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By Daniel Shears, Features Editor
The question seems obvious at face value; the word globalisation is often associated with other terms/buzzwords such as broad-minded, universalistic, tolerant, cosmopolitan and progressive. Those who reject globalisation are derided as small minded parochialists who fail to see the “bigger picture”. In Britain, the Leave campaign was associated with an archaic conception of 20th century nationalism, and mocked for its apparent ignorance of global interdependence, while the Remain camp claimed the EU was a wonderful symbol of globalisation and co-operation between once warring European states. The progressives flocked in their hoards to ballot boxes to choose to stay inside the EU, brandings themselves as liberal internationalists, with the majority of members of the Green Party, the SNP, Labour and the Lib Dems all decisively supporting Remain. Over in the USA, Trump’s advocation of protectionism has tarred anti-globalist rhetoric and sent liberals running scared. Anyone who dares insult globalisation is seen as somehow “backwards”: the very opposite of progressive.
However, it seems that economic globalisation has created more inequality, not less, with the richest 1% of people in the world receiving as much as the bottom 57%. Firms no longer just have to compete within their own country; now the whole world is on their doorstep. Free movement of human capital means foreign labour is suppressing wages in low-skilled, manual industries (whether this be Eastern Europeans in Britain or Mexicans along the American South). And when it’s not physical free movement of people, trade liberalisation and relatively free movement of capital has led to global competitiveness where goods and products are bought from the cheapest vendors, usually nations where labour is cheap such as China or Bangladesh. Efficiency is chased at the expense of human welfare. The global financial economy has not opened up new opportunities for all, it has simply entrenched and enhanced the position of those who already have vast sums of capital and valuable assets. Granted, we have witnessed a flourishing of new, prosperous middle classes in countries like China, India, Brazil and Indonesia, and absolute poverty levels have fallen across the globe. However, I can’t help feeling that this seems more like a fortuitous side effect than calculated and intended consequence.
The development of the global economy has occurred in the much the same way as national economies; countries essentially act as specialised firms, trading across the globe with other countries which can produce more of a good/service, at a higher quality and lower cost, with the same resources than they can. For example, America’s top exports are machines, engines & pumps (13.7%) electronic equipment (11.3%) and aircraft & spacecraft (8.7%), while India specialises in gems & precious metals (14.7%), oil (11.7%) and vehicles (5.3%). They both realise that it is more efficient to buy these goods off each other than try to reproduce the same goods using domestic supply chains, and, at face value, this seems like voluntary, mutually beneficial exchange rooted in the comparative economic advantages of each nation.
The problem is that, whereas specialisation and division of labour within factories increased productivity and raised living standards after the industrial revolution took hold of Western Europe in the 19th century (led by Great Britain), living standards have now peaked in the Western world (at least until the next paradigm shift in GPTs occurs). Unfortunately, specialisation on a national scale within a global context doesn’t yield the same results in terms of development or growth in comparatively poorer countries. Therefore, the focus now should be enabling more people to share in this wealth and prosperity, and attempting to close the gap in living standards between the rich and poor. The comparison between internal national inequalities and international inequalities is rather striking; for example, while Britain’s Gini coefficient is 33, the global coefficient is a staggering 66. Even the most unequal societies which exist in African nations (such as Comoros or South Africa) fail to reach this figure. As The Globalist reported back in 2012, the global 1% is composed of the “old rich”, i.e. Western Europe, North America and Japan, while the biggest losers of globalisation have been African and Latin American nations (as well as former Communist nations). It is shocking that the poorest global 5% have failed to see their income rise in the past two decades of intensely rapid globalisation.
This brings me to a crucial point. Global living standards have not risen at an equal rate by what I call “global specialisation”. Why? Because within nations, we have governments to redistribute the economic gains of increased productivity and efficiency. On the other hand, the international political and economic system is characterised by anarchy; it lacks any authoritative, supranational body to regulate the economic activity of nation-states (in the same way governments ARE able to regulate the economic activity of firms and individuals). In fact, since the end of WW2 the consensus has been to further liberalise the global economy by reducing trade barriers and expediting the movement of goods, services and capital across the world. At the 1944 Bretton Woods conference, U.S. Treasury Secretary Henry Morgenthau, stated that the establishment of the IMF and the IBRD marked the end of economic nationalism. The rise of offshore banking, for example, is emblematic of a global economic system where competition on a global scale reduces incentives to regulate large, multinational corporations, and which rewards countries which are most favourable to capital.
Therefore, in many ways, we can see the EU as a completely rational reaction to the uncertainty and chaos of globalisation; “Fortress Europe”, used as a pejorative term by Brexiteers to decry the protectionism of the EU can be seen as a vital economic firewall between Europe and the rest of the world. Perhaps this is why young, progressive voters supported Remain during the EU referendum. It wasn’t necessarily an embrace of neoliberal globalisation but an acceptance that Europe can act to temper some of the more negative aspects of global competition. The EU gives them a sense of control and security. It prevents a race to the bottom by providing an equal playing field (in the form of the single-market) for all member states, contingent on pooled sovereignty to override credible commitment issues. Competition within countries inevitably leads to failed enterprises, as consumers only buy goods and services which they value. Thus it only follows that, if we allow the same competition between countries, a similar pattern should emerge. In a world where cutting costs increases your comparative trading advantage, those without minimum wages or workers’ rights in place have no incentive to change that (see China, Colombia, Guatemala, Pakistan).
Moreover, because of global specialisation, there is no incentive for Western governments to invest in the economic diversification of developing states such as Ethiopia, which do a great job at providing us with coffee, tea, spices and vegetables. These developing nations, which never experienced industrialisation and the productivity gains associated with it, are now stuck in a global economic system which functions in the same way as modern capitalist nation-states but without the redistributive power mechanism of a common sovereign authority. This is why the rich are getting exponentially richer, while the poor lag behind. Of course, we can’t blame everything on global structural problems. Many developing nations are held back by political corruption, weak institutions, predatory governments, bloated public sectors, the infamous “resource curse” and unaccountable politicians. But that doesn’t mean a liberalised, unregulated global economy is making the situation any better.
Globalisation has undoubtedly brought about profound change, and much of it is good. The free exchange and movement of information, culture and people has undeniably made us more enlightened, more diverse and more enriched as a human species. But being a progressive doesn’t necessarily mean buying into Whig historiography, and accepting that as long as we are moving forwards, we are improving the human experience. Being a progressive is about moving in the right direction, not moving at any cost and in whatever direction the wind takes us. We must be careful about accepting globalisation in every form, and learn to be more nuanced and rational when forming our views and opinions. Above all, we must strive to create a better world for all, even if this means challenging liberal orthodoxies from time to time. And perhaps the nation-state, often dismissed as irrelevant, even undesirable by radical cosmopolitans, should be valued a little more for the security it can provide for its most vulnerable citizens.