Director, Centre of Development Studies Chong Hua Professor in Chinese Development
Director of the Chinese Executive Leadership Programme (CELP)
M.A. (Cantab.), M.Sc., Ph.D. (London), CBE
My talk will have four parts, each part quite short. First of all, some introductory comments. How do we view globalization? Capitalist globalization? What is the lens of the set glasses, spectacles, through which we look at capitalist globalization? And I think there are lenses that we can use, a set of glasses that we can use from both the East and West, and if we think about a lens that we can use from the East, we can travel back in time quite a long way 400-500 years, I say ‘B.C.’, but you know what I mean. And in China there was the school of thought called the School of Ying and Yang, and this remains deeply imbedded in oriental, especially Chinese, thinking. So the idea is that most phenomena contain two sides: ying — a dark side, so when one is talking about the economy and society, a greedy, selfish approach towards personal life, political life, economic life of the individual and the family. But that is balanced by yang, by an element in people that are selfless, try to work for the society and are not driven by greed and by lust for money. And life is about a complicated balancing of these forces into what Chinese philosophy calls the Middle Way. The Middle Way is not just compromise, it is dynamic interaction to produce beneficial outcome from these two forces.
In the West, we have not been very good, and by the West I include Russia, I think Russia was a part of Europe, was not a part of the Orient, Russia conquered the Orient, but it was European Russia as a part of Europe for a long period of time — and we lived in a zero-sum world, where the world of ying and yang is far removed from, including Russia. The Swedish army was at the borders of Moscow in early 18th century, killing, decimating people along the way. So we are not very good at ying and yang and very good at a zero-sum violence. But the achievement of two of our greatest philosophical thinkers in the late 18th and early 19th century were remarkable for standing outside that view of the world and for thinking on a very different way. Adam Smith is highly dialectical, highly balanced between an understanding of the power of the invisible hand, power of market competition balanced with the ideas that were explored in the other book, The Theory of Moral Sentiments, which is about the importance of the most important characteristic, which is not self- interest, but benevolence, and he used the word ‘love’ and ‘affection’. That is the highest level of impulse for human interaction, not the invisible hand.
And they are balanced in his writings in the most beautiful fashion in these two great books. Similarly, for Karl Marx the idea of the dialectic is central, and within Marx is the continuous contradictory character of capitalism with its Darwinism, its progressive, its internationalist character, but also continuous contradictions out of which would emerge hopefully a better society, though Marx devoted very little attention and was very unwillingly talking about what was the concrete nature of that society. So those are the lenses — East and West — through which I will say a little bit in each of the succeeding segments of my talk.
POSITIVE IMPACT OF THE GLOBALIZATION
So, first of all, if we look at the capitalist globalization from a yang, a positive point of view, from the point of view that Darwinism and positive contribution of this extraordinary era of the development of capitalism. And before I think about the things that have transformed the lives of almost everybody in the world. Governments have played their role, US government, defense institutions have played their role, Western governments and universities have played their role, but the most important role has been the role of competition, particularly between a relatively small group of giant global corporations which have got bigger and more and more focused during this period, which fight each other in rivalrous oligopolistic competition, firms like Siemens fighting with GE, firms like Boeing fighting with Airbus, and these have driven competition, huge expenditure on research and development, not all of which has been successful, but the existence of which has been and is necessary for competition in this world of globalization. European Union produces a study of the top 2500 companies in the world by Research and development spending, and this is almost all of the spending, more than 90% of all corporations in the world, that is their estimate. And within the 2500, 500 corporations account for 85% of the total: Toshiba, Google, Intel, Microsoft, Boeing, Airbus, etc. And that is the core of where modern innovation comes from, and it has been an immensely positive force for the world. Not only these companies produce those technologies, but through what we might call the advantage of the late- comer, through the impulse that Marx talked about in “The Communist Manifesto,” these companies have spread across the world.
So developing countries’ share of global GDP has more or less doubled during the era of globalization. The ladder has not been pulled up on development, it has been lowered, and developing countries have taken advantage of this to grow and prosper. If we look at the most important single synthetic indicator, the human development index, which Amartya Sen has made a very big contribution to, the human development index for developing countries has risen by 30% since 1990. Risen by 30%, not fallen by 20, or 10, or 50, but risen by 30%. That is not dark, in fact. That is a bright picture. If we look at poverty, a portion of the global population, the population below the poverty line of $1.9 (2005 purchasing power prices) has fallen since 1990 from 44% to less than 15% today. It is an astonishing progress for the world during the era of capitalist globalization. And it has been peaceful. It has been exactly as Marx talked about in “The Communist Manifesto”.
