The third wave of globalisation
Globalisation has the potential to raise living standards for citizens all around the world but it must be seen as a means to that goal rather than an end in itself.
The ongoing elections in the US and France have exposed an electorally popular strand of protectionism in both countries. In the US, the Republican hopeful Mitt Romney has made hawkish noises about China’s currency while Arnaud Montebourg came an unexpected third in the Socialist primary election running on a ‘deglobalisation’ ticket. Britain has always been more open to trade but the negative effects of competition from Asia and elsewhere has begun to erode that old consensus.
For the last year, IPPR has undertaken a research programme, led by Lord Mandelson, to look at how the global economy is changing, digest the latest economic evidence of the positive and negative impacts of globalisation, investigate how Britain can earn a living in this new context, and set out a series of policy recommendations at the international and domestic level to ensure that globalisation contributes to a more equitable and sustainable form of economic growth rather than detracting from it. After meeting hundreds of people in cities across five continents, IPPR today publishes our conclusions in The Third Wave of Globalisation.
As the title implies, we suggest that the global economy is on the cusp of a third wave of globalisation following the UK-dominated wave of the late Victorian era and the US dominated-wave after the second world war. But following the crash and the relative shifts in economic power away from the G7, no country or, indeed, economic paradigm is set to dominate this new wave. This should not be feared so long as a set of principles can be agreed at the global level to prevent the renewed build-up of current account imbalances, the volatility of short-term capital flows, a race to the bottom on corporation tax or a neo-protectionist backlash. We set out approaches in each of these areas for a more progressive approach which build on existing efforts in the G20 and elsewhere but urge quicker and more decisive action.
But these reforms will not be enough on their own. At the domestic level, governments need to realise that they have a role in supporting their comparative advantages, ensuring that their citizens are equipped to compete, and that protections are in place to help those who lose out. In the UK, New Labour was too late to the party in developing an industrial strategy, too timid in its approach to skills, and too unfocused in reforming the welfare system. We propose a National Investment Bank to sit alongside the sectoral industrial strategies developed from 2008-10, a skills policy that works not just to raise the supply of high skills but also to increase the demand for skills from employers at every level, and a welfare state reoriented at key crisis moments such as unemployment or wage loss.
Globalisation has the potential to raise living standards for citizens all around the world but it must be seen as a means to that goal rather than an end in itself. Smart government and policy is therefore critical to ensuring that the British public as well as those in countries like France and the US have a clear answer when they ask what it is that globalisation can do for them.