Globalisation has driven worldwide change over the past four decades: change that has benefitted many but disrupted and disadvantaged others. Tim Costello, former chair of the C20 during Australia’s presidency of the G20, explores the global context of this contradiction and consideres how policy makers can respond to help realise every citizen’s aspirations.
Globalisation is neither a single phenomenon nor the only force at work in our world. Some see it as unstoppable but right now it faces some serious challenges. While primarily economic, its cultural and political dimensions have also had profound impact. Trade liberalisation, financial deregulation, open investment regimes, more flexible labour markets and easier migration have all contributed to economic growth; to a more internationalised and integrated economic system; and, to some degree, to a reshaping of social structures and the relationship between states, corporations and citizens.
Rapid technological advances have not only driven economic growth but have also gone a long way towards creating a borderless world of ideas, notwithstanding the earnest efforts of authoritarian governments to exclude dangerous voices. Cultural globalisation has not quite led to homogenisation, as it has brought hitherto distant and diverse places and peoples closer to the collective consciousness. Yet it has also revealed the extent of shared fears and aspirations among apparently dissimilar communities.
Fears, not aspirations, are winning the most attention at present. Despite the manifold and manifest benefits of a more globalised world, many are experiencing the pains more sharply than they are feeling its uplifting effects, and optimism is in short supply.
Globalisation anxiety derives from three powerful, distinct but closely inter-related factors, all of which have a hard economic basis but are played out in social, psychological and political responses: inequality, insecurity and immobility. All three take different forms in different places, but they cut across the divide between developed and developing countries.
Inequality has been at the heart of political debate for centuries, and has always produced a philosophical divide.
Traditional societies were often hierarchical, and the conservative view was that inequality was part of the natural order of society. This was not unjust, as those at the bottom were protected and would have their basic needs met because of the principle of mutual obligation.
A liberal view was that inequality was not necessarily natural but a necessary corollary of the freedom of the individual, of competition and the law of property, all of which underpinned the phenomenal productive power of industrial society. Here was neither equality nor security, but the new wealth delivered opportunity, prosperity and social mobility.
Socialists rejected inequality entirely and sought to remedy it by eliminating the exploiting classes, organising most economic activity through the state or through collective or co-operative enterprises.
Modern liberals and social democrats have recognised that a balance can be struck whereby mostly free markets, with some regulation, include adequate provision of public goods and a degree of redistribution through state taxation and transfer processes. This view has formed something approaching a consensus in most of the world for many decades now, and has underpinned global growth and enormous progress in reducing poverty.
But just recently this consensus has come under challenge as more citizens have come to fear that the global economic system, as they experience it, is no longer offering them the benefits they had hoped for. They are now beset by the triple anxiety: inequality, insecurity and immobility.
Importantly, the anxiety they produce is related not only to extreme poverty or disadvantage but also on a widening gap between people's aspirations and reality. This matters because it is unmet expectations that threaten the legitimacy of both economic and political institutions and systems. Simply, if large numbers of citizens feel they are excluded from a stake in their society's progress, then social and political cohesion and stability will crumble.
This applies to rich and poor countries alike, although the way this fear and alienation manifests itself may differ greatly. Significantly, it applies to rich and poor together: the pressures of inequality, insecurity and immobility in one set of countries very quickly impact on others.
The trajectory of most OECD countries over the past several decades has been one of growth, albeit it somewhat intermittent, combined with the decline of traditional sources of employment, especially in manufacturing. In addition, the late nineties saw a shift from permanent and full-time employment towards part-time, casual and contract work which has remained consistent, and an ongoing reduction in the power and influence of organised labour.
My own country of Australia has now experienced 27 years of continuous economic growth, and living standards are extremely high, ranking second only to Norway in the Human Development Index. Yet there is pervasive pessimism, driven by a perception that the benefits of growth are concentrated in the hands of 'elites'. Enormous growth in executive salaries, a consumer culture where people cannot keep up, and distrust of institutions and leaders all contribute to the sense of alienation. Many are angered by a political rhetoric that celebrates change and innovation while their own experience is of exclusion from opportunity.
This applies especially to regional areas where traditional industries have declined, to trades where technology has reduced the need for labour, to older workers less able to adapt to the new environment and to young people who feel trapped in low-paid service jobs. The difficulty of securing decent employment and housing have led younger people in particular to believe that they will be the first generation in living memory whose life chances will be worse than those of their parents.
For many developing countries the pressure is much more acute. But again, a key issue is the aspiration gap: the sense that their society is unable or unwilling to provide young people with the opportunities they aspire to. Not only do many struggle to meet basic needs, but additional pressures such as environmental degradation, crime and violence and even large-scale conflict lead many to flee, often taking huge personal risks as they migrate.
Global progress in human development over the past 70 years has been astounding, and the complex system of processes we label as globalisation are overwhelmingly positive. But all change brings costs as well as benefits, losers as well as winners, and policy makers at national and international levels must pay greater attention to the costs and risks involved.
Globalisation is not to blame for all the world's ills, but it is not surprising if alienated and disenchanted citizens turn inward and even backward. Not only will they retreat into nationalism and protectionism, but they will become indifferent or even hostile to absolutely vital international tasks, such as addressing climate change and global poverty.
Protectionism is a dead end, and ultimately tends to impoverish those who practise it, yet it will increasingly become a political imperative if the global economic system does not deliver outcomes that meet people's basic aspirations.
Policy makers' best response at present is to take citizens' concerns seriously, and focus squarely on the triple challenge of reducing inequality, restoring a greater sense of security, and kickstarting social mobility. This means maintaining global openness but striving for inclusive growth that meets real human needs.