What profits does Switzeland reap from globalisation?
For the Credit Suisse Bulletin, 23 January 2007
Bulletin: Laws are national but the economy is international. Is politics still as powerless in the face of economy?
Kishore Mahbubani: Politics is as old as the Swiss mountains. And it will exist for as long as they have. National and local policies will even gain more importance and pertinence. Numerous political questions at a national and local level have a considerable impact on world economy. It would suffice to think of the failure of the World Trade Organisation Conference (WTO) in Doha. The main stumbling blocks were the common agricultural policies of the European Union and the agricultural subsides from the United States. These are essentially national questions that are crucial to the electoral race of the American and European governments. Yet they represent important obstacles to international trade. Globalisation cannot neutralise national policy.
What are the prospects for a small country like Switzerland within the context of increasing globalisation?
Kishore Mahbubani: Switzerland has always known how to take advantage of globalisation and I do not doubt that it will continue to do so. Because globalisation offers firms established in a small national market the possibility to access international markets resulting from the lowering of trade barriers, from the reduction of transport, communication and transaction costs as well as one of the largest availability of information etc... It moreover allows firms to make unthinkable savings in a restricted national market. Take the example of Nokia. Finland is even less populated than Switzerland. Yet Nokia profited from the information technology revolution to fill a fundamental gap in the industry and become the leading company in the mobile phone industry, totalling 36% of today's global market. Well before the word 'globalisation' was on everybody's lips, Switzerland had developed a reputed banking sector thanks to specialised services designed for international financial markets. I see no reason why this trend would change.
What weight could States like Switzerland have, that are outside of the large trading blocks, on the negotiations in international economical regulations, such as the Doha Round?
Kishore Mahbubani: A small country can have big ideas, ideas that can change the world. Malta, a much smaller State than Switzerland, is at the root of the first negotiations in the field of Maritime Law. And it is in Switzerland that the International Committee of the Red Cross (ICRC) and the World Economic Forum were founded and that today are of global import.
Wealth is far from being shared. Does globalisation not accentuate inequalities?
Kishore Mahbubani: Figures show the opposite. From 1980 to 1998, the percentage of the world population living in extreme poverty, that is to say with less than a dollar a day, has decreased from 36% to 21%. This evolution is most pronounced in India and in East Asia. These regions are clearly amongst the beneficiaries of globalisation because they knew how to seize the opportunities that were offered to them. Even though it proportionally benefits the rich more, economic growth is the most efficient tool to combat poverty. Would you rather live in a world where there was the same poverty for all instead of a disparate world where the real standard of living constantly progressed?
More and more jobs are relocated in the East. Will western countries soon be out of jobs?
"Switzerland has always known
how to take advantage of globalisation." Kishore Mahbubani
Kishore Mahbubani: If western countries continue to innovate in order to remain at the top thanks to constant improvement of their productivity, they will still appear among the winners in the future. Naturally, adaptations and relocations will be necessary in the short term. A large number of people and jobs will thus have to be relocated before global economic data can evolve positively in the long term. Governments and firms will have to weave protective social networks to lessen the negative effects of globalisation and to avoid a counter political reaction.
The global economy is constantly mutating . What will come of the international division of work in twenty years?
Kishore Mahbubani: We are indeed in a perpetual period of mutation. It was easy to predict. Joseph Schumpeter taught us that one of the strengths of capitalism resides in the 'destruction of creativity' of what itself has built. Now more and more people work for capitalistic firms; we can therefore deduct that the 'destruction of creativity' is increasing. In the long term, we will all reap a profit, like Adam Smith has also taught us. |
