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Globalisation: what to do about losers?

A Joint Conference with the Chicago Council on Foreign Relations
A Note by the Director (2002/09)
 
21-23 June 2002
Over a fine weekend at the end of June, in partnership with the Chicago Council on Foreign Relations, we discussed what to do about the losers from Globalisation.  We were fortunate that the range of experience and expertise around the table enabled us to look at this problem from a variety of perspectives and to come up with a number of policy recommendations.
We sought first a definition of globalisation, then to understand who were the winners and losers and why, and finally we looked at policies which could enable losers to become winners.
At a fairly early stage we came to the conclusion that it would not be possible to reach a common definition of globalisation.  There were simply too many aspects of a process which contained both economic and non-economic elements.  The latter included cultural and information globalisation in which apparently remote societies were now aware of trends and advances in countries at different stages of development to themselves.  Civil society global actors were another aspect of this phenomenon.  There was also agreement that the economic elements of globalisation needed to be disagregated if our analysis was to serve as a useful basis for policy.  Whatever the definition of globalisation, argued one participant, the process provoked strong views given the increasing inequalities among nations.  People tended to define themselves as Conformists, Rejectionists, Reformists or Transformists.  After further discussion there appeared to be agreement that we were all reformists now which provoked the question as to what exactly would be reformed and how.
Looked at in historical terms, globalisation was not, we thought, a new process.  It could be argued that a greater degree of economic globalisation had existed before the first World War but the politics of nation states had brought that experiment to an end in a spectacular and damaging way.  This, asserted one participant, underlined the close connection between the political and economic elements in globalisation – values and institutions were as important as markets.  The demise of nation states had long been predicted, commented another, but their twilight phase was likely to last for some time.  Global governance was not likely in the foreseeable future and indeed no global demos existed.  Nation states would continue to be the principal actors in this process.  It might be said that Globalisation had not gone too far but too fast.  Sometimes better results came from slow reform.
In the view of some, one of the distinguishing characteristics of current globalisation was the rapid pace of capital flows (as opposed previously to the predominance of trade flows) made possible by modern information technology.  This had created imbalances in the economies of those countries where the pace of change was slower than some of their competitors.  The industrial revolution had taken decades to develop and time to spread to other countries.  National cultures had had time to adapt and rules and conventions had evolved to cope with these changes.  Countries which had not had the same experiences were now being asked to accept the outcome of this without the same evolutionary process.
In looking at the participants, we spent some time on NGOs many of whom were resisting globalisation.  There were the violent opponents – the “window-bashers” – who had nevertheless played a prominent role in raising public awareness of the questions involved in globalisation by challenging issues across borders.  Their effect could be measured in the USA by the lack of support for fast-track authorisation on Capitol Hill.  Other NGOs wished to have a seat at the table and to shape the process on the basis of their own experience and capacities which were often substantial.  Concerns were expressed that the powerful and influential NGOs were based in the rich northern countries from which they drew their resources and whose political interests and cultural constraints they tended to reflect.  The hope was expressed that more “Southern” views might be heard around the table and that NGOs generally might be more transparent and accountable than was the case at present.  Some of us thought that the term civil society would be more appropriate than NGOs since a wide variety of groups such as trade unions, business associations, parliamentarians, religious and interfaith groups also had interests in, and needed to be involved in, globalisation.
Among the other important actors we looked at the role of the international financial and trade institutions.  The IMF and World Bank came in for a good deal of criticism for acting as judge and jury in deciding on the, at times inappropriate, policies to be followed by the developing countries.  It was argued that the IMF had sometimes turned manageable liquidity crises into serious solvency crises.  The institutions were thought solely to reflect the views of the creditors, and then only the views of the officials creditors and not the private financial institutions, commented one participant.  A plea was made to introduce an international bankruptcy regime independent of the IMF, to handle cases where inappropriate policies had caused a breakdown.  This would surely be in the interests of the creditors as well since all would benefit from an orderly exit mechanism in such circumstances.  There was also a call for better regulation of flows of short-term finance to emerging markets and for official support in crises markets to focus primarily on stronger social safety nets and not just on restoring market confidence.
Concerns were expressed about the WTO where, although the structure was at least based on consensus rule making, there appeared to be a tendency to load onto it more and more issues like intellectual property protection and labour standards.  These had been concessions extracted by the Europeans and Americans at the Doha Round for moves on agriculture and textiles which the rich countries should have made anyway, commented a former negotiator.  Suggestions were made which would have had the effect of obliging the international institutions to consult more widely with civil society and other interested groups before deciding on their developmental strategies as well as making their operations more transparent and changing the way in which the heads of such organisations might in future be chosen.
Overall, perhaps surprisingly, there was a feeling of optimism that more attention would be paid to the global as well as the local problems of globalisation in the years ahead.  Nevertheless the process had, in the view of others, introduced a significant feeling of vulnerability and insecurity at both the personal as well as at the national level caused by job losses and a fear that national cultures and institutions were under threat, often with the feeling that major decisions were being taken without any means for individuals or societies to influence them.
In looking at who were the winners and losers and why this should be, objections were raised about the title and indeed the concept itself of winners and losers.  The problem, in the eyes of one participant, lay not with the losers but with the winners and the means they pursued to “win”.  Given the pace of change commented another, the key to successful management of the process was to think through policies which were capable of responding to the rapidly changing situation and of softening the effects of some of the changes.  Indeed one of the defining characteristics of losers appeared to be their lack of capacity to absorb and adapt to change.  It was claimed that the 2 billion poor people who were living in countries which had either tried and rejected globalisation or, more usually, had not connected with the process at all, were the biggest losers.  Those who had benefited from it and lived in countries with large resources and capable institutions should keep in mind the moral grounds for seeking to help those less fortunate than themselves.  We also thought the categorisation of winners and losers was somewhat arbitrary.  Argentina was cited as an example of a country which was now a loser but five years ago had been high in the winners league.  It was suggested that the best way of identifying the reasons for winning and losing would be to look at specific case histories of countries which had failed such as Rwanda and Kosovo (although not a country) and others which had succeeded such as China and South Korea.  The point was made that the open market solutions proposed by the developed countries had frequently been applied only partially by some of the most successful developing countries.  In the 1960s and 70s South Korea had maintained high protective barriers to imports which threatened its nascent industries.  The same was true of India and China and indeed, it was argued, had been true at one point or another for most of the current developed countries.
