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Learning Objectives• To understand the concept of globalization• To analyze the features and stages of Globalization• To discuss how the companies globalize their operations• To know how the companies establish their production

facilities in various countries• To explain why companies procure finance and technology

globally• To discuss the various advantages and disadvantages of

Globalization• To analyze the efforts taken by the Government to globalize

its economy

The Great Globalizations Debate withPeter ThompsonPeter Thompson: Hello and welcome to this special edition ofBackground Briefing. When people recall their political memo-ries of Australia in 1996 in years to come, a few things willstand out: one will be the triumphant success of John WinstonHoward, who became Prime Minister with a pledge to makeAustralians more comfortable with themselves. For that we canassume Mr Howard was talking shorthand for saying that in thefuture the pace of change might be more comfortable.Out wentPaul Keating, the globalising moderniser, who worked for 13years as Treasurer, and then Prime Minister, to redirect thecountry towards an Asia-Pacific destiny, with a wide openeconomy. But who’ll forget Pauline Hanson? Pauline Hansonhasn’t mentioned globalisation as a factor in the new anxiety -just migrants, and how some sections of the community aregetting benefits at the expense of others. Maybe the peopleshe’s singled out as scapegoats for more invisible seismic shiftsin the way Australia operates in the world. This week the WorldTrade Organisation has been holding its big inaugural meetingin Singapore. The new coalition government is an enthusiasticsupporter of the ethos of the new, open trading environment.So today we ask: Is there a basic contradiction between becom-ing more comfortable and being part of the globalisation ethosof open markets and free trade?This week we’re coming to youfrom Melbourne, where a forum on globalisation and labourmarkets has been organised by Deakin University and theAustralian Council for Overseas Aid - ACFOA. Now with meon our panel are Chris Manning, who’s a Research Fellow in theIndonesia Project at the Australian National University; LouiseSylvan, who’s head of the Australian Consumers’ Associationand also Executive Member of Consumers International, thepeak global body on consumer rights. Edna Ross is Director ofAdvocacy for ACFOA; she’s just back from the Manila Peoples’Forum on APEC which discussed the impact of globalisation -on workers, human rights and the environment. And ScottBirchell, from the Department of International Relations at

LESSON 10:GLOBALIZATION - A NETWORK APPROACH

Deakin University.Louise, let’s begin with you: what exactly is globalisation?Louise Sylvan: Globalisation is really a process I think that isbeing driven largely by global corporations. It starts with thederegulation of capital markets; it enables those corporations toseek the best return anywhere in the world that they can, soprofit in a sense, is driving overall the globalisation processs,assisted of course by technological changes that give you largecomputing capacity and telecommunications.Peter Thompson: Well Chris Manning, as you sit down at theIndonesia Project at the ANU, what does globalisation mean toyou when you’re focusing particularly on a developing countrylike Indonesia? What does it mean there?Chris Manning: Peter first and foremost, it means the extensionof traded goods into the international markets - that’s the mostimportant aspect of globalisation. It’s the expansion of exportsand the import of capital equipment and the rise in that shareof traded goods to GDP.Peter Thompson: Edna, in the Philippines just in the last fewweeks, what does globalisation mean to people taking part inthat forum on APEC? Because if any organisation representswhat globalisation’s about, it’s APEC.Edna Ross: Well the concerns of the non-governmentorganisations in developing countries in particular, are about theun-level nature of the playing field; and what globalisationmeans is that if the barriers to trade and to investment areforced open in order to allow the northern countries topenetrate those markets, that they’ll be even further disadvan-taged. And so I guess the two main concerns are that theincreasing gap between rich and poor countries is going to beeven further widened and that the people who are marginalisedin those societies, who constitute actually a majority rather thana minority, will be further marginalised.Peter Thompson: And Scott, what’s your view? I mean what isat the heart of this debate, why bother to have it?Scott Birchell: Well I think the crux of the issue is the extent towhich nation states can no longer regulate or manage their owneconomies, without taking consideration of external forces. Sofor very much the first time in history, at least to this extent,governments, although held accountable in democratic societiesfor economic management, are really increasingly unable tomanage their economies in ways that they would prefer towithout taking account of finance markets or investors,speculators, who are part of this, of global community.Peter Thompson: Well back to Louise. I mean is this simply anunstoppable process? Should we just lie back and enjoy it?Louise Sylvan: Well I think in a sense we don’t have muchchoice but to lie back; I don’t know that everybody’s enjoying it,and I don’t know that we need not to take action. I think thereare things that we can do. Basically the companies that aremoving around the world are saying they’re economic entities,they have no responsibility for the social outcomes of what’s

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happening because of the movement of global capital. I thinkwe’ve got to argue, and argue successfully with them, arguesuccessfully with the nation state governments, that in fact theydo have some accountability and the results of people beingthrown into significant unemployment in various parts of theworld as one company moves to seek lower costs in anotherpart of the world. There has to be some quid pro quo for theprofitability that these companies are accumulating in terms ofthe social benefit that they deliver back to the communities.Peter Thompson: But those transnational corporations stick tothe law, don’t they? in the countries that they go to. Isn’t thatsufficient?Louise Sylvan: Sometimes they stick to the law. I think there arecases where they don’t, but I don’t think it is sufficient. Whilethey may provide some employment that may not have beenthere previously, it seems to me that if one can move theamoral position that they’ve got to a much more ethicalposition, part of their function could be in fact to create a muchbetter world for a lot more people. They could in fact signifi-cantly improve the situation for labour in a variety of countries;they could improve their particular contributions to things liketraining, education and so on. And some of them do this, butthey don’t do it from an ethical position, say, that they should.Peter Thompson: The Corporation’s only obligation is toshareholders, it’s not to make a better world.Louise Sylvan: Well I just don’t think that we can accept that anylonger into the future. And it’s a very big ask, I know, to saythat corporations have to change, the nature of business has tochange. But it seems to me the kind of results we’re gettingfrom solely a profit maximising set of corporations can’tcontinue in terms of its effect on our social structure.Peter Thompson: Chris, back to Indonesia: who are thewinners and losers from globalisation? How is it affectingIndonesia?Chris Manning: The big winners are capitalists, are trans-national corporations and by and large their labour inIndonesia.Peter Thompson: That’s a good thing, isn’t it? I mean thatsounds like its a job for people who don’t have a job or anykind of people who have a measly income now.Chris Manning: Yes.Peter Thompson: So, the positives outweigh the negatives?Chris Manning: The positive effects for labour in terms ofrising wages, in terms of declining rates of poverty, have beenquite substantial in Indonesia since it began to liberalise in themid-1980s. That’s not to say that there’s extreme abuse, someextreme abuse of labour rights. It’s not to say that labourstandards are very low by any first world criteria, and that there’sa long way to go. It’s also not to say that globalisation is theonly process that is involved in improving those standards.Peter Thompson: Yes, but to the extent that Indonesia isliberalising, and having more contact with the outside tradingenvironment, that in itself will be a pressure for reform of whatis a pretty repressive set of labour standards, one presumes.Chris Manning: I think the reforms will come slowly, throughformal political processes. Certainly they are beginning tochange, but it depends very much on domestic political forcesand circumstances, rather than on economic pressures. Eco-

