

NARRATOR: The market forces were simply too powerful

for the IMF, or any government, to contain. In late
1997, contagion reached Korea, one of the most
successful economies in the world.

EISUKE SAKAKIBARA: It was unbelievable that the crisis

had spread as quickly as to Indonesia and Korea, and
within a matter of six months or seven months. But the
world was much globalized that we thought it was at
that time.

Onscreen caption: Seoul, Korea, December 1997

ROBERT RUBIN: In the last week of December of 1997,

the 11th largest country -- economy, rather -- in the
world, which was Korea, had roughly speaking $4 billion
of reserves left and was using reserves at the rate of $1
billion a day. Well, it didn't take a great deal of
quantitative insight to see that that was not a long-term
viable situation.

NARRATOR: Korea had been misleading the world,

claiming it had enough money to withstand the crisis.
The IMF's Stanley Fischer arrived in Seoul to inspect the
Central Bank's accounts.

STANLEY FISCHER: I visited Korea a couple of days

before they turned to the IMF for help, and it was a
circus atmosphere. It was a state of panic, and it was at
that point that I went to the Central Bank and was
shown how much money was left in the Korean Central
bank. It was essentially all gone.

NARRATOR: Korea was about to default on its loans

from Japanese and Western banks. Pressured by their
governments, the banks agreed to share some of the
pain: They rolled over their loans. Korea was then given
the largest bailout in history.

Onscreen caption: Korea received $55 billion in

new loans and credits.

LEE HSIEN LOONG: If they had done that in Thailand, I

think that they would have not only avoided some
economic problems, but I think that a sense in
Southeast Asia that the Americans were really on the
side of putting things right would have been stronger.

back to top

Chapter 13: Russia Defaults [2:31]

WILLIAM McDONOUGH, President, Federal Reserve Bank

of New York: Then a very, very strange thing happened.
From about the first of February until the beginning of
August, there was a period in which financial markets
 essentially decided that risk didn't exist anywhere.

Onscreen caption: Moscow, August 1998

NARRATOR: Markets thought contagion had been

contained in Asia. Investment flowed elsewhere. Some
came to Russia, where the Moscow stock market was
the best performing in the world. But economic reforms
had stalled, and Russia was heavily in debt. Even so,
investors were convinced they'd found an emerging
market that couldn't fail.

WILLIAM McDONOUGH: Investors had decided Russia is

an ex-superpower; it has lots of missiles and lots of
atomic warheads -- certainly you could not have a
financial accident in Russia, because the rest of the
world, the rich countries, would bail Russia out. Well, it
turned out that that was wrong.

NARRATOR: Russia defaulted on its debt. Its currency

plummeted. Global investors were stunned.

WILLIAM McDONOUGH: All these people who in the

previous seven months had decided there was no risk
anywhere literally panicked and decided there's got to
be massive risk everywhere. Behind each fence and
barnyard wall there must be a risk that we hadn't
though of, you know, like the redcoats retreating from
Lexington.

NARRATOR: Everywhere, markets were freezing up. The

economic crisis seemed to have taken on a life of its
own.

ROBERT RUBIN: I thought at the time that I had a

pretty good sense of what was going on. But what I
didn't know, and nobody could possibly have known,
was not what was going on at the moment that you
were looking at, but what was going to happen at the
next moment.

RICHARD GEPHARDT, Democratic Leader, U.S. House of

Representatives: When you get in a room with both Alan
Greenspan and Robert Rubin and they say they're
scared to death, and they've never seen anything like
this, and they're worried about whether they can get
through it, I get worried, because they know a heck of a
lot more about it than I do. You had the contagion
sweeping across the developing countries. As Rubin
said, we'd never seen that before. I mean, maybe in the
Depression they saw that over a period of time, but
nothing happened that quickly.

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Chapter 14: The Crisis Reaches America [7:07]

NARRATOR: Now the crisis had reached America. A

little-known but powerful private investment fund was
on the brink of bankruptcy.

Long Term Capital Management, or LTCM, directly

controlled $100 billion of global assets and, indirectly,
more than a trillion dollars.

JON CORZINE, Co-chairman, Goldman Sachs, 1994-

1999: The '90s saw a huge buildup in concentrations
that we had never seen on a global scale. Maybe we had
way back in history. Maybe the Romans had financial
institutions that were disproportionately large to the
overall activity of the world that they operated in, but
LTCM was a specific type of hedge fund. They were
involved whether it was the Singapore exchange, the
Tokyo stock exchange, the London stock exchange, the
New York. There was no market that they weren't
[involved in] -- maybe the largest player, or close to the
largest player.

