Why Globalisation Matters
In economic terms the Covid-19 pandemic has been a crisis like none other in world history.
At present the subject of globalisation appears almost irrelevant.
The barricades are up everywhere and anything beyond national boundaries seems to be out of scope.
Battling the pandemic seems to be the only focal point. But at some stage, the economic costs will have to be weighed in the balance. The Presidential election in America as well as the ‘post Corona’ recovery in China, Western Europe and the United States will put globalisation, back on the radar.
It is quite evident that the rise of China and India remains the dominant event in this time even in the context of this crisis. The transformation of these two countries consisting of almost 40% of humanity – more than two and a half times the population of all of today’s so called ‘developed countries’ - is likely to prove an even more significant phenomenon for the long-term future of humanity. Also, India and China have the most to lose if globalisation becomes a casualty.
To my mind, the significance of globalisation remains as important as ever before. International economic integration is facilitating change in the world. This is true, not only in economic terms but also in how we tackle the bigger challenges such as climate change, fundamentalism, species extinction, financial instability and inequality.
Globalisation means economic integration across national frontiers. It is a process by which the economic agents in any given part of the world are affected by events elsewhere in the world. Integration leads to markets operating across political boundaries and beyond nationality. In the economic sense, there are no foreigners.
It is a process that has been on since the start of civilisation. In modern times, the movement of industrial goods, commodities and capital was overtaken by tradability of services boosted by offshoring thanks to the rise of information technology. India was a big beneficiary of this process. Economic liberalisation has pulled hundreds of millions of people out of poverty and spread opportunities more widely than ever before.
When economic liberalisation started in India in 1991, exchange controls were seen as things of the past and privatisation started in right earnest. We seemed party to the ‘Washington Consensus’ with an emphasis on sound monetary and fiscal policy and embracing of market forces towards economic development.
Globally, the creation of the World Trade Organisation – WTO, in January 1995 was a point of inception. After the Uruguay Round, the world saw the futility of inward-looking trade policy, the harm of insular economics and the distributive rewards of trade liberalisation. India, like many other developing countries, did play a greater role in the Uruguay round.
In my entire career of more than two decades, I have worked in the private sector and with global corporations managing global brands and businesses. I have learned, by experience, that an integrated world economy, founded on market relationships is beneficial for all. Socialism is a nonstarter without value creation. Communism failed and ended abruptly in the erstwhile Soviet Union. Liberal democracy is the best way -if not the only way- to run society along with an advanced economy.
When we buy a brand we make a choice. When we cast a vote we make a choice. A capitalist economy runs on the open market basis is about making choices. That is the most beneficial system for the largest majority of the world’s people.
The market is a very sophisticated, self-tuning and self-governing institution. Markets are above governments. Of course, governments can senselessly damage free-market economics. But, those states that understand that their long-run interest lies in a global cooperative economic order do well.
Imperialism ended and Communism failed. Fascist military nationalism drew the world into a global war and destroyed Europe’s pre-eminence in the world. The only thing that survived and thrived is liberal, democratic, the market operated free economies. Yet, the threats to globalisation are real. The COVID-19 aftermath may give it finality.
The earliest criticism of market-driven globalisation was that it subordinates interest of national economies, undermines democracy and leads to the surrender of sovereign power to powerful multinational corporations.
Since the end of imperialism and the conclusion of World War II, almost all advanced economies in the world – with the exception of China – have become liberal democracies. They have free media, elections, rights and responsibilities monitored by institutions. Across the world, lifestyles have improved and become better in terms of evident measures. In fact, globalisation should have allowed us to fight global challenges together. If instead, a crisis like a pandemic succeeds in halting the movement towards global integration, we will see our progress get reversed, prosperity falling and a corrupt control strengthening over means of value creation.
Our real challenge as one world is not to halt global economic integration but to celebrate it and strengthen it and make it work for those people that it has not been able to reach before.
In their book ‘Why Nations Fail: The Origins of Power, Prosperity, and Poverty’ Turkish-American economist Daron Acemoglu of the Massachusetts Institute of Technology and British political scientist James A. Robinson of the University of Chicago make the case that it is politics which decides the prosperity and success of nations. It is the nature of institutions we create that eventually determine our progress.
The world cannot be better as divided earth with hostile states ignoring the welfare of us all. Our global issue will not forever be a pandemic or war or economic loss or gain. Our global issue is self-interested politics dominating free-market economics.
We must not let that happen.
