A new report by the Institute for Public Policy Research (IPPR), headed by a foreword by Lord Peter Mandleson, takes an in-depth look at the positive and negative impacts of the increased internationalisation of trade – what they characterise as the Third Wave of Globalisation.
IPPR’s Will Straw and Alex Glennie set out how the modern increase in global commerce is distinct from those seen around the Industrial Revolution and World War II that were dominated by the UK and the USA respectively. Today’s growth in global trade is lead by developing economies in the East with a new pluralism in the economic strategies pursued by the fastest-growing nations as opposed to one consensus fits all.
The report’s authors take a refreshing approach to the phenomenon of globalisation, refusing to characterise the mixture of global trade and movement of capital, labour and technology as simple A Good or A Bad Thing. Instead they acknowledge that there are both opportunities and threats posed by different aspects of our current wave of globalisation.
The authors conclude that there are opportunities presented by the opening of new markets for highly-skilled and value-added services and manufacturing in particular, as well as threats from unregulated flows of capital and, crucially, the largely political failure to ensure that the benefits of global trade are justly distributed and citizens are adequately protected from the significant risks posed by the demands that globalised trade brings.
Lib Dems interested in reforming our economic systems, domestically, on a European front and globally (we’re nothing if not ambitious, right?) will find plenty of familiar political philosophy in the report. Indeed some of it states the obvious as far as Lib Dems are concerned and we could go as far as welcoming Lord Mandleson onto territory long-held by our party. We’ve long recognised the advantages of global trade (and are suspicious of economic insularity) but we also seek to ensure that the terms of said trade and the accompanying social policy makes prosperity both justly distributed and politically legitimate – that is the essential message of this study.
The IPPR’s suggestions for making sure globalisation works span both global and national remits; the former include Bretton Woods-like controls on capital flows, more robust global economic governance through strengthened institutions and a new global reserve currency, and the latter an interesting mix of taxation and social protection policies to be applied by countries as suits them to match their developmental stage. The policies mooted for Britain will challenge both lazy economic libertarians who see unrestrained markets as the only way to raise living standards, as well as those who seek to somehow put globalisation back in its box through protectionism. The report’s recommendations should be carefully examined and debated by all those seeking significant economic reform.
It is some journey for anyone to make from the paean to efficient market hypothesis that was New Labour to the recognition that in order for the global economy to serve socially liberal ends there needs to be strong democratic oversight of its institutions and outcomes. Lord Mandleson appears to have made exactly that journey, from being “intensely relaxed…” to saying in this report that the orthodox economic consensus of the past 20 years got the balance between economic efficiency and security wrong, and that “we must learn (or re-learn) the simple fact that we need effective states and governance to get the best out of globalisation.”
In that sense, this report marks a departure from the view that technocratic economic management would produce socially optimal results, and sees Mandleson finally acknowledge that the inequality that unrestrained capitalism brings poses a huge danger. Moreover it marks the return of a discourse in terms of political economy, an art too often overlooked in recent years. I for one relish the debate continuing on precisely those terms.
* Prateek Buch is Director of the Social Liberal Forum and serves on the Liberal Democrat Federal Policy Committee
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4 Comments
There is much to like in this report.
One perspective on globalisation is Dani Rodrik’s (Prof of International Political Economy at the JFK School of Government at Harvard) inescapable trilemma which postulates that, “democracy, national sovereignty and global economic integration are mutually incompatible: we can combine any two of the three, but never have all three simultaneously and in full.” If he is right – and I think he is – then there are powerful implications.
http://rodrik.typepad.com/dani_rodriks_weblog/2007/06/the-inescapable.html
the middle of those three is dramatically over-rated anyway 🙂
[runs and hides]
Hmmm…. We have had decades of sovereignty being more constrained than most knew or govts admitted; for instance there have been limits of just how independent have we been from our major trading partners in interest rates or even industrial standards down to the precise legal definition of chocolate. The last few days news that the EU wants to take over responsibility for the Greek budget. If agreed this would take this trend to a new level where democracy has been dragged under along with the sovereignty to make the world safe for predatory finance; that is surely very wrong and the Greeks ae right to reject this iniquitous plan.
Another facet of the progressive loss of sovereignty is the way that the super-rich and multinational companies can now manage their tax affairs through tax haven so as to pay very little and to hide and launder the proceeds of crime allegedly to the tune of hundreds of billions. When any govt tries to crack down they are warned that it will just lead to more offshoring of tax and jobs.
So, my vote for what gives first is unrestricted globalisation; the benefits of which flow largely to the 1% while the costs are picked up by the 99%. This takes us back to the sort of arrangement that was Bretton Woods. There are downside inevitably, but for my money less serious than with the other options. I believe that by rethinking our approach we can capture the valuable bits of globalisation without creating the thieves charter that it is now.
How right Liberal Eye is! “Free Trade ” was a Liberal dogma which destroyed the party’s credibility in the 1930’s Great Depression and bids fair to do the same to us now. The arguments about “comparative advantage” , global benefits and self-balancing trade flows have long been debunked. Our old system using sterling as a reserve currency within Imperial Preference is quite different from today’s petro-dolar,with its contrived markets and the anti-democratic banker domination so disastrous in its impact on Britain.
In order to obtain US financial and military support Britain agreed in 1940 to terms that were subsequently embodied in GATT: this abolished Imperial Preference and forced on us the ” most favoured nation” clause, at which point (by 1941) any chance that we were fighting to sustain the British Commonwealth and Empire became vanishingly small. So far as I can discover the only economist with the courage to protest openly at the time was Sir Roy Harrod – but pehaps other readers can correct me on that.