NARRATOR: By September 1998, LTCM's losses were

spiraling out of control. Contagion had arrived on Wall
Street. Incredibly, the failure of this single investment
fund threatened the entire global economy.

DANIEL YERGIN: If LTCM went down, it would be just

the gears, the machine just stopping, the economy not
working. And of course it's not just what's on the
balance sheet of banks and so forth, but that would
translate into people not working, businesses not
operating, small businesses not being able to get their
capital they need. And this in a global economy. It was
almost inconceivable to see what the picture was, but it
was sort of just not working, and people just not
working.

NARRATOR: The New York Federal Reserve summoned

representatives of major U.S. and European banks to an
urgent meeting. Jon Corzine, then at Goldman Sachs,
was among them.

JON CORZINE: The real problem of Long Term Capital

was nobody really understood all the downsides. All one
knew was it was going to be extraordinarily dangerous
to enter into that. And everybody, I think, understood
the Fed's concern that that had real implications to the
real economy.

NARRATOR: Since LTCM was a private fund, the

government could not impose a solution. The fate of the
global economy was in the hands of these bankers.

WILLIAM McDONOUGH: The head of a securities firm or

a bank is not paid to be a patriot. He or she is paid to
serve the best interests of the shareholders, so the
most that one could do in a position like mine is to say
the public interest may well be served by Long Term
Capital Management not failing, but there is no public-
sector money to solve the problem. The taxpayer is not
going to do this. You folks have to decide whether it's in
your interest to do it.

NARRATOR: The banks agreed to put up their own

money to rescue LTCM. Wall Street had averted disaster,
but the global crisis had one final chapter to go.

Onscreen caption: Rio de Janeiro, Brazil,

December 1998

What had started in Asia now reached Brazil, the eighth

largest economy in the world. But this time, a loan
package was put in place early. Brazil's government cut
spending and enacted reforms.

It worked. Brazil's problems were contained. Global

financial markets gradually returned to normal.

ROBERT RUBIN: Well, and it's not clear when you would
say it ended, but what happened was that the countries
that actually took ownership of reform -- Korea,
Thailand, the Philippines, Brazil -- began to reestablish
stability in their financial markets, and their economies
started to recover. And after a while there came a point
we began to feel, "Well, maybe we're past the crisis."
Then a little bit past that we said, "You know, it does
look like we are past the crisis." And finally we got to
the point where we said, "Well, we think this is over."
 NARRATOR: The world economy had survived the first
crisis of the globalization era, but millions of ordinary
people had paid the price.

ANAND PANYARACHUN: And that's the unfortunate part

of so-called globalization, because such negative effects
can be totally responsible, can come very fast. It takes
decades for a country to grow up to a certain level, and
all of a sudden it disappears.

SIRIVAT VORAVETVUTHIKUN: We've been a poor

country, so we never tasted richness. When we tasted
the richness, we wanted more, being greedy. I blame
myself also; I never had enough.

Yeah, it's quite a view, and I really feel bad because no

one can enjoy it now. It's all left to the bank. Nice
fairway and nice lake. It's so sad.

I had a big dream and couldn't achieve it. That's why I

am today standing selling things for two hours. But after
four years of struggling, at least I know I have a
chance. Today my big dream is to be McDonald's of
Thailand, because selling sandwiches on the streets,
now I've developed a new Japanese sushi. I use Thai
brown rice. I am the first in Thailand. So hopefully in
the near future I will raise my funds in the local stock
market so in the future I will be McDonald's of Thailand.

back to top

Chapter 15: The Global Debate [2:49]

NARRATOR: The global economy rested on institutions

that dated back to the end of the second world war. The
contagion crisis proved that the new era of globalization
needed new rules.

WILLIAM McDONOUGH: We have to improve the rules of

the game. You want the financial system essentially to
be like the shock absorber in a car. When you hit a
pothole the car still bounces, but have you ever been in
one that didn't have a shock absorber? If you have a
good, strong shock absorber, at least you get through
the pothole and you're still driving in the same direction
that you thought you were when you hit it.

LEE HSIEN LOONG: I think the morale is that there are

risks to globalization. But in the end there is no
alternative to globalization. So don't let your banks go
lend recklessly; don't allow bubbles to get out of hand.
Keep prudent measures, sound economic policies which
will inspire confidence and maintain confidence so in a
crisis people will know that you will stay the course and
won't panic and be up and off. It's easier said than
done, but these are the principles you have to follow.