So this process has produced enormous benefits for people across the world in developing countries, and there is a danger for those of us who are from high income countries facing challenges and from countries that have been decimated by the disaster, catastroika of looking at things from their understandable point of view. It is very different if you are from India, China, Brazil or Chile. If we look at the share of global GDP produced in different parts of the world, the picture is very different from the way most people understand it. Many people talk about the ladder of development has been pulled up. Developing countries have got poorer and poorer, relatively speaking. It is a very nice idea, but it is just wrong. If you look at the most authoritative database, the IMF’s World Economic Outlook Database — which is very carefully calculated in purchasing power parity terms which you can argue with — but that is the best data available. The share of developing countries in global GDP in 1980 was 36%. Is it today 25% or 20%? Multiple choice question. So it has come down, of course, but has it gone down from 36% to 30 or 25 or to 20? No. The answer is that it has risen to 58%.
THE YING OF THE GLOBALISATION
But there is a ying and a yang to balance each other. So if we turn to look, if you like, at the dark side, the ying side of capitalist globalization, you do not have to look very far. So alongside this, we have seen a decimation in ways that vindicate the fears expressed by the fabulous American commentator on the environment Rachel Carson in her wonderful books about who are we if we can decimate the natural world around us. I do not know what she would have made of the World Wildlife Fund Living Planet Index. I cannot imagine because the latest figure for the World Wildlife Fund Living Planet Index, which records the global total, of course, the roughest of possible estimates, but very carefully done, of 3057 vertebrate species under the water, on the land and in the air. The index since 1970, they estimate, has fallen by 58%. Who are we? Who are we that we have done this to our living natural world? It is unbelievable. What kind of a species are we?
Climate change. Everybody knows about the prospects, and the question of what kind of lifestyle people who will soon be 8 billion people, what will their lifestyle be? At the moment, in the high income countries we consume 4765 kilograms oil equivalent of energy per person per year. In low middle income countries, the figure is 639. If the rest of the world going to consume in the way that we consume with all the stuff… Technical progress will solve a lot, but it will not solve everything. The question of the style of industrialization and consumption for what will soon be 8 billion people in developing countries is a fundamental issue for the world.
GLOBAL BUSINESS POWER
And now we come to the concentration of global business power, and it is extraordinary. And these are companies; globalization is about firms. It is not some abstract concept that is just cracked across world. It has gone across the world through the spread of global business systems investing across the world, but it is very highly concentrated. I mentioned the figures for R&D expenditure. Let me just give you two examples to show just how dominant firms with their headquarters in the high income countries, but not for production systems, the headquarters in the high income countries are. If you look at the top 40 firms in the world in the automobile industry, there are only 2 from developing countries, and they are not really automobile firms. One is Astra, which actually is an assembly operation of Japanese vehicles owned by a very interesting gentlemen who is Scottish and owns 18,000 acres of shooting land in Scotland. It is not a developing country vehicle assembly. It is owned by Jardines, which is a very capable competent company, and they own Astra. Astra assembles Japanese vehicles in a highly protected market. And that is one of two companies out of 40. The other company is Shanghai Automobile Industrial Company (SAIC). It is not an automobile producing — have you ever bought a SAIC vehicle? of course not, they do not exist–it is a joint venture with two companies, with General Motors, that little American company which now produces more vehicles in China than America, and joint venture with the little Stafford company called Volkswagen. So that is what SAIC is. In other words, there are no companies at all in the top 40 companies of global autos and assemblies. That includes companies like, Bosch, Harmon, Continental, Denso, as well as the assemblers. I will not give any more examples.
And the relationship of the global firm to the home country has weakened and weakened and weakened. If you look at the top 100 companies in the world, transnational companies, including companies like GE, Volkswagen, etc., their share of the output assets and employment in their home countries has got small and smaller and smaller. Just as Rachel Carson asked, “Who are we?”, so the question was also asked by Samuel Huntington, “Who are we if our companies no longer are part of our domestic fiscal economy?” Leading British companies are not British companies. Company like WPP, which is immensely successful, has about 5% of its revenue in this country. HSBC is a British company, but most of its revenue is from the Far East. Shell is a global company, originally a British company. That is the nature of globalization.