nomic pressures will be important in the longer term, but notfor the next five, ten, perhaps 20 years.Peter Thompson: Scott, what’s your view on that? I mean asChina’s another case in point, that it’s always been argued thatthe best way to actually make China more liberal in a socialsense, is to do business with it.Scott Birchell: Well I think a couple of points there: first of all, Ithink it’s very dubious, there’s no exact link and there’s very littleevidence of a link between economic and political liberalisation.There are many examples of countries throughout LatinAmerica for example, which have substantially liberalisedeconomically but have maintained very harsh and repressiveadministrations.Peter Thompson: Although right now the evidence on thatwould appear to be pretty positive, that as Latin America tradesmore with the rest of the world, particularly North America, atthe moment at least the social climate is pretty positive.Scott Birchell: Well it’s improving. But I don’t think the link isthere, it may be improving for other reasons. I think the keypoint though that concerns me about Chris’ argument is thatglobalisation tends to validate these repressive labour standards,because effectively the advantage that these nations are enjoyingin low labour costs, is being maintained at the cost of organisedlabour - people being unable to assemble freely, people unableto enjoy freedom of association, freedom of the press. Thegovernment intervenes to prevent independent trade unions inIndonesia, therefore the price of labour is kept low becauselabour’s not able to organise. So this is not a testament to freetrade, this is not a testament to free markets, this is the Stateintervening to keep the price of labour artificially low.Peter Thompson: Well Edna, one of the issues here is whetherthe social context of globalisation is catching up with the speedof economic change. I mean on a recent visit of mine inSouthern China, I’ve never seen anything like it in terms of thepace of development there - a hundred mile building zoneliterally. What instincts did you get from your visit to thePhilippines about these issues we’re discussing, that is the linkbetween social policy, if you like, human rights, and exploitingglobal markets?Edna Ross: Well I think the feeling of people from civil society,as they like to call themselves, in developing countries, is verymuch that the agenda of globalisation is being run by interestsfrom the industrialised countries and particularly within thosecountries, by transnational corporations, and that therefore -and I think that’s borne out by what is on the table forexample, under APEC, and what is being discussed at theWTO meeting, that that is definitely what is the driving force.So the analysis from developing countries that it’s definitely totheir disadvantage. Now the question always is, Well why didtheir governments want to get into it? I mean are they reallytrying to stuff up their countries completely? And the argumentthen is that it benefits some people in those countries, and it’susually the elite. So I mean I think Chris has a point, I thinkthat wages are driven down in developing countries becausethere is a surplus of labour, a huge surplus of labour, andbecause people are incredibly poor and they will work foranything. But the question then is if you’ve got internationalfora that are pushing barriers down and down and down, and

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Tcountries are competing with each other for investment, andtherefore reinforcing the downward thrust of wages andconditions, or legitimising them, then is it not appropriate ornecessary to also introduce into those forums, discussions ofhow to actually rise up to a better level.And if I can just come in - you asked Louise I think, whethertransnational corporations don’t obey the national law. They do,but the trouble is that they also help create that law. And I thinkpart of the complaints -Peter Thompson: In the case of Papua-New Guinea apparently BHP actually writes the law!Edna Ross: Well exactly. And what I heard in the Philippines;the Philippines government just passed a Mining Act in 1995which just about gives away the country. And I said, ‘Whywould a government give 100% foreign equity?’ And apparentlyI got from two very separate and independent sources whoactually never talked to each other in the Philippines, the viewthat the Mineral Council of Australia was quite instrumental ininfluencing the Ramoz government to pass that Act. And thereasons for that are again because politicians in those countriesneed funds to get re-elected, and apparently some transnationalcorporations are not backward in coming forward.Peter Thompson: Let’s talk about the Australian perspective onthis for a few minutes now: John Howard came back from theAPEC leaders’ conference in Manila and said that the wholething has to be sold better. Which to me sounds like shorthandfor a policy which is a loser. Louise, is it just a matter of a sellingjob?Louise Sylvan: I think it’s much more than a matter of a sellingjob because you have effects on people in your own country; inAustralia, effects which are unemployment, potentially reducestandards and so on, I think a very strong case is going to haveto be made by governments who want to be in the globalcontext, out there trading and so on. And that’s why I thinkthere’s such a role for governments in not getting themselvesinto a bidding war against each other, to press standardsdownward. I mean it’s essentially what Edna was saying, it’s notsimply that labour standards might be pushed down whenthroughout the world as governments compete to get thecorporations in, it’s also all sorts of other standards that mightbe harmonised, but harmonised in the wrong direction:harmonised downwards in terms of consumer protections,environmental protections and so on.Now I don’t think you can sell that to people. Ultimately Ithink they will resist. So I think the strategy is going to have tobe not only better protections, but better overall outcomes insome way for the people.Peter Thompson: Well Scott Birchell, I mean we have justbipartisanship in Australia on this: we’re open for business,we’re open for trade, we’re bringing down tariff barriers as fastas we can.Scott Birchell: Well we have bipartisanship amongst the politicalparties, I’m not sure whether the public is carried away withenthusiasm about the policies. You’re right, there is no choice ifyou vote Labor or Coalition, you’re going to get a free tradepolicy.Peter Thompson: Democrats are largely free trade, except forperhaps a bit of concern about foreign investment.

Scott Birchell: Pretty much so, but there’s what’s called aDemocratic deficit here. In all the opinion polls that I’ve seen,the public has been overwhelmingly opposed to free trade andsupports tariffs. You don’t see a lot of opinion polls on thisissue for very good reasons. But whenever they are published,the population is a considerable distance away from the politicalparties on this issue.Peter Thompson: Yes, I mean on the issue of tariffs and freetrade, it’s not an easy thing to frame a question which actuallycovers a sophisticated sort of nuanced answer.Scott Birchell: No, except that people I think know in theirinstincts and are pretty good on this; they know that the greaterlevels of foreign investment and free trade, the less control theyhave over their own lives. The increasing amounts of foreigninvestment in the country diminishes the extent to whichgovernments can conduct national economic planning, anddevelop things with local necessities and local priorities. And Ithink people realise that, that those decisions are being takennow outside of the borders of this country.Peter Thompson: Well there’s no tri-partisanship coming fromPauline Hanson. She clearly is rowing a boat of her own interms of the political establishment in Canberra. Is the sort ofissues she’s raising, Edna, are they surrogate issues for realconcern about globalisation, as I say, she hasn’t used the word,but is she stroking or scratching away at anxieties that existabout these trends?Edna Ross: I think that definitely the sort of sentiments thatare expressed by Pauline Hanson are an expression of an anxietyabout change happening much too rapidly, and the loss ofcontrol. And the loss of control by national governmentswhere at least people can feel that they can identify and that thegovernment is supposed to govern in their interest; the feelingthat you are now at sea and at the beck and call of internationalfinancial markets, the UN, the WTO, APEC, and that people areno longer running their own agendas. I think that’s very muchone of the elements.Peter Thompson: What about in Indonesia? Is Pauline Hansonknown at all?Scott Birchell: She is known. She hasn’t been widely reported,certainly not as widely reported as she has been in Thailand andto some extent, in Malaysia. And I think the Resolution in theparliament had a significant impact in Indonesia.Peter, can I just come back to the issue of globalisation in ThirdWorld countries and in Australia. There is a lot of talk aboutmultinational corporations, but I think it is important to bearin mind that the key processes are the liberalisation of trade interms of welfare. It’s the cheaper imports, it’s the expansion ofexports and associated employment, and also the social effectsare primarily related to trade. The inequality in the US and inAustralia, the high rates of unemployment insofar as they affectunskilled workers, are related to trade. I think it’s a bit of a redherring to keep coming back to transnational corporations. Theydo play a role, and perhaps in Louise’s field, in the field ofconsumer preferences and so on, they are very important. But interms of work, areas of work and equality through work, it’sthe trade processes where the big gain is.Peter Thompson: And this is Background Briefing, coming toyou this week from Deakin University in Victoria. Our panel

