I was asked to speak to a lunch gathering of the AEBA on the topic of globalization – something we at Reuters know a lot about.

After a review of Reuters credentials on this topic (operations in almost 200 cities across 130 countries and publication in 19 languages etc.) I tackled the more sensitive issue of why do companies like Reuters establish operations in developing markets and what is the effect of this trend on workers in developed markets who may lose their current jobs as a result.

First it should be said that this is not just a company-level economic issue but a socio-political one. Companies like Reuters are expanding operations in developing markets in Asia because of three principal factors: lower wage costs a large and highly educated talent pool and the strong motivation of the workforce.

Most of the debate on globilization has been focused on the transfer of jobs from high wage to low wage economies. This is important but is only part of the answer and is also declining every year as natural market forces bid up wages and costs of doing business in places like Bangalore.

I believe it is the second and third factors which are the greatest long term threats to Western economies and their workers. For every job we create in our new Asian centers we receive a huge number of resumes from very talented applicants. Countries like India and China which used to send their best students abroad are now graduating tens of thousands of new workers each year with advanced degrees from good schools. Moreover this young workforce is highly motivated and focussed on performance and career advancement.

Businessmen (me included) usually defend globalization based on the classical economic arguments first established by David Ricardo and Adam Smith that free trade increases the pie for all of us and thus society as a whole is better off. I strongly believe this position and we can see it working as large parts of the population are lifted out of poverty in developing nations and the consumers in developed nations benefit from greater choice and lower prices.

However this macroeconomic view is not enough in my opinion because although the wealth of nations does increase it is often unevenly distributed. The problem for the Ford or GM autoworker who loses his job in Detroit is that it is relatively unlikley he can simply move into a job in the new economy such as learning to be a Linux programmer. Thus the problem as I see it is that the economic theory works well on a macro country level but not on an individual family level.

So what should we do? I do not believe the answer lies in fighting globalization and trying to hang on to jobs that are going to disappear anyway. This is often the politcal impulse in Western nations but it is as useless as sticking a finger in the dam to hold back the flood.

Instead I submit the answer lies in social legisltaion which seeks to guarantee a decent minimum standard for all workers the chance for retraining and affordable health care and education for the family. In this way society can obtain the very real benefits of free and open markets investments can be made in education to create a trained agile workforce for the knowledge-based economy of the future and individual human beings who cannot easily transform themselves into "knowledge workers" can still lead meaningful lives.

This for me is the true role of government in modern market-based economies and the blueprint for continued prosperity in the West.