LAWRENCE SUMMERS, U.S. Secretary of the Treasury,

1999-2001: We had a close call. And without an activist
international policy, you could have seen perhaps a
serious and economic downturn as we'd seen any time
since the Great Depression. And that's why we need to
continue to understand the dynamics of financial crisis
better. And that's why especially the United States
needs to be prepared to take a lead in working to
contain financial crises.

NARRATOR: For many Americans, the world financial

crisis created new unease about the risks of the global
economy.

LORI WALLACH, Global Trade Watch: People sense the

instability of it. They get indicators of it, but they sense
 it. They get indicators like big meltdowns, like the
financial crises in Asia. But they also get indicators of
things like, you know, the local bank which just keeps
getting merged and renamed. And like your card does
work, and it doesn't work, and the name keeps
changing every three weeks. And you combine that with
the real financial cataclysms like the Asian meltdown,
and a lot of people in their everyday life are seeing this
sort of out-of-control scenario very personally. You
know, it's out of their personal control.

NARRATOR: For critics like Lori Wallach, this was an

opportunity. Together with allies in labor unions, they
began to channel public anxiety into what came to be
known as the anti-globalization movement.

back to top

Chapter 16: The Battle Joined [5:08]

Onscreen caption: Seattle, December 1999

The World Trade Organization, known as the WTO,

manages the rules that govern global trade. In late
1999, delegates from 135 nations gathered in Seattle.
They planned to launch a new round of negotiations that
would expand trade even further. Instead, Seattle was a
watershed.

DANIEL YERGIN: As one could see from the way Seattle

exploded, it really caught the people of the World Trade
Organization meeting there quite by surprise. The World
Trade Organization meeting became a lightning rod for
all of those people across this very broad spectrum who
are concerned by some aspect of globalization or what
they perceive as globalization or by the causes that
animate and move them.

LESBIAN AVENGERS: The WTO, which is led by CEOs of

the company that make bovine growth hormone, get to
make rules saying that these countries can't ban an
unsafe product.

NARRATOR: While the protestors represented an array

of interest groups, the majority were from American
labor unions, which had bussed in thousands of their
members.

THEA LEE: People came together from all over the world
in Seattle to say that the rules of the current global
economy as embodied in the World Trade Organization
are unfair. They're bad for developing countries, they're
bad for workers, and they're bad for the environment.

NARRATOR: In the 1990s, the expanding U.S. economy

created 17 million new jobs, but unions' share of the
workforce had fallen dramatically. The AFL-CIO blamed
cheap labor overseas. As an example, they pointed to
this factory in China, where workers are paid five dollars
a day to make bicycles once built in America.

THEA LEE: Our workers are in direct competition to

workers overseas. We can't control whether every single
job stays in the United States or not, but it's another
thing to lose jobs to workers who are not represented
by independent trade unions. And so that changes the
nature of competition that American workers face.

NARRATOR: Countries that opened their markets saw

their overall wealth and living standards increase, yet
the politics of trade were less straightforward than the
economics.
 LAWRENCE SUMMERS: It's always difficult to sell open
markets. There's a basic cost of open markets. Whether
it's somebody losing a job particularly or very obvious,
the benefits are much less clear. Who said on Christmas
day, "Gosh, thanks -- without open markets I would
have been only able to buy half as many toys for my
kid"? Or whoever says, "You know, I'm not that great a
worker, but they really had no choice to promote me
given the surge and export demand"? On the other
hand, every job loss that can be remotely connected to
international trade, people do. So this problem of
invisible beneficiaries and visible losers is one that
bedevils the political economy of trade.

THEA LEE: The truth is that the business community has

very good access to the international institution and to
their own governments. And we hit the streets because
we feel that we have a hard time getting our
government to listen, or that our governments are
unresponsive to the concerns that we've raised. And we
think we can do better. We think we could write a set of
rules for the global economy that would ensure that
corporations had to live up to a minimum standard.

NARRATOR: But inside the Seattle meeting, the unions'

demands met stiff resistance from the developing world.
They wanted more trade, not less. Poorer countries
charged that America and Europe unfairly protect
industries with powerful union and business support.