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includes Scott Birchell who you’ve just heard from, who’sLecturer in International Relations at Deakin University; EdnaRoss, who’s Director of Advocacy for the Australian Council forOverseas Aid; Louise Sylvan, Head of the Australian Consum-ers’ Association; and Chris Manning, who’s a Research Fellow atthe Indonesia Project at the Australian National University.Let’s talk about that World Trade Organisation meeting that’sbeing held this week in Singapore. And Australia’s taken a quitefascinating position on this. It’s backed the ASEAN countries,and many developing countries, in opposing labour guaranteesbeing written into trade agreements. And the United States isthe country which is leading advocacy, or leading the advocacyfor this linkage to be made. This seems puzzling to say theleast. Edna, can you explain it?Edna Ross: No, not really. I mean I think our government hastaken the view that its interests in trade lie with the Asia-Pacificregion and that this is an area where it can show solidarity withour immediate neighbours. Maybe it’s the anti-Pauline Hansonfoil to prove that we’re actually a part of Asia.Peter Thompson: What is being proposed? How would thesethings be linked? That is, trade agreements and some labourguarantees? Scott?Scott Birchell: Well I think the idea being that for those who areopposed to it, which is the Australian government’s positionbelieves that really these issues of free trade and tradeliberalisation should not be hijacked or obstructed by consider-ations of universal labour standards or core labour standardsbecause that would bog negotiations down, forestall theprocess of trade liberalisation.Peter Thompson: After all, Australia wants to just get on withtrading agricultural products in particular.Scott Birchell: That’s the No.1 agenda for Australia. It wantsfurther liberalisation in agriculture in the WTO and by includingcore labour standards, that process may be delayed or rejected.And that’s their concern. So what the Australian governmentwants is to have those issues, the core labour standard issues,discussed in the ILO rather than linking them in to the actualtrade agreements and discussions.Peter Thompson: As a consumer advocate Louise, does thatmake sense to you, to shunt off consideration about linkageswith labour rights to the place that they might best be debated -in the International Labour Organisation in Geneva?Louise Sylvan: Well in a sense it makes sense. That’s obviously aplace to discuss them. But I think we’ve got to worry when thegeneral position being taken by the Australian government isthat issues such as labour rights - and I would extend thatsubsequently to include obviously consumer rights andenvironmental protections and so on - that these things oughtnot to be linked in any way to trade. What they’re basicallysaying is a government, which is a very surprising position Ithink, is that the trade matters; the other fundamental thingsdon’t, they’re allowed to come along some way on the side andso on. But first, foremost and primarily, the trade matters. AndI’m not sure that’s a particularly good position for the Austra-lian government to be taking.Peter Thompson: I mean you could link in all sorts of otherrights and trade agreements to. I mean you could link inconsumer standards, or you could link in environmental

standards. Would that be a good thing?Louise Sylvan: We think it’s a good thing, certainly. And thereare some standards linked in. There are processes in particularwithin the United Nations, which set for example, standards forfoods that are going to be traded throughout the world, andthese are pulled in to the World Trade Organisation processesby the States being able to have disputes with one another onthe basis of these standards. So in fact if you can get thesestandards across the world and get a reasonable standard, not alow standard, that’s a very powerful incentive for trade.Now the corporations and governments are willing to deal withthose sorts of standards, and yet when it comes to standardsreally for human rights, they immediately try to resolve fromany sorts of commitments.Peter Thompson: The developing countries, Chris, are sayingthat linking in labour guarantees into trade agreements is whatthey call backdoor protectionism. What does that mean?Chris Manning: Well it basically means that rather than restrictthe access of goods to developed countries, they put up certainstandards which labour has to meet, or which their citizens haveto meet in terms of environmental standards, or the corpora-tions have to meet as a means of limiting trade, essentially.Developing country access to developed countries’ markets.Peter Thompson: So this would be a bit like US concerns forinstance about distribution networks in Japan.Chris Manning: Certainly. Can I just come back to Louise’spoint on the issue of human rights and trade policy. I thinkAustralia has taken the right stand. I think the issues areseparate. I don’t think it indicates that necessarily the govern-ment doesn’t care about these issues, but it feels that the trademechanisms are not the channels through which these policiesshould be addressed. There are other organisations: the ILOsupport for trade union movements within these countries, theinternational trade union movements, through a lot of othermechanisms where these issues can be addressed.Peter Thompson: Why is that so?Chris Manning: In my view, the whole issue of labour stan-dards is a very complex affair. Most standards are relative, that isthey’re linked to a country’s standard of living; those issues arebetter solved by specialist organisations, better addressed byspecialist organisations like the ILO; they are best addressed andfought for by unions within their own countries. I think it isvery, very difficult, or it may turn out to be very, very difficult, toset those standards linked to international trade and toadminister them through those processes.Peter Thompson: Let’s take up another issue. This conferencewas addressed from Boston by John Kenneth Galbraith who Ibelieve is now in his late ’80s. But among the points he madewas that wars being waged against the poor in the name ofwelfare reform. Now at first glance that may not appear to belinked to the issue of globalisation. But Louise, what’s yourresponse? There’s certainly a lot of welfare reform going on. Isthat part and parcel of - as Galbraith puts it, spending less onothers - is that part and parcel of the sort of get ready forglobalisation, be most cost-competitive, which seems to be partand parcel of liberal trading?Louise Sylvan: I think it is part and parcel of it. Increasingly theargument is that all sectors of the economy have to be efficient,

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Thave to be competitive and so on, and there is also the argu-ment to the side of that, but linked to that, that governmentsare to get out of the ways of business and so on and so forth.And that’s how you get - I mean governments reducing theirdebt and so on, is how you get to the real attack on the sorts ofsupports that a government would provide to its people.So there’s a real attack if you like, on the role of governments,which I think has become part of the globalisation debate.Peter Thompson: It’s hardly conspiracy though.Louise Sylvan: Oh I don’t think it’s a conspiracy at all in thesense that 17 powerful men got into a room and decided this isthe way we were going to go. It’s more a sense of when you talkto the leadership of many governments, or you talk to theleadership of many of the global corporations, the same sortsof notions are basically there. They’re in fundamental agreementabout the directions. And that’s not necessarily agreements thatare shared with a lot of their people.Peter Thompson: Let’s go further on what Galbraith had to say:he talked about both an upside and a downside toglobalisation. The first thing he said was the upside: the upsideis that linked economies, those that are basically havingintercourse all the time, reduce the threat of war. And I supposethe best example of that has been the whole vision for postwarEurope. Scott, what’s your view on that?Scott Birchell: Well he’s got an argument there. This is one that’sbeen explored by people such as Michael Doyle and FrancisFukiama. The argument being that if you link the world’seconomies together, make them interdependent, then it’scounter-productive for them to enter into conflicts with eachother, because they only lose out. So yes, I mean this is thetheoretical basis if you like, of the European Union.Peter Thompson: It’s worked, hasn’t it?Scott Birchell: It has as far as France and Germany’s concerned,yes. So it really is counter-productive for those countries to evencontemplate conflict between them because they would lose asmuch if not more, than they would gain. So that’s the upside.Inderdependent econmies does limit the prospects and thejustifications for conflict.Peter Thompson: Back to Galbraith: he said the downside ofglobalisation was what he called the lowest common denomi-nator effect. That is, that there’d just be one low set ofstandards operating across countries that traded openly witheach other. Louise, from a consumer point of view, is that a realworry?Louise Sylvan: Certainly it’s a real worry. He’s not simply pickinga thought out of the air, he’s actually referring to some thingsthat are occurring. And if I can use consumer standards as anexample, when these standards are negotiated internationally,some of the food standards for instance, there are very power-ful interests around the table that are not trying to actually pickthe best practice world standard, they’re trying to pick a standardwhich is much lower. I think we have to be careful when we’resetting those sorts of standards, that we don’t set the standardsat a level for example, which is unnecessary because then you dohave unnecessary trade barriers. They have to be standards thatcan be met by a variety of developing countries and so on. Sorealistic standards of protection, but too often they’re set lowsimply because that’s easiest, you can go to the lowest cost

