Liberalization & Globalisation

Liberalization & Globalisation

1.1 Introduction

The conclusion of the Uruguay Round negotiations and the establishment of the World Trade Organization have contributed to the emergence of a new world order extending well beyond traditional trade matters.

It is argued, particularly in the multilateral financial institutions, and within organizations of the developed countries, that the new system will be of immense unqualified benefit to the South and that developing countries should therefore hasten to integrate themselves fully into the world economy by extensive and rapid liberalization. Integration, should not only be confined to opening up the economy to international import and export trade, but also encompass foreign direct investment (FDI) and capital flows.

Moreover, the analysis and policy conclusions of this publication also suggest a rather different programme of work from that being urged by the developed countries for UNCTAD -- the UN body centrally concerned with trade and development matters. In the view of the developed countries, UNCTAD's primary task should be that of helping developing countries speed up the process of their integration into the world economy by encouraging the adoption of appropriate national policies to liberalize their economies. It has also been proposed that UNCTAD's efforts should be focused mainly on the least developed countries.

The second point to be made is that the need for long-term economic growth is emphasized because this is essential if countries are to achieve their social and economic development goals. However, it is also a key assumption of this publication that growth itself will not necessarily resolve the problems of poverty, inequality, natural resource depletion and environmental degradation. For these to be dealt with adequately, appropriate domestic and international policies are required, to bring about a "people-friendly" pattern of growth and government expenditure which also economizes on natural resources and protects the environment.

Specifically, the publication makes the following points:

1. Liberalization and globalization both in industrial and developing countries have been cumulative and uneven processes extending over many years. However, at a practical level, there can be deemed to have been more or less free trade with respect to manufactures and free capital movements between leading industrial countries in the last ten to fifteen years. This is especially so, not only in comparison with the developing countries, but also, more significantly, in comparison with the situation in these economies themselves in the 1950s and 1960s. During these earlier decades most countries not only enforced international capital controls under the Bretton Woods regime, but also their domestic product, capital and labour markets were subject to a wide range of rules and regulations, in keeping with social, economic and political objectives.

2. The liberal regime in advanced industrial countries over the last fifteen years with respect to trade and capital movements provides an important vantage point for assessing the expectations of current conventional wisdom that liberalization will lead to improved economic performance and prospects. These expecta- tions are not justified by the evidence: the liberal economy has failed to deliver in many important respects.

3. The period since the 1980s in industrial economies has been characterized by slow and fluctuating economic growth, mass unemployment and consequent social disintegration. The trend rate of growth of output and productivity has been only half of what these countries experienced during the 1950s and 1960s. The more dynamic period in industrial countries was therefore prior to their deregulation of internal and external markets.

4. The mass unemployment characterizing European countries in the post-1980 period is an extremely important failure of the liberal economy. Unemployment at high levels, with the asso-ciated poverty, social degradation and marginalization, threatens the continuation of the liberal order itself, by fuelling demands for protection. Thus, it is not so much that liberalization and globalization lead to faster economic growth, but rather that higher rates of economic growth and employment are necessary for such a regime to be sustained.

5. In view of this poor record of industrial countries in the last fifteen years, a degree of scepticism and caution with respect to liberalization and globalization would appear to be appropriate. The euphoria, even herd instinct, among analysts and policy-makers emphasizes the positive aspects and shuts a blind eye to evidence on the negative side