Global economy ≠ Global society

Now that the pump is primed and I have you thinking about Davos; and now that my duties as a member of the ODI comms team have been fulfilled, and I have promoted my colleagues' opinions. It's my turn:

What better place to start than the IHT?

You know something big is happening when an article published just today topped the 'most emailed in the last 24 hours' list and is quickly ascending the 'most emailed in the last 30 days' list. The article that's causing the sensation: On the cusp of economic history.

The main argument of the article is that the fate of the world economy has arrived at a crucial tipping point. 30 years of neo-liberal, pro-market values have led us to this climax of global uncertainty. With what Hillary Clinton fears may be a recession (in case you missed her stump speech(es), she pretends to be the only one in the world smart enough to have seen this one coming. Indeed, I'm tempted to call it the 2008 Hillary Clinton memorial recession if she keeps on like this!) looming heavily, the repercussions are already being felt throughout the global economy.

What's worse, the rich keep getting richer and the poor keep getting poorer. A good measure of this is the GINI coefficient, a common measure of wealth distribution that ranges between 0 and 1, where 1 is extremely unequal and 0 is highly equitable. (See Wikipedia for a good introduction).

Consider this graphic representation of GINI coefficients from around the world since WWII:


The American GINI, sitting at 0.469 in 2005 is at its all-time high for the country since the statistic has been calculated. And what about China, which is supposed to be chipping away at American wealth? It's roughly equivalent to that of the US, and also sits at an all-time high for its country.

This, of course, runs counter to the fundamentals of neo-liberal economics which can be effectively summarised by the rather trite: 'a rising tide lifts all ships'. A stronger global economy was supposed to strengthen national economies. Or, in the words of the article:

"In theory [...] wages increase with productivity growth and all economies have a comparative advantage in the production of something."

But the theory isn't turning out as planned. The coming fear from the 'West' is that: "China and India combined will eventually be able to make just about everything the West can, only cheaper."

So what's the solution?

According to the majority of the candidates currently running for President in the US, the answer appears to be to fall prey to protectionist impulses. If you're Mitt Romney, it means bringing back auto manufacturing plants to Michigan (bad idea). If you're Barack Obama you're concerned about the so-called 'sovereign funds' bailing out ailing AMERICAN companies (so what?). If you're a good number of the candidates, it's about sending home all the illegal immigrants (really bad idea!! I mean people, if you want to lower the value of the dollar globally so that you can push your exports, you gotta have something to export. And that means that something is going to have to be manufactured... and if the majority of the population isn't willing to sit out on the farm harvesting soybeans, what is the US going to export exactly? This is where I also note that food oil prices are at record highs, and in 2007, for the first time in history, over half the world's population now lives in cities).

National economic and social protectionism is not just a bad idea, it's a head-in-the-sand approach that doesn't take into consideration fundamental economic, social, political and cultural changes that have already been set in motion through processes of globalisation.

The economy is not just a local problem, not just a regional problem, and certainly not just a national problem. It is a global one! If anything, the sub-prime debacle has taught us that.

Other GLOBAL problems include: the HIV/AIDS epidemic, tax shelters that undermine the effectiveness of government bodies, bird flu, the environment, migration, terrorism and security, human rights, animal welfare, and the impending global food shortage just to name a few.

In my view, the problem is not the neo-liberal agenda. The problem is that it has been pushed in an economic silo to the extent that there is now a large fissure between the global economy and the rest of reality. Sure, economic globalisation has had knock-on effects. The impressive expansion of information and communication technologies (ICTs) like the Internet across the globe is a good example.

But laws that impede migration maintain inequality between nations. Poverty prevents access to global flows. Societies based on strong family linkages hinder mobility. Isolation allows for irresponsible consumption. Social protection programmes like social security and national healthcare are feeling the pinch, and insecurity impedes progress.

For a global economy to function, we MUST have a global society to match--and how we achieve that is the real question that should be asked at Davos.