14.    THE GLOBAL ECONOMY AND GLOBALISATION

14.1   Much contemporary debate of international affairs revolves around the concept of globalisation. Despite the novelty of the new terminology, increasing economic integration has been an element in human affairs since a mechanical device (a wheel, a weapon) or a concept (writing, religious belief) first spread from one village to another. In both politics and economics, the trend has been in favour of steadily increasing size. Such changes have very often drawn opposition and have not proceeded smoothly but rather in fits and starts.

14.2   Contemporary economic integration, essentially the marriage of market forces, applied technology (especially information technology) and supportive public policies, imparts considerable dynamism to the world economy. Just as importantly, it shapes both world and national economic structures. Such globalisation at the beginning of the 21st century does have some particular features.

• It is genuinely world wide. Nearly all societies are affected to a greater or lesser degree by the pace of technological and cultural change.

• There is an inescapable link between global economic integration and economic growth. Countries which cut themselves off from the world may avoid some of the egregious excesses of globalisation, but they hold down the standard of living of all their people as a result. By contrast, those that enthusiastically and intelligently participate over the years have tended to improve their overall standard of living, albeit unevenly.

• The pace of change, which seemed rapid in the 19th century, and even faster in the 20th, continues to accelerate. The internet has spread much faster than television or the telephone.

• Globalisation is increasingly based on internationally agreed rules which reduce the ability of national governments to change policies at will (there is a mutually agreed reduction in sovereignty).

14.3   While both economic logic and post-1950 economic performance endorse global economic integration, there is a growing rejection in the developed countries of some of its consequences. Its opponents may be a vocal minority, but the intensity of the emotions displayed by the demonstrators outside the recent WTO ministerial meeting at Seattle surprised many. The demonstrators had no single coherent message; some opposed particular economic institutions, such as the WTO or the IFIs; others wanted solely to protect the environment; yet others wanted changes to the treatment of specific sectors while some wanted to overturn the whole trading system.

14.4   But it is not yet demonstrated that electorates in developed countries are systematically opposed to globalisation. The Seattle meeting failed to launch a new round of trade negotiations not because of a popular sentiment against global economic integration but because of the restrictions placed on the negotiating positions of American, Japanese and European delegations by their respective domestic interest groups. No developed country has significantly compromised the basic principles of globalisation: reregulation of finance and trade has not replaced deregulation; and developed country governments still accept that there is no feasible alternative principle on which to base economic management.

14.5   Most developing country governments seem willing to join their national economies to the globalising international economy although, as they showed at Seattle, they have their own minimum terms.

14.6   Should these conditions persist, globalisation will continue to shape the world and national economies. A move away from global economic integration in any of the major economies would be disadvantageous to New Zealand.

14.7   Global economic integration will be accompanied by an emphasis on regionalism and trade groupings: Europe's monetary union and single market are creating a major new economic entity. Free trade areas are gaining traction elsewhere as complements to global liberalisation.

14.8   Governments, though, will have to pay increased heed to popular concerns: these vary tremendously. In rich countries there are concerns about pressures on uncompetitive industries, damage to the environment at home and abroad and increased social stratification. The developed countries are under growing internal political pressure to put their international trade on foundations which take account of issues such as cheap or exploited labour and any denial of human rights. Poor countries want access to markets for their goods and services (preferably on concessional terms) and are concerned about the social impact of globalisation on less skilled and other marginal members of their societies. Various countries will participate only if they can protect their culture, often very broadly defined.

14.9   The outlook therefore is that economic integration will continue to impart a powerful dynamism into the world economy, and to shape it, but governments will take even more account of the concerns of particular groups and sectors. We do not see a reversal of past economic integration. But bringing new sectors and trades into the process will be a very slow process. And there will be less inclination to bring the inherently hard "behind the border" issues to resolution.

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