Brian Fallow: Reign of the globalists coming to an end

There have been times lately when we seem to be reliving the 1970s. Once again the economic orthodoxy of the previous decades has imploded, leaving a scary vacuum.

The mighty US dollar has been devalued. Oil prices are climbing. The West wonders if it can compete with rising economic powers in the East, with China and India now in the role once filled by Japan.

After the turmoil of the 1970s the prevailing economic ideas of the post-war era, which had delivered strong economic growth and rising living standards in much of the world, gave way to a new orthodoxy, a fervent belief in globalisation as an epoch-making, irresistible and ultimately liberating historical force.

But Canadian thinker John Ralston Saul argues in his latest book, The Collapse of Globalism, that that view of the world is already discredited.

It is not yet clear what will fill the vacuum left by the faltering of confidence in globalisation, but Saul is not inclined to mourn the intellectual poverty and arrogance of that mindset.

It was a period in which economists got above themselves and were allowed to colonise the space left by a failure of political leadership.

Looking at the world through the prism of a particular school of economics, the globalists, as he calls them, believed societies around the world would be taken in new, interwoven and positive directions.

It came to be known as the Washington consensus.

"Global economics came to be presented as a tool to weaken government, discourage taxes both on corporations and the top bracket of earners, force deregulation and, curiously enough, to strengthen private sector technocracies in large corporations to the disadvantage of real capitalists and entrepreneurs."

If the word "globalisation" conjures up an image, it is of dealing rooms full of brash young men peering at screens and placing bets for clients entrusted with vast sums of other people's money in currencies, securities, commodities and arcane financial instruments.

"Reef fish" David Lange called them.

But after the Asian crisis of 1997 and 1998 they were more likely to be seen as piranhas.

Saul sees the Asian crisis as a "near-death experience" for the world economy.

It has contributed to the faltering of confidence in globalisation and led many economists to question whether the deregulation of capital markets should be seen as "one of the inevitabilities alongside free trade".

New Zealand's Rogergnomes held as an article of faith that unilateral trade liberalisation, the slashing of one's own tariffs, is a powerful way of imposing competitive disciplines on domestic producers.

But, Saul says, "you can't have competition if some people can dump underpriced goods into markets to destroy the local structures and replace them with their own ... Globalisation as a system has normalised dumping".

Saul says he is not making an argument against international trade or international markets. "I live most of my life in them. My work career is to a great degree international and I am a great believer in the marketplace."

He is not an apologist for the anti-globalisation movement. His thesis is more subtle and more profound than that.

"The argument in the book is that we have come through a period where the dominant view was (a) that you would look at civilisation, at what could be done or not done, through the prism of economics, rather than the broader concepts of democracy or humanism, or the public good, and (b) that most of those economics were inevitable."

The globalist believes the power of the nation state is waning and that power will lie with global markets which, freed of narrow national interests and inhibiting regulation, will deliver prosperity and convert dictatorships into democracies.

But even some leading politicians of the Right have had doubts: "Nothing is more insidious than a fashionable consensus," said Margaret Thatcher. "Surely there is something logically suspect about a solution which is correct whatever the problem."

And Jacques Chirac: "The world is not only a market. Our societies need rules. The economy must be in the service of man and not the reverse."

New Zealand became a poster boy for globalisation. But Saul reminds us that the benefits of the tsunami of economic reform which swept over the country between the mid-1980s and early 1990s came at a stiff price in rising poverty and international debt.

He sees the period since then as something more than the partial reversal of economic policies which had gone too far too fast.

"It doesn't mean that NZ has turned its back on international trade. It just means it is starting to say it can set some policies and shape some things.

"The change has only partially been about economics. If you elevate such a secondary factor up to the status of a religion you invite blinkers, halters, limitations. You deny your complexity.

"What the New Zealanders reasserted at the end of the century has a larger shape, one in which economics is an important servant, not the purpose of society."

Elsewhere too, Saul sees a retreat from the high-tide mark of globalism.

On intellectual property, for example, brought within the ambit of the World Trade Organisation in 1995.

"At first everyone says, 'This is brilliant. Smart countries like us. Instead of living off our brawn we can live off our brain'. Nobody asks whether in countries which believe in the fundamental nature of freedom of speech it is actually intelligent to say, 'We are going to make our future by limiting freedom of information'."

Many economists, Saul says, now oppose bringing intellectual property within international trade rules because they think it is degenerate, encouraging a rentier, absentee landlord sort of economy.

One of the things which makes the current ideological vacuum dangerous is that the established elite were educated within the globalist orthodoxy, and rose to their positions of power and influence on the basis of accepting it.

"Underneath them the world is in a swirl and the ideology is no longer capable of shaping the swirl. It is getting out of their control. But they don't have the language, the training, the openness to deal with it and they are terrified because if they admit their language doesn't work, what do they do? They lose their self-confidence, their sense of what they are in power. And so they move into denial and insistence."

Meanwhile, the younger generation has channelled its interest in public affairs into non-governmental organisations rather than political parties and electoral politics. After all, through the 1980s and 1990s the elites were telling them the national state had had its day.

So what fills this vacuum?

So far, a revival of religious conviction and of nationalism, positive and negative.

If there was a defining moment in the demise of globalism it was when Colin Powell told the World Economic Forum in Davos in 2003 ahead of the US invasion of Iraq, "We will act even if others are not prepared to join us."

With that sentence, Saul says, globalisation was pronounced dead.