JAIRAM RAMESH, Senior Economic Advisor to India's

Congress Party, 1991-1998: The fact is the rules of the
game are tilted in favor of the economically powerful. I
understand, I respect that, and until India is
economically powerful we are not going to be able to
influence the rules of the game. Let's take the textile
trade. Now all textile imports into America, for example,
are governed by quotas. Every country is allocated a
certain quota. It's not free trade. It's managed trade.
America is free to sell textiles to us, but we are not free
to sell textiles to America.

NARRATOR: Developing countries forged a negotiating

bloc to make Western markets more open.

DELEGATE: This should not be a time when big

countries, strong countries, the world's wealthiest
countries, are setting about a process designed to
enrich themselves.

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Chapter 17: Failure at the Summit [4:58]

NARRATOR: Bill Clinton had been a leading proponent of

expanded trade, but the protests forced him into a
political corner. A presidential election was about to
begin, and Democrats needed union support. In a
speech to WTO delegates, Clinton appeared to side with
the protestors on the streets.

BILL CLINTON: I condemn the small number who were

violent and who tried to prevent you from meeting, but
I'm glad the others showed up, because they represent
millions of people who are now asking questions about
whether this enterprise will in fact take us all where we
want to go.

NEWT GINGRICH: I think his speech at Seattle was an

absolute disgrace and an act of strategic defeat for him.
I think they were gearing up for the election, and
appeasing the unions to elect Gore was more important
than standing for free trade.

NARRATOR: Clinton instructed American WTO

negotiators to keep protections for key U.S. industries.
The summit ended in failure. Leaders across the
developing world vowed to block the next round of trade
negotiations unless their demands were taken seriously.

MAHATHIR BIN MOHAMAD: We believe in trade, but we

didn't believe in just being a market for other people. So
when you talk about opening markets, you talk about
the rich people who can manufacture goods with added
value and sell them in our markets, not the other way
round.

NARRATOR: Countries like Tanzania that rely on foreign

aid claimed they wouldn't need the aid, if they could
only sell their products to the West.

BENJAMIN MKAPA, President of Tanzania: You see, we

talk about a level playing field, but in fact it is very
much tilted in their favor. We would earn so much more
than we are possibly getting by bilateral aid if those
markets were just open to us, literally by billions.

NARRATOR: Global poverty soon became the galvanizing

issue among globalization's opponents. In the wake of
Seattle, control of the protest movement began to shift
from unions to a disparate network of grassroots
activists.

JAGGI SINGH, Activist, Canada: We're trying to move

from the politics of protest to the politics of liberation.
It's not simply trying to create a kinder, gentler
capitalism. It's not simply trying to negotiate the terms
of our misery, to make our misery less miserable. It's
about changing the world; it's about creating
institutions, structures, and frameworks, communities
and neighborhoods that are based on our values, which
are values of social justice, of mutual aid, of solidarity,
of direct democracy. And we're a long way from where
we want to go, but we have to start now.

Onscreen caption: World Bank/IMF meeting

Washington, D.C., April 2000

NARRATOR: One of the protestors' next targets was the

World Bank, an institution whose sole purpose is to
reduce poverty in developing countries.

JAMES WOLFENSOHN, President, The World Bank: When

you see someone outside a barricade attacking you
vehemently because of something called globalization,
you have to wonder what it is they're getting at. It
enrages me when you have people who assume they
have the moral high ground against a team of people
here who are devoting their lives to addressing the very
questions that these people claim to be addressing.

NARRATOR: But the protests had become impossible to

ignore. Inside the World Bank and other institutions,
officials struggled to make sense of the growing debate.

NEMAT SHAFIK, Vice President, The World Bank: Well,

the protest movement is multifaceted, and the anger is
multifaceted, but there clearly is a sense of losing
control and a sense of alienation. The old structures and
the old institutions and the old lines aren't working
anymore, and I think we're at a stage where is this
extraordinary chaos in international organizations, in
international rules of the game, that we're trying to
define, and we're not there yet. And I think, like in any
chaotic situation when you're in the middle of it, you
don't see the way out, but I think what we're observing
 -- the series of protests, the series of engagements -- is
part of the process of coming towards some new
structure for managing a global economy.

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Chapter 18: The Global Divide [2:33]

NARRATOR: Globalization did not cause global poverty,

but it did make us more aware of it. And by creating a
single global market, it raised the question of how that
market benefits the world's poorest nations.

