OPINION
Paul Kelly, Editor-at-large
July 22, 2006
John Howard's best insight in his Committee for Economic Development speech this week was his claim that "most successful nations thrive not on fixed plans but on well-governed flexibility". There are still social and economic engineers who reject this. Yet in an age of rapid change, smart nations will maximise their flexibility while nations chained to the past will cling to rigid planning that denies better options.
This heralds the looming crisis of democracy, now apparent. The democratic technique of the older, rich nations is a perpetual bargain that trades votes for government guarantees of security, benefits and protection. These operate as an insurance against technological and economic innovation and foster a political culture that sees globalisation more as an evil than an opportunity. Once this culture is entrenched, the road to national decline is comfortably rapid. These tensions are going to escalate in all democratic societies.
Globalisation has been the underlying question of Australian politics for the past 20 years. It is implicit in much of Howard's agenda, notably his pursuit of industrial relations flexibility, his search for new options in energy policy and the modest reforms to keep our tax system internationally competitive. The 2007 election will be a contest over different models to manage globalisation.
Australia is a regional power with global interests. Its future will be determined by whether it has the economic, social, trade, education and technological skills to become a 21st-century success in global terms.
The metaphor of the "fast forward" switch captures the essence of globalisation. It means that nations will rise and fall faster than before. The consequences of nations getting things right (witness Australia, Ireland and China in recent times) are greater than ever, while the consequences of nations getting things wrong will be lethal. For Australia, located within the east Asian dynamic, harmonisation of domestic and foreign policy is critical. In this region any resort to the European social model would signal a retreat to slow growth and national marginalisation.
The truth is that Australia's post-1983, pro-market reform era has been heavily dictated by regional awareness. This is only intensifying with Australia's multiple economic ties spanning Japan, the US, China, northeast Asia as a region, emergent India and Europe.
Few figures are better advocates of "globalisation adjustment" than Bob Zoellick, who has just retired after six years with the Bush administration as chief US trade negotiator, then as deputy secretary of state to Condoleezza Rice.
In a farewell interview with The Weekend Australian, Zoellick identifies four trends driving change: the dismantling of the Middle East status quo; the rise of China and its integration into the world economic order; the arrival of India and the historic new ties between the US and a modern Indian economy; and the consequences for all nations of deeper global markets.
Zoellick says the number of people participating in the global economy has risen from one billion to 4-5 billion in just the past 15 to 20 years. This testifies to the power of markets to lift living standards and the ability of cheap manufacturing to drive low inflation worldwide. "With that many people coming into the world economy it is no surprise there are adjustments in everything from prices: commodity prices, prices for goods from China and labour costs globally," Zoellick said on the eve of his departure.
"For the developed world this creates some tremendous opportunities. This is one reason why we have had such a long period of growth with low inflation. But it also means, if you have a relatively open economy like the US and Australia, that it puts great pressures on the adjustment process."
With manufacturing in the rich nations under intense pressure, Zoellick highlights the pivotal role of education, from primary school to university to lifelong retraining by corporations or in public institutions. It is the key to future jobs and productivity.
For leaders who believe in free markets, the question is: "How do you help people deal with their anxieties about change?" Unless this question is answered, the campaign to "slow down change" and "to close off markets" will rise, even though it won't succeed. "I don't think the anti-globalisation movement has ever gone away," Zoellick says. "I think part of the challenge - maybe Australia has done this better - is to actively argue the case. As President Bush has said, there are strains that are protectionist, isolationist and nativist. For those who believe these are wrong policies you must be forthright in standing against them. And you can't beat something with nothing.
"I believe that in trade and globalisation the best defence is a good offence. I have tried to move on multiple fronts because, frankly, I would rather have the debate on 'should we pass this free trade agreement or not' than about 'what protectionist measure should we put in place'."
The recent front on Zoellick's radar has been China. During the second Bush administration he devised the best US framework for managing the rise of China that has come out of American politics. His message was to shun containment and insist that "the US welcomes a confident, peaceful and prosperous China", but that means China must accept a new responsibility as "shared stakeholder" in the global system.
He said: "Our discussions (with China) focus on how this concept can be applied across a whole range of policy issues: economic, energy, security, nuclear non-proliferation, terrorism and regional security." Zoellick's strategy is to expect responsibility and judgment from Beijing.
"While there are commentators worried about the growth of Chinese power and influence, I don't feel that is the dominant discussion," he says.
"The dominant concern, frankly, is more on the economic side than on the security and military side. I think American perceptions of China will be based in part on whether China is seen as being helpful or harmful with the major issues. It will be based on whether we can show that the economic relationship, while it has competitive aspects, is to our mutual advantage."
This is the ultimate globalisation test. China is a permanent factor in US politics. It is very important for China , as a responsible stakeholder, to revalue its currency and address the global financial imbalances, just as having co-operative relations with China requires it play a constructive role on Afghanistan , Iraq , Iran and North Korea .
The age of globalisation complicates international agreement-making because there are more players at the table: not just the US, Europe and Japan, but also China, India and Brazil. In this more competitive world of globalisation, success will come to those economic and political systems that are more flexible and accessible. That's the best long-run message for Australia.