countries then to produce your stuff; and really the result is thisdownward harmonisation of overall standards.Peter Thompson: Where are the examples of that?Louise Sylvan: Oh you’ve got - if I take Europe as an exampleand a very funny example that is used quite often, and the greatdebate between the UK and the rest of Europe as to thesausage standard -Peter Thompson: It’s very important!Louise Sylvan: Yes, it’s very important! Very important standardin the UKPeter Thompson: What’s the sausage debate?Louise Sylvan: The sausage debate was that the British peoplehave a certain sort of sausage, the Europeans have differentsorts of sausages, and at the end of the day they had tonegotiate a standard which has ultimately meant of course, thatthe amount of meat which is included in a sausage, is substan-tially lower than it was previously. So the result for consumers isactually a very poor outcome, which was probably unnecessary.Peter Thompson: When you consider the different types ofsausages in Europe, it’s a wonder they ever got together isn’t it?Louise Sylvan: Yes, it is actually.Peter Thompson: Let’s further consider the downside, and thelowest common denominator. Outside consumer products,what are the other issues there, Edna?Edna Ross: Well I think people have referred to globalisation asbeing a race to the bottom, and we’ve talked about a lot —Peter Thompson: A race to the bottom?Edna Ross: A race to the bottom. Because as different countriescompete for foreign investment, what we’ve been talking aboutis the forcing down of labour conditions and standards, itmeans that a lot of standards in industrialised countries thathave been fought for many, many years, are being eroded, andwe can see in Australia the new Industrial Relations Act, thepressure to de-unionise labour is strong in all countries that areexport focused. And the argument given is that we will not becompetitive if we don’t. So there’s I think, a tension in thenorth which again is one that is reflected by the Pauline Hansonargument, that if we have to compete in the north with verycheap and poor labour conditions globally, that that is adownward push on labour and standards and the rights ofpeople to organise, etc.Peter Thompson: So you’re seriously saying that deunionisationwhich is a phenomenon in Australia, is happening because ofglobalisation rather than a march of a whole number of othertrends, including the changing nature of the workforce, the shifttowards seemingly more sensible enterprise agreements and soon.Edna Ross: I think that all those forces are obviously contribut-ing to it. But there’s definitely a correlation betweengovernment-sponsored pressures to deunionise, or todisempower unions as well as the change in the nature of thelabour force, which has failed to attract people to unions. And Ithink there was a program on the ABC just the other day whichshowed that in Singapore and Malaysia there were very strongunion movements in the ’50s, and it was only when thosecountries switched to export oriented economies, that thepressure from governments to get rid of unions becamestronger.

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So I think there is a link in a global competition betweencountries to reduce the power of labour to work for betterconditions.Peter Thompson: Let’s consider Asian unions for a moment.Chris, we know that Indonesia has a set of unions that tend toget literally bashed around by the government when they speakout. What’s the state of labour unions in other Asian coun-tries? I mean except for South Korea, are they robust? Japanalso I suppose - are they robust in any Asian country?Chris Manning: They’re not robust and certainly not as power-ful as in most developed countries. Nevertheless there ismultiple unionism in Malaysia, in Thailand, in the Philippines.They are tightly controlled administratively.Peter Thompson: That is, the government sets the boundaries?Chris Manning: Yes, the government sets the boundaries,particularly on registration which is a key issue: which unionscan be registered, and which cannot. Do they fulfil the stan-dards, or don’t they. So the second area where there is very tightcontrol is on labour action in particular strikes. Strike activity isheavily regulated. So in those two areas there is considerablecontrol.Nevertheless, at the enterprise level, bargaining over labourconditions is quite active, particularly in the modern sector inthose countries.Peter Thompson: Do you buy this argument that there’s alowest common denominator effect?Chris Manning: Well I think it really depends, Peter, on whereyou’re looking from. If you’re looking from the position of anunemployed worker in Ipswich who’s lost his job because ofthe penetration of cheap imports into the Australian economy,yes, he’s pretty upset about that and globalisation is negativelyaffecting his living standards.Peter Thompson: Which is in fact the argument of the newGovernor of the Reserve Bank, that there’s a realy danger forpeople that are least skilled, in ratcheting up wages.Chris Manning: That’s absolutely true. I mean I won’t get intothe argument of what our wage policy should be, but certainlythere’s a whole community in Australia, in the United Statesand the developed world generally, that are suffering as aconsequence of globalisation, in particular the unskilled, the lesseducated people, and as you’ve mentioned, Pauline Hanson haslatched on that, although she’s redirected the argument anotherdirection.If we look at the issue from the north, if you look at it sayfrom South Korea, we can only say it’s a race to the top. There’sno other way to describe the extraordinary improvement inliving standards in that country over thirty years.Peter Thompson: Than what?Chris Manning: From something like $200 per capita to nowabout $3,000 to $4,000 per capita in thirty years, not even onegeneration. It’s never happened in the developing world, or thedeveloped world previously.Peter Thompson: And that’s because of globalisation.Chris Manning: It’s essentially because that country went outsingle-mindedly with government support, not just throughmarkets, and penetrated international markets. It got intoexport markets in the US, in Japan, and all over the world, andit did it faster and more efficiently than any other country in the

