Politics Of Policy | Globalisation Is Killing Globalisation
At World Economic Forum’s annual summit in Davos, it was evident that business and political leaders will have to scramble to save globalisation from itself
What is worse? Globalisation or protectionism? Market economy or command economy? Open borders or closed borders?
More than 50 years since these issues came to fore after the end of the Second World War, they are back to dominate public discourse on our future. At the annual summit of the World Economic Forum at Davos, business and political leaders discussed issues that were clearly a blast from the past.
As OECD countries created a world order based on open markets and free flow of capital, globalization grew at its fastest pace in history. In 1960, global trade was about 25% of worlds GDP but grew to 61 per cent by 2008 and is close to that figure now. The year 2016 is seen as the year that broke the back of globalization. Now pundits and economists across borders are fretting about our future as they expect global trade levels to fall in the coming months.
The questions are still valid. But the response depends who answers. Is rising trade good for the world?
The globalists say that trade is the best way to reduce poverty and increase wellbeing. David M. Cote, Chairman and Chief Executive Officer of Honeywell International, said, "Since the Phoenicians, we've known that trade between countries raises the standard of living."
Christine Lagarde, Managing Director of the IMF says, "To turn our back on globalisation, to turn our back on helping development, is exactly the wrong approach."
But speak to those advocating a sustainable agenda and the answer is diametrically opposite. They argue how the constant drive for higher consumption is wearing heavy on the earth. The focus on buy local campaigns across the world are not so much about protectionism but about reducing the resources spent in producing and delivering products of everyday use.
The irony is built into the argument for globalisation. Rising globalisation has been matched by rising inequality and the shrinking of the middle class. As globalisation and use of technology reduce jobs, the middle class diminishes and so does its buying power. Once the consumption demand begins to fall, global trade and investment reduce while social anger rises. The rise of Donald Trump and vote on Brexit are the symbols of society pushing back against globalization. About 10 per cent of public companies account for 80 per cent of profits. And eight men have as much wealth as the bottom 3.6 billion people in the world.
Effectively globalisation is killing globalisation.
At Davos, it was evident that business and political leaders will have to scramble to save globalization from itself. Efforts are on to mitigate the impact of globalization. David Abney, Chairman and Chief Executive Officer, UPS, USA, says, "We need to do much more to equip displaced workers with new jobs and 21st-century skills," he said.
Rising unemployment and inequality have manifested into strong political forces. And these forces are seeking protectionism and equality.
CEOs are seeking new solutions. They don't seem to have the moral right to ask the government to take care of including the deprived in the growth story. Unilever CEO Paul Polman is among those who is asking industry to focus on equality and environment. A framework of their participation was created in September 2015, under the leadership of United Nations, countries adopted a set of sustainable development goals (SDGs). Each goal has specific targets to be achieved by 2030. The goals include quality education, clean energy, sustainable cities, responsible consumption, clean water & sanitation, and gender equality.
Here business leaders have as much a role as governments. "It is an agenda for peace, poverty, planet, people and partnership. If we invest about $4 trillion in the SDGs agenda, the world could see a benefit of $12 trillion," Polman said to me in a session at Davos. "While shareholders need to be satisfied, they cannot be the objective of running your business." Strong words from the CEO of a very global corporation.
Business that build climate change and environment in their models are being experimented by many companies now. "The way we go about business is in many ways unsustainable," Mark Cutifani, CEO of global mining giant AngloAmerican told me. "If you're not producing the product sustainably, then the business itself is not sustainable," said Cutifani who runs the $20 bn company.
Though some of the CEOs have changed their language actions will take time to match.
Until CEOs and political leaders create a new framework for globalization, the anger will grow. SDGs may be able to mitigate the pain, but they alone can't make it go away.