Don't be fooled: multinationals do not rule the world

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"Globalisation" is a heavy word. It drips with doom and helplessness. It is used as a sort of chloroform gag to shut up people who think that a good government could give its citizens a better standard of living. "Don't you realise that we are all globalised now, and live in a post- political world?"

Awed by all those syllables, ordinary people might sum up their impressions of globalisation like this. Vast, unaccountable corporations now rule the world. From a plane high above the reach of national governments or even international agencies, they switch billions of dollars of investment between continents at a keystroke. These universal oligarchs dictate terms to trembling statesmen whose power over economies has been reduced to mere servicing. Wages and employment in the developed world tumble down, as production movesto Third World countries where labour can be had for a fraction of the cost. Any attempt to defend living standards is wiped out automatically by speculators dumping the national currency for a "safer" one.

This, in equally apocalyptic terms, is the nightmare of globalisation recently projected at German readers by the Hamburg magazine Die Zeit. In a New Year article on the front page, Theo Sommer wrote that "globalisation means open frontiers, keener international competition, struggles against extinction. It deprives nation-state politics of their last elbow-room. Those in charge administer, but scarcely govern creatively any more. Regulating, rather than ruling, becomes the name of the game. Leadership fossilises into impotent gesticulation which can scarcely affect reality. Who can be surprised when a liberal like the French sociologist Alain Touraine laments that public life has generated into a fancy-dress ball ...?"

But are things really so bad? Could globalisation turn out to be only a scarecrow rather than a real ogre overshadowing the world? Economists - or rather politicians rummaging in their grab-bags of half-understood economists' cliches - have always enjoyed constructing ogres. For instance, it was supposed in this country that going off the gold standard would bring the entire world trading system down in rubble. When the National Government was forced to abandon gold in 1931, wealthy people ran shrieking to their bomb-shelters. Nothing happened, however, except an adjustment in the price of sterling. Afterwards, the wondering Chancellor said: "Nobody told us we could do that!"

Today the idea of globalisation is paralysing political will all over the world. But does globalisation really exist? And if it does, what damage does it really do? And is it really an invincible force - or something which could be tamed if only politicians could summon up the courage and unity to try?

Late last year, two heretical voices in this country said boo to globalisation. One was a special number of The Ecologist, which gave a detailed and sometimes alarming account of how global companies play workers off against each other in order to depress wages. But it also discussed "glocalisation" - the new fashion for international companies to identify themselves with their host nations. This at least gave governments the chance to reassert the interests of the local community. A leading article concluded that, in spite of modish panic and despair, "there are few areas in which [transnational corporations] are not vulnerable to organised resistance".

The other blast on the heresy trumpet was an article in the left-wing journal Soundings by Paul Hirst of Birkbeck and Grahame Thompson of the Open University. Hirst is a political philosopher; Thompson an economist. And they are wonderfully aggressive.

They first set up an Aunt Sally to pelt with derision. This is John Gray's 1996 Demos pamphlet After Social Democracy. Gray claimed that the idea of regulating a national economy and redistributing wealth now belonged to history; national governments and organised labour were helpless in the face of the new international market forces, neo-liberal deregulation and global economic integration.

The Soundings Two start off by retorting that the failures of social democracy are mostly its own fault and have little to do with changes in world economic organisation. Then they declare that "the notion of globalisation is just plain wrong". And they set out to prove it.

The world had an open trading economy before 1914, they remark, and in many ways - although the volume of trade today is far bigger - the global market of the 1990s is still not as free as that of the Belle Epoque. Britain's trade in 1913 formed 44.7 per cent of its gross domestic product, but is only just over 40 per cent today; France and Germany show similar figures. As for the irresistible outrush of free capital from the developed world to the poorer continents, this is largely a myth. In 1993, there were capital outflows of over $100bn from the advanced nations to the "newly industrialising countries" (NICs); this sounds a lot, but in fact it amounted to a mere 3 per cent of investment in North America, Western Europe and Japan.

How about the assumption that imports from the poorer world, many of them manufactured there by transnational companies, are responsible for job losses in Europe and America? This is mostly myth, too. Hirst and Thompson show that these imports are relatively insignificant - under 5 per cent of total imports in the United States, far less in Europe or Japan.

But does globalisation push down wages in advanced countries, even if it does not destroy many jobs? To a slight extent it seems to do so. But again the impact is piddling. Only an idiot would try to depress British wages to compete with Indonesian wages. But unfortunately there are plenty of idiots. "Illiterate politicians and ideologically crazed economists claim that the UK will become more competitive if the wages of British office cleaners are reduced to starvation levels ... this low-wage strategy is best described as seeking competitive advantage by sweating - but it is mad."

The big lie is becoming plain. Third World sweated labour, organised by transnational capitalists, is being blamed for our declining earnings and jobs. But the truth is that almost all investment flows and transfers (no doubt seeking cheaper labour and less regulation) move within the advanced world - not out of it. The rich are screwing the rich. The global market is not all that global, but is sited right here; almost two-thirds of world trade is inside the "Triad" of North America, Japan and the European Union.

And how dominant are these famous corporations, and how "transnational"? They turn out to generate less than 7 per cent of world production. Most of them remain firmly based in their "countries of origin", with most of their operations and recruitment there. In theory, the great globe is their oyster. In practice, they are deeply involved with home-country governments. They may be arrogant and callous, but their immunity to political pressure is yet another myth.

These myths are useful, though. They are useful to reactionary or timid political parties, which foment the great globalisation scare to justify low wages and cuts in public spending. Unemployment and poverty in the advanced world are growing. But this is not because of uncontrollable winds of change blowing though the world economy, or because a new breed of transnational beings has arrived from outer space to colonise the earth. They grow because we let them. As far as the economy goes, this globe is still our globe and we can roll it whichever way we please.

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