By Darim al-Bassam
The late United Nations Secretary General Kofi Annan, a stunt fighter for multilateralism, described globalisation in one of his reports as “an irreversible process, not an option”. He said it is a positive force, but it is also blind and therefore needs to be carefully harnessed. Globalisation of the economy implies globalisation of responsibility and response capacity.
The global economic arrangements of the immediate post-World War II epoch were built around John Maynard Keynes’ insight that sustaining a world economy reasonably hospitable to international trade and investment would require carving up space for domestic macroeconomic management.
The GATT regime entailed a thin model of trade integration, not reaching beyond direct border barriers or trade in manufactured goods among advanced economies. It left plenty of room for countries to design their own regulations and industrial policies – and indeed protect ‘‘sensitive’’ sectors (such as agriculture or garments).
During the period since the late 1980s, and more after the creation of the World Trade Organisation, being the fastest forward surge in globalisation transactions, the ratio of global trade to world gross domestic product (GDP) doubled between 1990 and 2015, from 30% to around 60%. Foreign direct investment (FDI) flows rose strongly too, from less than 0.5% of world GDP in the early 1980s to about 2.5% between 2005 and 2015. And the flow of people across borders picked up markedly.
The increase in the number of international migrants averaged about 1mn per year in the period 1960-80, but rose to about 5mn per year since 2000. OECD data for inflows of foreign nationals into selected OECD countries and Russia show an increase from just under 5mn in 2004 to nearly 7mn in 2014.
During this period, there were three major factors that accelerated the pace of global economic integration.
First, many Central and Eastern European countries made the transition from planned to market economies. Second, China became increasingly integrated into the world economy at the same time as it enjoyed an extraordinary and unprecedented period of growth. Firms set up new value chains to serve this market and also expanded by relocating parts of their production chain, aided by rapid technological progress that reduced transport and communication costs. Third, over the 1990s and 2000s, trade and investment liberalisation was pursued by most advanced and emerging economies, via multilateral, regional and unilateral actions.
However, another aspect of globalisation – migration – has continued to advance, notably with the spike in refugees and asylum-seekers in 2015.
Under the current prevailing geopolitics uncertainty and the shifts taking place in the world order, such sweeping forces of globalisation could be slowed, but they stay irreversible, simply because such an evolving process results from a powerful innovation trend which is unstoppable.
Now the world is standing divided. Pessimists argue that political conditions are standing in the way of a productive global dialogue about globalisation. But realists will use the current moment to explore the gaps in the present system, and to identify the requirements for a future approach. And optimists will hold out hope that future-oriented stakeholders will create a community of shared interest and, ultimately, shared purpose.
The question now, in my view, is not whether we should accept or reject globalisation but how we shape and guide it to pursue the progressive goals that have been achieved. The globalisation project contains much that was desirable: improvements in living conditions through global trade, reducing conflict and threat of war through political globalisation and the establishment of multi polar world order and encouraging cultural diversity in a widening cultural globalisation.
There were immense welfare gains from this growth, especially from trade, in both the developing and developed worlds. These gains, though, were not evenly distributed, either within or across countries. Some economic theories, particularly the Stolper–Samuelson theorem, predict adverse distributional consequences for less skilled labour in rich economies. Other economists argue that globalisation speeds up skill-biased technological change, which can explain the reduced demand for lower-skilled labourers in developed countries and the wage stagnation they have experienced in the past 20 years.
Rising inequality and immigration are also associated with globalisation, and seen as a threat to lower-skilled workers in the developed world. If these workers are the median voters in these countries, what does this mean for politics? Will political parties respond by turning against globalisation and openness? If the means for compensating losers from globalisation no longer work, will these voters turn toward populism?
A backlash against globalisation has led to widespread political movements, from the left as well as from the right, hostile both to economic integration and to existing political institutions throughout the advanced industrial world. Openness to the movement of goods, capital, and people has had important distributional effects.
These effects have been particularly marked in communities dependent upon traditional manufacturing, some of which have experienced a downward spiral from the direct economic effects of foreign competition through broader economic decline to serious social problems.
Those harmed by globalisation have lashed out both at economic integration, and at the elites they hold responsible for their troubles. Political discontent is in part due to failures of compensation – insufficient provision of social safety nets for those harmed by economic trends. It is also due to failures of representation – the belief that prevailing political parties and politicians have not paid adequate attention to the problems faced by large groups of voters.
