An Address to the 5th Annual Conference on International Trade and Research,
27 October 2000
THE DEMONISATION OF GLOBALISM
When I started to consider what I might say at an address with a similar topic to this, as a reflex action I turned to the Internet and typed in globalisation. One of the first sites highlighted was that of our very own Pravda-on-the-Yarra, the Age. This offered a rich tapestry of matters addressing globalisation.
The first of these was the globalisation of sex. This did not strike me as a new dimension of the issue and I reckoned it would prove too distracting to wade through the piece. Other articles discussed the massive wealth divide, globalisation brings further injustice, the men have it better, the gap grows wider, and even The Globalised World According to Marx. Predictably, Pamela Bone, the lioness of the Fitzroy communes, was able to warn Age readers that the planet would pay a high price for John Howard's short-sighted policies.
You've got to hand it to the Age. They rarely miss an opportunity to propagandise about the ruin that capitalism and free markets are bringing to mankind.
The most contemporary opposition to globalisation erupted at the recent World Trade Organisation meeting in Seattle. That meeting was convened to do nothing more than had been done in five or six previous trade negotiation rounds. That is, having governments agree to allow their citizens the freedom to buy the goods and services they want to buy from the suppliers they favour. Lies about the environmental effects of trade liberalisation were among a series of matters activists employed to derail the proceedings.
The precursor to the Seattle riots and those in Melbourne and Prague occurred with an even more obscure proposal, the OECD's Multilateral Agreement on Investment. That proposal was simply to codify what is the practice in virtually all successful world economies: namely that foreign investors will be treated no less favourably than locals.
WHAT IS GLOBALISATION?
The notion encompasses several dimensions. Some of these are traditional, particularly trade in goods. Others, like trade in insurance and other services, have also been around a long time and capital movements have been the mainspring of the development of the New Worlds including Australia. The ability of nations to implement new techniques is almost the definition of a resilient and hence successful economy. Open access to migrants, at least those capable of paying their own way, is a major aspect of this.
One vital component permitting globalisation to happen is the Rule of Law. That is, well understood concepts of honesty and reasonableness in people dealing with each other. This was a central feature of the growth of western civilisation as we presently know it. Relatively unfettered trade between different political entities allowed a considerable cross fertilisation of ideas and allowed specialisation in production, while placing competitive pressures on monopolies. And one can see, for example in the Merchant of Venice, how general courts arbitrated disputes so that even those considered to be outcasts obtained the same justice as others. There was a very good reason why this was so. Those political entities that did not offer the same respect for the rights of foreigners as they afforded their own were by-passed by traders. They tended to decline in wealth and sometimes faced political emasculation as a result of the reduced capacity to defend themselves this entailed.
Trade and freedom of capital flows remain important aspects of globalisation today. Freedom of capital flows -- or foreign investment -- allows countries that can convince foreigners they offer good opportunities and security to top up their domestic savings with infusions from abroad. This is important for another dimension of globalisation: the ability to copy other people's ideas. Thus we see firms setting up overseas in non-tradeable services from McDonalds through to supermarkets, and construction. The host countries benefit from these investments because they bring know-how and with it increased productivity.
But there is nothing inevitable about this trade and investment led growth process. In fact, trade was much more important in places like Australia a century ago than it was in the 1970s. The long period of peace in the nineteenth century had brought a far greater globalisation than the world was to see for close to a century -- the world was more integrated in some respects in 1900 than in 1990. Passports, for example, were required in only the two most backward nations: the Ottoman and Tsarist Empires.
For Australia, our policy stance turned decidedly inward looking soon after the turn of the 20th century. This included the adoption of the tariff, supported by Australia's unique centralised wage determination system. Such policies shifted this country towards the false god of isolationism and away from integration with the world at large. And we slipped from being the most prosperous nation in the world in 1900 to barely making the top twenty 90 years later.
Some of the most significant steps in unravelling this were taken by the Whitlam Government -- in most respects the worst administration in Australia's history. Whitlam introduced the first assault on tariffs with the 25% across the board reduction.
Globalisation has been a long trend, though as the setback post 1914 demonstrates it is not an inevitable one.
And all this is being further revolutionised by the internet. Ironically, it is the internet that has allowed disaffected groups to caucus and assist each other in pushing agendas that are in general seeking to thwart the greater global interconnection that has made their caucusing possible.
For many people in these disaffected groups, globalisation can be stylised to mean:
- big business and an acceleration of what used to be called the rat race
- less job security than was enjoyed in previous times
- and a grinding down of living standards.
- For those outside major urban areas it means an intensification of the relative disadvantages that mass populations can avoid -- communications transport, culture.
