Globalisation in the Asia-Pacific Context
Professor Stuart Harris
Consultant, Foreign Affairs, Defence and Trade Group
19 February 2002
Contents
Major Issues
Introduction
What is Globalisation?
Glossary: The Globalisation DebatesSome Key
Terms
Is Globalisation New?
Is Globalisation Westernising? Or
American?
So? Does Globalisation Lead to Convergence or
Divergence?
Can Globalisation be Reversed?
Who Gains and Who Loses From
Globalisation?
How is Security Affected by
Globalisation?
And How Does Globalisation Affect the
Environment?
What About Reactions to Globalisation?
So, Does Globalisation Give Rise to a
'Democracy Deficit'?
Will the Asia-Pacific Seek to Limit the
Impacts of Globalisation?
Is the Role of the State Declining as a
Result of Globalisation?
How Should Australia and Other Regional
Countries Respond to Globalisation?
Endnotes
Appendix 1Globalisation Rankings
Major
Issues
Globalisation represents a lot of different
things to a lot of peoplejournalists, academics, parliamentarians,
business leaders and bureaucrats among them. It is welcomed widely
and lamented widely. Either way it is hard to ignore. Most people
seem to have a view on elements of it but still have many
questions. Is it old or new? Is it good or bad? Is it really
important or just the latest subject for hype? Who or what causes
it and who gains and who loses? These are some of the questions
addressed, from a variety of perspectives, in a now rapidly
expanding literature.
This paper tries to bring out the essence of
some of the important questions, with emphasis on Australia and its
region. It does not attempt a formal definition. There are now many
being proffered, yet few describe globalisation completely and
effectively and they generally embrace a lot of technical
language.
The paper begins by asking 'What is
Globalisation?' and points out that the term itself is both
imprecise and subject to contested definitions. Economic factors
are central to globalisation, and many in the Asia-Pacific region
would like to limit its effects to economics. However, the
globalisation process also includes social, political and cultural
links thatalong with economic and technological linkstend
increasingly to override territorial, legal and political
barriers.
Is globalisation new? Mostly no but partly yes.
Globalisation in an economic sense derives particularly from a
progressive reduction in transaction costs, and since this has been
occurring for a very long time globalisation can not be said to be
new. However, the level and pace of global economic interactions is
quantitatively much greater than in earlier phases of change (for
example in the latter part of the 19th century). Globalisation
today goes well beyond the economic dimensions and has spread
through political, cultural, environmental and even security
influences. Today's global integration is also qualitatively
different because of the scale, intensity and rapidity of the
processes involved.
Is globalisation westernising or American in
character? In overall terms the answer is largely no, but in the
Asia-Pacific widely yes. Many westernising influences have been
accepted voluntarily in the Asia-Pacific and most states have
actively participated in global markets. There have been strong
reservations held about the extent of western influence, especially
since the 1997 economic crisis, with concerns about the pressures
exerted by western capital markets and about the major
international economic institutions (such as the International
Monetary FundIMF).
Does globalisation lead to convergence or
divergence? Some see it as leading to convergence (including
culturally) and this can be viewed either negatively or positively.
Many others however see globalisation as encouraging and supporting
a healthy cultural diversity (with new technologies, for example,
empowering minorities and helping maintain threatened
identities).
Can globalisation be reversed? While in
principle globalisation could be checked or reversed (as was the
case in earlier phases by World War One and the Depression)
reversal would now in most areas be impracticable (as even the most
isolated Asia-Pacific states like North Korea and Burma are
gradually recognising). Changes in technology, communications and
global governance along with the associated spread of ideas, are
not reversible.
Who gains and who loses? Most gain, lots lose
and probably more lose for reasons other than globalisation and
wrongly blame the process. Many countries have gained from export
led growth and more open markets, particularly in the Asia-Pacific.
There have also been losers, for example in sub-Saharan Africa.
Careful assessment of the evidence on the effects of globalisation
both within and between countries suggests that inequality has not
increased between countries and that inequality within countries is
often wrongly attributed to globalisation.
Security can be affected by globalisation in
several ways. While economic inter-dependence has probably
decreased military insecurity, human security has probably not
decreased. Improved technologies have increased the global reach of
any potential military threat, while the declining control over
such conflict by states and the increasingly globalised economy has
increased the power of terrorist groups and organised crime.
How does globalisation affect the environment?
Probably adversely. Opponents of globalisation fear that liberal
trade and economic growth will have severely adverse consequences
and lack effective controls. Optimists, however, point to the
positive effects of the raising of global awareness and
cooperation, and given the material benefits of globalisation, more
environmental protection is affordable.
Reactions to globalisation have, not
surprisingly, varied widely. International institutions and most
economists, politicians and business leaders consider globalisation
as, on balance, contributing to economic growth and development
worldwide. Opponents include groups seeing themselves or their
interests affected adversely (such as some trade unions, businesses
facing import competition and environmental groups). Opponents also
include a wider group who see globalisation as causing most of the
world's problems (including increasing economic insecurity and
threats to the welfare state)and the role of non-state actors has
been highlighted in actions such as the protests during the Seattle
World Trade Organization (WTO) meetings.
Does globalisation give rise to a 'democracy
deficit'? This is increasingly possible. A number of Non-Government
Organizations (NGOs) have criticised the lack of transparency and
accountability in the decision-making of major international
institutions. There are indeed problems and remedial steps are
necessary to gain and maintain domestic support for these
institutions. But the NGOs are representative mostly of the
'north', and Asia-Pacific interests are under-represented in their
debates.
Will the Asia-Pacific seek to limit the impact
of globalisation? Mostly no, but in some respects hopefully yes.
The 1997 financial crisis demonstrated to Asian countries their
vulnerability to global short-term capital flows and to the
involvement of the IMF, whose policies have been seen as
compromising national economic sovereignties. However there has
also been convergence with western countries to improve aspects of
financial management and to increase involvement with international
institutions, as with China and the WTO.
Is the role of the state declining as a result
of globalisation? It is changing but not declining. The state
itself contributed substantially to globalisation through trade and
financial liberalisation and encouragement of technological
liberalisation. However state roles will change: while deregulation
has been required, so are new regulations needed to respond to
globalisation.
How should Australia and other regional
countries respond to globalisation? Polices will be increasingly
needed to address economic insecurity and to provide adequate
social safety nets and other methods of assistance for those hurt
by globalising processes. If governments underestimate economic
insecurity, the problems do not disappear but simply return in the
politics of extremism. There is also a need to sell more widely and
effectively the benefits that come from globalisation and from the
roles of international institutions which help manage them, such as
the WTO. Australia can also assist regional states to frame
measures to cope with economic volatility.
Introduction
The world is in a rush, and is getting close to
its end
Archbishop Wulstan (1014)
Worldwide coalition against globalisation
Demonstrator's placard at Seattle (1999)
Globalisation, more than anything else, means
Westernisation and the acceptance of Western business standards and
political systems around the world
Mahathir Mohamad (1999)
Economic globalisation is the natural outcome of
world economic development as well as the external environment for
the economic development of all countries in the future.
Jiang Zemin (1999)
Few national or international commentators seem
able to avoid the term globalisation today. Yet, not all of them
have in mind the same thing when they talk about it or even a clear
idea of what they themselves mean. In part, this is because it is
an abstract, constructed concept that different people define and
interpret differently, puzzle about and argue about. Consequently,
it is often a basket into which goes a wide range of social,
economic, political, security and other changes and problems, not
all of which are necessarily globalising or consequences of
globalising processes. It is often equated with liberalisation,
interdependence, modernisation, westernisation, or Americanisation.
To some it is simply the greater supremacy of liberal capitalism as
an economic framework and as a basis for democracy, as in the
American political philosopher, Francis Fukuyama's 'end of
history'. To others it is the end of bordersthe 'borderless world'
of McKinsey's Kenichi Ohmae and the 'end of geography' of the
British financial specialist, Richard O'Brienor at least a world
where national territories and borders have diminished
meanings.
Given the ambiguity about the meaning of
globalisation, and its different dimensions, it is difficult to
deal with it as a single phenomenon. Consequently, this paper
offers answers to a number of commonly asked questions about
globalisation. Since, however, the issues are still being
extensively debated and disputed, these 'answers' are mostly not
aimed at resolving those disputes. Although the paper sees
globalisation as broadly positive overall for Australia, it seeks
to indicate the range of issues and the nature of the debate
involved, and where the debate will be important for public policy
in the future.
What aspects of globalisation are considered to
be important commonly relate to where one sits geographically,
economically, socially, culturally or ideologically. To governments
in the Asia-Pacific, a particular focus of this paper, some of the
issues high on the agendas in the westlabour standards, human
rights and, often, the environmentdo not have the same importance
as in the West. Global warming and nuclear residues in particular,
however, are critical concerns for the Pacific Islands. The
region's special interest comes from two factorsthe first arising
from the economic crisis that emphasised the importance of
international financial flows.(1) The rapid economic
growth in Asia has been characterised by high levels of trade and
large flows of capital and foreign direct investment. This, as the
Asian economic crisis showed, involves risks and raises the
question of what should be the response. Second, there is concern
about globalisation's political and social impacts. In the
Asia-Pacific, as well as distributional equity issues and concerns
about the role of international financial institutions, cultural
impacts are also important, although cultural concerns are not
limited to regional states, as French activism on the issue
illustrates.(2) In the Asia-Pacific, as elsewhere,
anxieties exist over the power globalisation gives to multinational
corporations. And many workers, in developing countries as well as
developed, see its impacts as actually or potentially
marginalising.
