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Monday, Jan 26, 2004

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Globalisation revisited

S. Venkitaramanan

THE World Social Forum (WSF), which has just ended in Mumbai, had more than its share of publicity, some of it undeservedly ugly. It has been marked by displays of festivities and, in particular, song and dance numbers, which belie the sombre mood of its intended message to the world. At a minimum, it has brought a huge boost to the Indian tourism industry.

The World Social Forum at Porte Allegre, held a few years back, was the pacesetter for the protesters against globalisation and an inducement to gather and offer an alternative agenda. At that time, the protagonists of globalisation had dared their opponents to come up with alternative options.

Sad to say, in the hurly-burly of the mega conference, which the WSF represented, the message of an alternative way was lost. Obviously, the WSF has become a platform for the discontented youth, mostly of the developed countries, who aspire to find common ground with the dispossessed of the world. It is a movement in search of a message!

Globalisation and its discontents have been discussed ad nauseam elsewhere. Its principal supporters, mainly the developed countries, have realised that globalisation is not a one-way street. The developing countries have also exploited the options opened by globalisation in their favour.

The developed countries, which have expounded the doctrines of free trade in goods and services as well as financial liberalisation, find themselves hoist with their own petard, as developing countries have exploited their comparative advantage in services and goods.

Notwithstanding WSF I and II, "globalisation" in the sense of freeing inter-country movements and transactions from restrictions has come to stay. Globalisation has been facilitated by technological developments, particularly the development of Internet.

Enterprises in one country are in a position to transfer huge volumes of data and information instantaneously at the click of a mouse to entities abroad. Business process outsourcing - which leads to a shift of jobs from the wealthy West to the eager masses of the East — is a `dreaded' consequence of the very globalisation, which the West had preached for years.

Unfortunately for globalisation, its advocates resent its effects when it hits jobs in their own country.

It remains to be seen whether Bush will continue to support globalisation of trade in goods and services when it means jobs going out. Globalisation is a two-way street. What can be good for the corporates of the US, which derive fat profits from outsourcing services, has to be in the "overall" interests of the global economy!

To the participants in World Social Forum, globalisation has come to represent all that is bad in free trade and an open financial system. It has often been the experience of reformers that unintended consequences of reforms trivialise and hurt the very process of the reforms, such as globalisation.

Globalisation has begun to be a synonym for contraction of the State, in particular, and the extent of Government support to the social sector. The good that globalisation does in spreading job opportunities through the expansion of trade in goods and services has been forgotten in a legitimate concern about its negative effect.

In particular, the globalisation advocates have to contend with the excessive role that subsidies play in US/EU agriculture and the resulting distress of poorer countries' farmers.

That "globalisation" coincided with the spread of the Washington Consensus was inevitable. It was, in fact and in substance, an element of that Consensus, which had preached the contraction of the State and freeing of enterprises, in general, from excessive regulation and reduction of State ownership.

However, to blame all the evils of the post-1990 reforms process, in the world as a whole on globalisation as such amounts to a misreading of economic history.

The protesters at WSF, Mumbai, however, managed to convert their movement into a combined political voice against the dominant global hegemon — the US. The anti-globalisers focussed the bulk of their attention not on globalisation, but on a more unifying theme — the emergence of a new imperialism, which had culminated in a war, on the ostensible ground of existence of weapons of mass destruction, but actually was based on the need for regime change and acquisition of control over oil sources.

The World Social Forum, however, lost its edge on the fight for greater openness and fairness, mainly because of its diversion to Iraq-centred slogans, dominated by anti-US fervour.

Turning to the dominant theme of WSF - the fight against poverty - the rise of inequality following globalisation has to be traced to the flawed policies of Governments in the developing countries rather than to globalisation per se.

For instance, the fact of rising regional inequality in India — incidentally, emphasised by Joseph Stiglitz as a feature that diminishes the success of economic reforms — owes its origin not to the globalisation itself, but to the different factor endowments of the regions and the inadequacy of governance in the respective regions itself to correct these discrepancies.

To this extent, the reformers have to admit that the process of reform itself has to be modulated — if necessary by increasing the involvement of Governments in the affected regions to make up for the differences in private investment in backward areas. There is obviously need for the "visible" hand of Government to make up the deficit. The evident market failure has to be corrected by state action

WSF or no, the conclusion is obvious that we in India have to live with globalisation - with all its benefits and defects. Technology has opened borders even where the political will is absent or against it. The Internet has become a strong force for world market integration.

Whether we succeed in making globalisation a positive force or let it perform its role as an unguided missile is something else. The answer depends on how the heads of government and civil society perform. Granted, the spread of multinationals has not, for instance, been an unmixed blessing. It has, of course, led to widespread technological change, but it has also stripped nations of some of their jobs even as it has created some more. It has also introduced capital volatility in financial markets with all that it implies for economic growth even as it has increased inflows. The challenge of living with globalisation is to manage the "negatives" without abandoning the positives of the change.

The one positive message that has come from Mumbai is the need to take into account the social effects of globalisation. While a withdrawal into Fortress India is neither desirable nor feasible, it is necessary to take note of the adverse effects of globalisation.

The Government has particularly to take up the consequence of WTO on agriculture and manufacturing. This is particularly dependent on how the Doha round turns out. This has to engage the continuing attention of our proactive Commerce and Industry Minister, Mr Arun Jaitley.

WSF 2004 shows how important it is to take advantage of the existing institutions of multilaterals, such as the UN, the IMF, the World Bank and the WTO, for the betterment of the world order. We have to work with them rather than against them. It is by active intervention in these organisations and in their operations that the developing countries can turn "globalisation" into a force for good for the betterment of the human condition.

From this point of view, the experience gained by G(22) in the Cancun negotiations has been invaluable. It showed the strength of developing countries when they are united, well-informed and networked together.

The likely fragility of G(22) as it emerges also shows the importance of "cultivating" such coalitions not in a flash but over the long and difficult haul. Temptations abound before poor nations when confronted by the affluent.

The World Social Forum would have well-served its purpose if it ignites a new spirit of joint action among the deprived of the world, especially among the developing countries.

Success can come about not by denial of globalisation, but by working one's way around it and working with existing institutions, like WSF, so that we can derive advantages from globalisation without getting dominated by it. The significance of WSF, Mumbai, is all the more since India is facing the national electoral contest. On the two different sides of the contest are poised parties that are strangely divided on the issue.

The incumbent party in power, which had started with an anti-globalisation slogan, has now learnt by experience that the "devil" has to be lived with, not fought against arbitrarily.

On the other side, we have the Congress, once the initiator of economic reforms and of globalisation. But, its allies include a multi-hued Left, with its uncompromising stand against reforms and globalisation. How this coalition of unlikes in the Congress-led alliance will deal with the socio-economic challenges of globalisation is the billion-dollar question.

On its pragmatic and wise approach to the issues raised by WSF will depend the success of the Congress-Left alliance, if it comes to power. Maybe, here again, China shows the way, by its success in exploiting globalisation in favour of its people and without surrendering its basic principles.

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