COMMENT: In defense of globalisation

Moreover, economic inequality among countries has declined sharply in the past 20 years, owing partly to China’s rise, as well as to economic development across Asia, Latin America, and elsewhere. In fact, by 2010, the United Nations had already achieved its Millennium Development Goal of halving poverty by 2015, and recent projections suggest that, by 2050, poverty will be eradicated everywhere except Africa.

This will not happen without globalisation. African countries, in particular, will need to trade more with one another, and there is talk of creating an African free-trade area. But this could prove difficult now that anti-trade sentiment is on the rise. Are globalisation’s critics – those who wrongly consider it a zero-sum game – against eradicating global poverty?

Policymakers can take action to alleviate anxieties about globalisation. For starters, the seemingly endless growth of profits as a share of global GDP must stop. Anyone who thinks this sounds radical needs to brush up on economics. Higher profits should attract new market entrants, which would then erode incumbents’ profits through competition. The fact that this isn’t happening suggests that some markets have been rigged, or have simply failed. Policymakers need to address this with stronger regulation in some areas. For example, as I have previously argued, the current climate is far too permissive of share-repurchase programs.

At the same time, policymakers need to pursue measures to increase wages for the lowest earners, which could actually help boost productivity as capital becomes less expensive relative to labour. And, as World Bank President Jim Yong Kim recently pointed out to me, we need to strengthen enforcement of laws governing trade deals, and do more to help challenged domestic sectors that lose out as a result of those deals.

This reminds me of a sad story I heard from some laid-off Goodyear Tyre workers in Wolverhampton, in England’s West Midlands. They told me that job listings for their lost positions were posted on a notice board, and they could re-apply for them if they wanted to move to Mexico. The workers surmised that it was easier for the company to close its factory in the UK than to close even less productive factories in France or Germany. Surely changes like this can be handled better.

Lastly, policymakers need to prioritise development projects such as the UK’s “northern powerhouse” and “Midlands engine.” And more such initiatives should be launched elsewhere.

Despite the many challenges it has created, globalisation has made the world a better place than it otherwise would have been. And we still need it to eradicate poverty and generate higher living standards for all.

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Jim O’Neill, a former chairman of Goldman Sachs Asset Management and former Commercial Secretary to the UK Treasury, is Honorary Professor of Economics at Manchester University and Chairman of the British government’s Review on Antimicrobial Resistance.

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Copyright: Project Syndicate, 2017.
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