Michael Meacher

Labour Party | Oldham West and Royton

The Times: Crushed by well-heeled global boots

The poorest countries need tariff walls to protect them from international competition
 
 
“EMBRACING globalisation,” according to Gordon Brown in his CBI speech on Monday night, “is the best way to growth, jobs and prosperity.” Looking at the facts, however, might prompt a rather different response: is globalisation, once thought unstoppable, actually now in decline?

Politically, the acrimonious collapse of the Hong Kong World Trade Organisation negotiations in December, the stranding of the so-called Doha development round, and the increasing resistance to the Washington Consensus by which the international financial institutions have dominated the last century, all suggest the first stirrings of a shift to a new world order. This is also reflected in the downturn of global foreign direct investment, which fell 41 per cent in 2001, 13 per cent in 2002 and another 12 per cent in 2003. 
 
There are other uncomfortable facts. First, a system that has given unprecedented power to today’s private global capitalists to scour the world for the highest profit return has led to a drastic hollowing out of the manufacturing base of the US-UK economies. This has led to a current account deficit in the US now approaching 7 per cent of GDP and to net foreign debt of over trillion, a colossal 40 per cent of US GDP and still rising. This is unsustainable. In the UK we are losing 130,000 manufacturing jobs a year. Thirty years ago only a fifth of manufactured goods sold in the UK were made abroad; today it is 60 per cent and rising. No economy can survive on the service sector and high tech alone.

The conventional answer is to move up-market to counter the sucking-out of manufacturing jobs to China and other fast-developing countries. But this won’t work either. While information technology and call-centre jobs were the first to move to Asia, the trend is now spreading to areas long thought to be safe from outsourcing, such as financial services, legal servicesand even the media. The unpalatable fact is that China and India are already competing both with very low wages and in high tech as well.

The Chinese share of GDP devoted to research and development is growing 10 per cent a year, while Europe’s is virtually stagnant (0.02 per cent). That’s why in the US, as in the UK, there has been no net job creation in high-productivity sectors. The jobs created are in lower-paid public and private services that cannot be traded internationally. But the average pay in many of them — retail sales, customer services, cashiers — is below the poverty line for a family of four.

Secondly, the global economy has not improved economic performance. Since 1980 world GDP has grown only slightly more than half as fast as it did in the period before 1980. And in some respects its impacts have been quite malign.

Joseph Stiglitz, as chief economist at the World Bank, identified the uncontrolled flow of “hot money” as the main culprit of the East Asian tiger economy crisis of 1997-98, since footloose capital so often generates instability. The same instability of a global economy operating to a single set of monetary criteria lies behind the recurrent crises in Mexico, Argentina, South Korea, Indonesia and Brazil.

For the poorer developing countries the impact has been stark. The share of global income of the poorest fifth of the world has actually halved since 1960 to a paltry 1.1 per cent today. World inequality has grown drastically. The richest 20 countries now have 125 times higher GDP per head than the 20 poorest countries.

The main reason for this impoverishment is that a global economy has locked developing countries into the role of primary producer of basic commodities, forced to open up their markets to transnational competition that they cannot resist as the price of receiving the investment that they cannot do without. What is needed is the right for the poorest countries to erect tariff walls to protect their infant industries, at least until they are strong enough to meet the full force of international competition.

The key is to be allowed to tailor economic policies to domestic needs — which is why for example Vietnam, subject for decades to a US trade embargo, has had a growth rate five times higher than Mexico fully plugged into the world economy via NAFTA. But this is precisely what a globalisation run by the transnational corporations in their own interests will never permit.

Even, therefore, on the economic front the case for globalisation, at least in its current form, is clearly not made. But there is a darker side too which cannot be ignored. That is the global drug trade, the global trafficking of women and minorities, the more rapid transmission of Aids, diseases such as malaria, TB and perhaps avian flu, increasing migrant flows, and above all the relentless intensification of climate change. None of these was caused by globalisation per se, but it has exacerbated all of them.

The global economy is here to stay. But today’s, monopolised by international capital for its own interests, is not serving us well. A new model could achieve a fairer shift of power and opportunity to losers in the South, and entrench all economic activity within the limits of sustainability.

Nor is this a mere pipedream. The resistance to reinforcing the status quo at the WTO conferences at Seattle, Cancún and Hong Kong, and the emergence of a group of 21 vanguard developing countries to lead the opposition, suggests there is a powerful constituency for real change.