The Challenges of Globalisation

That is a cultural diversity which reflects the long historic connections which Britain has forged in seven continents. But it is also an economic advantage in a world in which the prosperity of a nation depends increasingly on the health of its trade and investment networks with other nations. The national airline of at least one of the countries represented in this audience has recently relocated its booking operation to London precisely because of the linguistic variety of the staff whom it can recruit here.

So I have every confidence that the stimulating environment of London will help you to resolve the problems of globalisation. To help you on your way, let me share some of the perspectives of a Foreign Minister.

The Impact of Globalisation
The effect of globalisation on business and industry has been profound. Innovations created in one country are routinely manufactured in a second country, often mobilising capital from several countries. The components in the laptop on which this text was produced may have travelled further before final assembly than even the Foreign Minister in the same period.

We live in a global economy in which growth is driven by trade which is expanding more than twice as fast as output. And in which financial flows across currencies are increasing even faster and every week outstrip the annual volume of trade. You will all be familiar with the dramatic effects of these trends on your business over your lifetime. Even the youngest executive among you has probably seen a bigger growth in trade than that in the period from the Industrial Revolution to the Second World War. And I will not embarrass the more mature among us by listing the even more dramatic changes we have experienced in our lifetime. But the impact of globalisation is as profound on politics as on business. No national economy is now an island. And every nation state is as interdependent as it is independent.

In the twenty-first century, the old dividing lines of national politics between domestic Left and Right will be less and less useful as a political definition. A more relevant guide to the forces of progress and those of reaction will be provided by how they respond to the new global reality of interdependence.

The progressive political forces will be those who are cosmopolitan and outward-looking, who are comfortable building international partnerships and who respect people from different ethnic identities. They will offer solutions that recognise that national security requires international alliances and that domestic prosperity requires the dynamic pursuit of external economic cooperation. They will be people who welcome foreign contact as enriching, not as threatening.

The reactionary political forces will be those who are isolationist and inward-looking, who feel more comfortable clinging to the comfort blanket of a false idyllic past. They will offer solutions that are based on a retreat to narrow nationalism and a reluctance to enter into international partnerships. They are more likely to keep out foreign contact than to welcome it.

As you meet in Britain, permit me to say where the British Government stands.

Global Britain
This Government is firmly committed to embracing the changing nature of the international reality as a condition of domestic success. We do not want to cling to a Little England. We want to build a Global Britain. A country which accepts globalisation as an opportunity to be seized, not a threat to be resisted. A country which is confident in its approach to international partnership. A country which is comfortable that it can face the challenges of globalisation. A country which is at ease with itself and with its neighbours in Europe. Global Britain can be confident in its approach to globalisation because it speaks the language of globalisation. English has become the language of the Internet, of software, of the communications revolution. English has been our country’s single most successful export.

Global Britain can be comfortable in facing the challenges of globalisation because our ethnic diversity is a strength in the modern world. A multi-ethnic society is better equipped to handle a multi-polar world.

Global Britain understands that the stronger we are in our own continent of Europe, the stronger we will be in the other six continents of the world. Any sane foreign policy must start by accepting the facts of geography. We cannot manage a foreign policy that goes all the way round the board of the globe without passing Europe. Any responsible trade policy must start by accepting the laws of arithmetic. It is with the other countries of Europe that we trade the clear majority of our exports.

The prosperity and the security of our nation depend on foreign contacts. Tolerance towards the foreign resident who has made his or her home in our country is the parallel to partnership with a foreign country abroad.

In the global village legitimate migration is the necessary unavoidable result of economic success which generates a demand for labour faster than can be met by the birthrate of a modern developed country. We must ensure legal migrants have the full opportunity to contribute their skills and talents to the country they have chosen as their home. By contrast, discrimination at home is sister to xenophobia abroad. In the age of globalisation, both damage the national interest. Neither should have any place in the political lexicon.