While giving special attention to the
Asia-Pacific perspective, by definition we need to put those
impacts into a global context. After asking what is globalisation,
we ask whether it is new, can it be reversed, what are its
distributional impacts (who gains and who loses) and what are its
security consequences. We discuss the anti-globalisation pressures
reflected at Seattle and elsewhere, and the concerns about the
'democratic deficit' (see Glossary) of international institutions?
We ask how globalisation affects the Asia-Pacific region,
specifically addressing the argument about a reduced role for the
state, and what policy challenges it poses for regional
governments. How do they manage the risks of economic
globalisation? Does globalisation threaten distinctive national
systems and jeopardise economic stability and social cohesion? And
what does that mean for Australia?
What is
Globalisation?
While fashionable, the term 'globalisation' is
imprecise and contested. For those emphasising economic
globalisation, the main part of the package is increasing
integration of the global economy through product and factor
markets (see Glossary) by way of trade, direct investment and
financial flows, greatly aided by deregulation of markets and the
liberalisation of trade and capital movements. Many in the
Asia-Pacific region would like to limit globalisation's effects to
economics, as the quote from China's President implies, but while
associated impacts can be limited they cannot be totally
controlled.(3) While economic aspects remain central,
globalisation embraces more, if less precise, transformations
through the associated spread of information, perceptions and
ideas.
These latter influences, in particular, have
themselves provided the organisational flexibility that leads to
various characteristics of economic globalisation. These
transformations include the geographic dispersal of production and
other economic activities. They include the trend to the
centralisation of many operations that benefit from scales of
operation, as in research and development and in financial markets.
They also include, however, transformations through the rapid
spread of information and ideas on political, social, cultural,
environmental and security processes and practices.
Discussions of the implications of globalisation
are equally imprecise, in part because it combines different
processes. That these different processes are incomplete is
illustrated by the argument that we should speak of a 'globalising
process' rather than 'globalisation'.(4) Although the
international market has become global with the end of the Cold
War, it is not fully integrated. In a fully integrated global
market, the 'law of one price' would apply, meaning that any
commodity has the same price throughout the world (allowing for
transport costs, local taxes, etc.). This seems to hold for basic
commodities such as wheat but the evidence is less clear for
non-standard products such as motor vehicles that, even within the
European Union, have different wholesale and retail markups.
Moreover, the market for investment funds seems similarly
substantially local. Capital still does not flow completely to the
most profitable investment sites; most savings are still invested
in the saving country.
Nevertheless, globalising changes are occurring
and, together with other processes of modernisation, such as the
spread of capitalistic productive processes, have been facilitated
by technological changes in information, communications and
transport technologies. The Internet, global communication
networks, such as CNN, and global money, from credit cards to
derivatives (see Glossary), have been major influences. In
addition, global and regional institutions, such as the United
Nations and the Asia Pacific Economic Cooperation (APEC) forum,
have helped by bringing much of the international community
together, sharing information, understandings and more especially,
ideas.
Clearly, as already noted, there is much more to
globalisation than economic changes. The international connections
include as well as economics and technologies, social, political
and cultural links that, as with the economic and technology links,
increasingly tend to override territorial, legal and political
barriers and change the nature of political and social
governance.
Glossary: The Globalisation DebatesSome Key
Terms
Product and Factor Markets: Product
markets are simply the markets for end products; factor markets are
the markets for land, labour, capital and technology. For some
purposes, it would also include entrepreneurship, reflecting the
geographically spreading markets for business leadership.
Financial Derivatives: swaps, forwards,
futures, calls, options, hedges and the like are financial
instruments that derive their values from an underlying asset,
reference rate (of interest) or index. They are used to hedge or
manage risk and at the same time they provide a mechanism for
speculation.
Peaceful Evolution: a proposition
propagated by the US (particularly by then Secretary of State John
Foster Dulles) that social, political and cultural changes,
associated with economic development in China, could be further
encouraged by the West, to weaken and eventually undermine China's
communist leadership. Not surprisingly, the Chinese do not see it
the same wayor perhaps do see it that way and oppose it.
Neo-liberal Agenda: a widely held
consensual world view on the key parameters of global economic
management; specific components include the importance of markets,
financial (and other) deregulation, liberalisation and
privatisation. Supporters see globalised market relations as
creating, in the long-term, economic health and human betterment.
There are those who disagree with that. Most controversy stems, on
the one hand, from those who interpret it as implying close to
total removal of market 'fetters' and, on the other, those who see
it facilitating the dominance of corporate capitalism with
inadequate concern for victims of market pressures.
Global Governance: the sum of the many
ways that individuals and institutions, public and private, manage,
through ordered rule and collective action, their common
international affairs. States are important but so are the many
international institutions, large-scale private enterprises or
multinational corporations and, increasingly, participation of
global non-governmental organisations and global social
movements.
Democratic Deficits: in this context,
the perception (or reality) of gaps between the global forces that
affect the lives of the citizens of nation-states and the
transparency and accountability of the elite movements associated
with global governance outside of those nation-states where
effectiveness rather than accountability is the prime concern. The
latter include national public leaders, officials and, at times,
business leaders associated, for example, with the IMF, the World
Bank and the OECD.
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Is
Globalisation New?
Unsurprisingly the answer is mostly no but
partly yes. Certainly, if regarded as a mainly economic phenomenon,
it is a result of a progressive reduction of transaction costsin
financial costs, time and convenience. Since these have been
diminishing for a very long time, globalisation can hardly be said
to be new. Does that matter? Perhaps only marginally, but it puts
into a better perspective debates about whether globalisation
creates additional injustices in class, race and gender contexts or
whether it has simply exacerbated existing injustices. Historical
experience also tells us something about how the role of government
was affected in the pasta subject to which we return later. What is
not new is that globalisation raises, although in a different form,
the old debates about social policy, including the trade-off
between efficiency and equity. Yet although the issues will be old
ones, the influences will include the new ones that globalisation
introduces.
More generally, to those for whom globalisation
constitutes rapid and potentially disturbing change across a range
of human activities, the quote from Archbishop
Wulstan(5) suggests concerns at the rapidity of change
more than a millennium ago. Some scholars track forms of
globalisation back to pre-modern times, with the gradual spread of
human populations across the world. Subsequently, the spread of
empires, religions and migratory groups fitted some perceptions of
globalisation, subject to the constraints of transport and
communication technologies that, until the 20th century, limited it
largely to Eurasia.(6)
Some elements of what were earlier termed
economic liberalisation and interdependence are now included within
the term globalisation. There are those who not only argue that
globalisation is not new and doubt its distinctive character but
believe it to be an ideologically based view being pressed by
corporate management worldwide. They argue that the openness of the
global system has not gone beyond that experienced in the 19th
century and early 20th century;(7) that there has
existed before a period when markets were as international as they
are today.
Even those who accept that the scale of some
elements has increased, notably international financial movements,
do not always see globalisation as new. The American political
economist, Robert Gilpin, referring to the 'second great age of
global capitalism' argues that many of the presumed consequences of
globalisation are in fact consequences of technological and
domestic policy changes and that the world is less integrated now
than it was in the 19th and early 20th centuries. He acknowledges
that integration of the global economy has been increasing but sees
this as a return to the pre-World War I era of
globalisation.(8) He argues that international migration
was much greater before World War I than today, although the
figures are not easily compared. Despite, however, the large
post-World War II movements of people, the intensity of
international migration over the latter part of the 19th century
and the early part of the 20th centuryfrom Europe to the US,
Australia and other lands, and the Chinese and Indian diasporaswas
greater than in the latter half of the 20th
century.(9)
Long-term capital movements were also larger.
Yet, foreign direct investment, the link to greater mobility of
production, not only grew in each year in the 1990s to a record
level ($US865 billion) but also grew more rapidly than world trade
or output. This was both a cause and a consequence of
globalisation. And, best known of all, short-term capital
transactions approaching $US 2 trillion a day, much of it
speculative, swamp trade flows and more than match the levels of
global financial reserves.
Within the narrower economic context,
comparisons of trade and investment a century ago with today show
that trade then was a considerably smaller proportion of national
production.(10) Moreover, international trade has grown
much more rapidly than during the period from before WWI to the
mid-1940s and faster than global production. World exports grew
from 7 per cent of global Gross National Product (GNP) in 1948 to
nearly 25 per cent in 1998; the Asia-Pacific has shown greater
growth with exports now representing 39 per cent of GNP. Moreover,
trade and direct investment now include many services, such as
retail trade and public utilities, then considered as non-tradeable
items.
While short-term financial flows, the centre of
much of Asia-Pacific's recent concerns in relation to
globalisation, were quite small a century ago (in the millions of
dollars daily), sceptics argue that long-term capital flows were
proportionately larger. That is true. Like trade, however, they
were limited to much narrower sectors of the economy and reflected
a lower level of economic integration than today, with little
impact on Asian countries. Moreover, there is a sense in which the
history needs careful interpretation. The role of government and
the expectations about how it will play that role are vastly
different today than before WWI in terms of economic management and
protection of the economic welfare of its citizens.
