The benefits that arise from democratisation, such as the expansion of civil liberties, the improvement of institutions and the acceleration of economic growth, exceed by far the costs of integrating into the global economy. However, growing numbers of people, including prominent political, cultural and religious figures, argue against globalisation on various grounds.12Here we shall look at the issues they raise, so as to assess their validity and find out if any need to be addressed.
6.4.1 Globalisation Reduces National Sovereignty
Critics of globalisation argue that financial crises, such as the one in Southeast Asia in 1997–1999 and in Greece today, provide fund managers with an opportunity to blackmail the governments of weak counties, forcing them to adopt hard austerity measures against their peoples, as set forth by the International Monetary Fund (IMF).
12Cohen (2004, 62) states that the critics of globalisation come from two camps. The one is that of the mullahs, who denounce it as a process for the ‘Westernisation’ of the world, and the other is that of the enemies of capitalism, who fight it because they stand ‘against the exploitation of peoples by big capital’. On the contrary, we believe that the enemies of globalisation come from many camps, including those of the nationalist and even of the misinformed.
However, countries cannot do their utmost to attract foreign direct investments while simultaneously seeking protection from the mobility of fund flows. The IMF cannot intervene and save countries from bankruptcy with profligate and wasteful governments because it does not have vast financial resources. But even if the IMF had the required funds, it would not be advisable to intervene indiscriminately because of the moral hazard problem.13By implication, countries must address the misuse by their governments of tax revenues and domestic and international loans, rather than blame globalisation. As for the prophecies that financial crises would create worldwide domino effects, the one in Southeast Asia was contained fairly quickly, and, as it transpired in the case of Turkey more recently, the experts of IMF learned how to help a country without raising issues of national sovereignty.
6.4.2 Globalisation Increases Poverty
The reality is that every poor country that found its way to a more or less decent standard of living during the past century succeeded with the help of globalisation.14 That is, by producing products and services for global markets rather than by trying to achieve economic self-sufficiency. Admittedly, in the process of economic develop- ment, many workers in export industries are paid low salaries compared to those that prevail in developed countries. But to argue that globalisation is responsible for their poverty, one must ignore two indisputable facts. First, that these workers were impoverished before exports gave rise and sustained their jobs and, second, that areas such as Central Africa, Southern India and Northwest China, which remain in geo- graphic and economic isolation, are incomparably poorer than all others that have integrated into world markets. China, the new economic giant of Asia, has achieved spectacular economic growth in recent decades through the decentralisation of admin- istrative controls, significant liberalisation of businesses and markets and advanced integration into the world economy.15
6.4.3 Globalisation Promotes Consumerism
Demonstrations against globalisation often showcase banners that show congested streets, traffic due to toll stations, office environments full of computers and dazed
13This is one of the reasons for which it is suggested (see, e.g. Rajan 2008) that IMF should serve more as advisor and intermediary, rather than as a source of loanable funds.
14According to the study by Goldin and Reinert (2006, 9, 26–9), during the period 1970–2001, globalisation helped diminished poverty worldwide very significantly.
15A detailed account of how market liberalisation contributed to the spectacular economic growth in China in recent decades is given by Park et al. (2006).
employees, satellite discs and McDonalds’ logos—all as indicators of a decayed material culture that has no other goal than to increase consumption. Ironically, the reality is that most people would gladly accept the inconvenience of traffic congestion in order to have the freedom associated with car ownership. They would gladly choose to work in the office rather than in the fields where work is backbreaking, and they would be happy to hang a satellite disc on their balconies, if they could afford it; and of course no one forces anyone to eat at McDonalds.
There are some who argue that when the consumption patterns described above spread to poor countries, the result is that they remain permanently underdeveloped as their urgency for investment and hard work decline. Our view is that (a) through television, tourism and other contacts, the diffusion of these consumption patterns would take place even without the acceleration of globalisation and (b) when in earlier times globalisation was much slower, and hence less bothersome, it was the growing per capita consumption that prolonged the lifespan of people, reduced infant and maternal mortality, increased literacy like no other time before, etc.
Therefore, consumerism is a key feature of open society and free market economy, and its desirability from a social perspective should be assessed by taking also into account its positive aspects.
