December 2000


‘Globalisation’ is often mistakenly equated with ‘liberalisation’, says the writer of the following article. He explains the differences between them.

By Gerald Helleiner

Geneva: A great deal of nonsense has been written and said about ‘globalisation’ in recent years - from the political right, from the political left, from business and political leaders, from non-governmental organisations and people in the streets.

The very term ‘globalisation’ has now become so slippery, so ambiguous, so subject to misunderstanding and political manipulation, that it should be banned from further use - at least until everyone is agreed as to its precise meaning and proper usage. In particular, those involved in economic and political policy-making and debate must clarify their messages in this sphere if they are to be taken seriously.

The term ‘globalisation’, as too frequently used, confuses two totally different phenomena. The first is the shrinkage in space and in time that the world has experienced in consequence of the technological revolutions in transport, communications and information processing... This new technology-driven ‘globalisation’ is the new reality to which we all are trying to adapt. There truly is no escape from it.

The second usage of the term, on the other hand, relates to matters of human policy choice - the degree to which one opens and submits oneself mindlessly to surrounding external forces. Individuals, firms, governments and NGOs all have choices. While globalisation (in my first meaning) is a fact, and it may constrain some choices, it does not totally foreclose them in the way that many imply.

One cannot quarrel, in the sense of being ‘for’ or ‘against’ globalisation, with globalisation as fact (although, of course, one is at liberty to like or dislike it). To equate globalisation with external liberalisation and full reliance on global ‘market-place magic’, however, as some do, is logical confusion, and it is quite misleading.

It is certainly convenient for those pushing an external liberalisation agenda to be able to depict it as an inescapable concomitant of the globalisation fact. But the fact of globalisation and external liberalisation are, actually, logically quite distinct.

Presumably globalisation (the fact) will proceed more quickly if all countries externally liberalise - that is, open to the world - their goods, services and factor markets (including, of course, their labour markets which liberalisation enthusiasts are usually somewhat reticent about discussing as they preach the virtues of full and free mobility of capital).

The trend toward such external liberalisation in recent decades has undoubtedly accelerated the pace of globalisation. This recent association of external liberalisation policies with the technology-driven fact of globalisation has contributed to the logical and terminological confusion.

External liberalisation policy in its various dimensions involves political, economic and social choices. The effects of such liberalisations and opening-up are not agreed and certainly are not uniform for all places and times (as pointed out in writings of Dani Rodrik, 1999, and Rodrik and Rodriquez, 1999).

The challenge - both at the national and global levels - is, through conscious policy choices, to make the new globalised system (an undoubted fact) work for maximum human welfare. The task before us all is to make globalisation functional, to ‘civilise’ it.

Few reputable developing country analysts or governments question the positive potential roles of international trade or capital inflow in economic growth and overall development. How could they question the inevitable need for participation in, indeed a considerable degree of integration with, the global economy?

The endless lectures by Northern leaders and heads of international organisations to policy-makers in developing countries, whom they evidently believe to be incapable of perceiving their own interests, as to the inevitability (and benefits) of globalisation and the virtues of participation in the global economy, are tedious and patronising. They should stop.

The real issues are rather more complex. They are matters of policy and are often politically difficult. They relate, firstly, to the terms on which countries and their governments can and should interact with the new global economy. These are not matters conducive to ‘yes’ or ‘no’ answers; or slogans of the genre - ‘Get on the globalisation train or you’ll be left behind.’

Secondly, they relate to the global rules and institutions that ‘govern’ the functioning of the emerging global economy.

It isn’t at all obvious either that further external liberalisation (‘openness’) is now in every country’s interest and in all dimensions or that in the overarching sweep of global economic history what the world now most requires is a set of global rules that promote or ease the path to greater freedom for global market actors, and are universal and uniform in application.

If there can be said to be a public and/or intellectual mood in the world today, it is one of scepticism on both counts. Whereas the relatively better-off have been doing quite well in the recent bursts of both globalisation and liberalisation, there is growing anxiety about the fate of the poorer, the more marginalised, the vulnerable and the powerless.

This sceptical mood is also, of course, reflected in many conclusions of the Trade and Development Board and innumerable other international assemblies both within and outside the United Nations system.

As the full implications of a globalised economy become more apparent, it becomes ever more evident that many of the functions of government, in particular the supply of public goods and the pursuit of social objectives, will somehow have to be undertaken at the global level. Yet there is nothing remotely resembling a global ‘government’. Nor is there one visible on any reasonable time horizon.

Institutions for such purposes will nevertheless be constructed; and international rules, laws and dispute settlement mechanisms to address them will evolve. So, probably, will international sector codes and standards, introduced on a voluntary basis, and, in some instances, ‘hybrid’ private public arrangements to achieve the same ends.

The most important implications of the globalisation of world markets, then, are: the pressing need for development of appropriate policies, at national, regional and community levels, for optimal use of the global economy in the interest of national, regional and local human welfare and development; and, perhaps even more difficult, the greatly increased need for improved arrangements for global economic governance.

Given the limitations of our knowledge and the enormous diversity of national, regional and local circumstances, it is difficult to generalise about the former; that, in turn, implies the need for global governance and rules systems that eschew over-harmonisation and ‘one-size-fits-all’ approaches.

Market forces are powerful, and can be so for good. But, left unchecked, they can yield socially deleterious outcomes... Markets may be important and market incentives can indeed be powerful, but they are neither all-pervasive, nor do they solve all problems. In their proper context, with appropriate safeguards and institutions, markets and their incentives can do much good. It is also, of course, well-known that great harm can be done when governments try to replace or outdo markets in circumstances where they do not have the capacity effectively to do so.

The trick for society, both at the national and at the global level, is to harness the power of markets in the social interest. That, and not the defence, or attempts at the ‘perfection’, of markets, through thick and thin, has been the traditional role of the economist.

These and other limitations of the pure market model and market system are not disputed among professional economists, much less social scientists of broader competence. Whatever one may think of a market-driven economy, no one would want a completely market-driven society.

Hence the universal agreement on the need for laws, rules and institutions to ‘govern’ the functioning of markets and of individual and corporate behaviour. What these look like is, of course, the very stuff of politics, as well as of moral philosophy. - Third World Network Features

About the writer: Gerald Helleiner is Emeritus Professor of Economics at Toronto University in Canada. The above article is based on Prof. Helleiner’s Prebisch Lecture at UNCTAD on 11 December.