Although these general debates continue, they
are not now major issues. For the Asia-Pacific in particular, much
of the argument is esoteric. They were mostly not part of the
global economic environment a century ago except as an outpost of
imperial outreach. They were, of course, inevitably responsive to
external forces; in Thailand, for example, marketisation and
sensitivity to world market prices was largely complete in the late
19th centuryas one way of staving off formal
colonisation.(11)
If we move beyond the purely economic aspect of
globalisation, most in the debate accept that there are new
elements in the global system that do pose particular challenges.
It is useful to elaborate on the issues raised, however, since they
bring out some important aspects of what has changed over the last
century.
There are two kinds of counter arguments to the
view that globalisation is not new. One is that even on the
narrowly economic arguments, there are quantitative (and most
probably qualitative) differences. The second is that globalisation
today goes well beyond the economic dimensions and has spread
through political, cultural, environmental and even security
influences unconfined to territorial boundaries, and that this is
what is really the globalising influence and which is new. As Held
and his co-authors note, the Silk Road from China (and Japan) to
Europe was an example of early global connections but it was a
'thin' or extensive link affecting only a few people rather than a
'thick' or intensive link more characteristic of
today.(12)
On grounds that we elaborate later, this paper
accepts that today's global integration is qualitatively different
for reasons of the scale, intensity and rapidity of the processes
involved. There are now new elements in the global interconnections
that move beyond the boundaries of social and political space set
by the borders of the nation-state. While not the end of geography,
there are important consequences of the Internet,
telecommunications and satellite TV that are qualitatively
different. There are now also issues, such as the environmental
issues of the ozone layer and greenhouse gases essentially not
bound by territorial barriers, that were not around only decades
ago.
Some analysts would limit the definition of
globalisation to these 'supraterritorial'
developments.(13) For present purposes, we take a wider
view given the new challenges that quantitative changes, such as in
money markets, pose for government policies. Although elements of
globalisation reflect merely changes in scale, as Friedrich Engels
once observed, an accumulation of quantitative changes eventually
amounts to a qualitative change. That globalisation is not as new
as frequently argued, and is still quite limited in many respects,
does not mean that it does not pose new and important
challenges.
Is Globalisation Westernising? Or
American?
In this case, the answer overall is largely no
but in Asia-Pacific, widely yes. The belief that globalisation is
western modernisation spread globally is extensively held. It is
often represented, however, by commonplace symbols such as
McDonalds and CNN, and seen as positive by globalists but by many
in Asia-Pacific as a form of neo-colonialism.
Yet, voluntarily accepted western influences,
although frequently European as much as American, are by no means
new in the region. The concept of the nation-state adopted in Asia
was a western construct: in China, Sun Yat Sen wore a frock coat;
Marxism, even with Chinese characteristics, was one form of western
modernisation; and Japan consciously absorbed western influences of
various kinds following the Meiji restoration. The movement towards
global markets in Asia-Pacific in one sense reflects an embracing
of capitalist ideas. It differed from western models to a degree,
however, if that means it was based on individualist values;
Japan's economic development was not purely western in form and
much of the developmentalism in Asia generally differed to a
degree. Moreover, western influences are competing with those from
other Asian cultures, notably from China, Japan and Hong Kong.
Domestic factors were often a determinant of
governmental responses in the region and hence to their
variability, and changes have occurred within some countries in the
light of the 1997 crisis. Yet President Jiang Zemin (in the quote
at the beginning of this paper) views globalisation as an objective
economic reality, not labelling it as particularly western, and
something that seems separate from the political 'peaceful
evolution' (see Glossary) that China resists from the west.
Conservative hardliners in China do argue, however, that
globalisation is a device of US hegemonism to weaken
China.(14) South Korea continues to embrace
globalisation as a necessity, despite its difficulties, in part as
a symbol of its entry into the developed, largely western world.
Due to its economic recession, Japan has become more cautious and
less enthusiastic about globalisation, indeed now considering it as
something of a threat. Taiwan faces the dilemma that it is more
capably responsive than most to globalising influences but that has
made it more economically convergent with mainland China while
political divergenceand its sense of threat from Chinaremains
strong.
Nevertheless, as the quote from Prime Minister
Mahathir at the beginning of this paper indicates, some in the
Asia-Pacific would argue against the influences of globalisationand
Malaysia would be joined at the popular level by many Indonesians,
Thais and others. For them, globalisation's influences are
westernising (and, for many, Americanising).(15) Yet
like others in the region, Dr Mahathir (while always suspicious of
US and Britishand Australianinfluence) until the Asian economic
crisis, pursued economic globalising policies
enthusiasticallycommitting Malaysia to the private sector, market
forces and integration into the global economy. Since the Asian
economic crisis, for Asia as a whole, opinion has increasingly
considered globalisation as western, laying bare, as that
experience did, the gap between their aspirations and the
dominantly western or American economic and financial
interests.(16) Asia's prime concerns are with pressures
from the basically western capital markets, and with the
international economic institutions with which they deal, the IMF,
World Bank and the WTO. Since the West, and particularly the US,
largely dominates these, the view that globalisation is either
western or American is not hard to understand.
Asia-Pacific countries are not the only ones
concerned about the pressure from external, largely American,
influences. As noted earlier, the French have long had this concern
but it is also a wider European concern. John Gray, a noted British
conservative political philosopher, in his polemic against
globalisation, is concerned that a universal civilisation coming
from globalisation will take as a model the US, which he judges to
be an unhappy and unsuccessful society as a result of the breaking
of traditional social bonds.(17)
So? Does
Globalisation Lead to Convergence or Divergence?
Again the debate is complex because there is a
range of different perspectives. Many who see globalisation as
westernisation or modernisation see it as leading to such
convergenceleading to homogeneity among consumers and the
replacement of existing cultures through the western mass media,
Hollywood and the English language. Some critics also see it as
leading to convergence, resulting in a 'race to the bottom', in
regulatory standards. This argument we take up later along with the
role of the state. Interest here is on 'cultural' convergence where
there are also differences about whether convergence is probable
and, in this case, whether cultural convergence is a positive or
negative development.
The increasing integration of global markets
means that interactions among cultures have increased and will do
so increasingly in the future, and many in the west claim universal
applicability for western ideas. There is, consequently, a wide
assumption that there is a tendency to impose uniformity. Gray
argues that convergence is being sought by the globalisers, is
based on the free market and is pushed politically by the US
through the World Bank, IMF and WTO. He believes, however, that
what he terms the liberal utopianism of the free market is both
impracticable and undesirable and will lead to economic and
political instability.
Many, although not all, of those supporting the
neo-liberal agenda (see Glossary) of those institutions doubt that
there can be a universal set of values. Rather than seeking a
uniform way of life and institutions, many argue that what is
needed is the tolerance of differences. Yet Korean President Kim
Dae Jung, for example, sees globalisation as 'universal globalism'
resting on universal values.(18)
Many others, however, see globalisation rather
as enhancing cultural diversity through various manifestations of
localisation, and with new technologies, video, radio, TV and
particularly the cyber-world, helping to empower minorities and
maintain threatened identities. The increased Thai links with the
related Tai-lue communities in Laos, Burma, Vietnam and southern
China are one example.(19) In Hong Kong a response to
globalisation has been a reemergence of interest in its
culture.(20) More generally, immigrant communities
generally tend to be stimulated to retain much that is important in
their cultural inheritance.
A different perspective from some that accept a
loss of community identities and cultures as a result of
intercultural communication, is that this is a positive factor,
engendering a greater sense of global community. Within the
Asia-Pacific context, potential convergence is either seen
negatively as neo-colonialism or positively as cosmopolitanism. Two
particular concerns are those of the conservative nationalists
anxious about their nation's cultures, such as the Hindu
nationalists in India; and those of religious leaders (Buddhists in
Thailand, Muslims in Indonesia) concerned, like their equivalents
elsewhere, about the survival of their form of spiritual values
under the influence of materialism and secularism. In many respects
these concerns are not necessarily a response to globalisation as
such but to the rapidity of economic growth and technological
change.
Can Globalisation
be Reversed?
In principle, much of it can. In practice, even
that is not easy. The earlier processes from much of the 19th
century to 1914 were reversed or held largely unchanged by WWI and
its aftermath including the economic disarray of the 1930s. That it
was the outbreak of WWI and the subsequent great depression that
stopped or slowed the process would suggest that it would need a
major influence to do the same today. Specific elements can be held
back without necessarily incurring significant costs; some ways of
regulating short-term speculative capital flows might be among such
measures. Other measures may be available, but involve a large and
increasing cost, such as agricultural or industrial protection
measures. And, while among many Asia-Pacific countries, there is
now a reduced enthusiasm in embracing liberalising measures,
countries such as North Korea and Burma, hitherto highly
isolationist, are gradually moving towards accepting, or
acknowledging, some globalising pressures.
In practice, however, globalisation cannot be
reversed except in some areas and then at considerable cost. China
and Taiwan have presumably drawn this conclusion in their decision
to join the WTO. Technological change will continue to be rapid and
this will stimulate further the interconnecting process of global
communication and global governance. That, and the associated
spread of ideas, is not reversible nor are other aspects of
globalisation such as the global dimensions of environmental issues
such as global warming. Globalisation will continue to affect the
other than economic dimensions of globalisation and some of those
other dimensionsthe spread of information, perceptions and ideasare
the most globalising of the interconnections involved, since they
are harder to counteract and less likely to be reversed.
Who Gains and Who
Loses From Globalisation?
