It’s easy to blame “globalisation” for a host of ills. The term itself is ambiguous, except insofar as it implies some party remote from our shores. Steel mills in China, bankers in Switzerland, multinational firms without fixed abode.
As such, the term can provide useful cover for unpopular policies that are entirely homegrown.
The term generally refers to economic openness — to trade, investment, immigration and ideas. It’s meaningless therefore to refer to globalisation as if it is a single property, but there have been times when prevailing norms of international behaviour could be described as more or less open.
We could go back to histories of the merchants of the Hanseatic League, or even further to aboriginal people trading in grinding stones and pituri, but a starting point for current consideration is 1944, when representatives of the soon-to-be victorious allied powers came together in Bretton Woods, New Hampshire, to hammer out a postwar economic order.
The background to the conference was the failed peace of 1918, and the isolationism and protectionism that had seen countries, each trying to pursue their self-interest, driving one another into a worsening depression and contributing to the horrors of another war. As the American political scientist Joseph Nye describes it:
“With their countries drawn into the conflagration despite their efforts to avoid it, Western officials spent the first half of the 1940s trying to defeat the Axis powers while working to construct a different and better world for afterward. Rather than continue to see economic and security issues as solely national concerns, they now sought to cooperate with one another, devising a rules-based system that in theory would allow like-minded nations to enjoy peace and prosperity in common.” — “Will the liberal order survive”, Foreign Affairs, January/February 2017
Australia was fully engaged in Bretton Woods. Our delegation included some of our most influential postwar economists: Leslie Melville, Arthur Tange and Frederick Wheeler.
From the Bretton Woods Conference emerged a number of co-operative institutions: the IMF, the General Agreement on Tariffs and Trade (later to become the WTO), and the World Bank. The spirit of such co-operation was also behind the Marshall Plan for the reconstruction of Europe, and the European Coal and Steel Community, later to morph into the European Common Market and eventually into the European Union.
The important point is that the post-1945 economic order, that brought such leaps in prosperity in all “developed” countries including Australia, didn’t just happen; it rested on a spirit of international co-operation supported by rules by which countries were expected to abide, and on domestic policies designed to ensure what we would now call “inclusive growth”.
Notably, in order to avoid countries engaging in the mutual destruction of competitive devaluations, an outcome of Bretton Woods was a de facto regime of fixed exchange rates. Fixed exchange rates work only so long as countries pursue the same pace of economic development, and that system started to fall apart in 1971, but the general co-operative arrangements remained intact, and the general path continued to be towards global economic openness.
Also by the 1970s, “developing” countries were taking advantage of a liberalised trading environment to become involved in export-oriented manufacturing, initially in labour-intensive industries, most notably clothing and simple metal fabrication. These industries were to be the first step in lifting many countries out of poverty. The “elephant curve” was starting to take shape.
Although Australia was comparatively slow to reduce tariffs, we were on a path of trade liberalisation, with imports putting competitive pressure on our manufacturers from the early 1970s onwards.
From 1970 to the end of the century, effective rates of tariff assistance to manufacturing fell from about 35% to close to zero; manufacturing’s share of employment fell from around 25% to 15% (it’s now around 8%); and imports in relation to GDP rose from 12% to 21%. From 1972, for the first time in postwar history, the unemployment rate rose to above 2%, never to fall to such low levels again.
The easy inference is that globalisation was to blame for the destruction of our manufacturing base, and if only we could reverse it we would restore those industries.
Such reasoning, of course, is subject to the post hoc fallacy, and it overlooks the impact of technological change — including the humble technology of the shipping container — and of automation.