Logo of Phnom Penh Post newspaper Phnom Penh Post - More needed to spread fruits of globalisation fairly: economists

More needed to spread fruits of globalisation fairly: economists

Cambodian factory workers sew together Armani jeans inside the Kin Tai garment factory on the outskirts of Phnom Penh last year.
Cambodian factory workers sew together Armani jeans inside the Kin Tai garment factory on the outskirts of Phnom Penh last year. Kimberley McCosker

More needed to spread fruits of globalisation fairly: economists

Love it or hate it, globalisation is not going away, though leading economists meeting in the Malaysian capital this week expressed hope that its benefits can be distributed more equitably.

Muhammad bin Ibrahim, addressing a two-day joint conference organised by the International Monetary Fund (IMF) and Bank Negara Malaysia (BNM), described globalisation as an unstoppable force that is shaping the world’s economy.

“Arguing against globalisation is like arguing against the law of gravity,” he said, citing the now-famous quote by former UN Secretary General Kofi Annan.

Globalisation refers to the increasing interdependence of national economies as the result of freer cross-border movement of goods, services, technology and capital. Most economists hold that it is a net beneficial process, but anti-globalisation sentiment has grown on what critics say is a system that favours the elite.

Ibrahim said that while globalisation has brought about an unprecedented period of world peace, prosperity and progress, lifting half a billion people out of abject poverty in the last decade, its benefits have been unfairly and disproportionately distributed.

“The fruits of globalisation that were not equitably shared led to a sense of injustice within the global community and economy,” he said. “Now, domestic inequality has increased, while existing wedges in wealth distribution, employment opportunities and social mobility have been amplified by globalisation.”

Ibrahim noted that between 1988 and 2011 the incomes of the poorest 10 percent of the population increased by just $65, while the incomes of the richest 1 percent rose by $12,000 or nearly 200 times as much.
He said globalisation must be made equitable and governments must exert more effort to both maximise its benefits and evenly distribute them.

Recent setbacks in economic globalisation, including President Donald Trump’s vow to pull the US out of major multilateral trade deals and Britain’s plan to leave the European Union, have led to concerns of mounting trade protectionism and “deglobalisation”.

However, Kevin O’Rourke, a professor of economic history at Oxford University, said globalisation has ebbed and flowed for millennia, and any reversals in its progress were temporary and the result of “political reasons”.

“When we have episodes of deglobalisation it’s typically because there’s been some perturbation to the system,” he said, adding that this could either be shift in the political equilibrium inside countries that results in a tightening of borders or a change that affects the international system as a whole.

Ernesto Zedillo, director of the Yale Centre for the Study of Globalisation and who served as the president of Mexico from 1994 to 2000, said globalisation has shown remarkable resilience despite world governments failing to meet their obligations to liberalise trade and coordinate macroeconomic policies, or to ensure equitable sharing of benefits.

“Globalisation has shown incredible resilience because some of the things that some [economists] thought were necessary to make the phenomenon sustainable have not been met,” he said.

Zedillo said the gap between globalisation and governance, far from narrowing, has become much wider in the aftermath of the 2008 global financial crisis (GFC). Instead of liberalising cross-border trade, many governments have raised trade barriers and imposed protectionist policies.

BNM’s Ibrahim asserted that the response was largely misdirected. The central bank governor noted that in the wake of the GFC nearly 400 trade protectionist measures were announced or implemented by G20 members while the financial globalisation channels that fuelled the crisis went unchecked.

“Despite consequences primarily associated with financial globalisation, trade has received the brunt of the blame,” he said.

“It is surprising how policymakers, particularly in the advanced economies, have yet to arrive at a consensus in recognising the harmful effects of free capital mobility that is disconnected with the real economic activity.”

He added that despite policy reforms, not enough was being done at the global level to address the risks posed by large and volatile short-term cross-border capital flows.

Ibrahim said that while globalisation had its drawbacks, the solution was not to reverse course by closing borders or cutting trade ties, but rather to progress towards expanded and measured globalisation using a more equitable and sustainable model.

“Looking ahead, globalisation will likely work if we widen the horizon that touches positively on all segments of society,” he said. “Negative spill-overs are likely unavoidable. But it is incumbent upon us to formulate policies and give greater attention to those most adversely impacted by this process.”

MOST VIEWED

  • Hun Sen: Stop Russia sanctions

    Prime Minister Hun Sen said sanctions against Russia as a result of its military offensive in Ukraine should be stopped as they have produced no tangible results, and predicted that a global food crisis would ensue in 2023 as a consequence. Speaking to an audience at

  • Chinese tourists 2.0 – Coming anytime soon?

    Regional tourism is grappling with the absence of the prolific travellers and big spenders – the Chinese tourists. Cambodia, which has welcomed over two million Chinese tourists before Covid-19, is reeling from the economic loss despite being the first to fully open last November ‘To put

  • PM reflects on shoe throwing: Free speech or act of violence?

    Prime Minister Hun Sen on May 17 questioned whether a man who threw a shoe at him while he was in the US was exercising freedom of expression or if it was an act of hostility. Hun Sen was referring to an incident last week when

  • Siem Reap’s Angkor Botanical Garden opens

    The Angkor Botanical Garden was officially opened on May 19 with free entry for both local and international visitors for the first six weeks. The garden was established on a nearly 15ha plot of land in Siem Reap. “After the first six weeks, Angkor Botanical Garden

  • Pub Street on the cards for Battambang

    The Battambang Provincial Authority has announced that it is considering establishing a Pub Street in the area around the heritage buildings in Battambang town in a bid to attract more tourists. Battambang provincial governor Sok Lou told The Post that the establishment of a Pub

  • Hun Sen: Don’t react to hostility

    Prime Minister Hun Sen urged tolerance and thanked members of the Cambodian diaspora for not reacting to the hostility on display towards him by others while he was in the US to attend the May 12-13 ASEAN-US Special Summit in Washington, DC. In an audio