GLOBAL ENTERTAINMENT AND LOCAL TASTE / 139 dreamed Of, an identification with the whOle human species and the welfare of the planet itself. The spread of commercially produced popular most 0f it conceived in the United States, is speeding up as once-formidable ideological barriers come down. The collapse Of makes it easler tO export music, film, and video tO Eastern Europe, the former soviet Union, and China. But integrating vast reaches Of the world into a global story-and-song market is not a simple task. ln 1990 Rudi Gassner was president of BMG lnternational and was ln direct charge Of Bertelsmann's music business. "Our priority,' he says, IS signing acts on a worldwide basis exclusive tO BMCJ for worldwide exploitation. " Months before the reunification Of Ger- many was completed, Bertelsmann had hired someone tO head its sales force for the German Democratic Republic, where, Gassner says, he is counting on picking up an additional 15 million cus- tomers. ()s noted, there are 0 司 y 17 million people in the former East Germany. ) "Our next target group," he wrote in an internal newsletter for BMG management in 1990 , includes 、 'Hungary, czechoslovakia, and tO a certain extent, poland. " But he antici- pated "enormous problems for us because Of the currency con- straints.... We will not make money lmmediately; we will not be able to take the money out. But I feel that long term we should be . for political and there and be one of the first, if not the first, strategrc reasons. The dream of supplying a billion Chinese with a Coke a week, a tape a week, or anything a week has been part Of American business culture SInce the nineteenth century, the inspiration for political ca- reers, quick fortunes, and wars. 4 But the head 0f BMG lnternational is wary 0f falling prey t0 fashion, and he is more skeptical 0f the potential Of the Russian and Chinese markets than are some industry Ⅵ think it's very chic, very sexy in enthusiasts in the United States. international circles tO say, gomg tO be there; my artists are going tO be there; " says Gassner. But Russia and China 、 'have tO put their houses in order first, in my opmion, before we can make any reasonable assessment. '' Because Of their "one-way edUCatlOn Of the past forty-five years" their managers understand free trade,

382 / GLOBAL DREAMS was a run on the bank's Hong Kong branch. Citicorp stock dived. J. P. Morgan ran pointed ads aimed at the $5-million-and-up market about "the security Of your assets," and in addition tO luring some Of Citi'S private lnvestors, Morgan and Other competitors alSO cut lntO Citi'S share Of the "swaps' market. Corporations wondered whether it was any longer prudent tO count on a long-term relationship with the nat10n'S largest bank. 44 Even the good news was embarrassing. A 36-year-old Saudi Arabian prince by the name 研 Alwaleed bin Talal bin Abdulaziz 引 Saud became Citi's largest stockholder with a wel- come infusion of nearly $ 800 million and a warning that he would keep his eye on management, which he said, had 、。 t0 be more in ” 45 Eyebrows were raised. lt was one thing for touch with reality. Moses Taylor or James Stillman tO own America's premier bank, but a Saudi prince? CritiCS broke intO print with elaborate (and exagger- ated) calculations on how Citi had been taken. ln November 1990 John Reed was summoned to a secret meeting by the president of the New York Federal Reserve Bank and the director Of the Fed'S division Of bank supervisron in Washington and informed that he would now have a partner in all important deci- sions affecting the future of the bank: the federal government. Then for two and a half years the Federal Reserve, the American verslon of a central bank, and the Office of the Comptroller 研 the Currency literally moved in. Reed was required to attend monthly meetings with the regulators at which mounting pressure was exerted on him tO cut COSts, slash dividends, fire staff, and unload investments tO build up cash reserves. lronically, Citi'S international business, which had been 1tS salvation at SO many pornts ln itS history, was now regarded in one rmportant respect as a vulnerability. A significant share Of Citi'S funds were in large overseas corporate deposits not protected by federal deposit insurance, and the Fed feared that ner- vous depositors might withdraw these funds and preclpitate a crlSiS. At one point there were more than 300 bank examrners gorng over Citibank's books. ln August 1992 the regulators turned up the pres- sure and issued a memorandum Of understanding that amounted tO a formal reprrmand Of Citi'S management for not moving fast 46 enough. Reed was now under fire from three directions. lnvestors had driven the stock down to $ 8.50. The board of directors, it was widely reported, was getting ready t0 fire him. The regulators were demand- lng more dracoman measures. At a board meeting in Mexico City Reed persuaded the directors to hang in with him. He then cut the

