The Hindu Business Line : Globalisation: Promises and pitfalls

Globalisation has almost an equal number of proponents and opponents. Even in countries that have benefited, there are winners and losers, leading to growing regional inequalities. It is the national Governments’ responsibility to ensure that everyone gets a chance to benefit from the opportunities thrown up by globalisation, says BHANOJI RAO

In several Indian cities, one comes across stores sporting the names ‘China Bazaar’, and the like, which essentially sell made-in-China goods for the price-conscious Indian consumer. This is globalisation for the common man, opening up of the economy for the ordinary citizen and bringing India-China co-operation to the street corner socialist.

Neither the Indian shopkeepers nor the consumers are concerned about China adhering to World Trade Organisation rules or workers’ rights. All that matters is the full freedom to enjoy cheap goods from even the not-so-free nations. This is perhaps the best manifestation of ‘enlightened self interest’.

China has proven beyond doubt that it can have the cake and eat it too, in contrast to our own ethos. Fixed, or almost fixed, exchange rate for a long while and soaring reserves go hand in hand in China. Here, the rupee appreciates and concessions galore are forthcoming to the duty-bound exporters, though our reserves are nowhere near the level attained in China.

The lack of freedom to form associations or dissent is no bar for rapidly expanding Chinese exports to the so-called free countries. India’s freedom and multi-party democracy has derived no special economic bounty for the common man.

China is different, in fact far too different, and that makes the world what it is, uneven and unequal. There is more to such differences beyond India and China.

Inequalities

Just about a year ago, on December 28, 2006, The Hindu published excerpts from an interview with Nobel Laureate Joseph Stiglitz on his 2006 book Making Globalization Work (Viking, 2006). Professor Stigliz made the point that while India and China are growing at historically unprecedented rates, largely due to globalisation, most of Africa has not benefited because of lack of educational opportunities and other resources essential for taking advantage of new technologies. Global disparities are on the rise.

A little over three years ago, The Economist carried an invited article by Professor Robert Wade of the London School of Economics on ‘winners and losers’ of globalisation. He pointed out: “Technological change and financial liberalisation result in a disproportionately fast increase in the number of households at the extreme rich end, without shrinking the distribution at the poor end. Population growth, meanwhile, adds disproportionately to numbers at the poor end.”

The main point of the article was as follows. Intra-national and international inequality has been increasing due to globalisation. Those who could access the jobs and opportunities have done so, but many are left behind.

This process at the aggregate national level has helped several countries in Asia achieve relatively high levels of average income per person. In the absence of similar gains in Africa and other parts of the developing world, international income inequality has increased.

Projections for 2030

As if taking note of the comments made by Professor Wade on international institutions not paying attention to the emerging problems, the World Bank in its Global Economic Prospects 2007 notes that as a result of globalisation, “along with rising average incomes may come dislocations and environmental pressures”.

The Report especially points to the following: growing inequality, pressures in labour markets and environmental degradation. Unchecked, they could derail globalisation and adversely affect growth and development in developing countries.

The Report has the following projections: The earth’s inhabitants now numbering 6.5 billion will rise to 8 billion by 2030. Labour force of the world will increase from 3 billion to 4.1 billion, requiring a billion more jobs over the quarter century.

During 2006-2030, per capita income growth will be an annual average of 3.1 per cent compared to 2.1 per cent during the previous 25 years of 1980-2025. The projected number of people below a $1-a-day poverty line will fall from the current 1.1 billion to 550 million, which in conjunction with the population estimates will translate to a decline in poverty rate from the current 17 per cent to 6.8 per cent in 2030.

These optimistic projections could be derailed by the three threats noted earlier: widening inequality, labour market tensions and new environmental pressures.

World Bank suggestions

To address the inequality issue, the Bank Report suggests creating new opportunities for the poor through additional investments in education, with particular emphasis on girls’ education. Also recommended are investments in infrastructure and health as well as completing the Doha Round of world trade negotiations. At best, the recommendations are too general to convince anyone of their positive impact on income inequality within countries.

The prospects are more convincing when it comes to inequality across developing countries, notably between those in Asia and those in Africa.

he Report rightly conjectures that the rise of China, India and others could create opportunities for exports from and FDI flows into Africa, contributing together to rising incomes in that continent.

As for labour force dislocations, the Report calls for protecting workers rather than protecting jobs — a sane suggestion indeed for all countries, especially democratic ones being run on vote-bank politics.

Environment

Demand-driven increases in the efforts to harvest fish from the open seas have been driving some valuable species to near-extinction. The legal framework is in place to ensure sustainable marine fishing, but results have not been promising as there is a lack of institutions that can effectively enforce the rule of law.

High rates of growth of trade and investment as well as tourism are part of the reason for the spread of diseases such as HIV/AIDS, SARS and, most recently, avian flu. The WHO has been active in all these and has been helping in the prevention of their spread, but more needs to be done.

Green house gases and global warming have now become buzzwords. National and international action, however, has been minimal and perhaps mostly limited to awareness creation, law-making and minimal enforcement.

The essence of the Report can be found in the following. “Because increases in production magnify cross-border pollution, while improvements in technology make it possible to expand or intensify exploitation of scarce global resources, decisions at the national level are having a growing impact on other countries… Mitigating climate change, containing infectious diseases, and preserving marine fisheries are three prominent global public goods that demonstrate the need for — and benefits of — international policy cooperation.”

End Note

Globalisation opens the doors — to opportunities as well as threats. National governments have a relatively high level of responsibility to ensure that citizens access opportunities and prosper while international cooperation alleviates the consequences from possible threats.

(The author, formerly with the National University of Singapore and the World Bank, is a Member of the Governing Board of the GITAM University, Visakhapatnam and Visiting Faculty, Sri Sathya Sai University. He can be reached at bhanoji@gmail.com.)

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