The piling on begins

["Ian Murray" <seamus2001@xxxxxxxx>]

[how long before they really start making bogus associations?]

[the Independent; contact info at bottom]

Diane Coyle: The globalisation protesters are utterly wrong
'All healthy capitalist economies do not have to conform to one
pattern'
19 September 2001

In 1930 the great economist John Maynard Keynes wrote an amazingly
prescient essay, Economic Possibilities for our Grandchildren. It was,
remember, an era of stockmarket crashes and depression, trade wars and
competitive devaluation, a grim economic situation that laid the
foundations for the authoritarian politics of that decade and the
subsequent world war.

As Keynes noted: "We are suffering just now from a bad attack of
economic pessimism." But the essay went on to argue that the upheavals
were in fact the "growing pains of over-rapid changes, from the
painfulness of re-adjustment between one economic period and another".
He predicted that recent technological advances - the spread of
electrification and growing use of cars, for example, much hyped in
the 1920s - would ensure that real average incomes would increase
eightfold in a century. He got it just about right. Keynes's
conclusion was that the difficult problems in human society are not
economic, but political. It's a lesson that needs to be kept firmly in
mind when trying to work out what the impact of this frightening new
state of war against terrorism will have on long-term trends in the
world economy.

Earlier critics of economic globalisation, including luminaries such
as Norman Mailer, have drawn bitter comfort from the assumption that
the terrorist attacks will have derailed the process of increasing
global economic linkages. But have they? And more importantly, should
they be allowed to?

The immediate result has certainly been a blow to short-term growth
prospects, with the postponement of the annual IMF and World Bank
meetings which had been due in Washington next week. That at least
rescues the opponents planning demonstrations against the Bank and
Fund from their dilemma about whether or not to go ahead with a
confrontation that might have ended in lesser violence.

On the other hand it does make more difficult the next stages in the
incremental reform in the management of the financial markets and
world economy under way for the past three years. Protesters claim the
adverse consequences of globalisation have been getting worse, when,
in fact, the powers-that-be have made great strides (composed mainly
of lots of small and obscure steps) in introducing reforms. Of course
more progress is desirable; it might be delayed, depending on how much
senior officials can do by conference call instead of face-to-face in
Washington.

We do not yet know how severe an impact the terrible blow to the
world's pre-eminent financial centre is having on financial markets,
confidence and economic growth. To be optimistic is hard, despite the
Federal Reserve's prompt and symbolically important interest rate cut.
There were signs that American industry had made a rapid inventory
adjustment to the halt in growth and was bumping along the bottom
before the economy picked up again, perhaps next year. There must be a
risk now that instead the US economy has been jolted into recession,
and with it the rest of the world.

There has been just one bit of good news: China this week got the
green light to join the World Trade Organisation this year, and the
WTO meeting in Qatar is to go ahead. Opening one of the biggest
markets in the world to increased trade, and continuing discussions
about a further round of trade liberalisation, will be highly
beneficial.

If there is a severe economic slowdown ahead, the politics of
globalisation look ominous. It will provide critics of market
capitalism with plenty of fresh ammunition. The bursting of the
dot.com bubble and sharp US slowdown last year energised the
campaigners who believe new technologies and globalisation have been
malign (and mainly American) forces; a further economic setback will
only convince them even more that they are right.

They are utterly wrong. Managed well, technology-driven globalisation
offers the best hope of increasing and sharing prosperity more fairly.
Yet even those who, like me, believe this, have to accept that some
hostile political reaction has put the reduction of poverty and
inequality firmly on government agendas. It has also emphasised the
valid point that all healthy capitalist economies do not have to
conform to one model, that there are many varieties.

Even so, the protest movement ignores inconvenient evidence that some
things have been improving, and it lacks a positive agenda. Having
failed to repudiate its extremists, it is also discredited by the
street anarchy in Seattle and Prague, Copenhagen and Genoa.

If now both pro- and anti-globalisers can agree the global market
economy is a process shaped by all participants, not a system imposed
by just a few, there would be real hope for continuing reforms. In the
wake of last week's atrocities it is clear that on both sides of the
existing debate about globalisation are well-meaning people who at
heart share the same basic values, of democracy, freedom, peace and
human dignity.

As Keynes said, in the very long run the technological forces already
under way will transform the economy, little as we might be able to
imagine it from this grim moment in history. But how much better it
would be not to repeat the dismal 1930s. Indeed, trying to avoid that
would seem an important stand to take against the terrorists who chose
as their target one of the key symbols of the global economy.

Diane@xxxxxxxxxxxxxxxxxxxxxxxxxx

Diane Coyle's new book on technology and globalisation, 'Paradoxes of
Prosperity', is published this week by Texere (£17.99, $27.95