Angela Smith MP

Working hard for you

Globalisation-The Good, the bad, and the Future 

For the Chanel Group. First printed 22/02/17

In recent times ‘globalization’ is a term which has absorbed much of our modern angst about the social and economic problems afflicting nation-states across the world.  It is, in many quarters, a dirty word, used often to describe uncaring, unscrupulous capitalism that delivers little of benefit to the majority of the world’s populations.  And yet the fact is the globalisation of commerce and trade has delivered tremendous benefits to all of us.  

Over the last 50 years, global per capita GDP has increased many fold and consumers have been able to purchase products which are cheaper and of better quality than ever before.  Globalization has shrunk the world, creating an interconnected trading web that stretches to every corner of the globe. The ability of capital and labour to increasingly move where they are best placed and most needed has created vibrant new centres of finance and industry, with the consequence that millions now enjoy living standards only dreamed of by previous generations.

One of the momentous events relating to the growth of globalization was the finalisation of the EU single market during the 1980s and 1990s.  During this period the biggest free trade and economic area came into being, containing within its borders a population of some 550 million.  The single market extends from Ireland in the west to Romania in the East, a surface area knitted together economically by the free movement of capital, services, people and goods. The absence of tariffs and the removal of non-tariff barriers has, without doubt, given a tremendous boost to the economies of EU member states. 

It has to be acknowledged, of course, that the macroeconomic benefits delivered by globalization have been accompanied by negative impacts, the greatest of which is a significant rise in inequality. According to Oxfam, the world’s richest 1% now has a combined wealth comparable to the other 99%. This gap between rich and poor has been widening for many years but was often ignored by policymakers during the decades when all incomes were rising. That, though, changed with the crash of 2008, and while income inequality may have fallen slightly since then, wealth inequality continues to spiral upwards. This, combined with stagnating and falling living standards across the various economies of the western world in the last decade, has given rise to a deep level of disaffection with the increasingly integrated nature of international capitalism.  Political disengagement is a consequence of the belief that seemingly relentless and all-powerful global economic forces are emasculating national and individual identities.

No wonder, then, that voters in the west are looking with interest at the simplistic but superficially attractive solutions offered by the extremes of the political left and the political right.  If the centre ground is apparently incapable of ensuring that the forces of globalization work for the many, rather than the few, then a vacuum opens up, all too easily filled by the rhetoric of the populist right and left.

One of the more typical arguments of the populists is to blame immigrants for the problems faced by western economies.  Not only, they argue, is globalization responsible for the loss of domestic industries, it is also the reason why indigenous workforces face unfair competition from cheap foreign workers who absorb expensive, taxpayer-funded public services. 

In the UK, the debate about immigration has been heightened and given huge impetus by the Brexit debate.  The boundaries between EU and non-EU migration into the country have been blurred by the referendum campaign, not clarified, and freedom of movement within the European Union now looms in many people’s minds as a classic illustration of all that is deficient about the global economy.   So much so, in fact, that the driving principle behind the UK Government’s approach to Brexit is the perceived need to reduce immigration dramatically. 

The truth, however, is that migration has benefited not just the development of the global economy, but the UK economy too.  11% of the UK workforce is made up of non-UK born nationals and yet we enjoy record high employment levels, indicating a need for foreign-born workers.  The NHS, for example, relies on around 235,000 non-UK nationals.  No wonder the IPPR has claimed that the NHS would collapse without EU workers.  And the New Economic Foundation posits that migrant workers are responsible for 4% of GDP. 

Politicians need to be wary, therefore, of succumbing to the populist demand to cut immigration dramatically as a means of demonstrating to voters that we know how to tackle effectively the challenges presented by globalization.  The damage to the economy would be felt very quickly, but the indigenous workforce would find that none of their pain is diminished.  Wages and living standards would remain stubbornly stagnant and public services would continue to deteriorate, given the record high level of public debt endured by the UK at the moment and the continuing government drive to cut spending.  

I would postulate that for many voters, immigration is perceived as a threat to national identity and I acknowledge entirely the specific challenges the UK faces in this regard. I acknowledge too the case for potential reform of the EU freedom of movement principle, perhaps specifically by defining the principle more precisely as the right to freedom of movement of labour.  But we do our citizens a disfavour if we pretend that closing our borders to large numbers of aspirant workers will do anything to address the insecurities that dominate current public discourse. 

The reality is that globalization is here to stay.  Increasingly, our key economic sectors work across national boundaries; the automotive industry in the UK, for example, is part of a supply chain that stretches across the EU single market.  It stands to reason therefore that we need to embrace our place in the global economy and focus on finding the solutions to the challenges that this smaller, more integrated world brings with it. 

These challenges are complex and the answers are not easy to find.  The centre ground in politics across the western world is struggling desperately to develop a progressive way forward when it comes to dealing with the growing inequalities that now characterize our way of life.  This does not justify, however, the scapegoating of immigrants as the root cause of all our problems.  This is not the way forward.  It would send out a message to the rest of the world that we are turning our backs on the global economy and adopting an increasingly protectionist approach to our economic future.  

Finally, what would a progressive way forward look like, when it comes to meeting the challenges presented by globalization and free trade?  Well, that’s the debate we need to have.  I would suggest, however, that a good place to start would surely be to accept that we need more international co-operation, not less. If globalisation has created transnational companies, often with bigger balance sheets than many countries’ GDP, then it follows that we need a progressive framework for international trade which works to ensure that the global economy works for the many, not the few.  Only by nations working together, with the principle of free trade at the core of their approach, can we successfully resolve the challenges raised by globalization.   

At the moment, though, we have a government in the UK which seems determined to turn its back on its closest partners.  The US has a populist President determined to pursue a protectionist and isolationist agenda.  China occupies an increasingly dominant position in the global economy but is clearly keen to ensure economic collaboration is delivered on its own terms and is worryingly antagonistic in its attitudes to some of its neighbours; likewise, Russia remains belligerent in relation to foreign policy.  

The challenge for centre-ground politics, and for those who espouse liberal western values, is once again to capture the imagination of people, to convince them that it is right to embrace firmly the forces of globalization, and to co-operate internationally to ensure that these forces work for the benefit of humanity and to increase prosperity for all. 

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