“Globalisation is the most progressive thing that can happen to humanity but also the most dangerous. It can transform us for the better but also kill us. However, we can’t stop the bad aspects of globalisation by being protectionist or nationalistic. No walls are high enough,” said STIAS Permanent Fellow Ian Goldin of the Oxford Martin School, University of Oxford in the first seminar of 2023. “We need more consensus, integration, cooperation, collaboration and transformation – more of the ‘goods’ and less of the ‘bads’ of globalisation.”
“The question now is whether we enter a period in which there are sharper divisions between regions, with competing spheres of influence and commerce centred around North America and Europe, and in East Asia around China, or whether global commerce and politics remains highly integrated, defying attempts to fragment the world economy. There is growing mutual interdependency arising from escalating risks, including pandemics and climate change, and we have to decide whether the shared interest in safeguarding livelihoods and our planet can overcome political differences. Closer cooperation could offer the prospect of a better and safer world, while fragmentation is likely to result in rising risks, stalling economies and growing inequality which, in turn, fuels rising protectionism and nationalism, and a more unpredictable and dangerous trajectory.”
Pointing out that globalisation is a misunderstood term, he said. “For me it means flows across borders – not just people, but goods, services, ideas and digital flows. But flows of both good and bad – good like vaccines, bad like pandemics. It’s the good, bad and ugly.”
“I’ve worked on globalisation for many years,” he continued. “There’s a lot to be said. Globalisation is not new – it comes in waves throughout history. But the speed and intensity of globalisation over the past 30 years makes this an era-defining period when nothing is inevitable and there are many questions.”
He pointed out that, like currently, previous waves of globalisation including the Age of Discovery (from the mid-15th to the mid-16th century) and the mass migrations of Europeans to America, Africa and Australia in the 19th century (when up to a third of the populations of some countries migrated) were underpinned by technological advances including better ships, navigation equipment and the printing press which led to enhanced exchange of ideas and an explosion in creativity and renaissance. In both cases these periods were dismantled by geopolitics and war.
However, the scale, intensity and breadth of globalisation now is of a much higher order of magnitude that anything previously.
He highlighted some defining events. “The fall of the Berlin Wall and collapse of the Soviet Union profoundly changed geopolitics. The Cold War was a brutal division of the world. The wall was not just physical – very little crossed the wall. You couldn’t imagine globalisation in the Cold War.”
“The end of Cold War heralded a growth in democracy. Countries that had had autocratic governments faced democratic changes. South Africa was one.”
“The dramatic ripple effects transformed things and people across the world. Within five years 55 countries had democratised. There were increased aspirations for integration and convergence in world views on democracy, advocacy on human rights and adherence to free markets. We wouldn’t be here today if the wall hadn’t come down.”
On the economic side, there was the opening up of China from the 1970s but accelerated in the 1990s as well as the 1992 Maastricht Treaty which created the European Union. “27 countries removed border controls for goods, services, people and capital,” explained Goldin. “This had never been done before. The ‘Maastricht moment’ created a big, integrated market – economically as well as for norms and standards – human rights, freedom, environmental sustainability were all given extra weight on the global stage. There was a realisation that together was better because countries could punch above their weights. There was a queue waiting to join.” (He described Brexit and the departure of Britain from the EU as “one of the follies of history”.)
Similarly the North American Free Trade Agreement in 1994 opened up trade between Canada, the US and Mexico, and the Uruguay Round from 1995 created the World Trade Organization and allowed enhanced trade, manufacture, services and IP protection between 123 countries.
“The revolution of the internet and the worldwide web from 1990 led to exchange of ideas at an unprecedented pace and price,” added Goldin.
“Rapid economic growth led to reductions in poverty and increased literacy. China took 700 million people out of poverty with an average doubling of income every ten years. By 2008 they were producing 50% of manufactured products globally.”
But the euphoria of accelerated progress gave way to the reality of a world of greater inequality and unevenness.
“Inequality has increased in every country at a faster rate in the last 30 years,” said Goldin. “Where you are matters more than ever. If you are not on the accelerating train, you are left behind. Schooling, education, language and attitude all matter. Some groups are more effective at capitalising on progress. There has also been an institutionalisation of power and inequality at government and global level.”
He pointed to three reasons for this starting with global competition in taxation where wealthy individuals and companies escape the tax net through offshoring, trusts and tax havens, causing governments to lose the ability to control income. This started during the Thatcher/Reagan era when free markets were seen as good and state-control bad, creating a competitive tax environment. “But it was highly exaggerated. Many countries with high tax rates do well. Taxes allow the creation of stable, productive, safe and more equal societies because governments can invest in infrastructure, education and healthcare which are the bedrocks of development.”
The transformation to knowledge-based societies further marginalised the poor and unskilled. “Transformation creates a skills-based technological exchange. Societies need more skills and if you can’t skill the population inequalities increase.”
He also pointed to mobility challenges. There are shortages of skilled people in knowledge-based urban areas but the less-skilled unemployed are usually in peripheral or rural areas. Because of the housing market and public transport, people can’t move or commute to where the opportunities and jobs are.
“Metropolitan elites love globalisation, everyone else hates it,” he said. “This translates into politics. Trump’s supporters are mostly low skilled and rural. Most Londoners voted against Brexit while the unemployed and people in poorer places voted to leave.”
Rising inequality translates into anger against the metropolitan elites and lack of access to jobs leads to crime, substance abuse, depression and suicide. All of which is hard to solve – “but while I support targeted and means-based support to overcome poverty, I definitely wouldn’t promote universal basic income,” said Goldin, “which pays people to stay at home creating the need for permanent social welfare”.
Butterflies and shocks
As the world connects, more intense entanglement creates a butterfly defect. “The unprecedented speed of technological and innovation change has led to the accelerated creation of ‘goods’ (for example a COVID vaccine in nine months) but also ‘bads’. The first shock was the 2008 Financial Crisis without which there would have been no Trump in the White House or Brexit in Britain. It caused loss of trust in financial systems. COVID was the second shock – many, including me, predicted it. We will have another pandemic. But we can manage the next pandemic and financial crisis better with the right collaboration.”
In discussion, he addressed whether globalisation leads to homogenisation and loss of national identities. “Homogenisation has been overstated. In some cases increased communication has led to the revival of identities and languages. It’s also allowed discussion of multiple identities and strengthening of identities like LGBTQ which would not have happened within some national contexts. It’s created a more diverse playing field.”
Asked about BRICS and the African Union, he replied: “BRICS’s time has passed. It was created by political opportunism in search of meaning. It brought together countries with nothing in common. But it’s hard to kill. The AU is different. It has a role in facilitating African trade. Africa can’t survive without closer economic integration. But it’s still just an ambition.”
Regarding addressing globalisation beyond the human impact, he said: “Human progress and global growth has been to the mass detriment of animals, diversity and climate but you don’t get out by de-globalisation or slowing growth. We need to transform growth dramatically. My hope is in raising consciousness. There are important debates to be had.”
“Globalisation needs management. No global institution currently is fit for purpose. We need to reform, recreate and transform to manage globalisation but we first have to admit that managing globalisation is essential.”
“Right now another Cold War is a real risk. Rising protectionism and nationalism is real. It’s a dangerous time. This would slow growth, and the poor who are victims of big-country ambitions will suffer more. We need at least the US, Europe and China to agree to address the great risks we face – climate, pandemic and others. A Cold War would mean giving up on managing the future collectively. This will have devastating consequences. We need management by consensus not conflict.”
Michelle Galloway: Part-time media officer at STIAS
Photograph: Noloyiso Mtembu