I have said that we want a Global Britain that is confident and comfortable and at ease with the challenges of globalisation. I was very struck reading through the papers for your discussion that not all contributors showed that sense of confidence, comfort and ease about globalisation. On the contrary, there were frequent strains of angst at being misunderstood and a touching sense of hurt at not being regarded with more affection. Let me therefore as a politician address some of the questions raised by the gulf between globalisation and its populist critics.

Building a Wider Consensus
The age of globalisation is marked by remarkable economic vibrancy and rapid technology transfer. In economic history, it is matched only by the experience of the post-war decades, from the Marshall Plan to the Seventies oil shock—what the French call “les trente glorieuses.” During that period, the British economy doubled in size, the U.S. economy tripled. Germany and Japan both grew ten-fold. However, the striking contrast between these two phases of similar growth is the difference in public reaction. The period of post-war growth was overwhelmingly welcomed and by and large was not in itself a matter of political controversy. By contrast, the term “globalisation” has entered the language as an unloved, faintly menacing word—as unattractive as it is polysyllabic. Why this contrast in popular reaction to two periods of similar growth?

The post-war settlement was built not just around economic growth. It reflected a much wider political consensus which was broadly shared across Western Europe. Business was guaranteed a stable environment for sustained growth. But the wider consensus was based on an implicit social contract with the people. Their consent was based on other features of the post-war consensus. A universal standard of welfare. Equal opportunity of education and in employment regardless of birth. An open society and democratic government. These were the broad planks on which popular support was built for the prolonged post-war period dynamism of business in the Atlantic area. Globalisation does not enjoy any such broad consensus. It is vulnerable precisely because it is often perceived by its critics as the globalisation only of investment and of trade. If we are to defeat those critics, we can do so only by building a wider consensus that globalisation must be much more than just a global economy.

We will not construct such a consensus simply through better presentation or wider process. I have no doubt that both could be improved. For instance, global organisations need to master the same structured dialogue that national governments hold with NGOs. Non-Governmental Organisations are no substitute for elected democracy, but they can complement it and are part of the strength of any mature civic society. There are for instance in Britain five times as many members of environmental NGOs as there are members of political parties. Prudent politicians treat them with respect.

If we are to divert sympathy of NGOs from those who take to the street, then we must enable them to be part of the international community in the same way as they are part of national society. And with a similar basis for dialogue. Official forums through which they can formulate and express their concerns. More open access to working papers. The exchange of secondments between staff of the official organisation and staff of the larger NGOs. The inclusion of representatives of NGOs within national delegations. All of these are methods which we have adopted domestically in Britain. It does not spare us from criticism. The whole point of a Non-Governmental Organisation is to put forward non-governmental views. By and large, though, inclusion does engage those who take part in a legitimate dialogue rather than illegitimate disruption.

But changes in presentation and process cannot by themselves create a consensus. That also requires changes of substance. So now I want to focus on two issues of substance, two essential building blocks of a consensus on globalisation—Global Fairness and Global Responsibility.

Global Fairness
First, Global Fairness has made a strong net contribution to development. In the past decade, the level of foreign direct investment in developing nations has increased six-fold. It now runs at three times official development aid. Over the past generation, countries in Asia have achieved such dramatic growth in trade that their incomes have moved from something akin to African levels to something similar to countries in Europe. These are formidable pluses on the balance sheet. But the benefits of globalisation have been unevenly spread. The overwhelming bulk of investment goes to just a few developing countries. Africa has been passed by. Despite the exciting trends and dramatic growth elsewhere, per capita income in Africa is less today than a generation ago. It is not just an irony but a tragedy that the poorest continent in the globe is the one which has actually got poorer during the age of globalisation.

The revolution in communications creates limitless opportunities for the transfer of knowledge, technology and design. A prime driver of economic growth will be the accelerating speed of technology transfer in a wired-up globe. But large parts of the face of the globe are simply not wired up. Here in Britain, 95 per cent of households have a fixed telephone line, and 65 per cent of the total population now have mobile phones. But half of humanity has not made or received a telephone call in their life. Like me, many of you might feel one day without a telephone call would be enriching, but a lifetime without it is impoverishing. The old divide based on differential access to investment or to skills is in danger of being replaced by a modern divide over different access to the new technologies of communication.

