COMPLEXITY, MYTHOLOGY AND OVERGLOBALISATION: AN OVERVIEW OF GLOBAL INTEGRATION

... the world economy has become so awesomely complex that no individual or group of individuals can fully understand how it works. (Alan Greenspan,2008: 529)

I would define globalization as the freedom for my group to invest where and as long as it wishes, to produce what it wishes, by buying and selling wherever it wishes, ... while putting up with as little labour laws and social convention constraints as possible. (Percy Barnevik, head of a transnational company, quoted in Gélinas, 2003: 21)

The above enigmatic statement by Alan Greenspan, former Chairman of the US Federal Reserve and one of the world's most noted supporters of free market globalisation, is instructive. He claimed that this complexity justified economic governance by markets rather than states, that the Global Financial Crisis (GFC) was likely just another 'once-in-a-century' glitch caused by the likes of 'irrational exuberance' or the under-pricing of risk, and that such minor flaws were curable with some tweaking of regulations (Greenspan, 2008: 507 ff.). Yet presumably markets themselves consist of individuals and groups of individuals, so why should we go on supporting, let alone enhancing, a global economy which is too complex for human beings to understand? It is surely not healthy if people cannot comprehend their world, which perhaps indicates that we are now in a state of what I describe in this book as 'over-globalisation', or excessive global integration. And this complexity has doubtless helped create the vast range of opinions which now surrounds the issue.

Certainly globalisation is one of the most complex processes ever devised by humans, being vast in scale, encompassing much of the world, entangling companies, industries and countries in its grip and rapidly becoming one of the most debated concepts in history. There is a wide spectrum of views on the topic ranging from 'hyper-globalists', who believe that supra-national structures are gradually superseding local or national units, to global sceptics who think this movement has been exaggerated, and an equally wide range of opinions on whether it is all good or bad. Some think global integration and the creation of one unified world is a grand historic destiny, while others scorn that it is mainly an American project to reshape the world according to its own values. Some consider it a noble cause which can enrich humanity, while many critics see it as a self-interested drive by business leaders to open world 'markets' (countries) for their own advantage, as reflected in the above quotation from Barnevik. The reality is doubtless more complex, probably varying over time. I see globalisation as an outcome of several forces, outlined below, which together have generated a widespread belief in the virtues of an open, liberal world trading and investing order and thus have created a great enduring myth of the age – the myth of beneficent global integration.

There is a vast list of scholars and activists writing on this topic and I cite many, of varying views, throughout the book. In particular I take issue with the prominent free market journalist Martin Wolf (2004; 2005), the leading Indian/US trade theorist,Jagdish Bhagwati (2004), and the British-based political adviser, Philippe Legrain (2002; 2011), all of whom stoutly defend globalisation, though not dogmatically so. I also often cite work by the likes of the Nobel-winning economists, Joseph Stiglitz, Paul Krugman and Michael Spence, Harvard scholar Dani Rodrik and former World Bank official, Branko Milanovic, all of whom have made constructive criticisms of globalisation, though likewise not dogmatically. I also note many others, ranging from strong champions of globalisation to stern critics, with my own position usually around the middle of the spectrum, depending on the evidence in particular cases. However, I believe I can say that much opinion about globalisation has been tending in the direction of criticisms I have been making for a long time, and publishing since 1997, as explained throughout the book.

Overall, like other moderates (e.g. Dicken, 2011: ch.1) I do not believe that globalisation is evil, that TNCs rule the world, that there is (as yet) a highly integrated world economy, that nation states are collapsing, that there is a dominant Americanised, advertising-fuelled global culture or that there is, somewhere, a sinister conspiracy to impose an all-powerful global government. On the other hand, I fear that some such trends could develop if allowed, that these would be undesirable, that they can be resisted by popular local or international action and that credible alternatives are possible.

Internationalisation versus globalisation

Definitions of globalisation abound, ranging from the mundane to the ultra-sophisticated to the downright confusing. These include the economic, e.g. 'increasing interdependence of national economics in trade, finance and macroeconomic policy' (Gilpin); the sociological, e.g. the 'decoupling' of space and time so that the world becomes a single place (Giddens and others); and the philosophical, e.g. 'the compression of the world and the intensification of consciousness of the world as a whole' (Robertson) – all quoted in Guillén (2010). One multidisciplinary textbook (Held et al., 1999: 16) tags globalisation as 'transformation in the spatial organization of social relations and transactions – assessed in terms of their extensity, intensity, velocity and impact'. This makes a useful, if somewhat jargonistic, distinction between social, temporal and organisational dimensions of the process so, as with the other definitions above, it helps to clarify the nature of globalisation. However, such approaches tend to treat globalisation as anything which happens beyond the border, whereas I believe further distinctions need to be made.

