| Ethos Issue 2, April 2007
The Globalisation Game
Interview with Martin Wolf
The right way of thinking about what
is happening in the US — which is also happening in the UK and
most other Western countries — is to ask: are there aggregate
gains? In the US case, there is no doubt that there are aggregate
gains. The economy’s growth is partly a reflection of the large
gains from globalisation. I do not expect the role of the US
corporate sector, university sector, innovation machine to disappear
in my lifetime; I expect it to remain dominant in these areas.
So the US is a divided community.
There are very big winners in the US, permanent winners. Of
course there are also some losers. How will this play out?
Up to now, the winners have consistently been more powerful
than the losers. In all probability, that will remain the
case.
One of the most important things
that has happened in this respect is that as companies increasingly
become multinational, their interest is no longer with their
domestic workforces. They have a global workforce, that is
how they think of themselves, so they are not going to go
for protection against imports. Therefore there will tend
to be friction. Globalisation divides societies. The tensions
will exist but I think they will be managed.
What do you think are the implications
of China’s entry into the global world? Do you think it strengthens
globalisation or undermines it?
By and large, China has been a responsible player at the globalisation
game. It has liberalised its imports dramatically, more effectively
than Japan ever did, in fact. This has been crucial to its
growth, integration with the world system and global engagement
in China’s development. It liberalised access to FDI in China.
So FDI in China is enormous, in relationship to gross domestic
product (GDP), whereas in Japan and Korea, for instance, it
remains very small.
So China has chosen to be much more
open to the world economy than, say Japan or Korea. I sometimes
joke that if you look at the statistics, China looks like
a gigantic Hong Kong, since it is so open. It has a much larger
trade now than Japan in gross terms, even though its GDP remains
only half of Japan’s. This is remarkable and the decisions
to open China in this way were very bold and have established
broad vested interest in China’s success from corporate sectors
globally. This is a source of great stability for the world.
Now, has China been fully sensitive
to the recent emergence of these large current account surpluses
and their associated dangers? I think this explosive increase
in foreign currency reserves and surpluses happened quite
suddenly, rather than as a matter of policy. Up to now, the
surpluses have been manageable. The problem is that they are
already very big and may get much bigger. Challenging adjustments
to this new problem will then have to be made in future. They
are aware of it and I think they will try to resolve it over
the next four to five years.
The world can accommodate China’s
rise economically — provided China remains open, its imports
grow as fast as its exports and its policies are seen to be
fair and reasonable. But since it is such a huge shift in
global economic power, adjustments are not going to be perfectly
smooth. On the whole, however, the Chinese have handled all
these challenges pretty well.
How do you see this geo-political
and economic relationship between US and China play out in
the long term? How will it affect other regional players?
This is the biggest single question about the future of the
world geo-politically. All you can say is, big shifts in relative
power have always created problems — new relationships have
to be formed and that is difficult.
Second, China and the US are very
different civilisations and different countries in a deep
sense. The US has a tremendous influence on contemporary China
— culturally and in terms of economic thought, for instance.
The reverse obviously is not true. The history of China (over
the last two to three thousand years) and its contemporary
political system makes it very different from the US on questions
like democracy, human rights and the way foreign policy should
be conducted. The potential for friction as a result of these
different attitudes and values is also very deep.
II |