world.Scott Birchell: Well I mean I think Chris is right, though hedoes I think underestimate the role the State played in co-ordinating the economic development in South Korea. TheSouth Korean economic miracle, if that’s what it is, is hardly atestament to free trade and globalisation, it’s a classic exampleof how important it is for the State to get involved in co-ordinating industrial development in these countries. It’s apattern that’s been reflected throughout the East Asian region.Edna Ross: I think examples like South Korea bring a wholeother issue about the role of the State into the fore: SouthKorea certainly has shown huge development and it’s done itlargely by improving its export performance. But it had a wholelot of other things in place, which meant that those benefitsfrom the increased earnings from exports were spread relativelyevenly. First of all it had a land reform program and secondly ithad a highly educated population. Now those two things areprerequisites. What you’re getting in other countries wherethere’s very rapid economic growth due to export, withoutthose other underlying factors having been taken care of, is thatyou’re getting an increasing gap between the rich and the poor.And I think that raises the question about the role of the Stateand about the whole international agenda, which is onlyfocusing on deregulating trade. And I think free trade is amisnomer. It’s deregulated trade and it’s where governments arebeing urged to remove themselves and to just allow multina-tional corporations or industries or whatever you want, to lookat it as to cross freely. And the question is, how can govern-ments come back into those negotiations and put a socialagenda on the table? Because they are linked. And if govern-ments can’t agree on bottom line social conditions, then theywill compete against each other and erode social conditions.And I think that’s one of the things Galbraith was saying, isthat internationalisation is good, but it will only be good ifgovernments talk to each other about common standards ofdecency and basic needs being met for everybody, and basichuman rights.Peter Thompson: Let’s begin talking about responses andstrategies to this as we move towards a conclusion.I began by really asking the question, Is this absolutely inevi-table? Everyone seems to think that that’s not quite the case, it’sa little more complex than that. What sort of responses canconsumers take, or are they simply victims of globalisation?Louise Sylvan: Well actually no. Consumers benefit a great dealfrom globalisation. You get products from all around theworld, increased choices. If you have a good competition youactually can get better prices. In fact consumers and consumerorganisations are fairly supportive of globalisation of interna-tional trade and so on. The critical thing is how you achieve that.And I don’t encounter many consumers that say to me thatthey would like to have cheaper prices that result from the abusefor example, of child labour. The consumers don’t want that.Peter Thompson: But consumers don’t know, do they?Louise Sylvan: That is exactly the problem. Consumers don’tknow. And lots of people say that the consumer buying poweris the way that you eventually start to come at these problems,that you get consumers to buy responsibly, ethically and so on.And that’s a great idea, but there are not many consumers that

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Tare going to spend their time in the stores with a great tax bookin hand, trying to figure out what company, let alone if thecompany didn’t use any number of variety of inputs from allover the world to actually produce its products. That’s why Idon’t think you can utlimately simply rely on consumer buyingbehaviour to change. They can make some changes, butultimately you’ve got to rely on a different sort of level playingfield than the corporations talk about. It’s a level playing fieldfor people in this globalised world.Peter Thompson: Well as in the case of the last twelve monthsor so, there was a consumer movement which has been verysuccessful against Shell for instance, because of their behaviourin West Africa, in Nigeria. There’s got to be potential todiscipline the behaviour of transnational corporations bytargeting just some of them.Louise Sylvan: There is definitely potential to do that. And Ithink that kind of consumer power should be used increasingly.When you do have a corporate entity misbehaving, and there areother examples of those sorts of consumer boycotts, thethings that matter most to those corporations are their profitsand their bottom line, and if you can hurt that, you canultimately I think, force them to behave in particular ways andmuch more ethically. But there’s a limit to how often and howsuccessfully you can engage in that sort of behaviour. But Ithink it’s a great lesson to the rest of the corporations that Shellcould be disciplined so effectively by consumer buying power inthe marketplace.Peter Thompson: Mm. Scott Birchell, in terms of prioritiesabout what action governments like Australia should take, whatdo you think the list is?Scott Birchell: Priorities I think is first of all that the publicought to be consulted in any agreements, whether they be -Peter Thompson: Consulted?Scott Birchell: Yes. Well I think there’s been a history -Peter Thompson: Extraordinary idea.Scott Birchell: It is an idea. It’s a strange idea in some quarters.My mind goes back to the December 1995 when the previousPrime Minister signed a Security Agreement with the Indone-sian Government, but had to keep it secret from the publicbecause when asked why did you keep it secret, said well thepublic wouldn’t have agreed with it.So I think we have to go back and think well, you know, publicpolicy whether it be in trade, finance or security, ought to besubjected to popular approval.Peter Thompson: But I haven’t forgotten what you said 20minutes ago, and that is, if there were a referendum on issueslike protectionism, everyone would say yes we’ll have protec-tionism, we won’t have free trade.Scott Birchell: Yes, but people - exactly. I mean these are - thepeople - know where their interests lie. The people in Geelong,for example, know what would happen if the Ford MotorCompany disinvested from Australia. There would be a massunemployment in that city. Now people know that protection-ism is extremely important and that principles - the free tradeprinciples represent a dogma in theology I think, more thanwhat the practical requirements are to build cohesive societies.And I think this is the point that Galbraith made very effectivelyyesterday.

Peter Thompson: Edna Ross, what’s your view, what’s theagenda for doing something about it rather than lying back andallowing the negatives of globalisation to happen?Edna Ross: Well I think it is important - I mean the debatetoday could suggest to people that we didn’t think trade was agood idea, and that you know that we thought that freeing uptrade and removing protectionism is a bad idea. I don’t thinkthat’s true. I think there are actual genuine benefits to be hadfrom removing protections. I think for example, the exportsubsidies paid to American agriculture, which is the major formof protection that the Australian government’s fighting against,have huge detrimental impacts on the environment, andcertainly by dumping them on developing countries, have hugedetrimental effects on small-scale farmers in developingcountries.So I think that it’s important to get it straight, that we’re notopposed to trade liberalisation, but it has a downside and anupside, and at the moment, everyone’s behaving as though it’sjust God’s gift to humanity. And if John Howard is seriousabout telling the people what globalisation means, then I thinkhe has to tell the whole story, and I think that is one of thecrucial things - is that first of all, we don’t know enough -Peter Thompson: It’s hard to tell the whole story in a soundbite, isn’t it?Edna Ross: It is really. But I’m going to try!That we need much more research on the benefits and the costsof both trade liberalisation and globalisation. And the otherthing I think that’s really important is that we need to realisethat the whole world is interdependent, and that at themoment, the agenda that’s being pushed in the WTO andunder APEC is definitely not acting - it’s definitely favouring theinterests of those that are already most powerful.And the third thing is that I do think that the people have to belistened to, and those institutions have to be democratisedbecause if they’re not, then the disadvantages that are beingextracted, and the payers in the north, workers in the north whoare going to be disadvantaged, will resist. And the wholeprocess will fall apart, and you will move back into a protection-ist world which could threaten the security of the world.So I think it’s in all our interests to open up the processes anddemocratise the whole thing.Peter Thompson: Chris Manning, if you could walk acrosswater in Lake Burley Griffin, what would you do to take controlto ensure that there were more positives than negatives comingout of globalisation?Chris Manning: I agree entirely with Edna. I think the wholeprocess of trade liberalisation and globalisation is threatened bythe failure of governments to tell the truth about whatprocesses are occurring, to explain, to link high rates ofunemployment and increasing inequality and the problems ofunskilled workers, to globalisation, there’s no doubt in mymind that part of that is related to increasing trade, though ofcourse a lot of it is to do with technological change.If I was - so I think that job’s got to be done. If I was lookingat developing countries, I would say that undoubtedly it’s inour interests for those countries to grow rapidly, for livingstandards to rise, and I would support globalisation becauseincreased employment means increasing purchasing power and

