STUTTGART, Germany -- Rich nations need to control the destructive capability of runaway capitalism in an era of global trade, or face growing turmoil and resentment among developing nations, former Philippine President Fidel V. Ramos warned German executives in roundtable talks here.
As a result of globalization, Ramos said, "millions of Southeast Asian families -- who had painfully pulled themselves up to middle-class status -- are slipping back into poverty."
He cited a recent United Nations report, showing half of all children under three in Indonesia as malnourished, as a result of their country's economic difficulties.
Even in rich countries, he added, working class families have seen their purchasing power dwindle, raising a backlash against globalization -- and immigrants in developed nations.
"Pain always precedes gains," Ramos acknowledged. "Sometimes, one wonders whether the gain is always worth the pain."
To prevent future financial crises, the former president urged restriction on the flow of portfolio capital.
"We cannot keep treating capital-account convertibility as we do free merchandise trade because capital flows, unlike merchandise trade, are subject to panics, manias and crashes," he stressed.
Ramos praised the administration of President Joseph Estrada for establishing a three-month holding period, during which portfolio funds entering the country are required to stay put.
He also said his predecessor's effort to ease the effects of globalization on the poor could stabilize the Philippine economic situation and strengthen the social contract between the state and its citizens.
While Ramos, a staunch advocate of industrial and trade liberalization, said globalization would eventually create more winners than losers, he warned of a rocky transition period that could exacerbate Third World resentment.
The former chief executive also chided powerful nations for pressing liberalization goals on poor countries, while themselves practicing creative forms of protectionism.
"Certainly the European 'third way' is one path the world community might follow toward a more benign global economy, one that reconciles market forces with a measure of social justice," he said.
The ex-president, who oversaw unprecedented growth in the Philippines after decades of stagnation and recession, urged G-7 countries to take more responsibility in alleviating the painful effects of globalization in the Third World.
He launched Germany's proposal to establish an international committee of financial regulators, to spot problems before they erupt, and Japan's proposed East Asian Fund to supplement International Monetary Fund (IMF) aid to troubled economies.
"But Americans -- who are now enjoying the longest economic boom in their history -- are wary of creating new regulatory structures that would offset the openness which globalization requires," Ramos said, citing US sentiments for sound government policies and greater prudence on the part of lenders and investors.
"Obviously, a great deal of thinking and consultation still lies ahead for our political and financial leader," he said. "It seems clear the global economy needs both new rules and new institutions to deal with globalization."
While rich countries may prevail in research for solutions, Ramos warned that developing countries must be heard as well.
The latter must not be made to feel that crucial decisions that vitally affect them are being made above their heads," he stressed.
"If the western democracies do nothing, they face a political backlash -- not just against free trade -- but against all the rich countries and transnational corporations that dominate the global economic system," he added.