BANKERS 1N A WORLD OF DEBT / 375 large backlog 0f nonperforming debt' t0 use the bankers' euphemism for default on interest payments. ) The Reagan administration saw the national shopping spree 0f the 1980S as the preferred pump-priming strategy for the economy and did all it could t0 encourage it. High living on consumer credit and tax cuts would (along with military spending) finance recovery from the 1980 recesslon and restore robust economic growth. Citi tOOk the lead in making easy money available for shoppers everywhere. Most Of those WhO produced a credit card for a meal or a trip or a pair of shoes were neither yupples nor deadbeats. AS real income manu- facturing jObs declined over the more and more Americans were using their cards just t0 make it through t0 payday. Citi officials were aware that behind the 、、 number rhetoric Of a flag- waving administration, there was a different reality. lncomes America for the middle class were falling' and so was the standard 0f living. credit cards constituted a privately financed safety net that kept tens 0f millions 0f Americans from falling t00 far or t00 fast for a while. But using credit cards tO supplement falling incomes works only SO long even When the economy is not ln recessl()n. Citi was forced to write 0 幵 $ 1 billion in U. S. consumer debt in 1991. At the same time, according t0 ABA Ba れた g ″川 4 / esti- mates, Citicorp was mvesting roughly the same amount ln its ex- panding consumer but as in prevl()us 1 OSt Of the new lnvestment was concentrated overseas. At a Frankfurt press con- ference JOhn Reed declared that "Europe was now more important tO Citicorp than was North America$' and bank officials announced plans t0 lure 5 t0 6 percent 0f European consumers bY the end 0f the decade with ℃ nty-four-hour-a-day banking servlces everywhere on the continent. Citicorp'S consumer servlces now reached 13.8 mil- lion households in thirty-seven different countries. Plans called for thousands Of branches, regional and automatlc teller machines all across the wor 旧 . Citi was already a member Of the Cirrus ATM network of 55 000 teller machines in twenty countries but it counted on the much larger profits that would flow once its own ATMS were on-line. 、、 not Just the size Of our capital said Executive Vice-President Thomas Jones as he explained ambitious expanslon plans in Latin and 、 is 引 so the size 0f our appetite. lt's the psychology here. We're really ” 30 glob 引 in our thinking. AS the recession dragged on, continued tO suffer big losses from lts consumer business in the United States. But once agaln

282 / GLOBAL DREAMS home countnes varies. ln Japanese culture an arms-length, not tO say adversarial, relationship betvv ℃ en the government and big business IS considered bizarre. ln the United States the relationship is not as intimate as in Japan, but thanks tO the deep involvement Of corpo- rations in the political process, it is hardly as adversarial as corporate executives often claim. Theoretically, the leverage federal and local governments have over global companies flying the American flag is greater than over foreign-owned compames since U. S. -based corpo- rations are creations Of U. S. laws and they are usually more depen- dent on the American market than are foreign corporations. Government treatment Of their home-based corporatlons can re- sult in competitive advantages or disadvantages. The Japanese gov- ernment does not Offer itS corporatlons the same tax lncentlves tO abandon the home country as are available in U. S. law. Thanks to a clearer consensus on the national interest With respect tO economlC matters than eXlStS in the United States, the Japanese government employs a heavier hand over its corporations tO ensure that the long- range needs Of Japanese are met. } 40 、 much home governments are willing tO spend on health, education, ports, roads, and Other public-infrastructure needs and hOW they spend it can translate intO competltive advantages or disadvantages for their home-based cor- porations. Clearly, Japanese corporations have benefitted from the decisions Of Japanese governments tO lnvest in pnmary and second- ary education. ln this sense the playing field is never quite level. The national origin Of a glObal business corporation matters less than it once did, but in a world Of nation-states it still matters.

