(THIS ARTICLE IS MACHINE TRANSLATED by Google from Norwegian)
In recent years there have been a number of books that critically analyze and attack globalization and market liberalism. Among the bestsellers have been globalization trap (by Hans-Peter Martin and Harald Schuman), No Logo (by Naomi Klein) and The Silent Revolution (by Noreena Hertz). These books have been printed in large volumes and have been translated into many languages. They have fueled the globalization-critical movements. Unfortunately, these books are unyielding and not thorough.
There has been no corresponding defense of globalization. Boka Open World – A defense of globalization represents a serious attempt. The book is edited by Jan Arild Snoen who was previously associated with the Progress Party's Research Institute, but who is now an independent writer and consultant. Here, critics of globalization are carefully scrutinized and the conclusion is that they are wrong on all counts. Globalization does not lead to poverty, increased inequality, weakened welfare states, increased environmental problems, more conflicts or cultural flattening. The consequences of globalization are, on the contrary, contrary to what opponents claim: Prosperity is rising, millions are being lifted out of poverty, health – especially for the poor – is improving and the environment is improving. Cultural diversity increases, democracy is strengthened and everyone is given greater freedom. Globalization is groundbreakingly progressive and the multinational companies represent an "important progressive force". Snoen has written three quarters of the book in a first part about financial matters. The rest of the book is short articles by Paul Chaffey, Nils Petter Gleditsch and Håvard Hegre, Mikale Sandström and Henrik Syse. This book should be taken seriously by the political left. It represents serious criticism of the globalization-critical movement. At several points it shows how this movement exaggerates or errs.
First, Snoen claims that it is wrong for inequalities in the world to increase. He claims that they are getting smaller. Here, however, there is no unambiguous answer. This depends on how inequality is measured. A research tradition has studied the relationship between growth and income levels in the countries of the world. The idea has been that if poor countries grow faster than rich countries, there will be a development towards smaller differences between countries. If rich countries have higher growth than poor countries, the differences grow. The figure shows that there is no development in the direction of minor differences between the countries in the world. The horizontal axis in the figure shows per capita income in 108 countries in the world in 1960. Along the vertical axis are shown average annual growth rates in the period up to 1998. The figures are taken from the renowned database "the Pennworld tables" which is frequently used in research on this. If inequalities between poor and rich countries decline, poor countries should have higher growth than rich countries. The figure does not support such a view. Poor countries (far left in the figure) have different growth rates, but there is no tendency for the poor to have higher growth than the rich. The countries located at the top left of the figure are poor countries that have taken on the rich. The countries on the bottom left are poorer countries that have become poorer. If the time period is limited to the 1990s, a positive connection is obtained. Then there was systematically higher growth in rich countries than in poor countries. The differences between rich and poor countries therefore increased in the 1990s.
The countries in the figure are drawn as circles. The size of the circles indicates population (in 1960). The two large and poor countries far to the left in the figure are China and India. It appears that these two countries have had high growth in the period studied here (they are located far up in the figure). China and India were poor in 1960 (they are located far left in the figure). Since these two countries are very large, Snoen is right that the differences in the world have become smaller, when this is measured in the number of poor people in relation to the number of rich. This is due to high growth in populous countries. On the other hand, it is not the case that poor countries generally have higher growth than rich countries.
There is a big debate about how inequality should be measured. There is no unambiguous answer to this even if one chooses to look at population and not country. For example, one can choose to study the ratio between the richest and the poorest. If one chooses to study the absolutely richest in relation to the absolutely poorest, it is clear that inequalities in the world have increased. If one chooses to look at the ratio between the poorest and the richest half of the world's population, it is equally clear that inequalities have narrowed. When Snoen claims to be based on research results, he should have pointed out that the answer is not as unambiguous as he writes. On the other hand, Snoen is right that high growth in populous countries has lifted many hundreds of millions of people out of poverty. He is also right that those who are critical of globalization often overlook it.
Snoen claims that reduced differences in the world are due to globalization. It is, of course, a stronger statement than that the differences have subsided simultaneous with the globalization of the world. The main thesis of the book is that international trade, international investment and other types of globalization stimulate economic growth and most growth for the poor. In line with this, he believes that the countries that are still poor are countries that for various reasons do not participate in globalization. This applies to countries such as North Korea and Burma and many countries in Africa.
Also in this area, Snoen claims to summarize recognized research results. He does, but he confines himself to a selection of them. The relationship between trade, trade policy and growth is controversial. Most economists agree that international trade in goods contributes to economic growth through specialization, the exploitation of economies of scale, and the transfer of technology. However, these are effects that are difficult to measure and quantify. There has therefore been extensive research on this. Many research results show what Snoen claims: increased trade leads to increased growth. On the other hand, there is disagreement about how large the impact is and under what conditions they are most important.