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eventually our economy will benefit from globalisation in thosecountries.Peter Thompson: Well we’ve had enough of talking to yourfour for a moment. Look, let’s take some contributions fromthe audience.Anthony Tabor: My name’s Anthony Tabor, I’m an environ-mental consultant. One dimension that seems to be missingfrom all economic debate around this issue is where we’reactually heading here. And there have been estimates thatlooking at the way economic development is progressing, andfuture population growth, we could be looking at severalhundred times the material resource throughput through theglobal economy of environmental resources. And even today,we’re in no position to manage the ecological impact at thispoint in time. And God help us if that is a hundredfold timesthis. And this strategy of export-oriented liberalised trade, a lotof those goods we’re talking about are headed for northernconsumer markets, they’re luxury goods, they’re unnecessarygoods, they’re ecologically destructive goods, and all the thingslike foodstuffs that pass across the oceans from one place toanother where those things could be grown locally in localcommunities and kept within local economies.Peter Thompson: A reply?Louise Sylvan: I think this is a very important point. I meanwhat a market economy does, whether it’s globalised ornational, is it doesn’t speak to equity or need or useful productsand so on. And I think Anthony’s raised another critical issue,which is if we’re serious about bringing up the rest of theworld’s people to a reasonable standard of living, I guess what’scalled the First World, improperly but, First World people aregoing to have to consider their use of resources. I can’tremember the exact figure, but I think every Australian con-sumes the equivalent of several hundred I believe, Indonesians.I mean we just consume so excessively in comparison withdeveloping nations.Peter Thompson: In reality it’s hard to see how that’s going toall work out though, isn’t it - I mean on the one hand, how’s itgoing to work out that people are going to go on and becapable in developing countries of consuming more and more,and on the other hand it’s hard to see how Australia is going tosay, Well, we’ll do away with cars because it’s not a fair distribu-tion of income.Louise Sylvan: I don’t think there’s any indication in fact, thatthose people in developed economies are willing to give upwhat they have now defined as reasonable standards of living.And it makes for an absolutely intractable sort of problem. Itmakes for a result that has perhaps one-third of the world’speople living at enormously high levels in terms of standard ofliving and the other two-thirds not even participating in thisglobal shopping mall that we’re evolving.Peter Thompson: I mean ecologists are saying that the othertwo-thirds just can’t raise to consume the sort of globalshopping mall standards that the lucky third are now consum-ing. So how does that get resolved?Louise Sylvan: Well I don’t think there is any good resolve thatI can see. Perhaps some other people have some good solu-tions to this. But it almost seems to me that we’re on a paththat doesn’t have any good solutions, ultimately.

Chris Manning: A very brief economist’s response: I mean wesee that process as being resolved in the way that all the fearsthat were put forward by the Club of Rome in 1972 wereresolved, and that is scarce resources lead to higher prices,consumption sets back on key scare resources through themarket system. That’s the principal mechanism by which it’sresolved.Peter Thompson: This week Background Briefing’s beencoming to you from Deakin University in Melbourne. We’vebeen part of a conference on globalisation and labour marketsorganised by the University and the Australian Council forOverseas Aid.On our panel has been Chris Manning, who’s a Research Fellowat the Indonesia Project at the Australian National University,thus his ability to walk across Lake Burley Griffin; LouiseSylvan, who’s Head of the Australian Consumers’ Associationand an Executive Member of Consumers International which isthe peak global body of consumer rights; Edna Ross, who’sDirector of Advocacy for the Australian Council for OverseasAid, which is the peak body for Australia’s 100-plus non-government aid agencies; and Scott Birchell, who’s a Lecturer inInternational Relations at Deakin University.

Introduction to GlobalisationFathom: What is Globalisation?Globalization is a relatively new idea in the social sciences,though some commentators argue that, while the term is new,what the term denotes is an ancient, or at least not novel, set ofphenomena. The central feature of the idea of globalizationthat is current in the social sciences is that many contemporaryproblems cannot be adequately studied at the level of nation-states, that is, in terms of national societies or internationalrelations, but need to be theorised in terms of global(transnational) processes, beyond the level of the nation-state.Fathom: In what areas have researchers into globalizationfocused in order to assess whether it is a real phenomenon?Globalisation researchers have focused on two new phenomenathat have become significant in the last few decades: one,qualitative and quantitative changes in economic structuresthrough processes such as the globalisation of capital andproduction; and two, transformations in the technological baseand subsequent global scope of the mass media.For these reasons, it is increasingly important to analyse theworld economy and society globally as well as nationally. Thestandard resolution of the difficulties this conclusion raises forconcrete empirical research is an often rather vague injunction to“think globally, act locally,” which appears to be as popular withthe major transnational corporations (as we shall see) as it iswith sociologists, anthropologists, geographers, environmental-ists and the rest. I suspect that most theory and research ontransnational communities proceeds in a similar fashion. Globalsystem theory has its own version of “think globally, actlocally,” where it is an expression of how the global capitalistsystem operates to maximize profits.Fathom: How does your conception of globalization differfrom other researchers’ work?

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TMost attempts to survey the field, while differing radically intheir interpretations of the facts, agree that globalizationrepresents a serious challenge to the state-centrist assumptionsof most previous social science. The apparently “natural” qualityof societies bounded by their nation-states, the difficulty ofgenerating and working with data that cross national bound-aries, and the lack of specificity in most theories of the global-allthese conspire to undermine the critique of state-centrism.Thus, before the idea of globalization has become firmlyestablished, the sceptics are announcing the limits and, in someextreme cases, the myth of globalization.Globalization, in the words of some authors and commenta-tors, is nothing but globaloney!

Thinking PointDo you think globalisation is a new phase of capitalism?Provide arguments for and against this interpretation.I have a good deal of sympathy with the sceptics, and my ownwork, paradoxically, has been an attempt to limit drastically thetheoretical scope of the concept of globalization and its concreteapplication in the sphere of empirical research. By this I meanmy research focus on globalization as a new phase of capitalism.Thus, globalization is an extremely important phenomenonand one that has to be confronted in theory and research if weare to have any grasp of the contemporary world. Therefore, Iattempt to research the extent of globalization empirically in adynamically changing capitalism on a world scale.Another way in which my research differs from others is that itsunit of analysis is not the nation-state. Global system theory isbased on the concept of transnational practices, practices thatcross state boundaries but do not necessarily originate with stateagencies or actors. This conceptual choice offers, as it were, aworking hypothesis for looking at one of the most keenlycontested disagreements between globalization theorists andtheir opponents, namely, the extent to which the nation-state isin decline. The concept of transnational practices (my basic unitof analysis) is an attempt to make more concrete the issuesraised by such questions in the debate over globalisation.Fathom: How does global system theory relate to globalcapitalism?Analytically, transnational practices operate in three spheres: theeconomic, the political and the cultural-ideological. The whole iswhat I mean by “the global system.” Today, the global system isnot synonymous with global capitalism, but the dominantforces of global capitalism are the dominant forces in the globalsystem.To put it simply, my argument is that individuals, groups,institutions and even whole communities, local, national ortransnational, can exist, perhaps even thrive, as they have alwaysdone outside the orbit of the global capitalist system, but thatthis is becoming increasingly more difficult.

Globalisation in Today’s Economy

Clay ButlerMeanwhile...at the global marketplace: a cartoon aboutglobalisation, which appeared in Z magazine in 1998.The term “globalisation,” ugly though it is, has now becomevery, very familiar. But you only have to go back about ten yearsor so to see that hardly anyone used it. I wrote a book about 12years ago, in which I was one of the first people to make quiteextensive use of the notion of globalisation. At that time,people did not really use it in academic life, they certainly did notuse it in the newspapers - they did not use it even in businessdiscourse.Over the past 10 or 12 years, the term globalisation has gonefrom nowhere to be everywhere. You cannot open a newspaper,you cannot listen to a political speech, whether it is Mr. Bush orMr. Gore or Bill Clinton or Tony Blair, you can not read thewritings of a business guru, you can not start an enterprise likefathom.com without encountering the notion of globalisation.Now when a term comes from nowhere to be everywhere, youcan be sure that it will provoke controversy. There is an extraor-dinary debate going on across the world about whatglobalisation is and about what its consequences are, and indeedabout whether it exists at all.