392 / GLOBAL DREAMS ing system, ' especially restrictions on products and geog- ” 17 raphy. The argument that globalization requires deregulation iS at least a quarter-century 01d. Deregulation Of the American financial-servlces industry has actually been going on for years, part 0f a global shift in the relationship between governments and banks all over the wor 旧 . TO a great extent the U. S. financial-servlces industry deregulated it- self. By resorting tO creative corporate rearrangements such as hOld- ing compames and mergers, the banking, brokerage, and insurance industries had slipped out Of the legislative restraints intended tO limit their geographical reach and their permissible activities well before Congress acted tO loosen them. Through itS parent corpora- t10n, which is not a bank under the law, Citibank could operate as a credit-card banker in all fifty states, rendering irrelevant and unen- forceable the New Deallegislation that was supposed t0 keep banks serving their own commumties. TO get around legal reqmrements that banks lend only a certain percentage Of their cash reserves, Citibank could sell its loans to Citicorp, which is not subject t0 these requtrements. Congress had not anticipated that the nation's largest bank would make such effective use 0f the one-bank holding company t0 escape regulation, and friends 0f the banking industry in the Senate effec- tively blocked efforts to plug the 100Ph01C. By the 1980S banks were not only operating across state lines, but they had become sellers Of lnsurance as 、 vell. Brokerage houses and automobile manufacturers were now deeply involved in the real-estate market. All had one way or another jumped over the fences Congress had put up tO separate investment banks from commercial banks and tO keep brokerage firms, lnsurance companies, and thrifts concentrated on the busi- nesses for which they were chartered. ThankS tO information tech- nology and the ingenuity 0f lawyers, money now traveled faster, farther, and in ways never envisioned by banking legislation and regulatory authorities. AS the ECO れ 0 川なー puts it, deregulation 、、 IS Often no more than an acknowledgement that the rules are no longer ” 18 working. But deregulation, whether by circumvention 0f official policy or by law, had unanticipated and extremely unpleasant consequences. Like war plans, bank regulations are written with the catastrophes Of the last generation mind. After the Great Depression, when the na- tional banking system collapsed because of risky loans, the Federal Reserve was grven authority tO set interest-rate ceilings on deposits.

18 / GLOBAL DREAMS the window through which t0 explore the r 叩 idly changing world 0f finance not only because Citi is a venerable institution that keeps reinventing itself as the glObal economy changes, but because it has been an lnnovator in overcoming the barriers tO glObal banking. We explore the political and social implications 0f globalization 0f 6- nancial markets and the fierce competition among U. S. banks and their much larger competitors based in Japan and Europe. Viewed together, these four webs Offer a picture very different from that of a global village. The G10bal Cultural Bazaar is reaching the maJority of households with its global dreams. Much smaller numbers are playing any role at all in the three networks that pro- duce, market, and finance the goods and services. ln the new world economy, there is a huge gulf between the b neficiaries and the excluded and, as world population grows, it is wldening. III. have made a point Of picking innovative companies that are leaders in their industries.With the conspicuous exception Of Philip Morris's cigarette business, which the company promotes with a disregard for health and truth, these compames are a positive SOCial force in many ways. They make things millions 0f people want. They are more envlronmentally conSCIOtlS than many, although by virtue Of the scale Of their operations they are significant polluters and gobblers 0f natural resources. They treat their employees decently and pay well in most cases. ln intervlews with top executlves at Bertelsmann, Sony, and Ford—Philip Morris and Citicorp declined t0 cooperate in the project—、 encountered exeCUtlVes Of broad ViSion and understanding 0f glob 引 issues that affect their markets. Their capacity for global thinking struck us as far more developed than that exhibited by most officials 0f national governments. But they d0 not appear tO dwell much on the long-term social or political con- sequences Of what their companies make or what they dO. The com- bined negative impact Of corporate activities on the jOb market or the environment or educatlon or family life is regarded as beyond their power tO address and therefore not within their province. b()()k iS not an exposé Of rapaclous corporatlons, corporate greed, or corporate corruption. Had this been our alm, we would have picked any number 0f 0ther companies t0 study. Rather, our