DANIEL YERGIN: We are seeing around the world a

movement towards greater reliance on markets, greater
confidence in markets. But for that confidence to last it
has to be seen that these markets are fair, that they are
delivering the benefits widely, that people are benefiting
from them. And if they don't have that kind of
legitimacy, then the confidence is not going to remain,
and the markets will be vulnerable to disruption and be
replaced by other kinds of controls. So every day the
market has to earn and prove its legitimacy, and that's a
big test, particularly in the developing world, where the
number-one issue, the central preoccupational concern,
is the issue of poverty, and delivering the goods means
lifting people out of poverty. And that more than
anything else is what these markets would be judged
by.

JEFFREY SACHS: Professor of Economics, Harvard

University: The world is more unequal than at any time
in world history. There's a basic reason for that, which is
that 200 years ago everybody was poor. A relatively
small part of the world achieved what the economists
call a modern economic growth. Those countries
represent only about one-sixth of humanity, and five-
sixths of humanity is what we call the developing world.
It's the vast majority of the world. The gap can be 100-
1, maybe a gap of $30,000 per person and $300 per
person. And that's absolutely astounding to be on the
same planet and to have that extreme variation in
material well being.

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Chapter 19: Capitalism Redefined [7:00]

HERNANDO DE SOTO, Founder and Director, Institute

for Liberty and Democracy, Peru: The problem that's
happened over these last years is that somehow or
other people who are capitalists in countries like the
United States considered the real interlocutors are rich
people from developing countries, so they've been
touching the wrong constituency. The constituency of
capitalism has always been poor people that are outside
the system. Capitalism is essentially a tool for poor
people to prosper.

NARRATOR: Hernando de Soto is one of the most

original economists in the developing world. An advisor
to Mexico, Peru, Egypt, and other countries, he seeks to
cut through the old debate about wealth and poverty
and reinvent capitalism in the name of the poor.

CHARLIE ROSE, Journalist and Talk Show Host:

Hernando de Soto has been called the most important
economist in the Third World. He's a champion of
market economics and property rights in Latin America.
His new book, The Mystery of Capital, talks about the
question of why capitalism triumphs in the West and
fails everywhere else. Welcome.
HERNANDO DE SOTO: So the important thing about a
capitalist system is that it's a system of representations.
Therefore it's a little bit like when I go to the United
States. People ask me for my identity, and I say: "My
identity is me. I mean, look at my face. I am Hernando
de Soto." But the man at the U.S. immigrations just
says, "Look, give me your passport."

The reason that things travel so well in the market

economy of the United States, and values travel from
one place to another, is because they all have passports.
And the real value is like my identity. It's not in me; it's
in my passport. Real value to pay the hotel room is not
in me; it's in the credit card. And so what happens is
that this system by representation, it requires of course
that all the representations -- the credit cards, the
passports, the IDs, the property titles, and the shares --
be organized by a system of law that allows people to
be able to trust what they're dealing with.

NARRATOR: In September 2000, de Soto published his

explanation of why capitalism hasn't worked for the
poor. He took his message directly to some of Latin
America's most remote regions.

HERNANDO DE SOTO: The reason I'm going to

Cajamarca now is because 12 years after the fall of the
Berlin Wall and 11 years after Peru adopted pro-market
policies, their situation hasn't got much better, and they
want to know why. The Mystery of Capital offers an
explanation. It says that the system per se works in the
West, but that in our country, like in much of the Third
World, it isn't functioning because we have missed some
of the crucial elements that the Westerners added in the
18th and 19th centuries, like property rights, without
which the system cannot function.

Onscreen caption: Cajamarca, Peru

NARRATOR: De Soto's book had become the number

one bestseller in Peru's history. And in poor
neighborhoods across the country, this economist had
become a celebrity.

De Soto believes that people are capitalists by nature,

but that in the developing world, most are locked out of
the capitalist system.

HERNANDO DE SOTO: Peru, like in every other

developing and former communist nation, people on the
ground, with or without a property law, have basically
agreed on the distribution of assets among themselves.
You go to any of the places we've been to -- the
hinterland of Egypt, of the Philippines, of Haiti, where
there is no official law that is actually in place or being
enforced, but there is another law in place: You step on
somebody's territory, and somebody comes up and
says, "Get off my territory," where there's a law or no
law. You walk down the street, and you walk into a
garden, and the dog starts barking, and you start
finding out that that dog is defending a consensually
agreed determination of possession rights throughout a
certain area. So there are property systems in place.
The question, I think, the important thing is that they're
illegal. They're extra-legal, to be more precise.

Onscreen caption: Kilimanjaro, Tanzania

NARrATOR: In the West, property rights are taken so for

granted, they rarely cross our minds. But in many
countries, these crucial "tools of capitalism" simply
aren't available.
 In the foothills of Mt. Kilimanjaro, Philip Tesha's family
has grown coffee for generations. He sells directly into
the global market, yet like many in the developing
world, he can't prove that what he owns is actually his.

INTERVIEWER: So who owns the land around here?

PHILIP TESHA, Coffee Farmer, Tanzania: The land is our

property. We brought it from the farmer who was willing
to sell to us. So we brought this land, although we don't
hold any title for the ownership. But it's our property.

INTERVIEWER: So how can you prove that's your

property?

PHILIP TESHA: Because I'm here. I was the person who

brought it, and the person who sold it to me is also
around here.

HERNANDO DE SOTO: So what we've been discovering

is that there's a real huge paper wall that stops the poor
from actually being able to develop private legal
enterprise.

NARRATOR: Without property rights, ordinary people in

developing countries can't get a loan, a mortgage, or
credit. They are excluded from the capitalist system,
and the global market simply passes them by.

HERNANDO DE SOTO: So this is a time of crisis for the

cause of capitalism worldwide, because for the moment
it has only meant giving the elite of developing
countries additional opportunities, and not being able to
get down deep, deep into where the real majority
interests of people in any developing country are, which
is among the poor.

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Chapter 20: The Bottom End of Globalism [4:46]

JEFFREY SACHS: It is an incredible moral problem how

to live together with this vast gap in wealth. It's also an
incredible intellectual problem. It's what development
economists such as myself spend all our time thinking
about. Why is the gap so large? What can be done to
help the poorer countries narrow the gap? It's a very
tough question.

NARRATOR: Places like Merelani, in Northern Tanzania,

are the bottom end of the global economy. Miners hunt
for gemstones -- tanzanite -- that will eventually sell for
over $1,000 per stone.

Some mines are too narrow for grown men to navigate.

Those mines are left to children as young as 10, known
as "snake kids." For each stone, they receive less than
one dollar.

HERNANDO DE SOTO: Oliver Twist has come to town,

and he's poor, and he's got a TV set, and he's able to
see how you live as compared to how he lives, and he's
going to get very angry. So either you show him a
capitalist route to do it and integrate him, or he's going
to find another ideology. And the fact that today there is
no more Kremlin that is organizing a revolt doesn't
mean that they're not going to find another capital,
because when these things happen, when people are
unhappy and rebel against a system, they'll find another
locus of power very, very quickly.

BILL CLINTON: I'm not one of these people that believes

 that economics solves all problems, but if people know
they're taking care of their children, and if they have a
personal interest in maintaining the peace, it's just
easier for them to manage life's difficulties. You know,
it's no accident that the Nazi Party arose in Germany.
Everybody who was alive at the time remembers people
in the Weimar Republic, after the harsh peace of
Versailles after World War I, carrying wheelbarrows full
of worthless Marks to the bakery to buy a loaf of bread.
So I don't want to oversell this: It is not sufficient to
build a peaceful, free world, but it is absolutely
necessary. What is? Trade.

Onscreen caption: Warwick, England, December

2000

NARRATOR: In his final foreign policy address before

leaving office, Bill Clinton sought to define the
challenges of globalization. He had come to the
presidency saying that free trade would benefit America.
He left arguing it was crucial to maintaining the peace in
an interconnected world.

BILL CLINTON: First let me say I think it's quite

important that we unapologetically reaffirm a conviction
that open markets and rule-based trade are necessary,
proven engines of economic growth. Now I know that
many people don't believe that, and I know that
inequality, as I said in the last few years, has increased
in many nations, but the answer is not to abandon the
path of expanded trade, but instead to do whatever is
necessary to build a new consensus on trade. And it's
easy for me to say -- you can see how successful I was
in Seattle at doing that. No generation has ever had the
opportunity that all of us now have to build a global
economy that leaves no one behind. For eight years I
have done what I could to lead my country down that
path. I think for the rest of our lives we had all better
stay on it. Thank you very much.

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Chapter 21: Changing of the Guard [3:04]

NARRATOR: Washington's free-trade agenda passed

seamlessly from the Clinton to the Bush administration.

GEORGE W. BUSH: Conquering poverty creates new

customers. What some call globalization is in fact the
triumph of human liberty stretching across national
borders, and it holds the promise of delivering billions of
the world's citizens from disease and hunger and want.

RICHARD CHENEY: At this stage I don't find in my

travels around the country or even around the world
that there is widespread opposition to the basic
fundamental trends that have been there for the last 40
or 50 years. Millions of people a day are better off than
they would have been without those trends and
development, without globalization, without the
developments of the increased international commerce,
and that's all of the good. And very few people have
been harmed by it.

Onscreen caption: San Cristobal, Mexico, February

2001

NARRATOR: On his first foreign trip, President Bush

came to Mexico. His friend Vicente Fox wanted to use
the global market to relieve his nation's endemic
poverty.
 VICENTE FOX: Mexico has been one of the losers of the
20th century. We tried many different alternatives to
development, and unfortunately we have 40 percent of
the population poor; we have a per capita income that is
extremely low. It is the same per capita income we had
25 years ago, so we must change things.

NARRATOR: Presidents Bush and Fox hoped to expand

the North American Free Trade Agreement to the entire
Western Hemisphere.

VICENTE FOX: Now we want to go further. I'm taking

about a NAFTA-plus, a NAFTA that takes us to a further
integration. I've been talking this with President Bush,
and fortunately he's seeing it the same way.

NARRATOR: But as his foreign minister, Fox chose a

leading voice of the left: a onetime friend of Fidel
Castro, and critic of global capitalism.

JORGE CASTANEDA: The left's main issue since the

middle of the 19th century has been inequality that
accompanies capitalism. There is probably more
inequality pressing against society today than before
within rich countries, within poor countries, and
between rich countries and poor countries. So on this
score, for example, the left has more of a cause, more
of a raison d'etre, than perhaps in any time recently.

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Chapter 22: The Battle Resumed [6:38]

Onscreen caption: Quebec City, Canada

NARRATOR: Presidents Fox and Bush were set to meet

again in Quebec City at a summit for 34 democratically
elected presidents from North and South America. Anti-
globalization activists made the summit their next
target.

ACTIVIST: No matter what anybody says, there's going

to be some kind of property destruction.

ACTIVIST: So far the way the debate has been played

out is violence, nonviolence. But for me that's not the
issue. Our goal is to disrupt the summit as best we can
with the largest possible mobilization on the 20th and
21st.

Onscreen caption: Summit of the Americas, April

2001

NARRATOR: The summit's agenda was to be trade,

poverty, and the new rules of the game. Organizers
sealed off the city center. As President Bush and other
leaders arrived, the demonstrators tried to break
through. Inside the barricades, Mexico's foreign minister
was now a part of the system he'd once criticized.

JORGE CASTANEDA: They never mention the

Americans. They said, "We need leeway to show that we
can get results," and that's true.

This is my first big summit as foreign minister, and it's

fun. Everybody's here.

INTERVIEWER: If you were 25 today, where would you

be?
JORGE CASTANEDA: On the streets. I would think that's
certainly a hell of a lot more fun.

NARRATOR: Like Jorge Castaneda, most of the

delegates were from developing countries that had
embraced globalization. Casteneda wanted more trade.
He also hoped to narrow the gap between the rich and
the poor of the developing world.

JORGE CASTANEDA: The issue that's been coming up

constantly in the speeches is that the small countries,
the poorer sectors of each society need a special deal;
that they cannot just be left out, because if they are,
they'll never be brought in. There is, I would say, a
growing consensus on that, but there isn't necessarily a
consensus on what to do.

GEORGE W. BUSH: I'm here to learn and to listen from

voices, to those inside this hall and to those outside this
hall who want to join us in constructive dialogue.

NARRATOR: By now, the street demonstrations had

become a routine feature of major international
meetings. Protest organizers were increasingly
sophisticated, using the Internet and other "tools of
globalization" to try to bring the system down.

GRETCHEN KING: So we travel around the country, and

we set up these Web streams wherever there's a minor
or a major demonstration. Wherever people want this to
be set up, we'll help them. If we can provide
alternatives, if we can provide criticisms that come from
the streets and represent a diversity of people, then I
think there's a possibility of success. And that success
would be, you know, burning the free-trade agreement
of the Americas; that success would be disbanding the
WTO; that success would be removing the power from
the top one percent of the world's population.

JORGE CASTANEDA: The protestors, by staking out an

extremist position, make a more regulatory position
more centrist, and that's fine. Perhaps that's not what
they want, but that's too bad. You don't always get what
you want, and you don't always know who you're
working for. But I do think that the protestors are
natural allies of people who believe that there are things
that should be done to manage world trade a certain
way.

