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November 5, 2008 - Wolfgang Clement
The global financial crisis has demonstrated that all of us, Asians and Europeans alike, have harboured the illusion for too long that we would be able to avoid the American real-estate and banking disaster. Stock exchanges worldwide have suffered sudden falls in prices, from New York to Moscow, from Shanghai to London and Frankfurt to Mumbai, and formerly first-class financial institutes have filed for bankruptcy. All of this has shown us – in a frightening way – the dark side of globalisation. Global interdependence in the flow of goods and money, mobility and communications, almost exclude autonomous national order and control. Nevertheless, these changes to the structure of our world economy do not automatically mean the end of political responsibility. Political decision-making – and this is the new aspect in the era of globalization – must go beyond the narrow boundaries of nation states. Thus national economics turns into international economics.
More specifically, national decisions are more rewarding for a country the more it orients itself toward the requirements of global markets and international trade. However, free international trade – like any market – needs a structure defined and protected by the WTO, i.e. a regulatory organization that urgently needs to be developed by international politics for the benefit of global financial markets, as learnt the hard way in the past few weeks. Perhaps the International Monetary Fund is the appropriate body to become such a “WTO of the global financial markets”.
The sinister message of our time, however, is protectionism. I am convinced that this barrier to global trade is, in the long run, a greater threat to peace and prosperity in the world than today’s crisis in the financial markets. This is why we must be on high alert because dramatic change is on its way. And the People’s Republic of China will have a key role to play.
In the USA of all places, an increasing tendency toward protectionism can be observed, probably caused by the latest developments. A mere 53 percent of Americans consider free trade to be a good thing for their country, compared with 78 percent six years ago. On the other hand, according to a recent American survey, 87 percent of the Chinese and 90 percent of the Indian population opt for freedom of trade. These are impressive figures, and one can only hope that they will be reflected in the politics of the two new powers in the world economy, during the current DOHA round of the WTO.
A British business magazine recently estimated that, between 2006 and 2020, China will contribute approximately one third of worldwide growth, compared with approximately 16 percent for the USA and a mere 1.9 percent for my country, today’s world export champion. The rate of change seen in the People’s Republic is phenomenal. The first private enterprises were not established until 1992. Today, Chinese companies make up two thirds of the country’s gross national product, making it the third largest national economy in the world.
Today, talking about global wealth is inconceivable without considering China. “It is quite simply China that makes the world more prosperous”, said Georg Blume, a German foreign correspondent to Beijing, in an essay entitled “China is no evil empire”.
This is true. As a former German Minister of Economics and Labour involved in the rather laborious DOHA process, I can only hope that governments will have greater confidence in the powers of the market acting in a fair way, than in state intervention and protectionism.
My optimism in this respect is also strengthened given the experiences I have had as Chairman of the Adecco Institute (London), a think tank on the future of work of the world leader in human resource solutions. The Adecco Institute agreed to work with the renowned Shanghai Academy of Social Sciences on questions pertaining to the labour market. We intend to work on joint projects in the areas of youth unemployment and improved education and training, with experts such as Professor Wang Ronghua, focusing on an exchange of experiences and experts, and on working out new concepts in joint workshops.
Together with our Chinese partners, we very quickly made the discovery that this great country of China has to struggle with structural deficits quite similar to the ones in the much smaller Western labour markets, namely demographic change and lack of skills, and that our social, economic and political strength will depend, in the future, upon the availability of skilled workers.
This is why, whether we are talking about labour markets or trade, multilateralism rather than isolationism is of paramount importance!
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