To examine what globalisation means in this stylised version I consulted one of the feral sites that were prominent in derailing the Multilateral Agreement on Investment. The site said
Citizens will have no rights to livelihood, to work, to food, to water, to safe environment.
Well if we examine this what do we find? The countries that have adopted globalisation most readily: US, UK, Australia, Singapore, HK Canada, have prospered most over the past decade or so. These countries have enjoyed rising living standards and considerable employment growth. Within the developing nations the countries that adopted freedom of capital movements and reduced tariff protection saw an acceleration of growth. One outstanding example in Latin America was Chile. Castigated as a 'fascist' state in the 1970s and subject to shipping sanctions from militant unions like the freedom loving Australian Waterside Workers, its policy of reducing taxation abandoning tariff and other support for particular industries pushed its citizens prosperity to the head of the Latin countries. Its success was not lost on others in the continent and one after the other Latin American countries have abandoned the protectionism with which they sought to insulate themselves from Yankee Imperialism. The outcome has been an end to the sluggish growth the Continent experienced over the four decades to the 1990s and a new dynamism.
The one Latin American country that refused to join this capitalist resurgence was Cuba. Once portrayed as the model for the Continent, Cuba is now recognised as an international basket case. It is a place to which many are flocking to see a 1950s museum piece, but a place from which its own citizens are so desperate to escape that they take colossal risks to do so.
A similar contrast can be seen in Asia. During my lifetime I have seen the disparity in outcomes between nations like Burma and North Korea and the Asian tiger economies. At least two Asian Tigers have overtaken Australia and enjoy income levels twentyfold those of nations that were comparably placed forty years ago. In a less dramatic fashion, we have seen India and Pakistan, both of which have adopted insular policies for most of the post war years, being surpassed in wealth by nations like Taiwan and South Korea. These countries started the Post World War II era in a far more wretched condition.
Environmental outcomes have proven to be better under globalisation embracing economies. Partly this is because the economic freedom entailed in globalisation improves the capacity of economies to afford better environments. In countries like Australia we have seen an immense improvement in things like Melbourne's atmospheric pollution, ozone, smoke, carbon monoxide now down to half their levels of the early 1970s. Perhaps we'll even return the Yarra to a genuine fishable and swimmable condition that has now been achieved with the Thames.
Similarly improved living standards have also allowed us to set aside more land for the environmental assets we prize. There is for example considerably more forested area in Australia today than there was a century ago. Partly this is due to national parks but it is also due to the increased productivity of land that has made it unnecessary and unprofitable to farm marginal land. This is in contrast to outcomes in the poorer countries where low living standards and low levels of capital force a more intensive agriculture.
Trade, investment and globalisation in general is no threat developing countries' environments. Quite the contrary. It offers them the surest means of alleviating environmental stress. Better environmental outcomes also result from the same forces that bring globalisation. The more insular economies with arbitrary law, like the old East European economies have had the worst possible economic outcomes with the eutrification of vast inland seas and air pollution in the cities.
The better outcomes in the economies embracing globalisation have come about partly because of the accompanying facets: individual property rights and obligations. These mean there can be no headlong rush towards a goal if that means impinging on others' rights. This is an automatic stabiliser that has been free societies' guardian against some of the grievous environmental outcomes seen in Eastern Europe.
There is another reason why globalisation has been beneficial to the environment. This is because it means trade, swapping information and allowing the most efficient use of resources. This allows more economical use of land. Thus crop yields in Australia and in those developing countries that have adopted modern, that is, global technologies have more than doubled since the mid 1950s. Without the ability to make better use of land by specialisation -- that is by trade -- and without the adoption of improved farming techniques, we would surely have faced famine as the population controller.
Right now we are seeing a further wave of global technology in the food and fibre industries. This is the genetic modification of plants that is allowing:
- increased plant productivity
- reduced use of scarce resources like water
- control of pests and other blights that would otherwise reduce output, in ways that greatly economise on the use of pesticides and other chemicals.
Unfortunately, we are seeing Greenpeace and other knee-jerk enemies of improved living standards embarking on campaigns not only to oppose these new products but to prevent them being tested. Some such ill-considered opposition campaigns seek to make use of trade to force their proponents' favoured outcomes.
We have seen such actions in the past. They stem from misplaced notions like those expressed by the World Wildlife Fund 'application of WTO rules continue to have unintended negative environmental and social consequences' (1). Yet, this proposed distortion of trade rules to promote environmental outcomes is a danger to the world trade system that has done so much to facilitate a uniquely long period of uninterrupted economic growth that we have seen this past 50 years. There are at present just a few such impediments to trade authorised by e WTO. But many, especially the European protectionists are looking to foster others.