Globalisation is not to blame for this unfairness, but nor will globalisation alone remove the unfairness unless we consciously adopt Global Fairness as a deliberate objective. There is much that can be done.

It is one of the harshest paradoxes of globalisation that in the very decade when the world has been integrating a global economy, the global level of development aid has been declining. Moreover, the global distribution of official aid sometimes appears to enhance rather than diminish unfairness. For instance, if we were to produce an index of poverty, it would be unlikely to produce a spread of development aid which allocated to sub-Saharan Africa only one-twentieth of the help per head available to the Middle East and North Africa.

As Foreign Secretary, I pay tribute to my colleague Clare Short, our Development Secretary. Under her guidance, Britain is increasing our aid budget by almost 50 per cent in six years. And refocusing it on the poorest people in the poorest countries.

Development aid in these circumstances is not in competition with private investment. It reaches those communities which currently receive no investment and which will attract private investors only through sustained development of human resources. And it needs to be accompanied by an approach characterized by a generous realism which recognises that poorer countries cannot develop their human resources if their debt burden exceeds their education and health budgets.

Yet, I was struck that none of your contributors saw an increase in official aid or a reduction in debt as part of the answer to the critics of globalisation. I believe it is in the interests of global private enterprise to press governments to reverse the general decline in development assistance and thereby address the perception that globalisation is unfair.

There is a parallel here with the point I made about the post-war consensus. Welfare for the destitute, public health to protect the community as a whole, and free access to education for all were essential elements in that consensus. It is precisely that development of human resources which is now needed in the poorest countries to enable them to take advantage of the opportunities of globalisation. Businesses engaged in the spread of globalisation should openly demand such investment by their governments. The other means of promoting Global Fairness is trade. Even a modest shift in the terms of trade can produce gains to a national economy that widely exceed any possible increase in development aid.

The fastest-growing developing countries have been those which have done most to take the opportunity of globalisation to boost trade. As a result, global inequality fell in the 1990s after three decades in which it soared. But global inequality remains much higher than a generation ago and the benefits of greater trade are uneven. The total exports of India, Pakistan and Bangladesh together are broadly similar to the exports of Thailand’s 60 million people.

The collapse of the Seattle talks arose in large part from the feeling among the developing countries that their priorities were not high on the agenda and that their voice was not influential in the Council chamber. Yet, it would be a tragedy for those same developing countries if we were not to take forward a further World Trade Round. Halving trade tariffs worldwide would boost developing countries’ income by three times the total of development aid flows. We must persist with a further World Trade Round. But we must ensure that it gives strong priority to promoting development. Free trade for the industrialised products of the developed world must be matched by fairer access for the agricultural products, textiles and clothing of the developing world.

This poses a particular challenge for Europe. The Common Agricultural Policy is the largest system of agricultural protectionism on the globe. But it does not protect the living standards of the farmers themselves, as we have seen here in Britain. Nor is it in the interests of our nations as a whole. Our consumers pay prices well above the world market, and in the case of commodities from the poorest countries, such as sugar, they pay three times the world market price. Europe cannot simultaneously be in the vanguard of liberalising industrial trade and in the rearguard of liberalising agricultural trade.

There is one simple but profound step which the WTO could take to demonstrate its commitment to Global Fairness. It should commit itself to achieving agreed International Development Targets, such as the reduction by half by the year 2015 of those living below the poverty level. It has the capacity to make a massive contribution to meeting those targets. It could thereby demonstrate to the developing member states that their concerns are shared by the organisation as a whole. And it could disarm those critics that see it as an instrument of injustice rather than an advocate of Global Fairness.

