L'état, c'est lui: Will Sarkozy be a Thatcher/Reagan or a Bush/Blair?

The election of Nicolas Sarkozy as the next president of France yesterday had us thinking about the nature of leadership in the globalization age. His arrival on the scene marks a major break from the past for France: the Hungarian immigrant's son is the first French president to be born after the World War II. In addition, Sarkozy has presented himself as a reformer, a tough guy who would not hesitate to make tough choices in pursuit of his strong-held beliefs.

The question is whether he will turn out to be a Thatcher/Reagan or a Blair/Bush. What do we mean by this distinction? Both pairs of British and American leaders presented themselves as people of conviction who governed by principle rather than by polls. They pushed ahead with their ideas regardless of the political setbacks and, at least in the case of Thatcher and Reagan, they were either admired or vilified for their commitment, grit and steely determination. Though his administration ended up creating a huge deficit due to the combination of high defense spending and tax cuts, Republican Ronald Reagan is now beloved - even by many Democrats - for his vision, his simple ways and his communication skills. Even Thatcher's critics would agree that her handbagging style and "the-lady-is-not-for-turning" rhetoric did force structural changes in Britain that were necessary and have turned out to be beneficial in the medium term.

As for Blair and Bush, both have turned out to be less-desirable "mini-me" versions of the two giants of the closing years of the Cold War. Blair came in on a wave of optimism, promising a "third way" - the free market outlook of Thatcher with the compassion and progressiveness of the Labour Party. Bush spoke in a pseudo-folksy manner and promised to rid Washington of the parsing of the Clinton years and instead govern along simple conservative principles. After 9-11, he took that a step further when he adopted a "with-us-or-against-us" stance in his "war on terror" - black and white, no gray.

Unfortunately, Blair and Bush went down the path to Iraq together, ensnaring themselves, their countries and the world in possibly the worst foreign-policy debacle in their respective histories. Their performance, however, has belied the rhetoric. Blair has been less than successful in improving education, healthcare and public services, while Bush has turned the Clinton surpluses into huge deficits. And of course there is Iraq - a devastating triumph of demagoguery and corruption over thoughtfulness and common sense that the world will pay for for many years to come.

So what then of Sarkozy? As former US treasury secretary Larry Summers said last year in Singapore, globalization means that the positives that result from it are magnified, as are the negatives. So when leaders do right, the full impact of benefits is greater than it might have been when the world was not as interconnected as it is today. In other words, good governance can really help. But the opposite is true: screw up and you can really make a mess. Iraq is just such a debacle.

If Sarkozy comes in with ideological blinkers on and pursues reform for reform's sake without the pragmatism and wisdom that comes with experience and perspective, then he could turn out to be a Bush/Blair. But if he takes a pragmatic approach even as he pursues his policies, he could be a great leader. France certainly needs to be shaken up. But you can shake a tree by the roots and kill it.

América latina a China: Usted hace que desea ser una economía mejor

After the Asia-Pacific Economic Cooperation (APEC) forum summits became annual events on the diplomatic calendar more than a decade ago, visits by Latin American leaders to Asia and Asian leaders to Latin America became more frequent. Yet whenever a Latin president turned up in Beijing or an Asian prime minister headed to São Paulo, the getting together of distant amigos seemed more quaint happenstance than a meeting of valued trading partners with strategic mutual interests।

By 2004, when Chinese President Hu Jintao spent two weeks touring Argentina, Brazil and Chile before passing through Cuba, that had changed. Both sides hailed Hu’s trip as a milestone in three decades of Chinese relations with South America. The reason: trade and investment between China and the region had been climbing sharply in recent years – and many South American countries were reaping the benefits of China’s soaring demand for commodities, still the backbone sector of the continent’s economies. In 2006, trade between China and Latin America rose to US$ 70.2 billion, up from about US$ 10 billion in 2000.

At the World Economic Forum on Latin America 2007 in Santiago in April, it was therefore highly appropriate that a number of sessions focused on China and the impact of its zooming growth and widening geopolitical role on Latin America. Participants from both sides of the Pacific stressed that the relationship was no flash in the pan of commodities but rather a match of complements with coinciding interests and a long, mutually beneficial future. “The trade and investment relationship between Latin America and China is a long-term strategic partnership,” said meeting Co-Chair Zhang Shoulian, President of China Minmetals Non-ferrous Metals.

But for a real partnership to evolve, China and Latin America will have to develop a more textured relationship, certainly one based on more substance than raw materials trade. Many in Latin America still do not know or understand the China phenomenon. Inasmuch as there is widespread skepticism about globalization among Latin Americans so is there wariness – even fear – of a rising China. Believers such as meeting Co-Chair Andrónico Luksic Craig, Vice-Chairman, Banco de Chile, took the opportunity to rally the doubters. “Let's dare, take risks, step out,” Luksic urged participants. “We need to understand and shake hands with our friends in China. We need to learn and know China.”

At one level, Luksic was exhorting Latin American business to seek out higher-value trade and investment opportunities in China. This dovetailed with the Chilean Finance Minister’s call for a transformation of Latin America’s economies so they are not captive of the boom-bust price cycles of raw materials. When the commodities party should end, Latin America has to be prepared. Countries must not only exploit the opportunities that China offers but must also prepare themselves to exploit their comparative advantages to compete in the global market against China, India and other emerging economies. This is particularly true for nations in Latin America that are not resource rich and may not be benefiting directly from China’s hunger for raw materials to fuel its 11% annual growth.

For countries to boost their competitiveness and come up with the products and services that China and the rest of fast-growing Asia need and will buy, Latin American economies must pursue the key prescriptions of the Santiago Consensus and invest more in education, innovation and infrastructure. Some in Latin America have pointed out that during Hu’s visit in 2004, China had promised to invest in a number of infrastructure projects. While China has been busily financing and building infrastructure across Africa, it has not been as active or munificent in Latin America. The region should not sit and wait for the bounty to come its way, but must move quickly to address its competitive shortcomings such as the lack of infrastructure, countered Javier Santiso, Deputy Director, Chief Development Economist, OECD. “China and Latin America are two faces of the same coin,” Santiso reckoned. “China represents an opportunity. It is a wake up call for Latin America to pursue reforms.”

That is a key proposition of globalization. Globally competitive countries should motivate or even force both partners and rivals to improve themselves and become more productive and efficient. China’s current advantage is its ability to produce quality products at a reasonable price, but its own economic transformation is slowly turning this giant Asian economy into a formidable force in higher-value sectors such as IT services and biotechnology that require innovation, world-class infrastructure and the rule of law to flourish. Latin America must follow suit. Like many Chinese companies that are going global after a period of reform or as a way to force themselves to become more competitive and hence better able to compete at home, Latin American enterprises have to reinvent themselves too. Concluded meeting Co-Chair José C. Grubisich, CEO, Braskem Brazil: “Global companies are looking to India and China which gives our local companies the opportunity to restructure and to prepare a strong platform to move into the international market in a better shape.” That is precisely how the rise of China is driving a powerful positive agenda for Latin America.