Shaping globalisation

Globalisation is a question of balance.
Secretary-General of the OECD
Page 3 

I confess to being somewhat tired of the term “globalisation” which seems to find its way into the speeches and writings of everyone who has any interest in public policy. Globalisation is alternatively condemned as a worldwide agenda driven by greedy multinational corporations and bureaucrats where the rich get richer and the poor poorer, or praised as the way forward to increased prosperity for all and the answer to the dire circumstances of billions of distressed people on planet earth.

Tired as I may be of the term, I am hard-pressed to find a replacement that adequately captures contemporary events and trends. But what does globalisation really mean and why is there such a polarisation around the issue? Why is it so important?

In its simplest form I would define globalisation, when fully matured, as a “borderless economic world”, where trade and investment on a planetary scale flow and locate as freely as within national boundaries and where workers can cross borders freely to find jobs. We are a long way from achieving that degree of globalisation, but economic integration has certainly accelerated, spurred by new transportation and information and communication technologies as well as by business strategies and public policy.

When I arrived at the OECD five years ago I suggested that achieving balance in a “triangular paradigm” between economy, society and governance would be necessary for real progress. The concept is largely a statement of the objectives of good governance and is inherent in the aims set out in the OECD Convention. All the challenges and priorities of our democratic societies – from poverty reduction to managing the environment – fit within this concept. Remove or unbalance any one of its corners and social and economic progress slows down and is often arrested. History is replete with examples, the extreme ones being revolutions.

The paradigm does not imply a standardised mould for all countries. Each democracy has to find its own balance within the paradigm, based on its own social, economic and cultural particularities. Just contrast the degree of responsibility for citizens’ well-being that many European nations assign to government with the individualism that countries like the United States espouse. Different preferences have led to important differences in many policies, affecting the distribution of national income for instance, the flexibility of labour markets, taxation, and indeed in the role of government itself. The notion of social equity also varies among democracies but, provided there is social stability, one cannot conclude that the balance achieved in one national paradigm is better or worse than any other. Only the electorate can decide that.

It may be time to revisit this paradigm, especially in light of the passions raised in the debate about globalisation. Serious clashes arise between those who support freer markets (including international markets through multilateral trade and investment) as the prescription for economic growth and job creation, and those who believe that social equity is being placed in jeopardy by the unbridled play of market forces.

It is not always easy to see where the answer lies. Yet for globalisation to work, there needs to be balance in this triangular paradigm at world level too. The public demonstrations in several cities in recent years suggest some imbalance. The question is: where?

There is no doubt that the fruits of globalisation, namely, trade and investment liberalisation, have brought much increased wealth to the world as a whole. But there is no point arguing that globalisation is good because no one is getting poorer. Individuals within OECD countries have been falling behind as others race ahead and there is a sense that the North-South gap is widening. Is the social equity side of the paradigm getting enough attention? Do the governance aspects require strengthening?

Many would agree that globalisation offers great potential for world development. So how can diverging interests be brought behind what may be a unique opportunity? As the phenomena of globalisation touch almost every aspect of economic life, so shaping it inevitably involves a wide range of public policies – not only for trade and investment, but also competition, labour, environment, financial markets, energy, agriculture and development, to name a few. No government, ministry, union or business is an island in today’s community of economies and societies.

The democratic governments of the OECD work together to improve policy, build co-operation and enhance the well-being of our countries. We take decisions by consensus and operate through dialogue, including with business, labour and civil society. We work closely with non-OECD countries too. We know there are downsides to globalisation which have to be managed, especially adjustment costs. Opening markets introduces competition, rewards efficiency and productivity and penalises the inefficient – even to the point of closing business and putting people out of work. The economic gains from globalisation on one side of the paradigm must be matched by measures to ensure social equity and stability. This is the business of good governance and the hallmark of the work of the OECD.

Globalisation for all represents an opportunity we cannot afford to miss. In fact, it is a moral responsibility of our times.

Donald J. Johnston, Secretary-General, OECD

©OECD Observer No 228, September 2001

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