Sunday, March 29, 2009

The Supposed Benefits of Globalization

One thing that seriously annoys me in politics is the way that orthodoxies take hold over certain subjects and anyone challenging that orthodoxy is often sidelined and ignored. It's a very dangerous situation because it can allow certain special interest groups to dominate the debate and sieze control of power.

It's my view that globalization in the form that we've had it in the last 30 years has been exactly this kind of situation. We've had a world where financial interests have seized control of political power and dominated the political debate. This is not just my view, but also the view of Simon Johnson former chief economist of the IMF in an article entitled The Quiet Coup he explains the rise of the financial interest in terms of both it's importance and it's influence over national governments.

Whats worse than the raw political influence has been the way that the financial interest managed to worm it's way into political thinking. To this day many Labour politicians speeches have been filled with talk of the benefits of globalisation, the need for competetiveness and the need not to restrict "aspiration". I'm sure that most are not complete converts on this score they've simply come to believe that these financial interests are impartial technocrats presenting a solution that is clearly the only right one to follow.

I do wonder if our politicans have ever looked at the figures, the table below shows per capita GDP growth in various regions of the world from 1960 to 1980.

Low Income Countries1.81.71.8
-Sub Sahran Africa1.70.21.0
Middle Income Countries3.53.13.3
-East Asia & Pacific
-Latin America & the Carribean
-Middle East &North Africa1.13.82.5
-Sub-Saharan Africa2.31.62.0
-Southern Europe5.63.24.4
All Developing Countries3.12.83.0
All Industrialised Countries3.92.43.2

The second shows the figures for the period 1980 - 2000 (with slightly different groupings).

Developing Countries1.41.71.5
-East Asia & Pacific6.46.16.3
-Europe & Central Asia1.5-2.9-0.6
-Latin America & The Carribean-
-Middle East & North Africa-1.10.8-0.2
-South Asia3.53.83.6
-Sub Saharan Africa-1.2-0.2-0.7
Developed Countries2.51.82.2

Looking at it we can draw several trends, we can note the massive growth of South East Asia, we can also see the negative growth of sub-Saharan Africa in 1980-2000 period, the terrible collapse of Eastern Europe and Central Asia in the 1990's as well as the very poor growth of Latin America in the 1980-2000 period. The more general trend is that the earlier period of more regulated capitalism delivered a far better rise in the standard of living.

For all the images of financial globalisation as a powerful driver in eliminating world povery the actual results, ignoring all social consequences and sticking to the primitive measure of GDP growth have been surprisingly lacklustre, which makes me wonder why our Labour politicians so openly embraced it.

1 comment:

Paul said...

Good piece, Andreas.

I've been looking rather long-windedly at the tax regime aspects of the 'self-fulfilling prophecy' of the globalisation-is-inevitable thesis at my place. Our conclusions - in your words 'financial interests have seized control of political power and dominated the political debate' - are similar.

If we both agree, we must be right. Now for that wider audience thing. Could you give Gordon Brown a ring and I'll call Barack.