Those environmental inspired trade restraints that we presently have include CITES. This well meaning system of restraint to trade in endangered species has done a great deal to prevent the use and hence harvesting and protection of wild animals. The rhino and elephant are dangerous creatures that destroy village crops unless their ownership is vested and the villagers can harvest them and otherwise gain, for example by protecting them for tourism. Similar such issues are present in Australia where we foolishly prevent the export of parrots and other wildlife which transforms them into vermin competing for fodder and water rather than the incubator of a new farming industry.
Other environmental trade restraints include the Basle Convention on toxic waste. Not only has this paternalistically imposed the wisdom of west on developed countries but it has done so in a typically heavy handed fashion. It prevents the disposal of and recycling of batteries, computer scrap and other waste in a cost effective manner. This denial of the most economical disposal has both a perverse effect on the environment it seeks to support, and operates to the detriment of Third World employment opportunities. To Greenpeace, a sponsor of the Treaty, the fact that every country is now required to dispose of its own waste is more important than an improvement in Developing Countries living standards and a better environment.
We now have this taken further with the Cartagena Protocol. This controls the trade in genetically modified products in foreign countries. Allegedly it meets a threat to biodiversity.
In fact, it owes much to the protectionism of the Europeans, seeing their own green movements applying sufficient pressure to block these innovations and fearing for their farming communities' consequent loss of competitiveness against crops that can be grown on less land with fewer pesticides and offering higher yields. The notion that these new products could create the Triffid mayhem that doomsayers predict is fanciful in the extreme; the possibility that they could survive processing and long distance transport is ludicrous. Yet we now have some new controls on trade and an aggressive green movement keen on imposing its prejudices on hapless developing countries.
These are the very ones who stand to benefit most from the technology.
Much of the opposition to globalisation is to multinational corporations. McDonalds and Starbucks were targetted at Seattle.
This demonisation of the corporation has never made less sense than it does today. Corporations are not remote institutions owned by an oligarchy of rich people. They are businesses desperately trying to seek out customers and ways of meeting their ever-changing needs, and doing so with a constant eye on better techniques and other cost savings. Competition forces these cost savings to be passed on to customers if the firm is to continue to exist.
Just as significantly, the corporations are owned by individuals, by everyone who has superannuation or any other form of saving. And the corporations are desperate to keep our money by constantly showing us, if we are individual shareholders, or our institutional agents in the case of superannuation etc. that they are protecting and augmenting our funds.
GOBALISATION: THE REALITY
Over the past decade or so we have seen a transformation of the Australian economy. This has greatly enriched us. In the decade to 1980, average wealth per capita actually declined by a couple of percent. During the 1980's this rebounded with a 21 per cent increase. But during the 1990s wealth per capita increased by 38 per cent.
Major stimulants to this trend has been globalisation and our adoption of it. During the 1980's we saw tariff reform that forced Australian industry to cease being coddled and to take its place within the world economy. The outcome was a quantum leap in productivity. During the 1990s we saw governments react to the need to maintain global efficiency by reinforcing the importance of competition law. This meant subjecting government owned businesses to the same market disciplines the private sector faced. It also, especially here in Victoria, meant privatisation with the unlocking of previously hidden value and a massive upsurge in productivity.
These developments were in part a response to the avalanche of increased global interaction that technology was bringing. In many cases the response was to the manifestations of technology rather than technology itself. Thus, the inefficiency of Victoria's gas and electricity industries had been tolerated for years but was becoming less so as industry sought every opportunity to achieve international competitiveness.
Perhaps for the first time in a century, over the past decade, we have now embarked on a period where our productivity growth is higher than that of the average OECD nation. Moreover, we weathered the Asian crisis without a pause in spite of our close export ties to the countries that suffered catastrophic reductions in their production levels.
Globalisation, like economic rationalism before it, is often used as a bogey word. In both cases the words are used to impart notions of imposed outcomes on a hapless public. Such constructions are the worst forms of Orwellian Newspeek. They reverse the meaning of concepts that simply represent freedom for the consumer to choose for herself what to spend her money on. Economic rationalism and globalisation mean getting government out of the way of decisions and allowing individuals to decide whether they buy one good rather than another, whether they buy services produced overseas rather than at home, whether they choose to spend their own money or save it, whether they invest at home or overseas.
Finally, the greater prosperity it brings allows us to afford the environmental services that we also value. In addition it means the application of newer technologies which tend to be cleaner than those they replace. Simple comparisons between countries, and within countries over time, demonstrate that improved income levels mean a better environment as well as higher living standards.
ENDNOTE
1. WWF International Position Statement, March 1999
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