Larry Elliot continues his tradition of insightful and often disturbing economic analyses. This one looks at the current Doha round of trade liberalization, fourteen years in the making with “precious little” achieved in that time. You might remember the first round in Seattle with the attendant protests. The second Uruguay round took seven years to complete, beginning two months after and partially in response to 9/11.
When the Doha round was launched, it was seen as marking the start of a new chapter in the story of globalisation. A decade-long process that had begun with the tearing down of the Berlin Wall had culminated with the birth of the euro and the admission of China into the WTO — both seen as evidence that a new borderless world was in the making. The 1990s had been a decade of rapid growth and technological change.
And we all remember how well that worked out. Kinda like the whole “free movement of capital” ideology that was at the heart of Doha as well as the wars in Afghanistan, Iraq, and anywhere else that proved resistant to the power of positive money. “The theory was that removing the postwar curbs on finance would allow capital to move to those parts of the world where it was most needed”, a statement of an unutterably idiotic conceptualization. As if capital were a social service, moving about the world looking for spots where it might be wanted!
Things did not work out quite as planned. There were certainly big flows of capital around the globe, but they tended to go into speculative construction booms rather than into the creation of new productive capacity. Financial globalisation did not raise growth rates — or if it did it only did [so] through the creation of enormous bubbles — but it did lead to regular and damaging banking crises, culminating in the big crash of 2007-08.
The public got the impression that the only real beneficiaries of this Frankensteinís monster was the financial industry itself. And when it became clear that the cost of failure would not be paid by the bankers but by the public, a backlash began.
Of course some benefits were seen to accrue to the working class in the form of cheaper goods. But these were paid for by a loss of manufacturing jobs.
This is the second age of globalisation. The first, also hastened by developments in communication, involved the free movement of capital, goods and people. That era came to an end in 1914 and the next three decades were difficult ones because mainstream politics couldn’t cope with the collapse of the pre-first world war order, and an extreme form of nationalism was unleashed by economic hardship.
Those who say history will not repeat itself should pause for thought. There has been a system failure. Everywhere, an extreme form of nationalism is again on the rise.
And trade pacts, which have done so much to create this horrific possibility, are clearly not the remedy for it. Nor, to be honest, is capitalism itself.