Other definitions, or descriptions, of globalisation centre on its supposed impacts such as the 'end of geography' and the demolition of nations (Wriston); a borderless cyberspace world which one writer (Ohmae) once dubbed 'Cyberia'; and an extended 'brutal in-your-face Schumpeterian capitalism' (Friedman) – all quoted in Dunkley (2004: 4–5). The US journalist Thomas Friedman (1999: 214, 333 and passim) depicts economic globalisation as involving a 'golden straitjacket' of strict but reputedly beneficial free market policies and an 'electronic herd' of financial speculators who trample through countries at will, leaving laggards or dissenters as 'roadkill on the global investment highway'. Bizarrely, Friedman says we must learn to love this monster and wonders why there are anti-globalisation movements!

I suggest we need further definitions based on intent, for which purpose I distinguish between internationalisation, or the arms-length interaction between sovereign societies, and globalisation, or the deliberate attempt to make societies more linked and integrated. Thus, the former involves innumerable loose, co-operative interchanges, including travel, informational exchanges, mutual assistance, some migration, cultural exchanges, the use of interactive technologies such as the internet and much more, but in a way which largely preserves the autonomy of each state. It is primarily propelled by a desire among peoples for cross-border relationships. By contrast I describe globalisation as deliberately fostered linkages and integration between states, supposedly so as to encourage commercial relations, often guided, sometimes compelled, by supra-national rules and bodies constructed for the purpose. This process tends to dilute each partner's economic, political or cultural sovereignty. For brevity I often distinguish between 'co-operative internationalism' and 'integrative globalism', or other related terminology as required. I therefore define internationalisation as 'the naturally increasing tendency over time for people's lives to be influenced by forces beyond the borders of their own country, including for consumption, mobility, education, information and ideas', and globalisation as 'a policy process which seeks to make the world's countries and their economics more complimentary, interactive and uniform for purposes of supposedly more efficient transactions between them'.

The distinction between these concepts is not absolute as they merge at the edges and not all issues can be clearly categorised one way or the other. Nor can each be judged unambiguously good or bad, as opinions differ and the virtues of each are mixed. Many economists passionately advocate continuing global or 'deep' integration between countries so that their institutions and policies gradually become more alike, or 'converge', arguing that the (supposed) economic advantages of this greatly outweigh any (purportedly minor) sovereignty costs. Conversely, most anti-global activists and many commentators from non-economic disciplines reject this weighting, believing that integrative threats to nations' sovereignty, even democracy, are more serious than can be justified by the economic results. I take the latter view, without being too dogmatic. For instance, I accept that nations should relinquish some political and policy sovereignty in order to participate in the United Nations and its work, which I classify as internationalism, whereas many of the economic sovereignty sacrifices required for integration through the WTO and other integration agreements constitute globalism and are questionable, as discussed later in the book. However, I strongly argue that the distinction between internationalism and globalism should be made, whatever words are used, to avoid many current confusions such as having to separate 'good' and 'bad' globalisation, as some do, or deeming it paradoxical that globalisation is both a problem and a solution. By contrast I suggest that some world problems stem from (over-) globalisation in the integrative sense, while solutions are best sought through internationalisation in the cooperative sense.

Some history and mythology of globalisation

There is now a vast literature on the history, phases, modes and other aspects of globalisation, some writers dating the process back to the ancient world, others to the Roman empire and others again to around 1500 AD, with the start of European commercial expansion. However, much of this was, in my terminology, internationalisation as it was usually limited, often designed to preserve social autonomies and occasionally exchange was largely abolished in favour of autarky (isolation), including during various periods in Greek, Roman and Chinese history. Furthermore, trading and other exchanges were often controlled and 'embedded' in social structures so that they supported society rather than the reverse as often seems to be the case now (see Dunkley, 2004: ch. 4). Although the great era of trading and expansion after 1500 has been romanticised, such as by Bernstein (2008), the trade sector was only 1 per cent of world GDP by 1820 (see Table 1.1), and exchange was internationalised rather than globalised until the post-war era. For most of earlier history the main force for integration was imperialism which usually extensively absorbed conquered territories, but societies which avoided this fate did not suffer much integration.

