The discussion of globalization suffers from a lack of precision and, increasingly, an excess of passion.

In politics, the number of sovereign states has increased from 60 in 1950 to 150 in 1980 to 185 in 1999. Nationalism - the polar opposite of globalism - is obviously on the rise, while ethnic and religious based civil conflicts are the every day stuff of the front pages. In economics, no serious analyst can sustain the fiction that Russia or China are conducting anything that looks remotely like free market economics and Mahathir, to everyone's amazement, escaped the worst of the Asian crisis (which was in large part brought on by IMF) with capital controls. In finance, emerging market governments and companies probably have less access today to international sources of debt and equity than they did ten years ago as a consequence of the Asia crisis, the Russian default, the Brazilian devaluation, the Ecuadorian default, and Y2K. In markets, Microsoft's Windows may be on everyone's computer and CNN can be found in many hotels, but genetically modified food is being rejected by the Europeans.

To me, the caricature of ubiquitous globalization reflects the combination of the long running U.S. economic expansion - in a world where every one else has been struggling - with the aimlessness and poor execution of American foreign policy over the past decade. The former generates envy and imitation; the latter generates annoyance.

You said in a speech in Brazil a couple of years ago that, as far as the U.S. economy is concerned, "These are the good old days." During the past decade, the United States has created unprecedented wealth; broadened and deepened the availability of capital; funded the creation, development, and broad distribution of a wide variety of new technologies; created markets for an endless array of goods and services (many of which are produced abroad); and improved its distribution of income. In economic terms it can get no better: full employment, rising real wages, increasing productivity, low inflation, increasing wealth, and non-stop growth.

Put aside that there is no solid theory to explain our success and, since no model anticipated the boom, no prediction of the future path of the economy has much validity. (By the way, even the Fed admits this; they are steering with no current map and no compass.) Success of this magnitude inevitably inspires imitation. To stretch the point a bit, it is not the preaching of the Treasury and the IMF that have persuaded countries to move towards market economics, it is the endless upward surge in the New York stock market.

The important point is what is being imitated. At the macro level, the U.S. policy "model" has combined conservative fiscal and monetary policies, government intervention through regulation rather than ownership or control, and dramatic deregulation of financial institutions, in the context of an established legal framework. At the micro level, U.S. business practices assume that capital is relatively cheap, that people are expensive, that successful competition is more about lowering costs than increasing prices, and that technology is the key to productivity improvement. In turn, this reduces the importance of traditional notions of comparative advantage, especially those based on factors like labor (because the labor content of most productive processes is relatively low and falling) and natural resources (silicon chips matter more than wood chips).

The only problem is that this model is uniquely appropriate to the circumstances of the United States at the turn of the century. Yet our policymakers and our business schools enthusiastically are in the business of exporting it, with the sort of mixed results that should have been expected. The extreme case is easy: Russia is no closer to being a free market economy than it is to being a democracy, despite all the lectures, billions of dollars, and endless crisises. But even in countries where some of the preconditions should have existed - in Southeast Asia and South America - the results are spotty at best. Nobody, except the United States, knows how to create jobs.

In one important sense, the very success of the United States is the problem. The equation is simple: growth requires capital, capital seeks the highest possible returns with the lowest possible risks, the U.S. offers the best tradeoff between risk and return. In a world dependent on private sector saving and private sector investing - they could be separated, of course - the money is going to go where it is most productive. And that does not mean China or Russia or Brazil or Nigeria; it means New York or California.

(This is about financial capital flows. Direct foreign investment to build plant or equipment, should be thought of differently. The plant may be in Brazil, but the business is in the United States or Germany or wherever.)

Without capital, countries and companies cannot grow; if they cannot grow, they cannot create jobs; if they do not create jobs, politicians quickly lose their appetite for the kind of profound reforms that the very successful U.S. model presumes. Ironically, this vicious circle can only be broken if the U.S. becomes a less attractive magnet for capital. But that suggests an even more vicious circle: if the United States finally has a recession or the stock market collapses, it would likely pull the rest of the world economy down with it.

There are different solutions to the apparent dilemma for different players. For countries, the long run solution is to embed the macroeconomic reforms in a context of the rule of law, judicial reform, and the professionalization of public bureaucracies and to build more sophisticated local capital markets. The short run solution is to try to become as much a "part" of the United States (i.e., NAFTA or dollarization) or Europe as possible, but this option is open to very few and is imperfect.

For companies, the only way to survive is either to become either global or local; the companies on the cusp will disappear. For example, a Mexican manufacturer who produces glass or steel or components for the auto industry and who does not have access to capital at the same cost as his U.S. or European based competitors will sooner or later fail, since he has no other competitive advantage. But a Mexican owner of radio stations can prosper since, like the United States, the Mexicans limit foreign ownership of radio and television. He can pay the Mexican cost of capital; he can compete for audience with the best local and international content; and he can benefit from a rising advertising market as the U.S. economy pulls the Mexican economy along in its wake.

The consequence, it seems to me, is that the big are going to continue to get bigger and more international (but not necessarily more global). The rush to size among very large companies has already moved beyond the United States to Europe; it will certainly push yet further (e.g., the acquisition of the Argentine oil company, YPF, by Spain's Repsol). The "bigger" are going to pick off the large Asian, Latin, and African companies; the latter will survive to the extent that they themselves can become less Asian, Latin, or African - at least with regard to access to cheap capital. Thus, South African Breweries moves its stock registration to London and Mexico's Cemex buys Spanish companies to let it raise capital as a European. However, there are very few "graduates:" most South African companies are still as South African as they ever were and most of Mexico is still Mexico - even if both countries are radically different (and radically better off) than they were in the not distant past.

But, again, these economic and market changes are driven more by access to low cost capital, than by any profound reordering of the dynamic of the world economy. At the moment this means playing by rules that are largely set in the United States. That will continue as long as our boom continues or until the Europeans create a capital market that is as broad, as deep, as transparent, and as dependable. The former could end tomorrow, although I do not expect it to; the latter is a way off, although the successful launch of the euro and the emergence of a euro bond market (as opposed to the eurobond market) brings it within the realm of possibility. The Japanese have dealt themselves out of this game for a long time.

The political impact of the economic and financial dominance of the United States has obviously been adversely affected by ham handed foreign policy and foreign policy makers. That is your turf, not mine. But my underlying point is that the basic structure of the international economy has changed less profoundly than the debate about globalization suggests. If suddenly the United States got it wrong for a few years, many of the fears - but also the benefits - of what is caricatured as globalization would quickly disappear.