Most gain, lots lose and probably more lose for
other reasons and wrongly blame globalisation. Export-led growth
and the opening of domestic markets to competition have facilitated
rapid growth and economic development globally. This is
particularly true for the Asia-Pacific but, for developing
countries as a whole, international trade has been growing more
quickly than the world economy in recent years. This has enabled
them to gain from globalisation, aided by the liberalisation of
product and capital markets.
That there are losers from globalising processes
is also evident. Losers at the country level include those
countries with weak institutions unable to handle the structural
adjustment and social change that benefiting from globalisation
requires. Indeed, globalisation redefines what constitutes an
effective and efficient government system in an increasingly
interdependent and interconnected world. In Asiafor example,
Singapore, Malaysia and probably South Koreathe economic growth
associated with globalisation has probably strengthened
governmental institutions. An inability to respond positively and
sufficiently rapidly to increased global competition and to
changing technologies, however, is widely present in sub-Saharan
Africa, much of the Islamic world and some parts of Eastern
Europe.
A widely articulated argument, however, is that
globalisation leads to increased inequality between and within
countries. The Pope, the head of the World Bank and other notables
say it does, and that would be widely accepted wisdom. So it is, as
well, to many NGOs in their criticisms, at Seattle and in other
contexts, of the WTO, the IMF, the OECD, the World Bank and, in
Asia, the Asian Development Bank. If their statements are taken to
imply increased poverty levels then they are at least partially,
and perhaps largely wrong, and may also be misleading. A common
source of the misunderstanding has been the United Nations
Development Programme's (UNDP's) Human Development Reports (HDRs),
although criticisms of them by one time Australian Statistician,
Ian Castles,(21) and increasingly others,(22)
have now been largely accepted by UNDP.
Two questions are involved here. Have we seen
greater inequality between and within countries during the decades
when globalisation pressures have intensified? And was this due to
globalisation? In a detailed report to the Norwegian foreign
ministry, an expert group concluded in October 2000 that, contrary
to the widely accepted views, during the last decades of the 20th
century international inequality has in fact been reduced. Its
empirical analysis also concludes that economic growth generally
has also benefited the poor,(23) a view emerging from
other detailed empirical studies.(24)
Alleviation of poverty is more critical than
reducing inequality, and although there may have been some increase
in absolute poverty in some regional areas during the worst of the
Asian economic crisis, in most of the affected countries the
situation has since improved. It is also relevant that other
measures support these general conclusions of long-term improvement
in income and the reduction of regional povertyeven with rapid
population growth. Thus life expectancy and secondary school
enrolment levels have increased steadily over several decades.
This does not deny, as the Australian Treasury
notes, that the problem of extreme poverty is still 'the main
international economic challenge for the 21st
century'.(25) This remains true although the majority of
the world's poor have achieved income growth faster than that in
developed countries. (There are exceptions, as in much of
Sub-Saharan Africa). That there is still a debate over whether
inequality has increased or decreased overall has depended in part
upon different measures of inequality,(26) and different
interpretations of the arithmetic.
The importance of the arithmetic can be
illustrated by considering an example of the rapid economic growth
of a developing country, like China, with rates of economic growth
(and of incomes per head) far ahead of those in developed
countries. A 6 per cent annual growth on a per head income of $3000
adds $180; a 2 per cent annual growth on a developed country income
per head of $20,000 adds $400. While the developing country's
income growth per head is proportionately greater, in absolute
terms inequality has increased.
Almost two-thirds of the lower income
populations in the world are in the Asia-Pacific: China, India,
Pakistan, Bangladesh, Indonesia and the other lower income Asian
countries. In all these countries, per head growth has been
substantial in recent decades despite, mostly, the 1997 crisis.
Some of the debate, then, is over what is more importanttheir
relative position or that incomes per head in developing countries
as a whole are growing relatively rapidly.
The Norwegian report used the more sophisticated
but standard statistical technique for measuring inequality (the
Gini coefficient), including some 115 countries in its
analysis.(27) The report concludes that inequality
between countries has diminished since the mid-1960s. In the early
part of that period the growth of the Asian NIEs (newly
industrialising economies) was an important factor in reducing
inequality. In the latter part of that period it appears that
income growth in China and India was important, as was the fact
that the US and Japan were growing less rapidly and accounting for
a smaller proportion of global population.(28)
How far these more positive results for the last
three decades are due to globalisation is not clear given the
varied influences involved. Moreover, particular influences may
work in different directions. Export led growth may have increased
the relative incomes of Asian states but contributed to greater
inequality within developed countries. A further problem of
interpretation is that, as with inequality between countries,
inequality within countries can increase even though all incomes
are rising as, until recently, in China. Moreover, domestic
institutions and political processes affect within-country
distributive patterns more. Consequently, movements in inequality
within countries have variedincreased in some and decreased in
others but probably overall are thought, in the judgement of the
Norwegian experts, to have diminished.(29) Moreover, for
developed countries, the role of welfare payments becomes
important. These are mostly lacking in the Asia-Pacific.
Nevertheless, estimates of Asia-Pacific within-country income
distribution from 1960 to 1990 show a distribution less uneven than
most regions and with little change over the period. Wide
differences exist, however, within the region with much greater
inequality in Thailand, for example, than in
Taiwan.(30)
In looking at within-country inequality, it is
commonly argued that among the losers from globalisation are the
unskilled, particularly in developed countries. These workers in
developed countries are displaced from their jobs by products
produced in developing countries by cheaper unskilled workers, and
it is argued that this accounts for increased income inequality in
developed countries.
Low labour-cost import competition has certainly
been important in particular industries such as textiles, or in
simple processing in developed countries. Some perspective is
important, however, when looking at inequality as a whole and its
relationship to globalisation. As American economist Paul Krugman
has observed, the relatively small proportion of increased imports
into the US from developing countries could not explain the rising
income inequality in the US.(31)
On average, this argument applies more
generally. Imports of goods and services made up 22 per cent of the
overall gross domestic product of developed (high-income) countries
in 1998. The value of total exports of low and medium income
countries is only one third of that of developed country
imports.(32) In other words, most developed country
imports came from other developed countries themselves. When
allowance is made for exports from low and medium income countries
that are not competitive in labour cost termssuch as oil, natural
resources and raw materials, and for trade with other low and
medium income countries, it seems reasonable to assume that perhaps
only half of the one third of developed country imports that come
from low and medium income countries are likely to be competitive
low labour-cost products.(33) In Australia's case, for
example, its ten largest import items are medium to high tech.
items plus crude oil and gold.
Consequently, globalisation, as we noted
earlier, may be a factor in displacing unskilled workers in
developed countries but this does not explain more than a small
part of the problem. Probably a more important reason for rising
inequality, where this occurs, is the impact of technological
change in various forms within the domestic labour market,
increasing the relative demand for skilled labour. Moreover, a
large part of domestic labour is employed in the almost 80 per cent
of developed country economies that produce non-tradeable items
(retail and wholesale trade, restaurants, public utilities) or in
sectors competing with imports from developed countries.
While attention to the problem of the growing
gap between skilled and unskilled workers is usually directed to
developed countries, it is becoming increasingly important for the
countries of the Asia-Pacific, notably in China and India. Again it
will be only partially a problem of globalisation.
How is Security
Affected by Globalisation?
Military insecurity appears to have diminished
as a result of economic interdependence; the world is shaped less
by military power and more by economic and political power. But
human insecurity has probably not decreased. A number of different
aspects are relevant. Indeed, the debates about globalisation have
given rise to an enlarged security agenda. For those who focus
their attention on the continuing liberalisation of markets and the
development of economic and other interdependencies, this is seen
as reducing the likelihood of military conflict between states.
International cooperation and peaceful resolution of disputes, they
argue, will increasingly replace this.(34) Globalisation
can work in the other direction, however, leading to
ultra-nationalism, racism, religious fundamentalism and, as the
events of September 11 indicate, terrorism.
The technical ability to project power
accurately to any part of the world reflects the most commonly
noted aspect; the development of computers, satellites and the
spread of intercontinental missile technology has extended the
global reach of any potential military threat. In addition,
production tends to have been most geographically dispersed in
those industries with high levels of R&D costs and significant
economies of scale such as machinery, computers, electronic
components and transportation. There is also a wider spread of dual
use technologies, with military as well as civilian applications so
that military technologies are more readily accessible
globally.
The declining control of military conflict by
states and the increasing power of organised crime, including that
of terrorist organisations, are developments aided by an
increasingly globalised economy. Globalised organised crime,
international terrorism and an unregulated world market in the
technologies of war are among the negatives of globalisation.
The growth of economic power as a means of
persuasion short of military conflict became important with
increased use of sanctions. The manipulation of economic power in
this way is increasingly constrained by the decentralisation of
production that globalisation makes possible. A decade ago, Robert
Reich noted that a car produced in the US by General Motors would
have parts or services (e.g. design services from Britain) imported
from up to ten countries and the cost of those inputs would
represent over half the final product cost.(35)
Globalisation has raised other issues of human
securitynotably economic security. While many see globalisation as
offering great opportunities, others experience a sense of
vulnerability to influences they or their governments cannot
control. The spread of diseases such as AIDS poses a further
intensifying human security problem.
That the role of the global social movements can
be important in the security as in other fields is illustrated by
the successful organised campaigns against the use of land mines.
Moreover, the activities of computer hackers and the development of
computer crime illustrate the vulnerability of nations to
globe-wide disruptive activities of individuals.
And How Does
Globalisation Affect the Environment?
