Consumers everywhere benefit from globalisation

Globalisation refers primarily to an increase in trans-national trading and human interaction at a speed and on a scale unprecedented in the history of human development. Thanks to information technology and other technological advances, the speed and scale understandably invite a great deal of debate regarding the consequences of the process and particularly its impact on developing markets.

Fair trade is at the very centre of global debate and should be discussed concomitantly with globalisation. Any meaningful attempt at reviving the collapsed Doha Round must pivot on the fundamental issue of fair trade across countries. In particular, the circumstances and realities faced by producers in developing countries relative to their counterparts in developed countries must be examined.

Policies in the agricultural arena should be the same as policies applied in other sectors of the global economy. For instance, a Mozambican producer of agricultural products may have no trouble selling her products in South Africa but should she try to enter the European market she would come face to face with the ