Opening or Closing?

"So, Jim, whatís your take on the global economy?" Now that Iíve returned home to New York, that's the question posed to me daily, the question everyone wants answered more than ever. I wish there were a simple response.

I went on my three-year trip around the world to take the pulse of the global situation at the turn of the millennium. Without a doubt, I became more aware of certain intractable truths about the state of the world. For instance, natural beauty is perhaps this planet's greatest asset. Contrary to the rhetoric of governments and their leaders, wars are fought for greed and money, not over ideologies. (Think Angola or Sudan or East Timor). Most of all, people, no matter where I was in the world, are curious and interested in American culture. Everyone loves Madonna.

But my biggest, and perhaps most important, realization about the state of the world is more countries are closing themselves off from one another. For the past 50 years, the global economy has zigzagged toward open markets and increasingly open borders.

Free trade policies have flourished. Countries once isolated from the rest of the world, like Myanmar, Albania and Ethiopia, have invited outsiders to visit and even encouraged foreign investment.

But now, I sense the prevailing winds are changing. In many countries, I was greeted with anything but open arms. Guards at the border in Egypt wouldn't let me enter the country unless I flew to Cairo first to get particular stamps for my visas. In Perth, I witnessed rabid anti-foreign demonstrations.

For people trying to manage businesses around the world, the environment is getting more and more protectionist. In India, I heard complaints from pharmaceutical industry leaders about ridiculous delays shipping their products through customs. South Korea touts its liberal trade policy, but one international businessman told me dealing with officials in Seoul has become a bureaucratic nightmare. He prefers getting his supplies in China.

On my last trip around the globe in 1990-1992, I opened brokerage and bank accounts all over the world. From Argentina to Australia to El Salvador, I was thrilled with the way countries were unshackling their markets, participating in the global economy and embracing foreign investments.

How times have changed.

On this trip, I closed more accounts than I opened. In Costa Rica -- allegedly the poster child for 21st-century Central American reform -- my brokerage firm refused to pay my dividends unless I drove to the brokerage house in San Jose, the capital, to collect my money in person. They wouldn't even pay my broker. If you ask me, it's just a way to keep the money in the country and restrict outsiders from investing. Argentina, as we all know now, is a shambles. The government recently passed a law allowing Argentine companies to default on foreign loans and bonds, another way of shutting the door on any kind of future foreign investment.

Such closing off is exactly what the powers that be have fought against in the past. In 1947, after World War II, 23 nations signed the General Agreement on Tariffs and Trade treaty, which was designed specifically to facilitate trade and safeguard against over-zealous protectionism. GATT later evolved into the World Trade Organization, a governing body that has the power to penalize any of its more than 100 member nations that don't engage in open-minded trade policies. As a result of GATT, average national tariffs have fallen from 55 percent in 1945 to 3-4 percent today.

History, apparently, is easy to forget. Distance always leads to misunderstanding, which always leads to problems. Who remembers that Ghana was once the wealthiest country in the British Empire? You would never guess driving through this insular nation today. In 1962, Burma (now Myanmar) was the single-richest country in Asia. Then it closed its borders to foreign influence. Today, it's one of the poorest places on earth.

My guess is the current drift is related to the break-up of once-great empires. When countries split -- think Czech and Slovakia or the USSR or Indonesia and East Timor -- there is often tremendous animosity between the former neighbors. The wounds of ethnic, cultural and economic battles must first heal before an open dialog can begin.

Protectionism in distant lands may sound unimportant to investors in the U.S., but it isn't. Protectionism only breeds further protectionism. Right now, shielding the U.S. steel industry, which is suffering greatly from excess production worldwide, is the focus of a great deal of discussion. If we shut out other steel-producing nations or raise tariffs on those countries looking to export steel, U.S. consumers will feel the pinch. The price of steel will rise. The cost of items made of steel -- like buildings and cars -- will in turn increase. Ultimately, the cost of competing materials like aluminum will also rise.

Protectionism often leads to a decline in quality as well. Let's not forget the 1960s and 1970s when the U.S. government tried to protect its automobile industry. American manufacturers didn't have to compete with foreign carmakers so the quality of cars made in the U.S. deteriorated. Later, when foreign manufacturers could sell their cars here more freely, competitors from countries like Japan and Germany drove circles around our manufacturers. We finally woke up in the 1980s and 1990s and improved our manufacturing quality but by then, the American auto industry had lost substantial market share. Profits had vanished. A lot of people lost their jobs.

Still think it's a good idea for countries to insulate themselves from one another?

Politicians, of course, say the current protectionism is only temporary, that tighter security has increased the costs for foreign shipments into our country. Right.

If you ask me, Ben Franklin summed it up perfectly when he said, "they that can give up essential liberty to obtain a little temporary safety will get neither liberty nor safety."

Globalization, we are discovering, is a very tricky concept. In the best of all possible scenarios, it means everyone will drink Pepsi, watch the NBA, and drive a Ford. Not everyone wants that. More and more people are turning inward to their own tribe, their own ethnic group or religion. Global telecommunications, the Web, and fast travel appear to make the world a smaller place but sometimes it simply makes people more protective of their own lives and culture.