NARRATOR: The lasting impact of the protest movement

was subtle, but real. Since Seattle, the terms of the
global debate had shifted.

NEMAT SHAFIK: In the early days, when the first

protests started, I remember feeling very frustrated,
because their rhetoric was so abstract. It was, you
know, it was about economic justice; they had no
alternative program. And the more I thought about it,
the more I realized that if one looks historically, the role
of protest movement isn't to provide solutions; it's their
job to be critical, and then it's the job of the insiders,
the people in the system, in their response to those
protests to come up with new solutions. And I think
that's where we're at now. And so I do think it's healthy
that we have them banging at the gates.

BILL CLINTON: They care about legitimate problems,

but they have the wrong diagnosis. Their diagnosis is
that the global economy has produced all the misery
that they're protesting against. On the other hand, you
cannot have a global economy without a global social
response, without a global environmental response,
without a global security response. It's just... it's
unrealistic to think you can. And that's basically the
next big challenge, is making this interdependent world
 of ours, on balance, far more positive than negative.
And the extent to which we succeed in doing that will
determine whether the 21st century is either marred in
its first 50 years by terrorism of all kinds across national
borders, and more racial and religious and ethnic strife,
and tribal strife in Africa, or whether it becomes the
most peaceful and prosperous and interesting time the
world's ever known.

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Chapter 23: 9/11 [4:27]

NARRATOR: In the first decade of the 20th century, the

global economy was in many ways as integrated as ours
today. That era of globalization ended in Sarajevo in
1914, when a bullet fired by a terrorist triggered the
first world war. In the aftermath of September 11, it
seemed possible that history could repeat itself.

DANIEL YERGIN: Up until September 11, there was a

sense that with the crisis and the risks, that
nevertheless this movement towards globalization really
was irreversible. And since then there's a recognition of
that you can't turn back the clock; we're not going to
abolish e-mail, or computers aren't going to get slower,
but things can go in another direction. Markets do best
and work best and deliver what they can do during
times of peace. And if you're not in a time of peace, but
you're in some other kind of time, then things won't
work as well, and priorities will be elsewhere as well.

NARRATOR: The U.S. economy was already in recession.

As the war against terrorism progressed, the Bush
administration sought to rebuild economic confidence.

GEORGE W. BUSH: Out of the sorrow of September 11,

I see opportunity, a chance for nations to strengthen
and rethink and reinvigorate their relationships. When
nations open their markets to the world, they find in
America a trading partner, an investor, and a friend.

NARRATOR: In November 2001, the World Trade

Organization gathered as planned in the Middle East.
The remote city of Doha had been chosen to keep
protestors away, but September 11 had dampened the
anti-globalization movement. Delegates reached the
compromise that had eluded them in Seattle. A new
round of trade negotiations was launched, and the
concerns of the developing world will be at the top of
the agenda.

ROBERT RUBIN: I think that the new technologies, that

the breaking down of trade and capital market barriers,
the spread of market-based economics, that all of this
has contributed greatly to global economic well-being,
and it will contribute enormously for a long, long time to
come. I think the potential is tremendous. But the
people in those countries who feel that they are left out
and the system isn't working for them have merit on
their side of the case. And I think it's not only an issue
of being helpful to them; I think it's enormously in our
interest that they become part of the system.

RICHARD CHENEY: I don't think there is any one

overnight solution. I don't know anyone who's smart
enough to sit down and write a brand-new set of rules
that we should all then adhere to. I think it is a process
for negotiation among solvent and independent nations,
and that's probably as it should be. And it will evolve
over time. And I do think we learn from our mistakes.
But I the idea that there's some sort of basic right way
to do it out there, and there's one individual or group
that have got all the answers, I'd be deeply suspicious
of that notion.

NARRATOR: Months later, the American economy

seemed on the road to recovery. While threats
remained, the system itself seemed more robust than
many had feared.

The era of globalization looks set to continue, as does

the debate over the new rules of the global game.

DANIEL YERGIN: The belief that trade increases the

odds for peace and also leads to higher standards of
living is something that has been part of the American
political tradition. And looking back on the Depression,
looking back on the first or second world war, it became
very deep seated, and it's not just a question of specific
trade agreements, but it's really a broad consensus
about the importance of trade to the American
economy, to what it does for economic development
around the world, and also as one of the foundations for
a more peaceful world.

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