Globalisation and the curse of guilt by association

| August 26, 2016

There’s a growing public rejection of globalisation and economic openness, and we ignore it at our peril, says Ian McAuley.

Ron Heifetz, of Harvard’s Center for Public Leadership, coined the term “work avoidance” to refer to the ways we protect ourselves from dealing with hard issues – issues that may require us to face serious adaptive changes.

Most often work avoidance takes the form of directing our energies to a real, but comparatively unimportant problem, while ignoring far more serious and challenging issues. It helps if that problem has neat and quantifiable dimensions, and can fit within our existing political framework.

The problem of “budget repair” fits the work avoidance model perfectly. It appeals to the simplistic notion that a deficit is “bad” while a surplus is “good”; there are agencies such as the Parliamentary Budget Office devoted to quantifying fiscal outcomes, and it aligns with the “left”/”right” partisan model of a conflict between a “big government” Labor Party in conflict with a “frugal” Coalition.

The issue we’re avoiding is the one Britain avoided until it woke up one morning in June and discovered a majority of voters had opted to leave the EU.

That issue is the growing public rejection of globalisation and economic openness.

That same rejection has spurred the Trump campaign in the USA and the rise of far-right nativist anti-immigration movements in many mainland European countries.

In Australia its manifestation is in the recent election. There has been a long-term drift away from the main parties, and the space has generally been filled by a bunch of members and senators with a heterogeneous mix of platforms spread along the “left-right” spectrum. In this election, however, one issue where even Hanson’s and Xenophon’s people find common ground is the desire for protection of local industries.

After the election Essential Media asked voters whether they believed Australia has gained or lost because of globalisation, which they defined as “the increase of trade, communication, travel and other things among countries around the world”.

Overall the public were roughly equally split in their response, but when broken down by party the results reveal a strong polarity. Green and Coalition voters see globalisation as beneficial – Green voters strongly so – Labor voters hold a negative view, and those who voted for minor parties have a much more negative view.


Belief whether Australia has gained or lost because of globalisation

























Don’t know







At first sight those who hold a “left-right” view of politics may be surprised by the Greens’ strong support for globalisation, but as analysis of the Brexit vote shows, this issue transcends traditional “left-right” boundaries. The Essential poll found that the young and the more educated were most likely to have a positive view of globalisation.

Given the success of the Hawke-Keating Government in pursuing tariff reductions and an opening of financial and product markets, the negative attitudes of Labor voters are, at first sight, surprising.

One general explanation is that the Hawke-Keating Government was essentially stealing the Liberal Party’s platform. The textbooks point out that it’s easy for a “left” party to steer a “right” reform through Parliament, and vice-versa.

But another explanation is that the Hawke-Keating Government had it easy because the gains from economic liberalisation were so clearly obvious. Because of tariff and quota protection, everyday items, ranging from cars through to socks, were horrendously expensive. A basic new car (the Holden XT) cost around nine month’s wages. Household appliances and electronic goods were high in cost and often poor in quality. It was easy for people to understand how industry protection was hurting households.

Of course protection did secure jobs in the manufacturing sector, but these were often very poor jobs. While our manufacturing sector employed some highly-skilled tradespeople – electricians, fitters, mechanics, pattern-makers etc – the bulk of activity was in low-skill short-cycle work in press shops and assembly lines. While the Hawke-Keating Government paid particular attention to retraining there were many who lost out, but not enough to derail the reform program.

If we come forward 40 years to 2016, with cheap cars, appliances and clothing all accepted aspects of the economic order, the benefits of further globalisation and the costs of protection are not so obvious to the community.

In a 13 week semester, with the incentive of assessable assignments and examinations, I could convince a class of the opportunity costs of bailing out Arrium or paying a 30 per cent premium to build submarines, and of how, in a general equilibrium model, protection for one sector imposes a competitive disadvantage on all other sectors. But no economist, and far less a politician seeking election, could get that same message through to the voters of South Australia.

The case for globalisation, whatever its merits, has become much harder to put, and governments around the world have done a poor job at convincing the public of its virtues, and at ensuring its benefits are spread fairly. To quote the Economist post-Brexit comment on the “Politics of anger”:

Rather than spread the benefits of globalisation, politicians have focused elsewhere. The left moved on to arguments about culture-race, greenery, human rights and sexual politics. The right preached meritocratic self-advancement, but failed to win everyone the chance to partake in it. Proud industrial communities that look to family and nation suffered alienation and decay.

Worse, “globalisation” has been used as an excuse for all manner of unpopular economic policies such as privatising government services, prioritising “business interests” over the common good, weakening the rights of workers and consumers, and yielding sovereignty in investor state dispute settlement provisions in so-called “trade” deals – deals that are far removed from the earlier multilateral GATT and WTO arrangements which did have clear benefits for Australia. Politically “globalisation” is suffering the curse of guilt by association.

This association is unfortunate, because the move for global and domestic economic openness stems from the liberal and progressive postwar order hammered out in the 1944 Bretton Woods negotiations. That order was specifically designed to avoid the beggar-thy-neighbour policies that had contributed to the ghastly events of the 1933 to 1945 period.

Now, as then, there is a pressing case for international economic cooperation, and the issues surely align with the interests of those who count themselves as liberals or progressives. Cooperation on reducing greenhouse gases is the most pressing issue. Other economic concerns calling for international cooperation include working conditions in developing countries, pharmaceutical pricing, controls on money laundering by terrorists and gangsters, protection of global commons resources in the sea and atmosphere and collection of taxation from multinational corporations.

Unless those who support globalisation, wherever they lie on the “left-right” or “conservative-liberal” spectra, can argue its case to the wider community and ensure that its benefits are shared equitably, there will be a political backlash involving isolationism and a slide into economic stagnation as we retreat into an economic system combining the worst aspects of feudalism, paternalistic statism and crony capitalism. As UN Secretary-General Kofi Annan said many years ago, “if we cannot make globalisation work for all, in the end it will work for none”.