- Globalisation is essentially all about China and India entering the global economic system. These two are so big in terms of population that they are changing the game plan as we knew it.
- Political and economic thinkers are on the whole positive about globalisation, but there are clear winners and losers in this process and if you are not extraordinarily talented or competitive you stand to lose from this transition.
- The winners are likely to be urban chinese and indian enterpreneurs some of them educated in the west who exploit for the most part the unemployment and low living standards of their compatriots to rise up in living standards and consumption.
- The losers are countries that have a democratically chosen bias to a more socialist direction in redistribution of income. Globalisation is stopping them from doing this redistribution and is one of the most undemocratic aspects of the change.
- Stephen King, global head of research at HSBC puts it well: "Globalisation," he argues, "isn't just a story about a rising number of export markets for western producers. Rather, it's a story about massive waves of income distribution, from rich labour to poor labour.
- Redistribution of income from workers in the west to workers in low-income countries has come about both through capital leaving high-cost sites in north America and western Europe for low-cost greenfield sites.
- Cheap labour is coming in the other direction. The rise in immigration has helped to keep downward pressure on wages in the west.
- Within western economies, labour's weak bargaining position has meant capital has been able to increase its share of the cake.
- Crucially as the wealth migrates it creates a vacuum in tax revenues that force governments to cut entitlements to universal healthcare in europe, decent pensions etc.
- Although i am not a green or a bleeding heart leftie I can see that the worst long term legacy of all this is pollution and environmental destruction. We all lose out of this one, and the changes will be unpredictable ones. It is not just climate change its all the other types of pollution as well. Capitalism of the chinese brand is not at all good for the environment.
- Often education is offered as the panacea to cure the ill effects of globalisation. That is an illusion.
So is this some kind of commie sympathising rant, are we denying that there are positive results from globalisation? There is no doubt there are winners out of all of this:
- The upside of globalisation is that it has led to lower prices for consumption and hence it has for many years raised your effective income in the west IF you buy shoddy goods imported from CHINDIA. This is why anything produced in your own country seems so expensive to you, in fact it is pretty much unaffordable.
- "Consumers and workers are not one and the same thing: consumers include children, students, househusbands and wives, pensioners and the unemployed - none of these receives a wage.
- Equally, consumers include owners of capital - shareholders - and those who receive income from their savings, whether through bank accounts or through ownership of bond portfolios." The likely outcome is that the wage earners of rich countries are going to have to pay via taxation the generous pensions of the old, the privatised education of the young, with the newly competitive (read low) wages that are allowed by the chinese and indian competition.
- The financial crisis might be a bit of a new element in these calculations but overall it does not change the long term trend. Indeed the financial crisis seems to have been aggravated by the fact that a bewildered middle class in the rich world saw housing as the safe investment to help them resist this onslaught of deteriorating working conditions.
- So far globalisation has benefited a small minority of upwardly mobile europeans and americans and their peers in China and India and their financial backers.
- Multinationals have both been hurt and boosted by these changes, the more ruthless they have been about abandoning western europe and America the more they have been rewarded.
In other words it increasingly does not make sense to be an employee but it does make sense to move to a place in the world that is cheap and compete unfairly with your ex-compatriots who still have to pay the high taxes and meet the high standards of western europe. (In Bratislava i have met many people from western europe doing exactly that taking advantage of the 19% tax)
It's not difficult to see why politicians intoning about the challenges of globalisation are met with such cynicism. It's easy to be enthusiastic about globalisation if you are a winner, less easy if you're a loser. If you've just received a 2% pay rise when your chief executive has pocketed an increase 10 times as big; if your job has just been outsourced to India or China, or if your ability to negotiate a pay rise is limited by the arrival of cheap foreign labour, you're not necessarily going to buy the argument that it is illegitimate to defend your job and your living standards.
This is why there is indifference to electoral politics in europe. Most middle or lower income people feel that their living standards are collapsing and they start voting for the far right as a result. Who could blame them? No matter which mainstream political party you vote for you always end up getting more globalisation.
The destruction of the environment point is an important point as China and India have for the most part been organic polluters not industrial ones. This is changing rapidly as China in particular is inheriting all the pollution for goods destined for the west. In the end the environment is going to be the big loser out of all of this when you have half the world's population wanting to drive a shiny new polluting car.. after having lived totally organically for generations (because of poverty ofcourse). Crucially because India is a democracy largely only in name, and China is a dictatorship that is reprehensible to right-wingers only if their investments are not there, corrective action to deal with the destructions of the environment will not happen because the population is too poor to have such worries and because even if they did the dictatorial regime in China does not pay much attention to citizen feedback. Even if both India and China were to become concerned politically about the environment which is highly unlikely, they would focus only on pollution that affects people directly, e.g. not shut down polluting factory ran by a politically connected comrade, but simply move the people to another area that is not so polluted and so on...
There should be no surprise as to why the masses vote either for the far right or don't vote at all. The lazy consensus about the political and economic choices we have (i.e. more globalisation and you better get used to it buddy) is a self interested one. Mostly because the people leading politics in most territories have a personal investments that benefit from globalisation and they don't take actions that would harm their personal private pensions.
Personally i am not optimistic about the eventual outcome, the elites of the US and europe have elevated a repressive and unreformed communist regime to primary superpower status principally by trading with it and investing in its future. This creation is a strange combination of right wing american economics and stalinist politics, orwellian repression. In the near future we will have a dominant China taking over from the USA as the number one economic and military power. All this so the walmart americans can buy cheap mega fridges to fuel their obesity...
EDUCATION EDUCATION EDUCATION. The policy makers past and present have dreamed the western world wet dream, we the currently rich world will educate our children to be fantastic entepreneurs and consultants who will mostly do white collar jobs and get paid huge salaries while the chinese and indians will keep buying our government debt because of the unsustainable pensions paid to our parents. Ok maybe we ll get some indian guy to fix our email but that is basically it.
Except the world does not work like that, both the chinese and the indians are perfectly capable to use new technology or do management (whatever that means these days -mostly being rich-) or become scientists. They produce increasingly brilliant engineers whereas the western world is producing media studies graduates with cocaine habits, a sense of entitlement and no understanding of rudimentary mathematics, and this is the kids coming out of the private schools.
History teaches us that it took Suez for Britain to realise that it was a bankrupt has been nation and no longer an imperium. Particularly the way that their rising ex-colony USA treated Great Britain then was an extremely rude awakening for the brits, almost 50 years later they are still trying to come to terms with it. Economically at least the UK looks set to reclaim the title of the sick man of europe. The crisis has left the UK in what can be seen as a 55 year old divorcee who went on a wild credit card binge for 30 years to artificially cheer up its gloom about its loss of status and who is now being denied further credit and faces bankruptcy (a mirror image of much of its citizenry).
History may be about to repeat with the USA playing the role of the UK in the near future.
Some also would say that it is preposterous to see the business and political elite of each country as traitors who sell their less astute compatriots down the river of globalisation.
Truly it can't be that all are so insensitive. The reality however is that the american dream is now a global one, and most people see life as a zero sum game, the jungle is becoming more and more the norm, and people feel alienated by this change and they are desperately trying to be on the winning side. It starts looking like we are returning to an era where established priviledge guarantees one the good life, a return to a kind of aristocracy of money. If that is true there is no end to the de-democratising process we have now entered into. When things will get bad enough, then fascism and revolution and war will be the next logical consequences.