We considered if cultural factors were important.  One participant pointed to the fact that the 35 to 40 countries which could be described as Islamic accounted for just 4% of the world’s exports.  There appeared to be a reluctance on the part of those countries to engage with the rest of the world.  Another participant contested the suggestion that Islam was to blame.  The countries concerned were politically stratified and the only outlet for protest was through the Mosque and religious extremism.  Africa was another area where its share of the world’s investment flows had decreased disproportionately over the last twenty years.  This was attributed largely to the nature of the regimes in a number of the countries and brought us to the recognition of the importance of politics in what was frequently considered to be an economic issue.  Good local governance was a prerequisite for economic progress.  But, argued a number of us, good governance was a two way process.  It required the developed countries to live up to the commitments they had made at Doha and elsewhere about opening their markets to exports from developing countries.  Recent moves by the USA in subsidising their farmers and steel industry and the EU’s reluctance to move on the Common Agricultural Policy were examples of hypocrisy which did not bode well for the future of the Doha negotiations.  Suspicions were also expressed about the developed world’s support for “capacity building” in the poorer countries.  This should not be taken as an exercise in building a view among the developing countries that they should understand and agree with the demands put forward by their developed interlocutors.  Capacity building, it was argued, should be about enabling the developing countries to stand on their own feet and compete effectively in the global system.
We recognised that Globalisation profoundly affected domestic politics.  The losers were not only in developing countries.  Many from the developed world had been among the protesters at Seattle and Genoa.  If policies were not put in place to cope with those in developing countries whose jobs were put at risk or eliminated by globalisation, then those affected would seek to prevent its development, to the detriment of lives in the developing world.  Challenged to come up with a coherent approach which did not follow the main lines of current globalisation, however much opponents might dislike it, the response from one participant was localisation, “Think global, act local”.  Working with local societies and economies in ways which did not involve massive debt burdens and supported local economies would, it was claimed, be preferable.  Transfers of technology appeared to be important even under this approach.  Indeed, the transformational role of modern technology in China and elsewhere was a theme to which we returned on a number of occasions.
We spent some time on the difficult question of migration or labour mobility as some of us preferred to call it.  Attention was drawn to the imbalance between the mobility of capital and relative immobility of labour.  Representatives from the developed countries pointed to the political problems associated with large inflows of unskilled labour over a short period of time.  Those from the developing countries underlined the brain drain from their countries.  Skilled medical workers were attracted to the North when there was an urgent need for them in the countries which had trained them.  No easy solution appeared to exist with opposition being expressed to Government control over individuals choosing how and where to make their living.  Support was expressed for some form of multilateral agreement to regulate this problem, possibly based on a system of quotas.
We had a detailed discussion about the best path for developing countries to follow to maximise their chances to benefit from globalisation.  Strong opposition was expressed against the view that there was a single model of development.  It was argued that there were a range of different models and there should be no inhibitions against adopting unorthodox approaches.  Governments in developing countries should be confident that they had real choices.  This, however, led us into a discussion of the “enabling environment” in which we identified a number of basic elements without which we thought countries would have difficulty in functioning as an effective market economy or in benefiting from the global economy.  Among these, we gave priority to basic property rights, functioning legal systems and a well trained and properly paid public service.  Underpinning this were basic standards of democracy and political rights.  In addition there should be a high premium on investment in the skills and education of ordinary people and in creating the basic institutions of business development like microfinance.  Governments and donors should be encouraged to see these as priority areas for their development policies
Official aid was discussed in some detail with the plea that there should be a better balance in the relationship between donors and recipients.  We thought it important that there should be local ownership of the reforms envisaged, with donors being prepared to accept the strategies of the recipient countries on the grounds that they would be likely to know their local situation better than outsiders.  NEPAD was cited as an example of a locally inspired initiative to be complemented by external assistance.  This acceptance would, however, have to be based on minimum standards of transparency, participation and accountability.  Against such a background aid should be treated as a form of investment and focused on creating an “enabling environment”.  It was also recommended that aid should be untied and not be attached to expensive prestige projects which often benefited the donors as much as the recipients.  There was strong endorsement for increasing Overseas Development Aid to the UN target of 0.7% of GNP but with the caveat that donors needed to be convinced of the credibility, commitment and competence of recipient governments to implement their programmes.  Debt relief was welcomed but there was also support for the view that the debts of the poorest countries should be cancelled on a once off basis which would go beyond the stalled HIPC process, provided, however, there were reasonable safeguards that the funds so released would be invested in positive social programmes.
The role of international business was considered, based on the proposition put forward by one participant that globalisation was essentially a business driven development.  Business was interested in systems which allowed markets to work.  Governments should bear in mind that business would respond to the incentives and disincentives put in place by the rule makers.  We thought that business had a strong interest in the development of fair and prosperous societies since, in the long run they would create shareholder value greater than the short term costs involved.  The most effective business programmes tended, we thought, to build on areas of closest interest to the businesses concerned such as the training of local staff, outsourcing contracts and building local capacity.  The caution was, however, expressed that business should not seek to replace governments or official donors.
Perhaps the strongest message of the conference was that the most important contribution to the developing countries that the developed world could make would be to offer a broad-based and generous deal on market access including on agriculture.  It was hard to see how developing countries could be winners from globalisation if they were not allowed to participate in markets where they had real strenghts.
Globalisation is, by its nature, a subject we will need to return to in the years ahead.  As one participant remarked, the present phase of globalisation had lasted for only about 15 years.  It was too early to tell if it was irreversible.  I am grateful to the Chicago Council and also to our Chairman, whose knowledge of the subject from both the business as well as the political points of view helped to guide our discussions so admirably, for setting us off down this road so well.
This Note reflects the Director’s personal impressions of the conference.  No participant is in any way committed to its content or expression.
 
