MEETINGS

Sixth Form Seminar: Globalisation

28 February 2005

Over 70 sixth form students and staff of local schools were addressed by three speakers before the speakers were subject to questions and discussion. (For brevity, the following account omits some references to specific examples of countries, organisations and people then discussed.)

Dr Turan Sabasat

(University of Bath) spoke first. He noted at the outset that the term ‘globalisation’ is interpreted differently according to the pessimism or optimism of the commentators. For example, a view expressed by a Singapore Prime Minister was that ‘September 11^th marks the conflict between globalisation and isolationism, between free trade and protectionism’, which he considered confused. In the early 1990s ‘liberal economists’ defined globalisation as ‘the spread of market relations in terms of increased trade and foreign direct investment, which is associated with liberalisation’. Later, ‘structural economists’, sceptical of the view of free markets, examined the implications of that definition. Governmental attempts to regulate multinational companies would cause them to move their activities elsewhere - thus international mobility of capital causes governments to conform to the requirements of international investors. Liberals then argued that this is desirable, because capital flows to developing countries would cause ‘convergence’, promoting their speedier growth.. Structuralists replied that ‘convergence’ did not occur and that nation-states could still decide economic policies. The World Bank then recognised that its policy needed to change, since the gap between the richest 20% of the world and the poorest 20% is widening, not narrowing.

In the speaker’s view, trade expansion implies internationalisation rather than globalisation, unless the nation-state’s power is reduced. Other views have been expressed. Some sociologists refer to ‘intensification of worldwide social relations’, ‘widening, deepening and speeding up of global interconnectedness’, ‘deterioration or spread of superterritoriality’, etc. but the speaker thought such effects are not specific to our times only. In his opinion globalisation is ‘a relative decline in the nation-state’s role/power to implement independent domestic policies as a result of increased internationalisation.’ That is- globalisation is a transition from the nation-state phase of capitalism to a supranational state of capitalism.

His analysis of economic history depicted the periodisation of capitalism as moving from Mercantilism (1450-1800) to Liberalism (1800-1945) to Keynesianism (post-1945) to Globalisation (from 1980s). In a fully developed globalised world , markets would be completely free, nation-states and nationalism would be redundant, and there would be a common language (though still some cultural divergence) – but all would be expressed within one ‘state’ which would be needed to run global economic and social affairs. Internationalisation does not require liberalisation, as is evident for example in East Asian countries such as South Korea, but today increases in investment and increasing powers of international companies with productive capacities beyond those of most nation-states requires some international ‘state’ structures. After Britain’s ‘industrial revolution’, state structures were needed to regulate for social welfare and sustainability and in the speaker’s opinion, the European Union and the World Trade organisation are good models for future supranational structures.

Robert Side

(Former headmaster, conference organiser & BRLSI Member ) spoke next. Classic theory of inter-state relations puts military and economic power as state objectives, in order to assure security, but today weapons of mass destruction require international cooperation for that. Common pro-market policies of developed democracies now also affect objectives. Some argue that global communications now cause the poor and oppressed to threaten despots and make policies to promote democracy and peace.

The speaker analysed globalisation as a combination of three ‘forms’- economic (fostering much discontent at inequalities), cultural (fostering uniformity against some expressions of discontent) and political (a resultant which promotes inter-governmental and non-governmental agencies). Three ‘hard realities’ should be noted, however. Despite fears, nuclear arms policies still threaten inter-state conflicts. Internal wars are proliferating, prompting external interventions. Foreign policies are still shaped by national economic and military objectives. Further, although economic and social benefits of globalisation can clearly be discerned, there are ‘no global objectives to achieve those ideals . . .there is no effective global governance’. The global economy is dependent upon America’s economy, poor countries are excluded from benefits or harmed, democracy is fragmentary or nominal, politicians pursue self-interests and international civil society is undeveloped.

He detailed some inhibitions to global benefits, particularly arising from American policies. ‘Unilateralism is not an option’ and America depends heavily on the global economy, but protectionism limits trade and massive trade deficits and over-valued exchange rates are left to market forces, which reduces goodwill. Policy-making must be affected by an emerging ‘tri-polar’ world, dominated economically by an East-Asian bloc and the European Union, as well as by America. Domestic producers determine American foreign policy relating to oil and gas reserves, which prompts ‘periodic military interventions’. He concluded his review by suggesting that the Doha round of trade liberalisation is ‘resurrected’, that economic cooperation over Iraq is needed to heal the ‘political rift’ and that American economic policy is ‘re-connected to foreign policy’, while ‘reciprocal benefits are offered to the Third World’. ‘The alternative is grim…An economy suffering from trade restrictions, a plummeting dollar and reduced productivity would be matched by increasing isolationism in foreign policy as the U.S. retreats from constructive cooperation with other states. Unilateralism, both in political and economic affairs, is always counter-productive and ineffective. The case for globalisation must be made persuasively, forcefully and repeatedly’.

