Lamy’s speech at UBC, “Is globalisation doomed?”

University of British Columbia (Vancouver) school of public policy and global affairs

“Is globalisation doomed?”

Lecture Pascal Lamy, October 30th 2019

Globalisation has been the main transformation of the world for several decades. What I call globalisation for the purpose of this discussion is a phase, among past and future phases, of capitalism. A phase of expansion of market capitalism resulting in an intensification of international exchanges, whether trade, goods, services, capital or people.

For quite some time, the view had prevailed that this reality we live in would be the new normal and would prevail in the future, with a few dissenting opinions.

But more recently, especially since the 2008 financial crisis, the mood has changed. According to some, the growing economic, social and political turbulences, which we now have all over the place on this planet, should or will result in de-globalisation ,a reverse of globalisation with a world economy becoming more fragmented rather than more united. Some like it, others do not. Some see de- globalisation as the solution to our problems and others see de-globalisation as a threat as it would handicap finding solutions to the problems that cause the present hardship.

In order to try to shed some light on this major debate and to introduce our discussion, I will make three points. The first one is about the main shaping factors of globalisation, as we have seen it for the last decades. The second one is about why this change of mood happened. The third point is about how we could do better in harnessing globalisation in the times to come.

Starting with why we had this wave of globalisation, which succeeded previous waves of globalisation in human history, I see two main shaping factors: technology and ideology.

Technology, which I believe remains the main engine of globalisation, produced leaps forward in transportation systems leading to a reduction of the cost of distance from wind to steam to electricity to aviation to conteneurisation to internet etc. Reducing the cost of distance is the main trade facilitator as it keeps alleviating the main obstacle to the expansion of markets of goods and services and the circulation of capital and people towards an asymptote equal to zero.

The second engine is ideology, a global consensus according to which the opening of international exchange is the right way to go. The vertu of a simple Ricardo-Schumpeterian model according to which the combination of comparative advantage and competition is a source of efficiencies thus a growth accelerator. Hence the multi localisation of production systems and the organic proliferation of global supply chains now spanning the planet. Reducing obstacles to trade resulting from public policies that protect producers from foereign competition is the line to take as it fosters this process. Of course, these efficiency gains are not painless because of the winner-loser intrinsic equation of this model, but as long as growth and welfare systems make it politically acceptable, it works.

Why is his rosy picture now in doubt?
I think there are several reasons for that.

Not that it has not worked. The positive effects of globalisation have happened. Many winners. And in a proportion totally unprecedented in human history, starting with Asia. A clear and huge benefit in poverty reduction. But also more losers and losing relatively more than was expected. Because of the rapid increase of inequalities everywhere, and because of the poor response of the welfare systems which had been built in the western world in the XIXth century as a consequence of the previous big wave of change and globalisation. They did not properly cushion the increasing social violence of globalisation for the weakest, hence a political backlash in particular after the 2008 crisis. Trump, Brexit, the rise of populism.

To this well known problem of capitalism with social justice, globalisation is now seen, rightly or wrongly, as having added a new, fastly growing dimension: climate justice and environmental degradation. Trade expansion, a major feature of globalisation for public opinions, is finger pointed as the culprit.

Globalisation has also resulted in a rapid geopolitical rebalancing between the previous US hegemony and a growing China which, as predicted by Thucydides, may pit them against one another in a dangerous rivalry. This is the real background of Trump’s ill conceived, damaging and inefficient tariff wars and of a resurgence of nationalism. A world disorder apparently succeeding a world order.

Democracy, where it exists, is also under threat of illiberalism, or a least questioned, as a result of social discontent and may be of the the echo chamber of social networks which have created a new space for polarising and antagonistic political expression whereas it was previously seen as a tool for freedom of expression expansion and which are transforming feelings of belonging and of identity threats by “foreigners”.

Socio economic discontent amplified by digitalization, more fractured societies, protests everywhere, a more dangerous world. Certainly not the implicit assumption of more peace and happiness behind the “end of History” mantra. And more appeals about de-globalisation as the way to go.

Which takes me to my third point: is de-globalisation the way to go?

At the risk of being blunt, my answer is no. For one main reason: given the degree of interdependence we have reached now, it would be extremely costly. Globalisation is efficient and painful. De- globalisation would be inefficient and painful. Just look at the troubles of Brexit, the impact of Trump’s tariffs, or at studies about the disproportionate impact on growth of reducing trade on CO2 emissions. Or think about the consequences it would have for poor people in poor countries.

But then, how can we avoid de-globalisation if it is the choice of people tired with globalisation where people can choose? My answer: in making globalisation less painful, less stressing for humans and Nature, in being better at harnessing it than we have been recently.

Starting with focusing the right problem which is not globalisation but capitalism. For those of you who now the Chinese proverb, let’s look at the moon which is capitalism, not the finger, which is the globalisation. And recognize that the present version of capitalism underlying globalisation exacerbates its well known flaws: instability, social injustice, environmental degradation. Hence a reform agenda around a few priorities: taming finance and its excesses, new systems to reduce social insecurity and cope with the digital revolution, turning production systems towards circularity through proper pricing of environmental externalities.

Assuming this direction is accepted, we are left with another challenges of today’s version of globalisation which is the global governance deficit, accentuated by attacks against multilateralism. Here again, let’s accept that the existing rackett has many holes and that the Westphalian model we

have inherited has structural imitations. But also that the solution is no to destroy it but to complement it with other approaches based on solutions and on non sovereign stakeholders, like what led to better results as in the case of fighting against HIV-AIDS. This new endeavours are the ones we help succeeding with the annual Paris Peace Forum which I have the privilege to chair and which was launched last year on the occasion of the centenary of the armistice of WWI. Tapping on the formidable source of energy and engagement in civil society to address global problems, be it business, cities, academic institutions and also on the power of digital tools to catalyse new creative coalitions.

To conclude by coming back to the initial question, whether or not globalisation is doomed depends, in my view, on our capacity to direct the dominant economic system, ie capitalism, towards a different course. The UN SDGs agenda offers, in my view, the right picture of where to go. The present numbers tell us that without a huge collective effort we will remain far from this target in 2030 in most cases. Reforming capitalism remains priority number one. It is urgent. Still dreaming of an alternative might help us achieving it.