Fiscal Cliff

Fraying at the edges

From the fiscal-cliff shambles in the US to the distracted politicians of Japan, the world has a way to go to realise seamless globalisation

PUBLISHED : Wednesday, 02 January, 2013, 12:00am
UPDATED : Wednesday, 02 January, 2013, 4:24am


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Globalisation is all about creating a single, seamless world where national boundaries diminish in significance in the interests of economic freedom and greater opportunities for all.

The internet is the great leveller, allowing everyone to express her or his views to the world without having to go through the tiresome, time-consuming or expensive filters of newspaper editors, publishers or other media.

Over the past 30 years, both have been roaring successes, helping to create fast-growing economies and an interconnected world, instant communications, and new business opportunities and jobs that have seen hundreds of millions of people lifted out of poverty, and the rise and rise of China and other emerging economies.

But today the benefits of these systems are threatened, gravely wounded by a multitude of simultaneous enemies, including the failure of international leadership, political paralysis in the United States and the dangerous flaws and contradictions in the concepts of globalisation and of the internet.

One of the candidates for the new English word of 2012 is "omnishambles", meaning that everything is in a mess. It is certainly true of the global political economy.

It is hard to be optimistic about the United States of America given the political mess exemplified by the dance to the edge of the so-called fiscal cliff. It is not merely the preposterous posturings of the partisans, but their failure to comprehend facts or the need for compromise, let alone an imaginative or generous spirit.

As for American leadership of the world, it is all but dead. On a wide range of issues from protection of the environment to stalled world trade talks, Washington has shown little leadership except in the idea of nickel and diming everything for shortsighted, short-term benefits, often at the behest of powerful special interests.

The spirit of generosity that helped to jump-start Europe and the global economy after the second world war and laid the foundations for the modern economy has disappeared.

Why lament? Empires come and empires die, with a normal lifespan of a century. It's just that the timing of the impending American demise is unfortunate.

The US still accounts for the biggest single chunk of the global economy - about 25 per cent of nominal global gross domestic product and 20 per cent in purchasing power parity terms - and is the biggest trading power. This means and that if America catches a cold the rest of the world will suffer from its sneezes.

China is not going to catch pneumonia, but its growth rate will slow and trading patterns will change.

Compounding this is that the other older economic powers are in a bigger mess than the US.

The European Union is suffering from deep structural faults that run across political as well as economic lines.

Japan, the world's third-biggest economy, has already experienced two lost decades. Even so, its new political leaders in Tokyo are also preoccupied with the task of rewriting history to prove that far from being an oppressive force, the old Imperial Japanese Army had a healthy business relationship with the women known in China and Korea as sex slaves.

The globalisation system has already started to creak and needs attention. Nobel laureate Joe Stiglitz, among other critics, has pointed to major flaws that undermine the fine global ideals.

He claims that, among other defects, the rules of the globalisation game are unfair, and benefit the rich and powerful, both governments and corporations.

Stiglitz also claims that the quest for growth damages other values, especially the environment; that the poorest countries are vulnerable; and that the modern market often leads to greater inequality.

Recent history has shown that Stiglitz is more often right than wrong in his arguments.

Governments are an essential part of the solution, but they can also be an important part of the problem both in globalisation and in seeing that the internet offers a great spreading opportunity for all.

Whatever the theories may claim, the world is far from being or becoming a small village.

The Arab spring showed the potential for the internet to spread fresh ideas widely and wildly, making governments aware of the freedom of expression that the internet offers or - they fear - threatens them.

Iran and China were among those who imposed rules and conditions to limit the dangers to them.

But governments that impose tough rules will also stifle the imagination and creativity that the internet can bring towards economic rejuvenation.