Globalisation is good for you — but it needs a lot of improvement. So says journalist Philippe Legrain in a readable new book which could usefully top every executive’s, politician’s and protester’s list to take to the beach this summer.
Open World: The Truth about Globalisation is a definition, defence and dissection of the phenomenon that has stirred passions for and against across the globe.
“World leaders” now confer in hiding in inaccessible places like Los Cabos in Mexico and Coolum in Queensland, to escape rioting mobs. Proselytes promise plenty; protesters prophesy apocalypse.
They would both benefit from reading Legrain. So would anybody trying to make sense of our turbulent age. Free traders would acquire an arsenal of refutations of the fears and misconceptions the motley armies of protectionist unions, greens, marxists and indigenous rights campaigners promulgate. Anti-globalisers would find ammunition for calls to action which politicians and business could not glibly dismiss.
And both might usefully ponder this: “Globalisation is not a shorthand for the way the world is today, let alone everything you dislike about it.” Nor is it a juggernaut “system” that began in 1989 with the fall of the Berlin Wall.
Both sides in this debate of the deaf might recognise they are in the same boat. As Jim Anderton said in September, the protesters’ ability to organise so effectively is itself a product of globalisation. Legrain says: “Many of the critics’ complaints should be directed at a lack of globalisation or the absence of accompanying measures to make it work better.”
Legrain did a spell as a “special adviser” to Mike Moore at the World Trade Organisation in Geneva and his book switches rather Moorishly from place to place and example to example.
Legrain uses this to disciplined effect. He is as scathing of New York Times columnist Tom Friedman’s triumphalist The Lexus and the Olive Tree (2000) which approvingly describes free trade as a “golden straitjacket” as he is of anti-globalisers’ darling Naomi Klein’s No Logo (also 2000) which conjures a corporate conspiracy to enslave us to American bad taste.
Trade makes us better off, Legrain argues, both rich and poor. The poor in a Korean-owned Vietnamese Nike factory are working for less than American steel workers but for a lot more than in the paddy fields. And their lot will get better.
Protection, whether in the name of saving jobs or in retaliation for others’ protectionism, is counterproductive. Saving 9000 steelworkers jobs in the United States by special tariffs is likely to cost 74,000 jobs elsewhere in the United States economy. Even unilateral liberalisation benefits the liberaliser, as this country’s faster growth in the 1990s demonstrates.
The real culprit for the loss of American steel workers’ jobs, Legrain says, is not foreign competition but technology: a steel plant Legrain visited produces the same output with 3500 workers that once took 30,000. “Trade accounts for less than a quarter of the decline in manufacturing’s share of GDP” in the United States: “two percentage points out of 9.1.”
The same goes for the rest of the rich world. “In 1982 imports from [non-oil] poor countries were 2.5 per cent of GDP in rich OECD countries. In 2000 they were 3.9 per cent” — hardly enough to justify industrialists’ and their workers’ howls of outrage and the huge subsidies and tariffs doled out to them by craven politicians.
Neither is globalisation the cause of unremitting third-world poverty, says Legrain. Poor countries which have opened up have done well out. China has taken off since it began opening up. India, now opening slowly, is showing similar signs after stagnating under protection.
Legrain demolishes other myths. The world drinks Coca Cola not because western corporations are forcing people into a cultural straitjacket but because they like Coca Cola — even in Cuba. Far from all-conquering, brands are proving fragile. What are no-logo-ists to make of the fact that Britons’ favourite takeaway is curry and its 7500 Indian restaurants outnumber McDonald’s six to one?
“Many on the left support multiculturalism in the west but cultural purity in the third world,” says Legrain. He finds cultural cross-fertilisation, not dominance. Al Qaeda might take note.
And what right do rich-world protectionists have to impose rich-world labour and environmental standards on poor countries — not to mention a growing plethora of food safety (including GM), health and sanitary restrictions? Every right, Legrain says, for global issues such as climate change — how about trade sanctions on the United States if it bucks Kyoto (and how about a carbon tax)? But no right if it means imposing impossible standards on a poor country in transition and thereby ensures it stays in poverty.