The standard view of global history is that the late nineteenth century saw what some call a first age of globalisation, with various starting-points nominated, but key events included the mid-century adoption of free trade by Britain, the landmark 1860 Anglo-French free trade agreement and considerable improvements in communications. However, the degree of integration at this time is often overstated because by1870 trade was still only 5 per cent of world GDP, with an exceptional 17.5 per cent for the Netherlandsand 12 per cent for Britain (Table 1.1), while most countries quickly abandoned free trade at that time (Dunkley, 2004: 75 ff.). When confronted by highly competitive British exports integration largely, though not wholly, collapsed after 1914, and only revived in the post-war era, which is often called a second age of globalisation. However, I suggest it is more accurate to date a modern age of globalisation, which was quantitatively and qualitatively different from the earlier one, to around 1980, this date seeing the start of many trends noted throughout the book, including a massive explosion of publications on the topic (Guillén, 2010: Figure 1, p. 8), perhaps indicating a new global consciousness often noted by sociologists.

Key events of the new global era include the collapse of the old Bretton Woods system, to be widely replaced by floating exchange rates from the early 1970s; commencement in the mid-1980s of the Uruguay Round trade negotiations, culminating with the new WTO in 1995; the adoption from the late1980s by the IMF, World Bank and other global bodies of aggressive free market/free trade policies, later known as the Washington Consensus; and, above all, the 1979–80 advent of neoliberal governments in the UK (Thatcher) and the USA (Reagan), with many countries following suit over the next decade or so.

Some key features of the post-1980 new global era included a marked upturn from around the mid-1970s in trade ratios which had already been rising since the1950s (Figure 1.1); a massive upsurge in financial globalisation from around the mid-1980s (Chapter 6); a comparable surge in FDI from around the mid-1990s (Figure 1.1); a mild upturn in cross-border migration during the 1980s (Figure 1.1); accelerated improvements in transportation, especially with containerisation, from the 1950s, and communications, especially with increased use of the internet from the 1990s; ever increasing domination of global production by TNCs via complex global value chains (GVCs), as outlined in Chapter 5; the ascent of globalising institutions such as the IMF, World Bank, WTO, OECD and more, whose self-appointed mission has been to advise upon, advocate and sometimes enforce globalisation policies; the construction of,often private, cross-border regulatory networks in fields such as financial processes, product standard-setting, accounting or other professional standards and much more (Büthe and Mattli, 2011); the growth of a global underground encompassing illegal or highly questionable cross-border activities such as organised crime, tax evasion, regulatory avoidance, marketing of banned products and much more, often conducted through what I call 'offshore evasion zones' created for such purposes; and, finally, the emergence of a global elite who lead decision-making in business, government, media and innumerable organisations, who are heavily committed to an ideology of globalisation and who often meet through bodies such as the Swiss-based World Economic Forum (WEF); this last point has given rise to plenty of conspiracy theories, but the conservative US writer,David Rothkopf (2008), who attends WEF meetings, has documented what he calls a global 'superclass' of about 6,000 influential world leaders, these people being dominant decision-makers rather than conspirators.

This list by no means exhausts all features of modern globalisation, most of which are sufficiently important and novel as to markedly distinguish the present global era from that of the pre-1914 period, noted above. However, one further feature is noteworthy. Like all movements with ideological overtones, a characteristic mythology has come to surround both globalisation and 'free trade', the latter being the associated doctrine that all goods and services should be traded freely across borders without tariff, administrative or regulatory impediments. The three most conspicuous myths are that global integration is now well advanced, is inevitable or unstoppable and is overwhelmingly good for almost everyone, all of which I have argued (Dunkley, 2004) are over-simplified, exaggerated and largely untrue. But globalists have created a powerful set of myths of this sort and regularly appeal to 'history' for supposed validation. For instance, they have long promoted what I call a 'legend of the thirties' which claims that protection, or the breaching of free trade principles, caused or greatly exacerbated the Great Depression, whereas I have argued (Dunkley, 2004: 83 ff.) that this is exaggerated or even probably untrue, as even some mainstream economists now accept. A former head of the WTO, Renato Ruggiero, once declared that 'trade liberalisation is not just a recipe for growth, but also security and peace, as history has shown' (Dunkley,2004: 4), without any references to actual historical evidence. Throughout the book I question such myths and presumptions

So if the virtues of globalisation are dubious, the question arises as to who or what is driving the process, for which I nominate five sets of forces:

1. long-term technological improvements in transport, communications and cross-border organisational capacities which have gradually made globalised activities more physically feasible, but which may have limits (see Chapter8);

2. the dominant position since around 1980 of pro-global ideologues in academia, international organisations, the media and, sometimes hesitantly, in government;

3. the rise of pro-global business interests which now often politically and economically outweigh the concerns of smaller more domestically-oriented sectors;

4. the gradual implementation of both domestic and cross-border deregulatory and liberalisation policies in key economic sectors by governments, under the influence of the previous two sets of forces;

5. the often favourable, even biased, interpretation of ambiguous data to rationalise globalisation, even though, as illustrated throughout this book, so many studies and information sources provide only patchy evidence in favour of pro-global inferences.