IF MUSIC BE THE FOOD OF LOVE / 121 skeptical the tOP American managers became. a 、、 record man. " He had made his name in Germany bY solving a technical problem involving the music business, but he knew noth- ing about art1StS or their culture. TO the he seemed ar- rogant and ignorant. TO Dornemann, Goldman seemed erratlC and cantankerous. The German owners would suddenly make their presence felt in ways that infuriated the Americans, one case forcing Goldman tO fire the head 0f international operations, wh0 had moved his family to New York from California, because he is 。、 not our style. " (With his golden parachute, G01dman gleefully points out' the man started a successful new label. ) According t0 G01dman, Dornemann interfered with a major licensing deal, forcing G01dman t0 alter it in he believes, that eventually cost the company millions 0f dollars. G01d- man 引 so says that Mark woessner flew into New York and killed GoIdman's design for a new 10g0 for BMG with a wave 0f the hand and a iSt dass?" The American creators considered it an act Of desecration. ・ what did these printers from Germany know about the music business? Bertelsmann faced not only the daunting task Of consolidating its global musrc operation but also the special problems 0f doing busi- ness in the United states. A Ra 訪 0 川 0 れ drama developed over the subJect Of Office sex. lt was as if the buttoned-up German executives and the bohemian American creative types exchanged stereotypes. German executlves surprised, even shocked the Americans as SWIngers on the 100Se. The Americans struck the managers from Germany as prudish and hypocritical• Conduct considered well within permissible limits in MuniCh or the Germans com- plained, turned out tO constltute sexual harassment in New York. lncidents that would not have made a ripple in Germany demanded the attention Of top management. After five years under Bertelsmann management RCA profits grew and Arista was doing well' but neither company had yet t0 "break" a new superstar. ltS biggest new artist, RiCk was developed in the United Kingdom and licensed t0 Arista in the United states. His debut album sold 7 million copies. But given the huge COStS Of acquirmg, cultivating, and promoting talent' even this was not enough tO come close tO the 15 percent return BertelS- mann's president was now demanding from its divisions. RCA had dumped faded stars like Barry Manilow and J0hn l)enven but

72 / GLOBAL DREAMS this 引 so failed. Heinrich's daughter married J0hannes Rein- hard's grandfather, and since there were no male heirs with the Ber- telsmann name, the MOhns tOOk over the business. Even as a 16-year-01d boy, Reinhard M0hn was making solemn resolutions about his 、、 responsibility" for Other people. NOW' next tO the youngest 0f six children, he felt duty-bound to pick up the pieces of the family business. His father was in failing health. His oldest brother had been killed in battle, and another was missing in Russia. There was no one else tO carry on. 、 l()hn still remembers his father . eager t0 d0 everything right and t0 d0 his as 。、 a very orderly . duty," WhO, tO the bOY'S acute embarrassment, would say grace be- fore dinner at restaurants a commanding VOice that prOVOked giggles and stares from some 0f the other patrons. Unlike most Ger- man high-bourgeois families, the MOhns were not permitted tO have tobacco or wrne in the house. But the elder 、 lOhn was extravagant in Other ways. An elephant was maintained at the family estate in the Harz Mountains tO amuse the children. His father's piety never tOOk ho 旧 in Reinhard's life, but the Protestant ethic did. As Mohn set about t0 rebuild the company, he recalled that at the height of the inflation in the early 1920S the family business had been down tO Just six employees. But now there was nothing left but the family name. With the Kansas b00k carts in mind, M0hn decided t0 start with a scheme tO distribute used bOOkS door - tO - door. Because tens of thousands 0f private b00k collections had gone up in smok% there was a lively market for anything t0 read. He began scavengrng through rubble heaps and bombed-out libraries, collecting thousands of volumes that had escaped the bombs. A little later he managed t0 get a few presses working that he used t0 print labels for a c 引 distiller, for which he was paid in whiskey. This was prime currency' better even than cigarettes. The bOttles were traded for bricks tO rebuild the publishing plant. By working other avenues 0f the barter system on which the German economy ran in 1946 , M0hn got his hands on wastepaper. He then reopened C. Bertelsmann' keeping the Old name but converting the operation intO a publisher Of general- interest bOOkS. Bertlesmann salesmen began knocking on doors and the book business took 0 圧 On June 20 , 1948 , with n0 advance warning, the United States, Britain, and France imposed a currency reform. ・行 th the stroke Of a pen the conquerors abolished 93 percent 0f the paper wealth 0f the German people living in the zones occupied by the Western powers. There were not many whO had any interest in spending what was left

