The Future of Globalization
The Future of Globalization
As the pace of globalization continues to increase, new opportunities and challenges will arise for leaders and communities. While globalization has brought immense benefits to many sectors, certain countries and individuals remain vulnerable, whose interests should be protected and promoted. How can societies best approach the challenges this presents?
Pascal Lamy (left), and Kevin Rudd (middle). Ngaire Woods moderated the discussion.
Q: What are the best and worst things about globalization?
Kevin Rudd: The spreading of wealth is the key benefit in my view: globalization is lifting economic growth rates and living standards around much, though not all, of the developing world, and in developed countries as well.
The worst thing is the disconnect between the volume of activity that now requires regulation at a global level and national political systems incapable of agreeing on global forms of governance to do that.
Pascal Lamy: The best thing to come out of globalization has been poverty reduction, and the worst is inequality. Because globalization is extremely efficient, inequalities within countries and among countries have increased: poverty reduction is absolute, inequality is relative. And if we don’t change these inequalities, the social reaction will endanger globalization. I come at this issue as a person from the left, and think inequalities in themselves should be addressed. But even if I came from the right, pushing globalization for efficiency, I would want to address the problem, so that populist, sovereignist, isolationist reactions do not hinder the positive side of globalization.
Kevin Rudd: Inequality is an inevitable consequence of capitalism. The key is managing the level of inequality. Whether you come from the perspective of equality of opportunity or enlightened self-interest, the net consequence of both is a level of social intervention. I do not support the ultimate neo-liberal form of globalization but one based on a social democratic conditionality. That means ensuring that those who are temporarily losers are supported by adequate safety nets and able to readjust to other forms of employment.
I think waiting for the magical marketplace to resolve these questions is self-delusional. There are also economic dimensions to this. The net impact on government budgets of large-scale, long-term unemployment in terms of lost revenue through collapsing wages is significant – far better to be more radical in your interventions to get people back to work.
Pascal Lamy: In Europe, Nordic countries have addressed inequality reasonably well, southern countries have not. I think it is necessary and can be done. Governments need to address their debt overhang, which will take time, and make the necessary structural reforms to grow to their potential.
At an international level, we need proper global governance that has the necessary tools, power and intervention capacity to recreate a more level playing field.
Q: Is there any part of globalization that you think is improving the ability of individuals to hold those in power to account?
Pascal Lamy, Director-General, World Trade Organization
Pascal Lamy: Technology, the infrastructure of globalization, has huge empowerment capacity, and it doesn’t make governments’ lives easier. Governments will regulate globalization if their constituencies give them the mandate to do so – if governments don’t do it, it is because they don’t presently have the necessary political energy at home. The danger for democracy comes from globalization not being harnessed, because people believe there is nothing they can do.
The danger for democracy comes from globalization not being harnessed because people believe there is nothing they can do.
Kevin Rudd: The essence of globalization is the contraction of time and space in international transactions through the platform of new technologies. Citizens, including some of those in the poorest countries, are now globally wired. But managing the business of existing democratic constituencies through regular election processes, and the new constituencies in a more chaotic form through new technologies, makes the business of democratic governance more complex than ever.
Q: What is the most important element of cooperation needed to make international globalization safe?
Pascal Lamy: I think the environmental sustainability issue is not being adequately addressed at present. I am not saying we don’t have problems in trade – we do need to keep opening it, and the Doha Round was and still is a recipe for doing that. But it is not the only recipe, there are many – if we revamp, for example, the information technology agreement, we could bring a lot more open trade. With trade, so far we’ve succeeded in not receding – we haven’t damaged the system. On the environment, we are moving this planet backwards in terms of well-being, and that’s why I think the environment should be the priority.
Q: Is the G20 the place to get the world to focus on climate change?
Pascal Lamy: After its second meeting, the G20 decided not to talk about the environment anymore – it was too divisive. But we all know the basic components of an environmental agreement have to take place within the G20. This is where the countries that are preventing the agreement happening – because they disagree – are all around the table.
Kevin Rudd, Prime Minister of Australia (2007–2010) and current Member of Parliament
Kevin Rudd: Global institutions provide the mechanism to make globalization work but they require national political governments to work, too. If a large enough grouping within the G20 said “this needs to be done”, it could be. The G20 is not just a clearing house, but a marshalling mechanism.
One way to add confidence to the global economy, and to add new activity in a way that wouldn’t cost an arm and a leg, is open trade.
Q: What is the shock you most fear in 2013?
Pascal Lamy: At the low probability end, but with a very high damaging capacity, is cyber risk. We who follow politics closely know that there is a much higher risk from that side than is acknowledged in public debate. Political instability in the Middle East may have a lower immediate global impact, but a higher probability to create shocks.
Kevin Rudd: A cybersecurity attack that collapsed platforms for engagement in a global context would be catastrophic.
Q: What would you put top of the agenda for leaders to debate at the World Economic Forum Annual Meeting in Davos in 2013?
Pascal Lamy: The crucial issue is for each to make an effort to understand where the other is coming from. A radical recipe would be for each of these leaders to come to Davos with an anthropologist – the leader saying nothing, the anthropologist explaining to the others the specificities of his or her country. I think once they’d done that, the leaders would understand each other better and probably have a much higher capacity to converge on issues.
Insights revealed during a session entitled “The Impact of De-globalization” during the Summit on the Global Agenda 2012:1
- Globalization and easier access to information and disclosure are too often seen as solely positive, whereas they are also creating a world that is more volatile with increased economic uncertainty.
- In the current volatile environment, globalization and de-globalization may alternate, and even co-exist. Across localities, countries, regions, but also sectors and industries, globalization and de-globalization are considered less and less mutually exclusive.
- There is a loss of trust in the ability of governments, even if democratically elected, as well as business leaders to resolve crises and improve lives in their communities.
- Success of global governance as a central pillar of globalization is much more outcomes-driven than process-driven. Trust will only be earned if solutions are delivered.
- Globalization is continuing in migration, global food production systems and the tertiary education sector (student flows, global outreach of universities). However, examples of de-globalization can be seen in the manufacturing and production sector.
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For more information on the Summit, please visit www.weforum.org/events/summit-global-agenda-2012.