Maximize the benefits of globalization for all

Siwage Dharma Negara, Economic Researcher Indonesian Institute of Sciences (LIPI), Jakarta

A recent poll by the World Economic Forum, which surveyed 25,000 people in 25 nations ranging from the most to the least developed, revealed that citizens of poorer nations have high hopes for globalization, although those hopes are extremely fragile. This fragility stems from the threat of increasing world poverty, environmental degradation, imperfect access to world markets and job losses.

The poll results have fueled the long-running debate between supporters and opponents of globalization. Even though a majority of those polled said that globalization, especially in trade and finance, would raise individual living standards, the cynical belief that globalization is just another means for developed countries to expand their business empires remains strong.

Globalization has sparked both support and opposition, and both camps in the intellectual debate have equally valid arguments for defending their standpoints. The supporters, who, according to the poll hail mainly from North America, Northern Europe and developing countries, believe that it will bring faster growth, higher living standards and new opportunities for countries and individuals.

They do not reject the critique that these benefits are being unequally distributed. The poll showed that 62 percent of citizens representing the world's wealthiest countries believed that globalization would not benefit poor countries as much as rich ones. However, they argued that the current inequality would be resolved once the global market was underpinned by rules based on shared social objectives.

Meanwhile, globalization's opponents argue that international integration without a level playing field will impose social costs outweighing the potential economic benefits. Increased global poverty and environmental degradation are viewed by opponents as consequences of the fostering of world integration.

From the opponents' point of view, globalization should be condemned because of its role in promoting excessively rapid economic growth. The interaction between economic liberalization policies and rapid technological change has unleashed disruptive forces on the economic and social life of poorer countries.

These forces are said to have spread at a much faster rate than the domestic institutional frameworks' ability to absorb them. Globalization's opponents argue that the failure to keep up with the headlong pace of economic growth and the inability to cope with its dislocating effects has led to social and economic tensions and political instability.

The poll results suggest that supporters of globalization are more numerous than opponents. Sixty percent of those polled said they believed globalization would improve their family's quality of life and enrich their nation's cultural life. Fifty-two percent of those surveyed in the world's poorest countries believed their nations would share the benefits stemming from globalization.

Such optimism needs to be nurtured by national and international policy responses. Richard Saman, director of global issues at the World Economic Forum, suggests the need for major commitments and initiatives to tackle problems related to globalization. These initiatives should involve all market players, particularly individuals.

United Nations Secretary General, Kofi Annan, has stressed that people must feel included if globalization is to succeed. He has said, "We must put people at the center of everything we do. Only when that begins to happen will we know that globalization is indeed becoming inclusive, allowing everyone to share its opportunities."

A people-centered approach that places individuals, families and communities at the center of development strategies can lessen or completely remove the despairing sense that the weak will never be able to compete with the strong and powerful. Such an approach would direct the benefits of liberalized trade and investment more effectively toward reducing poverty, increasing employment and promoting social integration.

The disruptive effects of global market forces often encourage the latent inward looking tendencies of developing countries. However, long run economic prospects seem to lie in the direction of outward looking policies. Furthermore, those countries are already well integrated with the world economy and to retreat to a more isolationist stance would prove very costly. As Hla Myint of the London School of Economics pointed out, "We shall have to accept that the process of the breakdown of traditional social welfare arrangements under the impact of market forces is likely to be irreversible, even in the least developed of the developing countries."

Therefore, efforts to shorten the transitional phase by pursuing efficient growth policies is the only practical way forward. It is hoped that economic growth will provide governments with an adequate income stream. This income can be used to alleviate the worst effects of the social and economic dislocations accompanying economic growth.

However, this will not guarantee a more effective provision of social security and welfare. Apart from a limited administrative capacity, hampered further by bureaucratic inefficiency and the serious corruption problems facing developing countries, the ultimate obstacle remains a lack of political will.

The main constituents of the international public sector, the World Bank, the International Monetary Fund, and the World Trade Organization, are now facing mounting pressure to somehow transform globalization's current "winners and losers" scenario into a "win-win" situation. They are being urged to devise new programs to ensure that the benefits of global integration are more evenly shared, that competitive policy making is avoided and that problems of incomplete risk markets are mitigated as international integration becomes ever more complex.

Finally, there will be more controversy over whether globalization benefits poor countries as a whole and whether it creates benefits for poor people within individual countries. This controversy will expand and receive increased attention reflecting the convergence of interests between rich and poor countries.

One thing is clear -- globalization can be strengthened through intensifying poverty eradication, increasing access to world markets and job creation. There is an urgent need to help the least developed countries in particular to maximize the benefits of globalization and liberalization. This can be achieved by facilitating their integration into the world trading system, and helping these countries to become actively involved in international trade negotiations.