Rodney Tye

(Convenor to BRLSI Economics Group ) was the third speaker. He traced the role of principles studied in Economics from schools to citizens and governments then through to international bodies and agencies –‘where globalisation comes in’. He warned that politicians make promises, which economic and political realities (such as the effects of taxation and pension policies on voters) cannot sustain. He noted that differential labour costs across various countries would affect capital deployments. In sum, he stressed that while globalisation is basically desirable, it does have ‘drawbacks’. The more powerful states will attempt to remove them through policies, which they themselves will favour, albeit within the international framework within which they operate. He discussed the situation confronting President Clinton at Seattle, when poorer countries being affected by trade distortions (such as the relatively low price for their coffee) stimulated riot by their supporters. He commented in that respect how the voice of those producers was weakened through their inability to afford to go to Seattle.

Adam Smith argued that if producers shared their various skills and products in a perfect market all would benefit, but markets are not perfect and some producers have advantages which do not extend to others. In the instance discussed, some countries can produce coffee for export but little else and thus become vulnerable to producers elsewhere who can produce more cheaply anyway. However, while monocultures are vulnerable, expanding global demands bring new opportunities and new products for countries to exploit – for example in entertainments, heritage and media services. A free flow of goods, capital and labour should open up benefits of globalisation for every trading country, but there are ‘hidden hands in the marketplace’ in the shape, for example, of monopolies and cartels which can exploit consumers and distort free trade. While customs duties and protective tariffs may be traditional and justified in some contexts, regulation is certainly needed if trade barriers are to be removed for the benefit of all.

Plenary session

The following series of questions and the answers given by respective speakers are here summarised.

How may globalisation affect the gap between rich and poor countries?

Subasat: structuralist East Asian countries attracted Western investors through fixed exchange rates, but in 1997 the ‘bubble’ burst, promoting a deep financial crisis. Before it was ready for competition Africa had liberalisation imposed on it. He concluded that interventionist policies are a necessary condition for development, but they are not a sufficient condition.

Side: following up that point – the American political motive for bases in a divided Korea brought investment, while a large Asian market brought demand at the time discussed.

Tye: where new opportunities for trade develop and where sanctions are brought to bear, responses differ- countries do not respond in the same way to the various economic pressures they experience.

Can subsidies be beneficial- for example, the support given to the U.S. steel industry?

Side: not in the long term, reasserting that ‘the prosperity of the free world depends to a large extent on the American superpower’.

Tye: the imbalance is now said to be likely to be corrected by the growth of China and India, also as superpowers. Nevertheless, he agreed that in the short term such behaviour can cause problems.

What is now called ‘globalisation’ is surely predated by Britain’s relations with its empire? Side: colonial exploitation is not globalisation, which relates primarily to investment and free trade, not evident in India then, for example. (Both Side & Subasat repeated their analyses of globalisation.)

How may the power of multinational companies be reduced?

Tye: governments often try to attract them, in fact. Moreover, international companies, charged with having undue power to affect economies, often reply that imposed regulations cripple both local opportunities and efficiency, to the disadvantage of locals. On the other hand, there are attempts (as in the EU) to regulate cartels.

Side: there is little international regulation and ‘appalling exploitation’ results, but he conceded that what may be criticised as trade distortion arising from ‘cheap labour’ by others, locals often welcome. They accept their own exploitation (as in 19^th century Britain, pre-regulation) since employment and wages could be higher than would otherwise be the case. Sabasat: China achieves some control by requiring majority shareholding by government in joint ventures with international companies. Multinationals do want ‘ minimal regulations, low wages, trade orientation, low taxation’ etc , but they also want ‘ large domestic markets, political stability, skilled labour forces, infrastructure, transport services’ etc, which enables governments to negotiate with companies. Unfortunately, a proposed ‘global compact’, which would have provided sanctions if companies did not respect human rights and the environment and prohibited employment of children and slaves has been reduced merely to stated intentions by companies.

Side: there are examples of effective action. When shareholders and Seattle protesters tackled Nike about ‘sweated labour’ the company did change both policy and activities. The widespread corruption within the Third World puts pressure on multinationals to employ bribery, but there is ‘moral responsibility’ recognised by some in the developed world at least to tackle abuses and build effective regulatory bodies.

Geoffrey.Catchpole