 
PARTICIPANTS

Chairman  :  Sir Mark Moody-Stuart
Chairman, Royal Dutch/Shell Group (1998-2001);  a Director, board member, the Global Reporting Initiative;  Chairman, Business Action for Sustainable Development;  member, UN Secretary-General’s Advisory Council for the Global Compact
BANGLADESH/USA
Mr M Kamal Ahmad

Corporate Attorney, Mayer, Brown, Rowe & Maw;  formerly:  World Bank, the Rockefeller Foundation and UNICEF
BANGLADESH
Dr Debapriya Bhattacharya
Executive Director, Centre for Policy Dialogue, Dhaka
BRAZIL
HE Ambassador Celso Amorim

Ambassador of Brazil to the United Kingdom (2001-);  formerly:  Permanent Representative of Brazil to the United Nations (1995-99);  Permanent Representative of Brazil to the United Nations and the World Trade Organisation, Geneva (1999-2001)
CANADA
The Hon J Hugh Faulkner PC

Executive Chairman, Sustainable Project Management;  former Cabinet Minister and CEO, ALCAN India
Dr Ian MacPherson
University of Victoria (1976):  Director, British Columbia Institute for Co-operative Studies (2000-)
Dr Michel G Maila
Bank of Montreal (1983-):  Executive Vice-President and Head of Risk Management Group (2001-);  formerly:  Executive Vice-President, Risk Management (1997-2001);  a Director and Treasurer, Canadian Ditchley Foundation
Professor Edward Safarian
Emeritus Professor of Business Economics, Rotman School of Management, University of Toronto
FRANCE
Dr Brigitte Granville

