Donald Trump’s victory in the American Presidential election has brought into prominence greatly divergent views concerning the merits or demerits of globalisation. Here we set out the criteria that need to be met before globalisation can be regarded as a world welfare improving institutional arrangement.
First, and absolutely fundamental and necessary, is the need for nation states engaged in trade and international borrowing and lending to implement domestic policies that establish sustained full employment of their work forces and normal capacity working of their existing stocks of capital goods and human capital.
Secondly, if the first criterion is met, movements towards freer trade will be beneficial, provided that measures are taken to protect those sectors that will be adversely affected by these moves. Ideally, in order both to protect and to benefit from the social capital that has been built up over generations in the sectors and areas affected, policies that attract capital flows into alternative industries in those areas should be systematically implemented, along with retraining schemes and, if absolutely necessary, generous pensions for displaced, often older, workers. Coupled with these moves is the need to maintain past gains in conditions of work and in the community generally. Such a set of policies would imply far less disruption socially than the alternative that requires displaced labour to be mobile, to be forced to move to other areas in order to obtain employment.
Finally, and especially in a world of floating exchange rates, capital controls and schemes to crack down on destabilising speculation need to be implemented. Especially is this so in small open economies such as Australia that are peculiarly susceptible to destabilising speculative flurries.
Only if ALL these criteria hold is it possible to look with a benign eye on globalisation and its positive effects of helping to raise standards of living worldwide. But merely to state these criteria is to see immediately how far off they are from being met in the modern world.
Geoffrey Harcourt is Honorary Professor, School of Economics, UNSW.
Comments
4 responses to “GEOFFREY HARCOURT. The pluses and minuses of globalisation”
Would it be helpful at this stage to speak of positive or progressive “models” of globalism, compared to the negative, regressive and neoliberal models that progress only the imbalance between corporate power and publicly-accessible governance as expressed in functioning rather than disabled states. The TPPA looks more like a coalition of corporations than of states, calling themselves “Persons” in their Definitions section with one-way rights to sue nation states (called “Parties”) in their own revolving-door tribunal.. This imbalance could have evolved into a quasi-state or Investor State (IS). It would likewise diminish the role of the nation state and therefore the U.N. For all its flaws the United Nations Organisation at least has worthy goals, such as the recent Sustainable Development Goals (SDG). UN reform will not be aided by the “withering away of the state” ideology of the radical neoloberal-corporatist model of globalism.
Geoff basically I can see where your coming from and I agree, however what about fair trade NOT free trade.
The Tobin Tax was proposed to dampen the rate and volumes of capital flows; it earned a Nobel Prize about 1970 but has been studiously avoided by the ‘master of the universe’ class. I believe it was aired in Europe after the GFC – but the City of London objected successfully. It is now needed more than ever.
The problem with fictionalisation is cross border capital flows. neoliberals and international banks would have you believe otherwise, a fall in these money movements is entirely a good thing. Ken Rogoff and Carmen Reinhart found in their study of 800 years of financial crises, high levels of international capital flows are correlated with more frequent and severe financial crises. cross border capital flows are to varying degrees over 60 times trade flows, and nothing to do with trade.