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Wednesday, Jan. 9, 2013

Globalization and its enemies


Special to The Japan Times

HONG KONG — A new year needs a new word that reflects the special trends and tendencies, the hopes and dreams and challenges ahead. Sadly, a strong candidate for the word of the New Year 2013 has to be "omnishambles," meaning a mess everywhere. Wherever you look, economies are under unprecedented pressure, governments are suffering from budget deficits, unemployment rates are high and hurting millions of families, world trade is slumping and the very systems that underpinned recent rapid global growth seem to be breaking down.

Even globalization is facing important challenges. It is all about creating a single seamless world where national boundaries diminish in significance in the interests of economic freedom and greater opportunities for all.

It has been helped recently by the Internet, which is the great leveler, allowing everyone to express her or his views to anyone and to all the world without having to go through the tiresome, time-consuming or expensive filters of newspaper editors, publishers or other media.

Over the past 30 years, both have been roaring successes helping to create fast-growing economies and an interconnected world, instant communications, new business opportunities and jobs that have seen hundreds of millions of people lifted out of poverty, the rise and rise of China and other emerging economies. But today the benefits of these systems are threatened, gravely wounded by a multitude of simultaneous enemies, including the failure of international leadership, both globally and nationally, political paralysis in the United States and the dangerous flaws and contradictions in the concepts of globalization and of the Internet.

"Omnishambles" is certainly a good word to describe the global political economy. It is hard to be optimistic about the U.S. given the political mess exemplified by the dance to the edge of the so-called fiscal cliff. It is not merely the preposterous posturings of the partisans, but their failure to comprehend facts or the need for compromise, let alone an imaginative or generous spirit. In the end, the American politicians did reluctantly compromise, but only on the immediate issues, leaving big battles ahead about spending cuts and the immense U.S. debt mountain.

As for American leadership of the world, it is all but dead. On a wide range of issues from protection of the environment to stalled world trade talks, Washington has shown little leadership except in the idea of nickel and diming everything for shortsighted short-term benefits, often at the behest of powerful special interests. The spirit of generosity that helped to jump-start Europe and to rebuild Japan from the ashes of war and laid the foundations for the modern economy has disappeared.

Why lament? Empires come and empires die, with a normal lifespan of a century. It is just that the timing of the impending American demise is unfortunate. The U.S. still accounts for the biggest single chunk of the global economy — about 25 percent of nominal global gross domestic product and 20 percent in purchasing power parity terms — and is the biggest trading power. This means and that if America catches a cold the rest of the world will suffer from its sneezes.

China is not going to catch pneumonia, but its growth rate will slow and trading patterns will change. Compounding this is that the other older economic powers are in a bigger mess than the U.S. The European Union is suffering from deep structural faults that run across political as well as economic lines. Japan, the world's third biggest economy, is has already experienced two lost decades.

Even so, its new political leaders in Tokyo are also preoccupied with the task of rewriting history to prove that far from being an oppressive force, the old Imperial Army had a healthy business relationship with the women known in China and Korea as sex slaves.

The globalization system has already started to creak and needs attention. Nobel laureate Joe Stiglitz, among other critics, has pointed to major flaws which undermine the fine global ideals. He claims that, among other defects: the rules of the globalization game are unfair, and benefit the rich and powerful, both governments and corporations; that the quest for growth damages other values, especially the environment; that the poorest countries are vulnerable; and that the modern market often leads to greater inequality to the disadvantage of the poor.

Recent history has shown that Stiglitz is more often right than wrong in his arguments.

Governments are an essential part of the solution, but they can also be an important part of the problem both in globalization and in seeing that the Internet offers a great spreading opportunity for all. Whatever the theories may claim, the world is far from being or becoming a small village.

The "Arab Spring" showed the potential for the Internet to spread fresh ideas widely and wildly, making governments aware of the freedom of expression that the Internet offers or — they fear — threatens them. Iran and China were among those who imposed rules and conditions to limit the dangers to them, and Beijing has recently increased its blocking of sites allowing opinions it does not like. Indeed, it is easier to buy guns and dangerous drugs on the Chinese Internet than to express prodemocratic views.

But governments that impose tough rules will also stifle the imagination and creativity that the Internet can bring towards economic rejuvenation. This is still one of the saving graces of the American way, which could help give the U.S. economy a new lease of life that the squabbling politicians are trying to stifle.

Another danger comes when governments and powerful business interests work together to slice and dice the benefits of economic growth. The World Trade Organization is increasingly becoming the battleground for protectionist struggles, as special interests, such as farmers or steel producers persuade their governments that they need protection from the globalizing forces that have helped unleash economic opportunities.

The Internet itself also suffers from some of the defects that Stiglitz sees in the development of capitalism, notably the capture of the market by a small number of powerful players who control entry.

Even Facebook, lauded as a refreshing way of allowing people to connect with each other worldwide, is far from the free meadow that Tim Berners-Lee, inventor of the World Wide Web, envisaged; it is more of an enclosed garden, entry to which is controlled by the owners of the company to whom entrants must surrender their secrets.

Let the freedoms of globalization and the Internet ring, but there are grim struggles ahead to see that it will be so.

Kevin Rafferty is editor in chief of PlainWords Media.


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