In the absence of enhanced global cooperation,
probably adversely. The fears of environmental opponents of
globalisation are that liberal trade and economic growth within a
globalising world will have severely adverse environmental
consequences and will lack effective controls. They point to a
range of environmental problems. Not all are global, but problems
of greenhouse gases and ozone depletion are globally caused,
species extinction reflects an intense global concern, while
concerns about AIDS, BSE and other diseases are increasingly
global. The optimists point to the positive effect of the raising
of global awareness and global cooperation, including international
agreements on ways of dealing with such problems. Moreover, given
the material benefits of globalisation, more protection is
affordable.
Apart from the broader global environmental
influences, ecological impacts have grown with increased openness
to economic and other international movementsas the rapid
transmission of foot and mouth disease in Europe has indicated.
Within the Asia-Pacific region, external problems of acid rain,
dust storms and forest haze, as well as potential problems of
global warming, have become important issues. While the environment
is still widely seen in Asia as a 'northern' issue, the region
nevertheless has been sensitised to the cross-border nature of
environmental problems.
The issues of greenhouse gases and the ozone
layer bring home most readily the global environmental issues
related to intensifying human activity that cannot be handled by
individual states alone. In the Asia-Pacific there is now a greater
understanding of the significance of such problems. There is a
concern, however, that 'northern' criticisms of World Bank projects
on environmental grounds affects adversely projects providing
much-needed water and power in developing areas.
What About
Reactions to Globalisation?
Since globalisation means so many different
things, not surprisingly reactions to it are similarly wide
ranging. Nevertheless, they mostly fall into traditional categories
of 'in favour', 'opposed' and widely divergent 'in-betweens'.
Those for whom globalisation is inescapable and
irreversible, even if not new, include those who see it as good and
those that do not. Those who see it as reversible may also include
those, such as Gilpin, who favour it and want to avoid its
reversal; many in that group, nevertheless, see the optimism of
hyperglobalists such as Ohmae and the New York Times' Tom
Friedman,(36) with their expectations of global
convergence, as excessive utopianism. More evident are those who,
believing globalisation reversible, oppose it as a project of the
powerful that, given sufficient effort, can be countered.
International institutions, most economists
generally, most politicians and business leaders consider
globalisation as, on balance, positive, contributing to economic
growth and development world wide.(37) Those opposing
globalisation include special interest groups seeing themselves or
their interests adversely affectedtrade unionists in traditional
industries, businesses facing tough import competition from
developing countries, environmentalists and some development
interests. Opponents also include a wider group who see
globalisation as causing most of the problems of the
worldincreasing economic insecurity and inequality, threats to the
welfare state, homogenising consumer tastes, damage to the global
environment, increased power of exploitative multinationals, and
the undermining of sovereignty, national independence, identity and
democratic processes.
Another division in the debate is between those
who see globalisation as self-generating and those who see it as a
result of deliberate collective human action. While some see it as
being driven by the activities of dominant international actors,
others see it as anarchic and haphazarda 'runaway world' as it was
termed by Anthony Giddens, originator of Tony Blair's 'Third Way'.
And then there are those reacting just to the pace and extent of
change, in the cultural as well as economic scene for which they
blame globalisation. For many, economically and culturally,
globalisation broadens their options; for others it simply
bewilders.
Giddens argues that the sceptics are mainly on
the left of the political spectrum who see globalisation as an
ideology to support unfettered markets and to remove the ability of
governments to shape economic developments.(38) There is
certainly strong criticism from the radical left. They argue that
it adds to the strength of capital at the expense of labour and its
neo-liberal ideology is pushed by an association of modern
financial entrepreneurs, with the help of the faceless officials of
international organisations such as the IMF and WTO. They also
believe it enables transnational corporations to exploit developing
countries. Gilpin, hardly of the left, acknowledges that capitalism
tends to concentrate wealth, power and economic
activity.(39) And anti-globalisation advocates include
representatives of the right, such as Pat Buchanan, Ross Perot and
George Soros in the US and Pauline Hanson in Australia. Moreover,
some right wing think tanks in the US, such as the Cato Institute,
have called for the abolition of the IMF.
One manifestation of opposition to globalisation
that has received considerable publicity has been the
anti-globalisation demonstrations at the WTO meeting in Seattle (in
December 1999) and at other meetings of the main international
economic institutions.(40) Less well publicised were
anti-IMF riots and demonstrations in countries subject to IMF
programs that have occurred since the 1980s against particular IMF
policies.(41) These continue, as recent PNG
demonstrations indicate. There were also anti-globalisation
demonstrations well before Seattle. It was perhaps the success of
the internet-based organisation of opposition to the proposed
Multilateral Agreement on Investment (MAI) in 1997 and 1998,
however, that illustrated the major potential of globally organised
social movements.(42)
Yet, it was not just the rioters that caused the
failure of the WTO meeting in Seattle. Trade ministers from
developing countries, among them some from Asia, were strongly
critical of the priorities being set by western leaders and of the
WTO decision-making processes, which they saw as discriminating
against them.
Since Seattle, however, anti-globalisation
demonstrations have, if anything, intensified. They have different
characteristics to the IMF riots and the global social movements
involved have broadened their activities and agendas. The protests
have been generalised to question the policies of these
organisations, usually their neo-liberal agendas, and to criticise
the processes of decision-making in the institutions which they
argue demonstrate a 'democratic deficit' in that they are not
transparent and accountable. The activists in these demonstrations
have also become much more centred in the developed countries
rather than primarily in developing countries. There are now both
common and conflicting interests between the anti-globalisation
social movements and Asian countries. Asian exporters of
agricultural products note, for example, that among the
demonstrators are those criticising the WTO's efforts to reduce
European and US agricultural protection that blocks exports from
Asia-Pacific countries.
Most publicity, however, goes to the
demonstrations because of the effective public relations tactics of
some NGOs and the violent activities of 'recreational'
demonstrators. Not only has the number of international NGOs grown
rapidly to now number over 26 000 but activists have been able
to develop worldwide coalitions of labour, cultural, environmental,
developmental, feminist and nationalist and other interests and to
exploit a globally connected media. As the second quotation in the
heading to this paper suggests, activists now use the
characteristics of globalisationcheaper air travel, the Internet
and global telecommunicationsto make possible the vastly increased
participation in global networks.
Yet there are perhaps more important political
aspects of global governance (as distinct from governmentsee
Glossary) processes than publicised demonstrations. A wide-ranging
effort by global civil society seeks to influence the shape of
global governance and particularly the activities of the economic
organisations, notably the IMF, the World Bank and the WTO in other
ways. These three organisations are important and can be seen as
having substantial effect on the daily lives of large numbers of
people as indeed do the more recent targets, the EU and the G8.
They are, however, only a small part of a wide range of actors that
provide a substantial level of global governance in various fields,
such as finance, health, the environment, international shipping
and civil aviation, posts and telecommunications and arms
control.(43)
The processes of global governance include many
actorsas well as states and international non-governmental
organisations, multinational corporations also contribute to global
governance. It is now widely accepted that global governance
mechanisms have increased in overall importance relative to that of
states. The many NGOs and other bodies that make up global civil
society are concerned to influence global governance institutions,
particularly in the economic field, in terms both of the processes
of decision-making pursued and the policies
followed.(44) Most of the actors in these movements,
however, are reformist rather than radical and, to pursue their
objectives, have been increasingly involved in direct discussions
with the main economic institutions.
Even so, developing countries are wary about
this. The Third World Network is a well-established NGO based in
Malaysia with a particular interest in trade. It is concerned that
well funded lobbyists from developed countries could have undue
influence prejudicial to developing country
interests.(45)
Scholte argues that civic activity can no longer
be understood with a territorial conception of state-society
relations.(46) For states, as well as recognising the
greater role of global civil society, the problems include a
growing legitimacy gap for globalisation, although not all in
global civil society are critics of the market or the neo-liberal
agenda. Thus, we see demonstrations against one global social
actor, the World Economic Forum, which supports the neo-liberal
agenda, by other global social actors questioning the legitimacy of
markets. In part the 'legitimacy gap' argument can be addressed by
ensuring that international institutions respond effectively to the
valid concerns of those falling behind, but action among member
states may also be necessary.
There are also democracy deficits among members
of the global civil society. NGOs are commonly not fully
transparent and accountable, especially not to those whom their
policies affect. More complex is the role of other components of
global governance. For example, in this respect, the external
effects of the pronouncements of private institutions such as
credit agencies can, as they did in the Asian economic crisis, have
a major, often adverse, impact. Yet they too suffer from an
'accountability' deficit, in that they lack adequate transparency
and accountability.(47)
So, Does
Globalisation Give Rise to a 'Democracy Deficit'?
Not necessarily, but it is increasingly
possible. We noted earlier that the processes of
globalisationfalling costs of travel and falling costs and
increased speed of communicationmade possible the rapid expansion
of international NGOs claiming to represent global civil society. A
major plank in their platform is what they term the democratic
deficit in the global economy or in the instruments of governance,
notably of economic governance.(48) Their criticisms are
aimed at both what they regard as the undemocratic gap in
transparency and accountability, at the decision-making processes
of these organisations and at the neo-liberal policies they pursue.
To a degree, their arguments could be interpreted as saying that if
the institutions are not accountable to the NGOs, they are not
accountable. Nevertheless, their complaints have some substance.