What’s New about Globalisation?On the one hand, there are those who are skeptical of the termglobalisation. The skeptics say that, if you look back a hundredyears to the late nineteenth century, there was already a good dealof trading across the world. At that time, there was also massmigration, as everyone who knows American history will bevery conscious of. So the skeptics say essentially, “What is new?”You could call this view a nothing-new-under-the-sun kind ofposition. The old left, the traditional leftist parties across theworld, including sectors of the Democrat Party in the US, tendto like this skeptical position. If you do not believe that toomuch is actually changing in the world, you do not have tomake too many political changes, either. For example, you can

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keep existing welfare institutions intact. That is one side of thegreat globalisation debate.On the other side are what I call the hyper-globalisers. They saynot only are there fundamental changes going on, but they areso fundamental they have already transformed most of thebasic systems and structures of the world.To my mind, there is no doubt that the truth is closer to thehyper-globalisers’ version. There are fundamental changes goingon in the world economy which differentiate it from previousperiods. Recent research shows that the volume of trade inphysical commodities is much, much higher than it was 100years ago, and a lot higher than it was 30 or 40 years ago. Themost important development in the global economy is not, ofcourse, trade in physical commodities, it is trade in informationand trade in currency.

Ready ReferenceHowever, I think it is also fundamentally wrong to supposethat globalisation is solely or even primarily about economicfactors. Globalisation is not just economic; it is social, cultural,and political. If you want to look for the prime driving force ofglobalisation, it is not, I think, primarily in the marketplace. Themain driving force of globalisation over the past 20 or 30 yearshas been the revolution in communications.You can say that the global communications revolutionessentially dates from the late ’60s and early ’70s—the time atwhich the first commercial satellite was put up above the earth,making it possible to have instantaneous communication fromone side of the world to the other. Without this marriage ofglobal communications and computer technology, many of theinstitutions which we have now become familiar with wouldnot exist, including global money markets.

Is the Nation State Obsolete?In his book The End of the Nation State, Japanese business guruKenichi Ohmae speaks of a borderless economy. He arguesthat, in the future, you might have several hundred city stateswhich will replace nation states. If you consider Hong Kong,for example, as an illustration, or Barcelona, or London, orindeed New York. These are global cities; they point outwardsinto the global marketplace. They do not have that much to dowith the hinterland, the nation of which they are a part.But globalisation does not signal the end of the nation state.The hyper-globalisers I think are plainly wrong about that. Inmy view, nation states still remain more powerful than corpora-tions. Some people say this freed-up, liberalised marketplace isdominated by big corporations. But that is not the case. I thinknation states remain and will remain for the foreseeable futuremore powerful than even the biggest corporations.

Thinking PointDo you agree with Leslie Sklair’s view that the unit of analysis inglobalisation “is not the nation-state”?Nation states control territory; corporations do not. Nationstates acting individually or collectively control an apparatus oflaw; corporations do not. Individually or collectively, nationstates control military power; corporations do not. So when yousee the battle between the US Government and Microsoft, I donot think that is really a battle between equals.

Globalisation pulls away from the nation, but globalisationpushes down as well. It creates new forces for local autonomy,new pressures for local cultural identity. It is behind the revivalof local nationalisms across the world from Quebec toCatalonia to Scotland to Kashmir. In lots of parts of the worldyou have these new regions developing, which is sometimes asource of important democratic transition, and which othertimes has produced ethnic violence.

Globalisation from belowWhen most people talk about globalisation, they talk aboutglobalisation of markets. They ignore fundamental furtheraspects of globalisation, which I call “globalisation frombelow.” Globalisation from below is the way in which interestgroups, self-help groups, third sector groups, and volunteerassociations themselves draw upon international communica-tion systems to establish themselves in the global arena.This is indeed what happened with the protests at the WorldTrade Organization meeting in Seattle. Everybody knows thatthe protesters who assembled in Seattle did so by using theInternet. There was a very funny poster that some guy washolding in Seattle that said, “Join the worldwide movementagainst globalisation.” If you go back 30 years, you only hadabout 1000 non-governmental groups in the world, groups likeGreenpeace and so forth. Now you have by some estimates30,000 such groups, many of them operating at a global level,many of them fairly well resourced.One of the themes of the Seattle protests was corporate power.My view is that the power of corporations can be readilyexaggerated. You only have to consider the humbling of theMonsanto Corporation to see that, no matter how powerfulyou are as a corporation, you can be brought to your kneespretty quickly. At one moment, Monsanto seemed to haveeverything going for them in the area of genetic technology. Butthey underestimated the power of consumer groups, whichplay a crucial role in global society, especially in Europe.If you are running a corporation, you ignore these forces at yourperil. No matter what you are doing, in whatever part of theworld, you will be watched. So corporations flirt with disaster ifthey ignore the leverage that the counter-power whichglobalisation from below is promoting in the world.

Economic Inequality: Is Globalisation the Culprit?The Seattle protests raised another crucial question: isglobalisation the cause of increasing inequalities through theworld? Most of the protesters would say “yes.” But when youlook at the phenomenon, I do not think you can actually agreewith them.Many people say that inequality is increasing through the world.If you look only at the bluntest measures of economicinequality, this is true. The poorer countries are falling behindthe richer countries every day of every year. But you can also takea richer notion of inequality, the kind of notion introduced bythe economist and Nobel Prize winner Amartya Sen fromTrinity College, Cambridge. Sen says a proper measure ofpoverty should include education, access to health care, andaccess to basic non-material features of life that make life worthliving. And I think this is correct.

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TIf you look at those measures, inequality has actually beendeclining rather than increasing across the world. The poorercountries have improved in respect to the broader conceptionof inequality. But the inequalities are nevertheless very big.Globalisation is not the prime cause of increasing inequality.Income inequality in the US increased for a period of some 30years until a few years ago. But the best study we have of thatseems to indicate that trade liberalization accounts for onlyabout five percent of that. Maybe 15 percent of it is accountedfor by new technologies, especially the growth of the knowledgeeconomy, the impact of information technology essentiallymakes large numbers of unskilled workers redundant - you donot need unskilled workers in a knowledge economy.

Thinking Points

• How do you think globalisation affects inequality anddeveloping countries?

• Think of concrete examples, which illustrate the effects ofglobalisation in these arenas.

But a very big structural force in the US is actually changes in thesphere of the family, especially the emergence of large numbersof one-parent families in a society that does not have a devel-oped welfare state. So you cannot really blame globalisation forexpanding inequality in the US. And actually, economic inequal-ity in the US has dropped. Blacks and Hispanics are doing muchbetter in the economy than they have done for some 30 or 40years. The lowest 20 percent have shifted up their share ofincome quite substantially.