Head, International Economics Programme, Royal Institute of International Affairs
M François Lagrange
Chairman, National Commission for Privatisation (1998-);  President, Institut National de la Propriété Industrielle (Patent Office);  Conseiller d’Etat;  author;  a Governor, The Ditchley Foundation
ILO
Mr Gerry Rodgers

Director, Policy Integration Department, ILO Geneva
I
NDIA/UNITED KINGDOM
Dr Gautam Sen

Lecturer in the Politics of the World Economy, London School of Economics and Political Science;  consultant, UNDP;  member, Indo-British Roundtable
NLD/UK/US
Professor Jan Aart Scholte

Professor, Centre for the Study of Globalisation and Regionalisation, University of Warwick
OAU/MAUR
Ambassador Vijay S Makhan

Assistant Secretary General, Organisation of African Unity, Addis Ababa
SINGAPORE
Dr Cho Khong

Chief Political Analyst, Shell International Limited;   member, advisory panel, Centre for Globalisation, Warwick University
UNITED KINGDOM
The Lord Bhatia OBE

Chair and Managing Director, Forbes Campbell Interntional Ltd (1980-);  Director, Casley Finance Ltd (1985-);  Chair:  Forbes Trust (1985-);  Ethnic Minority Foundation (1999-)
Mr Harold Freeman
Deputy Head, Economic Policy Department, Foreign and Commonwealth Office;  formerly:  Institute for Fiscal Studies;  HM Treasury
Mr David Grayson CBE
Director, Business in the Community;  co-founder/director of Project North East;  senior adviser to the pan-European public affairs consultancy, EPPA 
Rt Hon The Lord Holme of Cheltenham CBE
Liberal Democrat Peer:  Rio Tinto plc:  former Executive Director and, since retirement, Special Adviser to the Chairman;  Chairman, The Hansard Society;  Chancellor, University of Greenwich
Ms Kathleen M Laya
Director, External Relations, Accelerating Access Initiative & International Global Government Affairs and Public Policy, GlaxoSmithKline (2000-)
Mr John Lloyd
Correspondent, New Statesman;  Moscow office, Financial Times (to December 1995)
Mr John Lotherington
Director, 21st Century Trust
Ms Ann Pettifor
Programme Co-ordinator, Jubilee/New Economics Foundation
Dr Babu M Rahman
Head of Global Issues Research Group, Foreign and Commonwealth Office
Dr Michael Schultz
Chief Social Development Adviser, Department for International Development
Mr Gerry Wade
Partner, ProbusBNW (1991-);  trustee, Community Development Foundation and Ashoka (UK);  member of Council, Hansard Society
UNDP
Mr Stephen Browne
Principal Adviser on Capacity Development, UN Development Programme
UNITED STATES OF AMERICA
Dr William J Antholis

Director of Studies and Senior Fellow, German Marshall Fund of the United States, Washington
Professor Jagdish Bhagwati
Professor of Economics, Columbia University
Dr Marshall M Bouton
President, The Chicago Council on Foreign Relations (2001-);  Executive Vice President, Asia Society (1990-2001);  author
Dr Robin Broad
Professor of Development, School of International Service, American University, Washington DC;  member, Council on Foreign Relations;  author
Mr John Cavanagh
Director, Institute for Policy Studies, Washington DC, and Chair, International Forum on Globalization’s Alternatives Task Force
The Hon D Cameron Findlay
Deputy Secretary, US Department of Labor
Mr Nicholas Goodban
Senior Vice President, Philanthropy, McCormick Tribune Foundation
Dr Jo Marie Griesgraber
Policy Director, Oxfam America
Mr David D Hale
Global Chief Economist, Zurich Global Asset Management;  Chairman, China Online LLC;  consultant to US Department of Defense on the effects of globalization on US security relationships
Ms Lyric Hughes Hale
Founder, CEO and Publisher, China Online;  board member:  Chicago Council on Foreign Relations;  Council, Brookings Institution;  Advisory Board of the International Research Exchange Board
Mr Elmer W Johnson
President and CEO, The Aspen Institute (1999-);  counsel, Kirkland and Ellis (partner (1962-99);  formerly:  General Motors Corporation, including Executive Vice President and Director (1983-88); author
Mr Paul Laudicina
Vice President and Managing Director, Global Business Policy Council, A T Kearney Inc, Chicago
Mr Richard C Longworth
Senior Correspondent, The Chicago Tribune (1991-)
Ms Mary Page
Director, Global Challenges Project, MacArthur Foundation, Chicago
Mrs Adele Simmons
Vice Chair and Senior Executive, Chicago Metropolis 2020;  senior adviser to the World Economic Forum;  board member, Chicago Council of Foreign Relations