Former World Bank chief economist, Joseph Stiglitz has noted that
'The IMF likes to go about its business without outsiders asking
too many questions'.(49)
American political scientist Joseph Nye argues,
however, that unlike self-appointed NGOs, international
institutions tend to be highly responsive to national governments
and can thus claim some real, if indirect, democratic
legitimacy.(50) A problem is that those links are likely
to be attenuated, with long lines of delegation. Moreover,
member-state representatives do not always represent more than a
particular interest area within the state since a 'whole of
government' approach is commonly absent. For their part, the
international institutions have been moving to improve the
transparency of their operations reflecting the fact that there are
gaps. Their legitimacy, based as it is on being accountable to
member states, is substantial but the public recognition of that
legitimacy may be deficient. The pressures to introduce in the
Australian Parliament a Treaties Committee to review Australia's
participation in international treaties illustrated the belief that
a 'democratic deficit' could emerge even within national
systems.
There are arguments that there should be some
direct international processes to ensure more open and transparent
decision-making processes at the global level and, as Duncan Kerr
argued, for democratising the international sphere.(51)
The question, however, is whether it is possible to contemplate a
global democratic process without the existence of a global
political community. Until that emerges, action would seem to be
most appropriate at the national level with pressure being brought
through domestic governments. In practice, members of global civil
society already go around national governments and deal directly
with major international bodies.
The issue for public policy goes beyond this
however. It could be argued that any such global political
community as currently exists is based largely on the multilateral
institutions being criticised by the global social movements. Yet,
if we accept that there will be a requirement to cooperate globally
more in the future than now, we need to direct attention to the
points that global civil society has raised in order to gain
greater domestic support for both the objectives and the
institutions themselves. In many respects, global civil society
gives a voice to those underrepresented in the global political
community. Yet that global civil society it is itself still largely
from the 'north'and those in the Asia-Pacific are still under
represented. There is a democratic deficit in that context as
well.
Will the Asia-Pacific Seek to Limit the
Impacts of Globalisation?
Mostly no, but in some respects, hopefully yes.
Even more than in other respects, however, generalisation is
difficult. Globalisation is still uneven in geographic coverage,
but although the economic benefits and costs are felt more
intensively in the major industrialised countries, it has had major
impacts in the Asia-Pacific associated with the rapid regional
economic growth. While there is also a widely held concern, as
articulated perhaps most in Indonesia, that globalisation will
marginalise developing countries, this seems not so far to have
been reflected in specific policies.
According to one measure of globalisation,
Singapore heads the list of some 50 countries classified in order
of their degree of globalisation. Malaysia is number 20, Japan 29,
South Korea, 31, with China and India 48 and 49
respectively.(52) For comparison, the UK is 8th, the US
12th and Australia is 23rd. The table at Appendix I lists the top
25, but given the discussion earlier in this paper about the mix of
processes and mechanisms involved in globalisation these rankings,
while indicative, need to be regarded with caution.
In terms of economic globalisation, however,
Asian countries have been relatively open in trade and capital flow
terms and, until the Asian economic crisis, were gradually relaxing
their controls on monetary flows. The contribution of globalisation
might seem to be evidenced by the extent that Asia trades more
outside the region than within. Yet, although trade in absolute
terms has increased more substantially with countries outside the
region, trade within the region has also grown in importance. There
has consequently been a concurrent growth of globalisation and of
regionalisation.
Economic liberalisation and increased trade
integration contributed substantially to successful economic growth
in the Asia-Pacific, among other things, reducing income inequality
relative to the West. Globalisation is now also associated with the
1997 crisis, or at least with its intensity. Globalising trends
certainly made it possible; as did the new forms of financial
instrumenthedge funds, derivativesthat globalisation helped to
facilitate.
The crisis demonstrated to countries in the
region their vulnerability to the global flows of short-term
finance, and to the major involvement of the IMF. The IMF's
conditions included financial deregulation, banking reform with
extensive banking closures, abolition of monopolies and large scale
privatisation programs. These are widely seen as compromising
Asia-Pacific countries' national economic
sovereignties,(53) a particularly sensitive issue given
the region's recent colonial or semi-colonial past. Yet it was not
only the short-term capital flows that created the crisis. State
involvement in allocative functions, whatever the initial benefits,
led to structural problems, while the state's regulatory functions
were either neglected or compromised. The appropriateness of a
state's regulatory processes will become even more critical as
global processes intensify.
This will require a considerable degree of
convergence with western practices to fill what is currently an
institutional deficit. It is common in Asia-Pacific to blame the
external effects of globalisation for the 1997 crisis, but to a
degree convergence with the globalisedwesterneconomic system
continues in the regulatory field. Some of this was involuntary,
under the pressure of the IMF, including opening existing controls
to allow the entry of foreign, mainly American, firms.
Nevertheless, there will be greater caution in liberalising in the
monetary arena. China is likely to be cautious in relaxing its
foreign exchange controls but it remained keen to enter WTO, as was
Taiwan. Korea has sought, not very successfully, to move away from
its support for the chaebol (large conglomerate) business
enterprise system, but like a number of other Asian countries has
moved to introduce financial regulatory processes more consistent
with a globalised monetary system and freer exchange rates.
Confidence in the international financial
institutions was damaged by the crisis. The lesson taken from the
economic crisis, that individual countries were unable to deal with
it on their own, has led to calls for regional cooperation to cope
more effectively with any future crisis. Whether that is an
appropriate lesson is an open question, given the role of domestic
policies in managing global pressures. The mix of impacts and the
actual political and social consequences, as distinct from how much
was inevitable under globalising pressures, makes conclusions
difficult.
The moves to greater regionalisation seem
designed more to deal with future problems than to erect barricades
against themalthough this may be only partially true of the capital
controls operated by Malaysia and Vietnam.
We noted earlier that social welfare payments
have been important in developed countries in limiting the growing
inequality in the face of globalisation and technological change.
There has been some interest in Asia-Pacific countries, and notably
in China, in developing better social safety nets. Pressures of
this kind are likely to increase as globalisation and other
economic impacts intensify.
For the most part, however, Asia-Pacific
countries have seen the regional financial and trade activities as
needing to be consistent with the global rules and norms of the
international institutions. Yet they want a bigger say within the
global institutions, particularly in the IMF, and in this there has
been some, if limited, progress.
Is the
Role of the State Declining as a Result of
Globalisation?
Although still widely debated, the answer is no;
the role of the state may be changing but not that quickly.
Governments certainly face various new challenges but, in many
cases, they simply face old challenges of social governance but in
a different framework. The state itself contributed substantially
to the process of globalisation notably through trade and financial
liberalisation and the encouragement of technological innovation.
Some enthusiastic supporters of globalisation argue that
globalisation implies the end of the state as we have known it or
that its role is simply to help adjust the domestic economy to the
requirements of the global economy. It is not only the sceptics,
however, that argue that in effect 'sovereignty still rules: OK?'
The mainstream argues that states survive but governance is
different, the link between foreign and domestic policy becomes
more blurred and the appropriate policy mix changes.
Globalisation offers a challenge to national
governments in the Asia-Pacific in several respects. Among them,
the developing countries are mostly postcolonial societies;
together with societies like Thailand, they have only recently
gained full control of their borders and resources, and are keen to
maintain their sovereignty, to retain the position of national
governments as the primary source of authority, and to resist
extraterritorial influences. There are, however, real consequences
of globalisation to which national governments have had to respond;
and the ever-present debate about what constitutes appropriate
government policy will in the future be couched increasingly in a
global framework.
Not every country starts from the same point.
Thus, in China, with increased marketisation of the economy through
its increased participation in the global economy, state power is
diminishing relative to power elsewhere in its society, as
resources gradually move out of the state's direct control to the
market and to an incipient civil society. Vietnam will ultimately
go in the same direction. For others, such as South Korea,
Singapore, Malaysia, Thailand and the Philippines, this process has
been underway for much longer.
To gain the benefits of globalisation and to
attract mobile factors of production such as financial capital and
foreign direct investment, countries in the region have had to move
to a market oriented economy but also to follow other forms of
economic management to make their economy competitive. As well,
various multilateral global and regional institutions have
established rules and norms designed to curtail governmental
freedom to pursue autonomous action, and to play a more active, if
different, role than in the past. Those institutions want
governments to ensure effective prudential and transparent
regulation of their capital markets. In both contexts, the national
governmental role in critical. So, while deregulation has been
necessary so are new regulations to respond to globalisation
pressures. These rules and norms are often seen as diminishing
national sovereignty but in reality it is a voluntary act of
sovereignty that can, if necessary, be withdrawn.
The growing need to follow the basic rules of
the globalised international system has led to Thomas Friedman's
proposition that market pressure puts governments in a 'golden
straight jacket' that limits, for the good, actions that
governments can take in a globalising world.(54) An
opposing view is that rather than the 'straight jacket' being
golden, it will involve a 'race to the bottom' for regulatory
standards. Both imply lowest common denominator convergence of
government actions. Both imply reduced capacity to act autonomously
on fiscal and monetary policy and on welfare policies and also in
other areas such as labour, safety and health standards. Among
other things, there are fears that downwards pressures on taxes on
mobile factors of production, notably capital and skilled labour,
reduces the capacity of governments to maintain or develop welfare
programs just when greater political pressures for such programs
result from the pressures of globalisation.
The history of the first great age of
globalisation in the 19th and early 20th century showed that while
the elements of globalisation increased, the role of government
also grew, with increased regulatory standards, protective measures
such as tariffs, immigration barriers and increased international
cooperation. At least for developed countries, welfare state
systems gradually emerged from that experience. It would be ironic
if welfare systems now were to diminish as a result of the second
great age of globalisation. Yet the relationship between
globalisation and welfare programswhether globalisation (notably
open product and capital markets) increases political demands for
welfare expenditures or reduces the capacity to meet those
demandsis now widely debated.