Global Responsibility
The other foundation for a new consensus must be Global Responsibility. The connections between our actions and their results were much easier to understand in an age when most of the products we bought were produced domestically, possibly even locally. But now consumers buy their food, their clothing and their compact discs from countries which they have never visited. They have no idea, and no means of knowing, what may have been the non-financial costs of their purchase. When they buy furniture, they have little idea of the environmental footprint on the local forest. When they buy an engagement ring, they cannot tell whether it was bought with blood in an African conflict.

Nor can their government address these concerns by unilateral regulation. Developing countries are rightly suspicious of national environmental restrictions on trade as a covert form of protectionism. And, in any case, these are international problems which can be solved only by international solutions. Governments cannot hope at an international level to discharge the public responsibility which they are expected to exercise at a national level.

Nor is it unreasonable in the modern world to expect a wider degree of private responsibility. One of the consequences of globalisation has been the rise of transnational corporations with assets greater than those of governments. Wal-Mart has a turnover broadly similar to the GDP of Norway and General Motors has a turnover greater than the GDP of sub-Saharan Africa. Many of the larger corporations represented in this room have more executives working in foreign capitals than I have diplomats working for the Foreign Office.

In these circumstances, it is reasonable to ask for corporate good citizenship. Business has as much a duty as government to ensure that its activities protect the environment. And there are many striking examples of corporate business accepting that duty. Global Responsibility means that it should become the norm within globalised business to observe the sound principles of environmental management. The sustainable harvesting of timber and fisheries. The reduction of waste emissions and energy consumption. The application in developing countries of the same safety standards that they would apply at home. The publication of an environmental audit as a routine part of the annual reporting cycle.

All of this is in our own interests as well as those of the local population. The most compelling demonstration of globalised cause and effect is the discovery of the intimate way in which disturbing the environment in one hemisphere can produce profound and irreversible changes in the climate in the other hemisphere. Those businesses most active in the globalising economy must show the greatest global responsibility in stabilising the global climate.

There are other examples where business and government can work as partners to demonstrate Global Responsibility. For instance, diamonds from regions of conflict.

The majority of deaths in conflict over the past decade have taken place in Africa. And the struggle for control over the diamond fields is at the heart of many of those conflicts—in Angola, in the Democratic Republic of the Congo, and in Sierra Leone. In all of them, control of diamonds is a principal incentive and the sale of diamonds is the principal means of paying for weapons.

Mainly because of our leading role in Sierra Leone, Britain has been pushing for a global ban on rough diamonds from conflict areas. I have to say that we are very encouraged by the positive response from the diamond trade and I would particularly mention the strong leadership provided by De Beers. As a result, we are now on the verge of a world certification regime, which will ensure that rough diamonds cannot be traded from countries in conflict unless they are validated by the legitimate government. This will reduce both the capacity and the will of rebels to prolong a conflict. But this will also provide an illustration of the positive potential of globalisation and the way global networks can be turned to advantage if business and government together accept their Global Responsibility.

Conclusion
Globalisation is with us. It is not just here to stay. It is here to accelerate. Our prosperity and our security will become increasingly interdependent. I have tried to sketch out some of the elements of a political consensus to match that new economic reality. Greater transparency of international organisations. A determination to ensure that the benefits of globalisation are more fairly shared. A commitment that global trade does not knowingly destroy the local environment or unwittingly promote local conflict.

Of course, it will be a major undertaking to turn round the perception of those who see globalisation only as a threat and never as an opportunity. But I said at the start that London might prove a stimulating environment for your discussions. Perhaps I could end by adding that the example of London provides not only a stimulus but a hope. London was after all first established as the capital of England by Romans from Italy. Who were in turn driven out by Saxons and Angles from Germany. The great cathedrals of this land were built mostly by Norman bishops, but the religion practised in them was secured by a Dutch prince. Contact with the outside world did not begin with globalisation.

London City and the British nation have both been shaped by successive waves of migration and foreign influence. And there is a consensus among my countrymen of natural pride in the culture and economy that has resulted from their past contact with the outside world. I offer that happy ending as an encouragement to your discussions and a sign of hope that with effort it should not be impossible to build a similar consensus on the accelerating foreign contacts required by globalisation.