Developing Countries and The Global MarketplaceIs it true that globalisation is the cause of the impoverishmentof the poor countries of the world? Again, by and large, youhave to say no, I think. When you expand free trade, there is nodoubt that it can have disruptive consequences for some poorercountries, when those countries are not prepared to engage withthe economic forces that are released.However if you look at the statistics, you can show thatengagement with the global economy is actually the conditionof the economic development of poorer countries. No country,which has sought to disengage from the global economy, hasprospered: countries like Burma or North Korea that try toisolate themselves from the world system are among thepoorest countries in the world.Poor countries which have kept fairly closed economies haveonly had a .04 growth rate, that is virtually no growth rate, overthe past fifteen years. Poor economies that have been moreopen have had an average 4.5 percent growth rate over thatperiod. So you cannot blame globalisation for these inequalities.The key question concerning economic development is reallyunder what conditions can poorer countries engage withglobalizing forces. And one should still remember, I think, thatwe have before us the most successful example of countriesleveraging themselves out of poverty ever known, which is theEast Asian economies. In spite of the crisis of 1997-98, therehas never been an example in history of millions of peoplebeing leveraged out of poverty so quickly.

This happened over a period of some twenty-five or so years.In 1970, for example, Korea was poorer than Portugal. NowKorea is richer than Portugal per head of GDP. So there is amassive transformation, and these countries achieved it byengaging with the global economy, not by disengaging from it.

Governments still have a Role to PlayIn order to produce a more egalitarian world and help thepoorer countries to become richer, you cannot simply leaveeverything to the global marketplace. Market forces often tendto accentuate inequalities, rather than reduce them.That means what you are looking for is a new kind of relation-ship between governments and markets. Some of the bestwriting on this is by Joe Stiglitz, who was a famous economistat The World Bank. He wrote a series of articles about theInternational Monetary Fund, criticizing what he calls the“Washington Consensus.” Stiglitz argues that you need acertain measure of government involvement in order tofacilitate economic development. He says that there is no knownexample of successful economic development where a govern-ment has not been involved, including the United States in itsearly years, the UK in its early years, European countries, Japan,the Asian economies, and so on.Stiglitz essentially argues for a “third way” in developmentstudies, although he does not use that term. He says that, in theperiod after the Second World War, many people thought thatthe state was the main medium of economic development.And that failed. Countries that tried to develop throughexpansion of state institutions, like Tanzania or India, hadabysmal economic records.As a result, many people thought, “Ha, ha; well, if the statecannot do it, then we must turn toward the market, liberalizethe market and everything will suddenly come right.” Stiglitzsays this does not work, either, and I believe this to be correct.You need a kind of partnership between government andmarket institutions. And I think Stiglitz is quite right in someof the subtle and acute observations he makes.For example, he says that it has proved to be much, muchharder to establish market institutions than we ever imagined incountries that do not have them. The reason is that it is veryhard to establish an appropriate legal system, very hard toestablish appropriate norms of a cultural kind that underliemarkets. You cannot have a successful market economy unlessyou have a successful civic culture. Having a successful civicculture is also the condition of democracy. Anyone who hasstudied recent events in Russia will know this.In Russia, what you had under the Soviet system was essentiallyan economy of favours. The way in which you got things donewas not through the use of money, because that would not getyou anywhere, it was through the use of favors. You wouldhave to ring someone if you needed something, like getting atelephone quickly without waiting years for it. Out of thiseconomy of favors has come a kind of corrupt gangster-styleattempt at capitalism, which lacks the basic institutions out ofwhich a successful capitalist economy and a successful demo-cratic society can be built.

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Managing the Forces of GlobalisationIn conclusion, I think you do need a role for effective govern-ment in the world. It must combine with the selective use ofmarkets. You can hope to make a big dent in the problems,which bring the protesters out in the streets in Seattle. And Ifeel that to the degree to which we make this successful, thedegree to which we can effectively conquer global inequalities isactually the condition of the twenty-first century lookingdifferent from the twentieth century.

If you look back to the beginning of the twentieth century, youcould say that was the first age of globalization, as I describedearlier, the open markets and so forth. A lot of people thoughtwell, there is going to be a period of economic prosperity andglobal cooperation, we can build a League of Nations, and soforth. And what happened was a century of warfare, 200million people killed in warfare in the twentieth century.I think we have an obligation to try again at the beginning ofthe twenty-first century. It is a much more intense age ofglobalisation. But if we do not effectively cope with issues,especially of expanding global inequalities, we will not be ableto handle the forces which globalisation has released.

India’s vote: Globalisation Fine, but notLocal Enough

The Wall Street Journal had a front-page story last Wednesdaythat caught my eye. It was about how the antiglobalisationmovement seemed to be losing steam, with police not expect-ing the sort of violent protesters of the late 1990s to show upat the G-8 summit in Sea Island, Georgia, this week. If youwant to understand why the antiglobalisation movement -

which was always a mishmash of groups and ideologies - haslost its edge, you should study the recent Indian elections. Andif the antiglobalisers want to understand how they could againbecome relevant, they should study those elections as well.To everyone’s surprise, India’s elections ended with the rightistHindu nationalist BJP alliance being thrown out and replacedby the Left-leaning Congress Party alliance. Of course, nosooner did the BJP- which ran on a platform of taking creditfor India’s high-tech revolution - go down than the usualsuspects from the antiglobalisation movement declared this wasa grass-roots rejection of India’s globalisation strategy. They gotit exactly wrong. What Indian voters were saying was not: ‘‘Stopthe globalisation train, we want to get off.’’ It was, ‘‘Slow downthe globalisation train, and build me a better step-stool, becauseI want to get on.’’

‘‘Every time an Indian villager watches the community TV andsees an ad for soap or shampoo, what they notice are not thesoap and shampoo but the lifestyle of the people using them,the kind of motorbikes they ride, their dress and their homes,’’says Nayan Chanda, the Indian-born editor of the invaluableYaleGlobal online magazine. ‘‘This election was about envy,anger and aspirations. It was a classic case of revolutionshappening when things are getting better but not fast enoughfor many people.’’Indeed, Indian villagers and farmers are just like all otherconsumers today - better informed. And they seemed to know,at a gut level, exactly why the BJP’s stress on informationtechnology was not delivering for them. It was because localgovernments in India have become so eaten away by corruptionand mismanagement they cannot deliver for the poor theschools and infrastructure they need to get a fair share of thepie. The Indian masses didn’t vote for an antiglobalisationstrategy, they voted for (among other things) an effectiveglobalisation strategy. Sonia Gandhi, the Congress party leader,seemed to understand this when she chose as prime ministerManmohan Singh, the former Congress finance minister, whofirst put the Indian economy onto a globalisation track in the1990s. His task now is to make globalisation work for moreIndians by making government work for more Indians.‘‘Both the Congress and its Left allies would be risking India’sfuture if they draw the wrong conclusion from this election,’’said Pratap Bhanu Mehta, an Indian professor of government,

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Twriting in The Hindu . ‘‘The revolt against holders of power isnot a revolt of the poor against the rich: ordinary people are farless prone to resent other people’s success, than intellectualssuppose. It is rather an expression of the fact that the reformof the state has not gone far enough.’’My own recent travels to India have left me convinced that themost important forces combating poverty there today are thoseactivists who are fighting for better local governance. The worlddoesn’t need the antiglobalisation movement to go away now -it just needs for the movement to grow up. It had a lot ofenergy and a lot of mobilising capacity. What it lacked was a realagenda for helping the poor.Here’s what its agenda should be: Helping the poor by improv-ing governance -accountability, transparency, education and therule of law - at the local level, using the Internet and other toolsto spotlight corruption, mismanagement and tax avoidance. Itmay not be as sexy as protesting against world leaders on CNN,but it is a lot more important. Ask any Indian villager.

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