In practice, the empirical evidence of recent
decades gives only limited support so far to either golden straight
jacket or race to the bottom propositions. In part this may be
because of the still far from complete nature of economic
globalisation. The policies commonly proposed for governments to
ameliorate the effects of globalisation are, internationally,
increased cooperation to ensure more effective international
governance, and domestically, cooperative relations with those
adversely affected and adequate redistributive policies under
social safety nets. The globalisation process may have affected the
taxation system: company income taxes have fallen and tend to
converge across countries. But these are relatively small items of
revenue. Concerns about taxation capabilities that would make
social support systems difficult to maintain have as yet little
basis in the actual outcomes of the budgets of OECD countries at
least.
These empirical studies are basically limited to
OECD countries since in much of the Asia-Pacific area, welfare
mechanisms are just starting to be developed in response, in part
at least, to globalisation. They show that the incomes of OECD
governments had been maintained and only limited, if any,
constraint has emerged upon governmental ability to conduct
independent fiscal policies.(55) Consequently, arguments
that globalisation pressures on the state must compromise a state's
responsiveness to political demands arising from the effects of
globalisation do not seem to be supported by empirical
analyses.(56) Certainly, there seems to have been little
retrenchment of the welfare state in developed countries that can
be linked to globalisation pressures rather than to party
ideologies.
These studies do indicate complex relationships,
however, depending upon the kind of opening experienced (trade or
capital and if so what kind e.g. with developing or developed
countries). They also note different emphases within welfare
systems. Scandinavian and Anglo-Saxon countries appear to give
greater emphasis to productivity related welfare services
(including education and labour adjustment programs) than other
OECD countries.(57) Consequently, one possibility is
that welfare programs may shift further in this direction under the
pressures of globalisation.
There is also little evidence to support the
belief that there is a race to the bottom in regulatory standards
as a result of globalisation. Any basic changes are more likely to
have come from other causes, such as changes in political
beliefs.
On the other hand, other trends potentially
strengthen the role of government. Globalisation increases the need
for international cooperation, whether in responding to global
environmental change, for example, such as the greenhouse gases, or
in cooperative action on economic issues, such as the management of
international money flows.
We noted earlier that debate continues on many
aspects of globalisation, including its importance and the extent
of gainers and losers. Opinions will continue to vary; what is
critical is that for governments, it will be difficult to ignore
those issues both because of the reality and because of the
perceptions. If true, however, as John Gray argues, that ideologies
have largely gone as ways of legitimising governments, and that no
government today can claim legitimacy without that legitimacy
coming from meeting their citizens' economic needs, then economic
competency remains central.(58)
Constraints do exist for governments in pursuing
their macroeconomic policies under globalisation to maintain
domestic stability. But just as instability in the international
system is not new, neither is the inability of governments to
pursue autonomous policies. This is so despite the important
contribution of the Bretton Woods institutions, whose objectives
were to reduce international instability and facilitate domestic
economic policy autonomy. Without increased global cooperation,
however, globalisation can potentially frustrate these objectives
even further, with increased potential intensity. For Asian
countries this is a particularly sensitive development.
How
Should Australia and Other Regional Countries Respond to
Globalisation?
By considering responses and adjustments in
three areas: policy responses; distributional responses; and
structural responses, increasingly factoring globalisation
pressures into decisions on a wider range of economic, political
and social policies.
The line between foreign and domestic issues
will become even more blurred than today, but it is still useful to
distinguish policy adjustments according to their domestic or
international targets. Domestically, the costs and benefits of
particular policies are changing. Clear examples are policies that
affect incentives or disincentives to foreign investment and
foreign entrepreneurship with major issues of economic power and
control to be addressed. Also important are policies dealing with
the overall problems of economic insecurity and how they affect the
ability to achieve the gains from the neo-liberal agenda, through
gaining acceptance of liberalising policies, by adjusting or
providing social safety nets and other ameliorating measures for
those substantially hurt.
From Adam Smith on, economic justice has been
seen as critical not just for a stable society but also to enable
economic progress to continue without disruptive reactions. Karl
Polanyi's famous study of the development of market economies,
The Great Transformation, is now often alluded to as
observing that end-of-19th century globalisation led to utopian,
but eventually oppressive, ideologies of both left and
right.(59) If governments underestimate economic
security problems, the problems ignored do not disappear from
politics; they simply return in the politics of extremism.
Internationally, for countries in the region,
including Australia, multilateral international systems and the
processes of global governance, already matter; for Australia, they
have been central to its view of the world. With globalisation,
they will matter more. The examples of the expanded role of the
WTO, the development of the Montreal Protocol, and tightened bank
reserve requirements set by the Swiss-based Bank for International
Settlements already reflect responsive institutional changes. More
will be needed. To maintain the effectiveness of state power will
likely require more cooperation with other states to manage the
processes of globalisation, take advantage of its opportunities and
minimise its disadvantages.
There is also a need to sell effectively the
wider benefits that come from those policies. Moreover, regional
governments will need to defend, and encourage others to defend,
the international institutions while responding constructively to
valid criticisms of their policy implementation and their
accountability and transparency. Few outside the institutions are
positioned to defend them at present and the public relations
battle is being lost, despite the line-up of additional countries
wanting to join those institutions. In the past, Australia has been
active, globally and regionally, in arguing for the continued
effectiveness of these institutions, and has the advantage of the
English language, the language of globalisation. In the case of the
WTO, a recent Australian parliamentary committee report has argued
a compelling need for the government to promote the benefits of WTO
membership and of participation in the global trading
system.(60) This is important regionally as well as
nationally.
At least until there is more of an international
political community, popular concerns about any democratic deficits
will need to be responded to through national governments rather
than internationally. The public relations battle has to be fought
nationally. An example of what is needed was the recent speech by
the Treasurer, Peter Costello to the Sydney Institute on
globalisation.(61) It would seem desirable, however, to
take the message to a wider public and to do so repeatedly.
Meanwhile, the countries in Asia could benefit
from Australia's help and experience in framing measures to cope
with economic volatility through better management of capital
flows, regulatory procedures for the private sector, protection of
consumers and investors and in social insurance.
Structurally, each country in the region will
need to ensure that its domestic institutions and structural
policies in place respond effectively to the challenge of the
globalisation and the other pressures normally seen as associated
with globalisation. Since the role of economic management has
changed, greater effort has now to be put into ensuring the economy
is effectively integrated with the increasingly influential and
competitive global financial and productive structures through its
education, research and economic management policies.
However, while governments have to take into
account the influences of globalisation, they will also have to
deal with new players representing global civil society. These will
include the gradually expanding number of international
organisations but will also include the more powerful transnational
corporations and the growing number of 'global' NGOs.
Other policy approaches will need to be
considered. Much more systematic research is being undertaken in
Europe than in Australia or regionally on what globalisation does
or will mean for states and governments. The required structural
and other adjustments will not be limited, moreover, to the economy
but will include the political, social, technological, educational,
demographic and cultural aspects of concern to the Australian
community and to the communities of the countries of Australia's
region. Given the substantial differences between the region and
Europe and North America, the gap in the information base in the
region compared with the US and Europe is both large and
potentially damaging.
Endnotes
-
- The origins and impact of the Asian Finahncial Crisis are
analysed by Ross Garnaut and Ross McLeod, eds, East Asia in
Crisis: From being a miracle to needing one?, Routledge,
London, 1998.
- See Hubert Vedrine with Dominique Moisi, France in an Age
of Globalisation, D. C. Brookings Institution Press,
Washington, 2001.
- Stuart Harris, 'China and the Pursuit of State Interests in a
Globalising World', Pacifica Review, vol. 13, no. 1,
February 2001, pp. 1529.
- Robert Keohane and Joseph Nye, 'Globalization: What's New?
What's Not? (And So What?), Foreign Policy, Spring 2000,
pp. 105119.
- Cited by Anthony Giddens, Runaway World: How Globalisation
is Reshaping Our Lives, The 1999 Reith Lectures, Routledge,
New York 1999.
- Held and his co-authors distinguish four periods of
globalisationpre-modern, early modern, modern and contemporary.
David Held, Andrew McGrew, David Goldblatt and Jonathan Perraton,
Global Transformation: Politics, Economics and Culture,
Stanford University Press, Sanford, 1999.
- The time periods variously range from 1820, 1840 and, the start
of the classic gold standard period, 1870.
- Robert Gilpin, The Challenge of Global Capitalism: The
World Economy in the 21st Century, Princeton University Press,
Princeton, New Jersey, 2000, pp. 1819.
- ibid., p. 295; Held and others, op. cit., particularly pp.
31114; it is generally held that migration from Europe alone in the
19th and early 20th century was of the order of 60 million.
- For discussion of these issues see Michael Bordo, Barry
Eichengreen and Douglas Irwin, 'Is Globalization Today Really
Different Than Globalization a Hundred Years Ago?', National Bureau
of Economic Research (NBER), Working Paper 7195, June 1999; Richard
Baldwin and Philippe Martin, 'Two Waves of Globalization:
Superficial Similarities, Fundamental Differences', NBER, Working
Paper 6904, January 1999; and Gilpin, op.cit.
