Three ways to fix globalisation

'There is going to be rising concern about the negatives of globalisation, while the world economy is heading into a much tougher period'

Hamish McRae
Saturday 17 September 2011 14:09

The new rallying cry for the anti-capitalists is "globalisation". And you can see their point. Even people who have zero sympathy for the May Day protesters ­ who see them as the spoilt children of two generations of post-war peace and prosperity ­ must feel uncomfortable about some aspects of what has come to be called globalisation.

We all have our own very different concerns: for example, the exploitation of decent people in the sweatshops of China making trinkets for the West; the rewriting of history by Hollywood to suit America's jingoistic tastes; or the destruction of wildlife habitat by logging and farming, often subsidised by taxpayers. All these ills are by-products of globalisation. If we did not have so much trade with China, or have a global film distribution system, or were not able to buy wood products from countries that wreck their forests, then these unhappy effects would be much diminished.

Even those of us who rejoice in the global triumph of the liberal market economy must seek to fix the problems it generates. Or rather especially those of us who feel that way: it is people who believe in the system who are the ones who can do something about it. The losers of the great intellectual battle ­ the former communists in Eastern Europe, the Marxist dictators in Africa, the extreme trade unionists in Western Europe ­ have little interest in fixing a system they spent the first half of their lives trying to pull to bits.

Fix it we must. Not only is there going to be rising concern about the negatives of globalisation, but the world economy is heading into a much tougher period. In particular, it is going to be very hard to deliver rising living standards when the proportion of people of working age is falling, not just in the developed world but pretty soon in most developing countries, too. If people are unhappy about an economic system when it is delivering, for the majority of people, higher living standards, they will be seriously miserable when it is struggling to do so.

What needs to be fixed? And to what extent are there market solutions to the problems? The second question is important because if there are market solutions, then the system can fix itself. If not, then we have to rely on weak global political institutions, which are likely to be ineffective, or worse, do more harm than good.

Three aspects of globalisation give particular cause for concern: its impact on the environment, inequality and cultural hegemony.

The problem of the environment is a problem of both success and excess. If there are more people in the world, and we are still adding more than 70 million to the global population each year, they will need more resources to feed and house themselves. In as far as population is rising as a result of increased life expectancy, that is a great success. We don't really want people to die younger, do we?

These additional people are, on balance, getting richer. With the sad exception of sub-Saharan Africa, every region of the world is on balance richer than it was a quarter century ago. Some parts, China and East Asia, are spectacularly so. Generating more wealth, of itself, need not damage the environment. On the contrary, we can use wealth to solve many environmental problems: put clean water into cities, generate electricity without burning dirty coal. However, as we become richer, we do use more energy, and while the world remains a fossil-fuel economy, that means that we will increase carbon dioxide emissions.

The market, left to itself, can alleviate many environmental concerns, particularly if it is nudged in the right direction by thoughtful regulation. Governments have often acted perversely towards the environment: look what the Common Agricultural Policy has done to our farmland. But there are some things the market cannot fix and the increasing use of fossil fuels is one of the most serious.

Countries are profoundly hypocritical about environmental regulation. The US has tough regulations on car fuel consumption, and accordingly has driven US motorists to four-wheel drives and light trucks that escape the regulation. Japan prides itself on environmental correctness, but sees nothing wrong with throwaway chopsticks and the killing of whales for "research". Many continental European countries criticise the US for excessive car use, but actually have higher car ownership and shorter distances to drive themselves (little Luxembourg has the highest car ownership in the world).

But increasing the carbon dioxide in the atmosphere does matter, because the long-term effects are so uncertain. We may end up flooding large parts of fertile low-lying land. The solution lies in changing policy in two countries, the US and China, and global self-interest can help solve it. You just have to convince them both to rein back their excess. It should be easier to do so in an interdependent world than one in which large countries operate without caring what their trade partners think.

Inequality: as a rule of thumb, the effect of globalisation is to increase inequality within countries but diminish it between them. There are exceptions: parts of sub-Saharan Africa may be losing ground simply because they cannot produce the products the rich world wants to buy, and not just because of corruption and civil war. Western banks and governments have also been extremely irresponsible in lending money to countries that wanted to borrow, but would always be unlikely to be able to repay. International financial markets are a facet of globalisation, and it would have been hard to deny countries access to them, even when that access was inappropriate. But lenders should always carry responsibility as well as borrowers, and when the relationship is unequal, the responsibility on the more powerful party is all the greater.

But for much of the rest of the world, inequality between rich countries and poor ones has diminished during the past 20 years. A simple fact: both China and India have grown faster both absolutely and per capita than either Western Europe or the US over this period. The gap between the world's two most populous nations and the two richest regions has narrowed.

The alarming problem, surely, is rising inequality within countries. This has happened everywhere, showing in some places (such as the US and UK) in rising income and wealth differentials and in others (much of Continental Europe) in different employment prospects. Both are profoundly distressing, and it is a fine point whether it is worse to have people working on low wages or to exclude them from the job market altogether.

The problem is determining to what extent globalisation is responsible for widening differentials, and to what extent other economic changes have increased the relative demand for skills. Some of the reason for holding down the real wages of working people in rich countries must be greater imports from lower-wage countries abroad. But part is the result of the need for skills. Everything we can do to lift skills must be an effort well-directed.

But the aspect of globalisation that worries me most is the third: cultural hegemony. Most people use this expression as a coded attack on the US: the imposition of hamburger values on the rest of us. I don't mean that: if intelligent adults really want to drink Coca-Cola, they should be free to do so. My worry is more fundamental; in myriad ways, we are being nudged to adopt customs that are foreign to our heritage. You can see it in Britain, with the imposition of continental weights and measures. You see it in France, with the creeping growth of the English language. If this jars in rich, developed countries, how must it feel in poorer ones, where the background noise from the developed world is all the louder?

I see no way of fixing this, except by being more self-confident about our own diversity and by respecting ­ and relishing ­ the diversity of others. Globalisation brings huge benefits; but it must never be allowed to crush diversity.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

View comments