Everybody in this room is a part of the global. Without a single exception. I mean at the door we actually have an electronic tag which you are unaware of which actually checks your status before you come into the room, so unawares you are all being tagged, and we know that you are all part of the global elite. By definition, if you are studying or working or teaching or partying in Cambridge, you are part of the global elite. You traveled here — the first thing, you got on the plane, which means that you must be part of a small group of the world. You are having an education in Cambridge, which is great, but it is very very expensive. Somebody is paying. So the global elite, English- language based, children going to global schools and global universities, and this is at the forefront. That is the reality of the global elite in the terms of Charles Wright Mills, the American author, based on which the power elite can be recognized. Finance. We can talk extensively about finance. Similar extraordinary high degrees of concentration in the most important commanding heights of global finance.
I will not say very much about class structure. Simply to say, the statistics on global inequality are incredible. The Credit Suisse Group is very happy because the top 1% of the world’s population, they estimate, accounts for 50% of global wealth. Top 1%. That is very good news. By the way, if you are very rich, and you want your assets to be managed by one of the world’s leading asset managers — I hope you are very rich — because Standard Chartered Bank just announced that nobody can be entitled to their privileged private wealth activities unless they have, I think, now $5mln. I can see some wealthy people sitting around here, but you got to have, I think, $5 mln. It is a great economies of scale, 1% of 50%, 50% of 1%. This is an extraordinary unequal world. At its heart is a global elite.
WHAT IS TO BE DONE?
The question is, “What to do?” And as Lenin said, “What is to be done?” There are three possibilities: one is violent revolution. You can understand why people feel so violent, and that is one path, but it is not very likely to be the dominant path. And indeed Engels, when he wrote “The Condition of the Working Class in England” in 1844 in German, he said, “This cannot last, there will be in this country (in Britain) violent
revolution.” After Marx had died, the introduction to the English language edition was published in 1892; in this, he said, “I was wrong.”
Individual countries have great autonomy in what they do in that space, that is very different from industrial policy. And the challenges for industrial policy are enormous. So when we think about industrial policy, let us think about concrete countries, concrete industries in particular places. So what does industrial policy mean for Kyrgyzstan? Are you supposed to build you Boeing aircraft? Are you supposed to compete with Bosch? Are you going to create your own Google Android? No? Not feasible. And if you try and fail, you waste resources for your country. You have to think very carefully. China is different. China has 1.3bn people and has possibilities that no other country has.
There was not a violent revolution in Britain. Something evolutionary happened in Britain. And if we think about Britain today, we think about what states can do and what they cannot do. Britain is a highly unequal country. Its universities, private schools are highly unequal, but if you look at the data on income after tax and redistribution, the Gini coefficient in this country today under conservative leadership is 0.3. 0.3 Gini coefficient after tax and redistribution is the same as China in 1980. I am sure if Marx came here today, he would have said, “You have done it! Well done! You have arrived at socialism! Congratulations!”
Then, finally, global institutions. Should we decimate the United Nations? Should we walk away from the Paris Agreement and create new institutions? We can do a lot at the national level, particularly, on social welfare and redistribution, creating the society that is homogenous if we wish to do so. But in terms of regulating the global problems, there is no alternative to existing global institutions. They are changing. If you look at the IMF, the voting rights are deeply unequal, but they are changing. They are indefensible. That America should have a veto. Everybody knows that. They are ashamed that Christine Lagarde was elected for a second term. It is just shameful. If you look at the most important institution, which is very imperfect, the FSB, the Financial Stability Board established after the global financial crisis, its main characteristic is that China and India are a part of it, and China and India are working to try to improve in a pragmatic way. Regulation of the global financial system — a long complicated story.
So out of the contradictions of globalization, we can see the shape of a new society, but in thinking about what is feasible and what is desirable, it is highly necessary to think in ying/yang terms, visible/invisible hand terms and about balance between the positive and the negative forces of capitalist globalization, especially if you are in a particular place. What does it mean for Kazakhstan? What does it mean for Kyrgyzstan? What does it mean for Tajikistan? And Russia?