- Natasha Hamilton-Hart, 'Thailand and Globalization', in Samuel
Kim, ed, East Asia and Globalization, Rowen and
Littlefield, Lanham, 2000, pp. 187208.
- Held and others, op. cit.
- Jan Aart Scholte, Globalisation: A Critical
Introduction, St. Martin's Press, New York, 2000, chapter 2.
- Stuart Harris, 'China and the Pursuit of State Interests in a
Globalising World', op. cit.
- Bridget Welch, 'Malaysia and Globalisation: Contradictory
Currents', in Samuel Kim, ed., op. cit., p. 243.
- Joseph Camilleri, States, Markets and the Asia Pacific
Region, volume 1, Edward Elgar, Cheltenham, 2000, p. 393.
- John Gray, False Dawn: The Delusions of Global
Capitalism, New Press, New York, 1999.
- Barry K. Gills and Dongsook S. Gills, 'South Korea and
Globalization: The Rise of Globalization', in Samuel Kim ed,
East Asia and Globalization, Rowen and Littlefield,
Lanham, 2000.
- Craig Reynolds, National Identity and its Defenders:
Thailand 19391989, Silkworm Books, Chiangmai, 2001, chapter
13, 'Thai Identity in the Age of Globalisation'.
- Ackbar Abbas, Hong Kong: Culture and the Politics of
Disappearances, University of Minnesota Press, Minneapolis,
1997.
- Ian Castles, 'The Mismeasurement of Nations: A Review Essay on
the Human Development Report 1998', Population and Development
Review, vol. 24, no. 4, pp. 831845, 1998; see also Ian Castles,
'The Human Development Report 1999', Room document for the 2000
Meeting of the United Nations Statistical Commission, available as
Annex 1, to Friends of the Chair of the UN Statistical Commission.
(www.un.org/depts/unsd/statcom/2001docs/2001-18e/pdf)
The use of purchasing power parity (PPP) figures, preferred for
measuring inequality, accounts for only a small part of the
difference at best. (UNDP uses them for its Human Development Index
but not for inequality measures). PPP has been stated by the UN
Statistical Commission to be the appropriate indicator for
measuring inequality. Even using unadjusted US dollars, however,
UNDP figures show a fall in inequality from 1993.
- Treasury Department, 'Global poverty and inequality in the 20th
century: turning the corner?,
(http.www.treasury.gov.au/publications/Economic
Publications/Economic Roundup/2001); Norwegian Institute for
International Affairs (NUPI), Globalisation and Inequality: World
Income Distribution and Living Standards, 19601998, Oslo, October
2000, issued as a report by the Royal Norwegian Ministry of Foreign
Affairs: Report 6B: 2000.
- See, for example, David Dollar and Aart Kraay, 'Growth is Good
for the Poor', Policy Research Working Paper 2587, World Bank,
Washington, April 2001
- Norwegian Institute, op. cit., see also Dollar and Kraay, op.
cit.
- Treasury Department, loc. cit.
- A comparison limited to the top and bottom 10 per cent
percentiles of world population, rather than the top and bottom 20
per cent used by the UNDP, does show increased inequality.
- The Gini coefficient measures the extent to which the
distribution of income differs from a perfectly equal distribution.
Taken over a period of years, it shows how income distributions are
changing. The Norwegian study weighted countries by population.
- Norwegian Institute, op. cit. pp. 1215.
- ibid.
- Norwegian Institute, ibid., p. 19.
- Paul Krugman, Peddling Prosperity: Economic Sense and
Nonsense in the Age of Diminished Expectations, W. W. Norton,
New York, 1994, pp. 146150.
- World Bank, Entering the 21st Century: World Development
Report 1999/2000, Oxford University Press, New York, 2000,
Tables 1 and 15.
- This appears consistent with Dollar and Kraay's conclusion that
they could find little evidence of a systematic relationship
between trade liberalisation and incomes of the poor.
- For a detailed discussion of these arguments and the main
counter arguments, see Stuart Harris and Andrew Mack eds,
Asia-Pacific Security: The Economics-Politics Nexus, Allen
and Unwin, 1997, St. Leonards, particularly chapter 1.
- Robert Reich, The Work of Nations: A Blueprint for the
Future, Simon and Schuster, Lanham, 1993, p. 113.
- Kenichi Ohmae, The Borderless World: Power and Strategy in
the Global Marketplace, Harper Business, New York, 1990. Tom
Friedman's The Lexus and the Olive Tree, Farrar, Straus,
Giroux, New York, 1999, is probably the best known statement of
globalisation optimists.
- Even the distinguished scholar and social critic, Amartya Sen,
while decrying poverty, has said that 'Much of what we see as
scientific, technical and economic progress in the world has really
been connected with global expansion'. TV Program Transcript, ABC
Lateline, 14 May, 2001.
- Anthony Giddens, Runaway World, op. cit.
- Gilpin, op. cit., p. 1.
- See Robert O'Brien, Anne Marie Goertz, Jan Aart Scholte and
Marc Williams, Contesting Global Governance: Multilateral
Economic Institutions and Global Social Movements, Cambridge
University Press, Cambridge, 2000.
- ibid, chapter 5.
- For a comparison of the MAI and WTO protests in Australia, see
Ann Capling and Kim Richard Nossal, 'Death of Distance or the
Tyranny of Distance? The Internet, Deterritorialisation and the
Anti-Globalisation Movement in Australia', Working Paper 2000/3,
Department of International Relations, Australian National
University, October, 2000.
- According to Scholte, there are over 250 multilateral
regulatory institutions. See Scholte, Globalisation, op.
cit., p. 58.
- For more detail on this see Robert O'Brien, Anne Marie Goertz,
Jan Aart Scholte and Marc Williams, Contesting Global
Governance, Cambridge University Press, Cambridge, 2000,
op. cit.
- Ann Capling, Australia and the Global Trade System: From
Havana to Seattle, Cambridge University Press, Melbourne,
2000, pp. 2045.
- Jan Aart Scholte, 'Global Civil Society: Changing the World?'
CSGR Working Paper No 31/99, May 1999, p. 13.
- Aseem Prakash, 'The East Asian crisis and the globalization
discourse', Review of International Political Economy,
vol. 8, no. 1, Spring, 2001, pp. 1323.
- See, for example, the argument of Lori Wallach, a major
organiser of the Seattle demonstrations, that much of the success,
for them, of the Seattle demonstrations was due to the democratic
deficit. Quoted in 'The FP Interview: Lori's War', Foreign Policy,
118 Spring 2000, pp. 2955.
- Joseph Stiglitz, 'What I Learned at the World Economic Crisis',
The New Republic, 17 April 2000.
- Joseph Nye, 'Globalisation's Democratic Deficit: How to make
International Institutions More Accountable', Foreign
Affairs, vol. 80, no. 4, July/August 2001, p. 3.
- Duncan Kerr, Elect the Ambassador: Building Democracy in a
Global World, Sydney, Pluto Press, Annandale, 2001.
- 'Measuring Globalisation', Foreign Policy, January/February
2000, pp. 5665. The index is constructed with a limited number of
quantifiable factors, including use of the Internet, trade in goods
and services, capital flows and personal contact (international
travel, international phone calls, cross-border remittances etc).
- The Jakarta Post, January 17, 1998, cited in Mark Beeson, 'APEC
and the IMF in East Asia', The Pacific Review, vol. 12,
no. 1, 1999, p. 17.
- Friedman, The Lexus and the Olive Tree, op. cit., pp.
8392.
- Gunther Schultze and Heinrich Urpsprung, 'Globalisation of the
Economy and the Nation State', The World Economy, vol. 22,
no. 3, 1999, pp. 295352.
- ibid, p. 3467, see also Daniel Drezner, 'Globalisation and
Policy Convergence', International Studies Review, vol. 3,
no. 1, Spring 2001, pp. 5373.
- Brian Burgoon, 'Globalization and Welfare Compensation:
Disentangling the Ties that Bind', International
Organization, vol. 55, no. 3, Summer 2001, pp. 501551.
- John Gray, False Dawns: The Delusions of Global
Capitalism, op. cit.
- Karl Polanyi, The Great Transformation: The Political and
Economic Origins of Our Time, Beacon Press, Beacon Hill,
Boston, 1957 (1944).
- Parliament of the Commonwealth of Australia, Joint Standing
Committee on Treaties, 'Who's Afraid of the WTO?' Australia and the
World Trade Organisation, Report 42, September 2001, p. x.
- Address by the Treasurer, Peter Costello, 'Challenges and
Benefits of Globalisation', The Sydney Institute, 21 July
2001.
Appendix 1Globalisation Rankings
1.
|
Singapore
|
2.
|
Netherlands
|
3.
|
Sweden
|
4.
|
Switzerland
|
5.
|
Finland
|
6.
|
Ireland
|
7.
|
Austria
|
8.
|
United Kingdom
|
9.
|
Norway
|
10.
|
Canada
|
11.
|
Denmark
|
12.
|
United States
|
13.
|
Italy
|
14.
|
Germany
|
15.
|
Portugal
|
16.
|
France
|
17.
|
Hungary
|
18.
|
Spain
|
19.
|
Israel
|
20.
|
Malaysia
|
21.
|
New Zealand
|
22.
|
Czech Republic
|
23.
|
Australia
|
24.
|
Greece
|
25.
|
Poland
|
Source: A. T. Kearney, Globalization ledger: Global Business
Policy Council, A. T. Kearney, Alexandria, VA,
2000.