That trade can stimulate growth, on the other hand, is not the same as a liberal trade policy creating growth. This is the bigger controversy about. Should poor countries open their markets to outside competition or should they build customs walls against such competition? Snoen reproduces several studies that indicate that free trade and liberalization are best for economic growth. It is possible that he is right. However, similar to the connections between trade and growth, this is a research area where there are major challenges. Some studies that Snoen reproduces very briefly show that the impact of liberal trade policy may be limited. China and India are again illustrative examples. They both have high tariffs, but both countries currently have high growth rates.
Nevertheless, it is likely that it is good for poor (and for rich) countries to have access to other countries' markets. That is why Snoen is right when he criticizes critics of globalization who are fighting for rich countries to open their markets to poorer countries. It is hardly in solidarity.
Snoen almost pays tribute to multinational companies in the book. They contribute modern technology, increase wage levels and reduce poverty in poor countries. This part of the book will surely provoke left-wing activists. However, there is a good research basis for what Snoen writes. In general, working conditions are better and the wage level is higher in foreign-owned companies in poor countries than in nationally-owned companies. This has been demonstrated in a large number of contributions from international research. At this point, it is clear that many critics of globalization have been wrong. But so have those who have defended multinational corporations. In recent decades, many have argued that the main positive impact of foreign investment in poor countries will be the transfer of technology to local communities. These are assumed indirect effects. For example, multinational companies may demand high-quality local products, train workers who start in other local businesses, or disseminate knowledge to local communities in other ways. Here, international investments have not lived up to expectations. The effects of foreign investment on the overall productivity of the recipient countries have been shown to be low, at best it is small and positive, but at worst it is negative! It is not clear what caused this. One reason may be that multinational companies, by paying high wages, vacuum the local communities for the most competent workforce. Currently, this is an area where more research is needed. It is striking that Snoen – who claims to present research results on globalization – completely ignores this in his mention of multinational companies.
Snoen does not believe that globalization is only good for the economy. Globalization also promotes democracy, gender equality, the environment and cultural diversity. In all these fields, Snoen gives a thorough but unvarnished presentation. An example is the discussion of the environment and pollution. Snoen reproduces research that suggests that polluting industry is moving to poor countries. But poor countries' exports of non-polluting goods are increasing more than polluting goods. Snoen interprets this as meaning that polluting industry is not attracted to poor countries with weak regulations, as hypotheses about "environmental dumping" would indicate. Because if that were the case, poor countries should specialize their exports in particularly environmentally hostile goods. They do not. But here Snoen concludes more strongly than the researchers who have researched this. This result depends on a single industry and the researchers write that when one disregards this industry, there is a systematic relocation of polluting industry to poor countries with weak regulatory regimes. However, the researchers do not believe that this effect is particularly large. It is striking that Snoen cheats in this way, especially because he makes a big point of those who are critical of globalization cheating.
In sum, Snoen provides an interesting and well-documented presentation of the excellence of globalization. Well-documented in this context means that he provides an insight into the research that is going on about this. Snoen also provides interesting and exciting discussions about possible connections between globalization and a number of areas of society. The fact that the book is well documented does not mean that the presentation is balanced. It seems as if the book gives a systematically skewed presentation of the results of research on globalization. It is a pity, because Snoen is right that the popularized literature on globalization is often tendentious and unvarnished. This could be a contribution to a more objective debate on globalization. Unfortunately, Snoen has fallen for the temptation to be tendentious himself.
Nils Petter Gleditsch and Håvard Hegre do not have that. They write about globalization and armed conflict. They provide a good discussion of whether economic integration reduces or increases the dangers of war and conflict. They discuss this in the light of different theoretical directions and they summarize the empirical research on trade and conflict. Gleditsch and Hegre report results that countries with high trade between them are rarely in armed conflict with each other. The causal link can, however, be both that trade creates peace and that peace creates trade. This is also a context that seems to best describe the relations between industrialized countries and not between raw material producers.
Mikael Sandström gives a discussion of the proposal to impose taxes on capital flows across national borders (the Tobin tax). This proposal was put forward by the Nobel Prize winner in economics James Tobin at a time when countries most often had fixed exchange rates in relation to other currencies. Tobin showed how such a fee could limit harmful currency speculation. Now, when most countries have chosen to have floating exchange rates, the arguments for such a tax are worse.
Paul Chaffey seems to have two main messages in his chapter. First, that it is wrong, as globalization critics claim, that most people become poorer from globalization. As we have seen above, there may be different (qualified) opinions about it. Second, Chaffey argues that it is important for countries to seek influence in international organizations such as the EU, the WTO and the World Bank. Chaffey then points to blocs and 'communities that are closed to some countries' in the world economy as dangers. This is one of the development trends that could backfire on globalization. Chaffey's concern is shared by many who fear that the WTO will be undermined by regional trade blocs such as the EU. It seems inconsistent both to want to strengthen the EU and to warn against such trade blocs.
The book is published by Civita who calls himself a think tank (!). They are funded by strong business interests and "work for increased support for the market economy – the free economy – and its significance for welfare, freedom and democracy." The book is a good contribution for this purpose, but I myself was not convinced.