Countries vary on this, as do national experiences with the populist upsurge. Previously dominant socio-economic interests and political actors may act to try to address this dissatisfaction, but the path faces serious economic and political obstacles.
Theoretically, economists conceptualise globalisation from four broad perspectives. The first conceives globalisation as internationalisation. globalisation in this way, lays emphasises on cross-border relations among countries of the world with increasing international exchange and interdependence.
The second is the interpretation of globalisation as liberalisation, meaning opening of market and removal of all restrictions on movements of goods and services including labour. Globalisation, therefore, has as one of its focal points, free markets and unrestricted trading.
The third views globalisation as universalisation, a process that gives goods, services and labour a transnational character as national borders are no longer barriers. The fourth sees globalisation as deterioration, meaning the growing irrelevance of social space, which is no longer considered absolutely in terms of territorial place, distance and borders. Some sociologists equate this latter perspective with a process, which embodies a transformation in the spatial organization of social relations and transactions.
The Marxian perspective interprets globalisation to be synonymous with Westernisation or modernisation, a process of spreading capitalism across the world. Globalisation is therefore equated with colonisation and imperialism.
I agree that the globalisation paradigm is basically a Western construct for the integration of world markets. The West has presented globalisation as a market-driven strategy for development. The International Monetary Fund (IMF) and International Bank for Reconstruction and Development (IBRD) particularly link globalisation to liberal modernisation. They described globalisation when it took off as a principle meant to “rapidly develop and create a dense network of interconnections and interdependencies that characterise modern social life.
But this doctrine is under scrutiny right now. Ironically, China is becoming the main defender of globalisation. The surge of anti-globalisation new nationalism and inward populism in Europe and the US has often put at the centre stage three ideological actors of society: the people, the elite, and the ‘other’ (foreigners, immigrants) to whom, in the populist narrative, the elite has sold the people out in the name of globalisation.
New nationalism policies have often picked convenient scapegoats for economic grievances, while hiding real policy trade-offs. They have mastered the art of ‘follow-ship’ as opposed to leadership, where everything has become more short-term and responsive to instant polls. National short-term concerns have become paramount and states, rather than seeing common good for the long run, have become ‘inward-focused’ both in terms of time and space.
People of my generation remember that nationalism once was one of the main pillars upon which the contemporary international system was founded. Nationalism and the international system grew to be mutually reinforcing. First, nationalism became the legitimising principle embraced by the system, and later, as a result of its “internationalisation,” nationalism became further diffused and extended around the world.
Fred Halliday, the late British political scientist whom I happened to know closely, sees the link between nationalism and the international system as not only historical but also normative. It is concerned with values, norms and the governing principles of how people should live and who to obey. According to Halliday, by spreading across the world, nationalism developed into the main justifying or legitimising doctrines of the international system itself. “(It) has become the ethical, moral, basis of international relations so much so that the body grouping the states of the world is called the United Nations.” Today, however, nationalism is increasingly regarded as an anti-system phenomenon.
It follows that the main distinguishing feature of the so-called new nationalism is its troubled relation with state and more broadly with the international system the states comprise. The new nationalisms arguably lack forward-looking, emancipatory political agendas – they do not carry state-building ambitions and instead develop mainly in opposition to the state.
I think the task for the intellectual elite and global activists now is to develop a sophisticated understanding of globalisation and of its consequences for public policy under the multipolar world order which is taking shape.
A globalisation project of creating a more connected, sustainable, just and peaceful world is too important to be left to the bankers and the political elites.
The goals of more equitable economic growth and of social inclusion can either be facilitated or hindered by the shape of globalisation. If globalisation moves, as it has, with few effective limits on bad behaviour, and if national economic policies are either captured by vested interests or are simply powerless to stop the excesses of globalisation, then a wholesale retrenchment is inevitable. This would be a global loss in economic efficiency and would also condemn the poor regions of the globe to persistent poverty. Making globalisation work for a greater number of people in the advanced countries is indispensable to help fight poverty in developing countries. Furthermore, the way in which inequality is dealt with in the advanced economies is a useful guide to middle-income countries facing diminishing growth prospects and rising inequality.
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