GLOBAL THINKING IN A DISORDERLY WORLD / 427 the individual's livelihood, place, worth, and sense 0f self are increas- ingly defined by his or her j0b. At the same time the jobs are disap- pearing. The global economic system is fragile because it depends on growth fueled by the expanslon 0f consumption, but the fierce drive tO eliminate work and cut wages is clearly not the way tO bring the crowds to the shopping malls and car lots. Yet there is a colossal amount Of things walting tO be done—・ building decent places tO live, exploring the unlverse, making cities less dangerous places, teaching one another, helping tO ralse our children, vislting, comforting, healing, feeding one another, dancing, making mLISIC, telling stones, lnventing things, and govermng our- selves. But much of the essential activity people have always under- taken tO raise and tO educate their families, tO enJOY themselves, tO grve pleasure tO Others, and tO promote the general welfare is not considered work and is not packaged as a j0b. There is a rich range Of ideas around in the United States about hOW tO create JObs: worker training, reorganized management, more direct government assistance. But most thinking at the pinnacle Of government and in corporate boardrooms concerns national and cor- porate strategies for competing more effectively ル″わ ~ れ the existing 40b 引 system rather than strategies tO push the system itself in Other directions. Only a fundamental rethinking Of values and priorities can stop the human assault on human beings we call the j0bs prob- に m. Globalization is not really glObal. Transnational business activities are concentrated in the industrial world and in scattered enclaves throughout the underdeveloped wor 旧 . Most people are outside the system and the ranks 0f the window-shoppers and the jobless are growing faster than the global army 0f the employed. Yet the pro- cesses Of globalization are altering the character Of nations every- where and the quality of life within their borders. At the same time nationalism IS on the rise. The power Of national governments over the tWO most critical functlons Of the natron- state—security and economic development—have eroded, but the myth Of national sovereignty is as strong as ever. The result iS the new sort of power vacuum we have described. Yet the gridlock that traps public authority combined with the disclaimer of public responsibil- ity by the private sector guarantees a world economy out Of control. public accountability is the essence Of democracy. But the institutions for assurrng corporate accountability at the local, national, and in- ternationallevels are extremely weak. ln the absence 0f public pol-

420 / GLOBAL DREAMS ever-expanding globallabor POOI as more than 47 million men and women enter the jOb market each year. But there are not enough good jObS, that is, secure jObS with decent working conditions that pay enough, nor are there encouragmg pr0SPects that such j0bs will ever be available in sufficient numbers. Because Of the downward pressures on wages many places in the world in recent the class 0f global consumers is not growing rapidly enough t0 keep the global mass-production system humming. Viewed as a whole as if from space, this system appears fragile. The built-in pressures tO cut jObS and wages are intensifying because Of chronic overproduction and glOb 引 competition, and advances in automatlon and training make it easler tO relocate and tO Slash payrolls. production becomes more 、、 in an eC()Il()mlC sense, but the next generation faces declining prospects Of well-paid jobs and more 0f the world's population are fated t0 be window shoppers, not customers. Finance is now glObal, but most people in the world cannot get a loan t0 build a house' plant a field' or start a business. As they look out on this world, CEOs, presidents, prime ministers and chancellors feel that they do not have the luxury t0 adopt the astronaut's angle Of vision, much less the prophet's. They are players in a highly competitive game, notlofty observers. Each has his (oc- casionally her) own responsibility only for a piece 0f the playing field. The collapse of communism has dealt a blow even to the sort of glob 引 thinking that characterized much 0f world politics over the last fifty years. The Cold War was a truly worldwide struggle, a long peace in Europe, North America, and Japan accompanied bY wars and threats Of wars almost everywhere else. Even regimes in remote places deemed tO be under soviet influence or in danger Of becoming subJect tO such influence were ObJectS Of American either as reclpients Of guns and dOllars or targets Of military and paramil- itary operatrons. sporadic military interventions contlnue. But with the end Of the soviet Union and its far-flung political interests around the world, theleading industrial nations that formed a global alliance tO oppose it have turned inward. The United states iS engaged in an uncertain effort tO renew an overstretched and abused economy through cost-cutting and modest SOCial reform. Germany iS focused on integrating itself and finding ways tO pay the heavy COStS Of reunification without wrecking what has been the strongest economy 0f Europe. As the decade begam Japan, the world's chief supplier 0f foreign capital' seemed t0 be on