6.4.4 Globalisation Leads to Depletion of Natural Resources
Opponents to globalisation believe that increasing population and per capita con- sumption will deplete available natural resources and condemn future generations to a state of perpetual austerity and poverty. The prestigious Club of Rome made this exact argument in a report 40 years ago. Not only its predictions did not materialise, but trends since then are moving in the opposite direction. In particular, per capita consumption has not increased dramatically, the rate of population increase has slowed and the prices of commodities in real terms have declined.
Looking into the future, shortages of natural resources are unlikely to occur, because technological breakthroughs are driven endogenously by relative scarcities, and the fact that the supply of natural resources can be considered infinite, since it depends on human inventiveness. The latter view holds primarily with respect to energy, since fossil fuels will have to be replaced soon because of their adverse effects on the climate.
6.4.5 Globalisation Harms the Environment
Despite the improvements achieved in recent decades, current production technologies are still not environmentally neutral and they may never be. Thus, since globalisation increases the production of goods and services, the flow of pollutants increases. This aspect appears to be indisputable and gains for the critics
of globalisation a lot of supporters. But in reality it is not, because (a) poor countries behaving recklessly can do a great deal of harm to the environment, (b) interna- tional organisations induce rich countries to follow least harmful environmental policies and (c) by introducing innovative ideas such as the trading of pollution rights, the rate of increase in global pollution may be harnessed.
6.4.6 Globalisation Destroys the Diversity Among Peoples and Leads to the Disappearance of Their Cultural Heritage
The protesters argue that in a globalised world dominated by tradable goods and services, there will be little or no room for the cultivation and development of those characteristics that make each country unique. In their view, languages, religions, traditions and cultures will become extinct. Over the course of millennia, globalisation enabled some peoples to remain in the forefront of history, whereas it relegated others to oblivion. For example, while Babylonians, Assyrians and Phoenicians all disappeared along with their cultures, Greeks have survived. In this light we fail to see the reasons why the attributes that render each country unique are threatened by accelerating globalisation. Rather, the opposite is true because with the spreading of globalisation (a) the demand for the cultural goods of a region or of a country expands, since their services enter into the consumption baskets of millions of worldwide customers and (b) peoples are induced to improve, maintain and promote their cultural goods on a systematic basis. Normally then we would expect globalisation to influence the cultural goods and services of various peoples in a positive way.
Still one may object on the grounds that, since cultural goods will open to international competition, they may lose demand even in the preferences of their own peoples. This possibility does exist. But we cannot predict what will happen because entrepreneurship is not evenly distributed across countries. Our view is that the cultural goods of every country have unique qualities and enjoy great compara- tive advantages. That is why we side with the analysis of Caplan and Cowen (2004), which suggests that through globalisation these goods may be expected to gain traction in international markets. But if people themselves think low about the strength of their heritage, then they run the risk of self-fulfilling prophesy, whereby one suffers what one would wish to avoid because of not standing up to the challenges. For the above reasons, the burden of the proof that globalisation entails the risk for people to get estranged from their cultural goods lies with those who invoke it.
Although the criticisms against globalisation are not sound, they are not devoid of reason. Globalisation results in capital and jobs moving from high to low wage countries. This generates unemployment and job insecurity in the developed countries, and it leads to workers pressing for job protection at all skill levels.
Globalisation drives also down the wages and salaries in the industries that suffer
job losses. Workers are forced to either move to other sectors with lower wages or to reduce their wage demands under the open or implicit threat of employers to move production elsewhere. As a result, in the affected industries, unemployment rises and incomes decline, thus contributing to inequality. On the other side, work conditions in the countries where the productive facilities move tend to be objec- tionable: working hours are too long, occupational safety is weak, workers are deprived of the comforts that are customary in developed countries and child labour practices are particularly deplorable. In short, despite the improvements that globalisation may bring to their lives, workers in these countries have many good reasons to complain and react.
The protests against globalisation have begun already to attract the attention of governments and international organisations. Governments are adopting positive policy measures such as offering early retirement or retraining of workers, prolonging and increasing unemployment benefits, attracting foreign investment and engaging international organisations on the subject of illegal immigration. In this light, the violent reactions of protesters in recent years cannot be interpreted as a realistic desire to return to an era of closed borders and economies. Since such a reversal would hurt the very countries they wish to protect, the true reason for their continued reactions must be that globalisation liberates the growth advantage of democracies, thus causing instability in the nondemocratic regimes.