That is designed to protect rich countries’ privileges. A better way of lifting labour standards in poor countries would be for rich countries to pay into a fund that gives aid to poor countries that comply with agreed International Labour Organisation standards. Firms rarely move their operations to take advantage of lower environmental standards in another country: Legrain proposes a World Environmental Organisation to match the ILO and WTO.
Protection ensures the poor countries stay poor just as surely as Europe’s insane common agricultural policy and the United States’ hypocritical special tariffs and farm supports. Even worse, such supports crimp markets elsewhere as rich countries export the resulting surpluses. “While European and American farmers live fat on the land, many poor farmers in poor countries starve.”
It gets still worse — and here Legrain is likely to find glimmerings of interest among anti-globalisers. He devotes a chapter to the evils of TRIPS, a United States-imposed element of the Uruguay free trade round which protects intellectual property and which the United States enforces with trade sanctions.
Fine for the rich countries which produce the vast majority of patents. Not fine for 40 million aids sufferers in poor countries, the governments of which can’t afford the TRIPS-protected $US10,000 cost for drugs for each sufferer which an Indian supplier could supply for $US350 and others for even less.
The protection ensures drug companies get enough payback to develop new drugs, a worthy objective: but of 122 new drugs launched between 1977 and 1997 only 13 were aimed at tropical diseases. Why should poor countries in effect pay (through loss of life) for rich people’s new drugs? TRIPS, Legrain says, needs radical reform.
It is a short step from that to rich countries’ stingy attitude to aid. The United States gives 0.1 per cent of its GDP, much of it tied, some of it military. Europe gives 0.33 per cent. We are in between. The United Nations’ modest target is 0.7 per cent.
Legrain sides with Paul Krugman and Joseph Stiglitz on the need for measures to constrain the damage international money traders can do to vulnerable small economies they suddenly go cold on. One option: a process for country bankruptcy similar to that for companies.
In short, Legrain argues for a better globalisation. And that requires government action.
But aren’t governments supposed to be powerless in the face of this inexorable force? Isn’t that the one point on which the Friedmans and the Kleins agree?
Yes, they do — but they are wrong. Governments are still powerful. They can deny their citizens the benefits through protectionism or they can open up to the benefits and, in rich countries, mitigate the effects on some people through skills programmes, relocation grants, subsidies on low wages and generous welfare systems (which will also help deter the less-well-off in rich countries turning against globalisation).
And collectively governments could clean up the many ills in the world trading rules, notably through the World Trade Organisation. It is, Legrain essentially says, not multinational corporations which exploit the poor countries’ poor; it is their pusillanimous governments.
But aren’t many corporations, especially American ones, bigger than many economies? A schoolgirl arithmetical error, says Legrain: Klein and her ilk put total revenue against GDP, which is a value-added concept. The value-added of the top 50 corporations equals only 4.5 per cent of the value-added of the 50 biggest countries.
In any case governments are more powerful than corporations. They have a monopoly of coercive power. They can tax. They can regulate. And they do.
The strongest curbs on the corporate “giants with clay feet” would come from freer, not less free, trade. Competition kills monopolisers. Governments kowtow to protected national champions, thereby conniving against their own citizens.
But in democratic societies they have a duty to their citizens. In Legrain’s eyes this does not mean slavishly following some other country’s policy set. “There is more to life than maximising GDP growth. Europeans should be able to choose social democracy if they are willing to pay the price for it … If taxes are well spent they boost an economy’s productivity.”
And the flip side of that coin: “If your priority is more spending on public services, that is not a reason to oppose globalisation. On the contrary, progressive people should support globalisation because it makes more resources available to fund social spending.”
Full circle, at least twice round. Readers will find a lot to disagree and agree with in Open World. What they will not find is comforting cant. Instead, they will find tight argument. And all this from a 28-year-old. Moore should be so lucky to have had such a special adviser. ColinJames@synapsis.co.nz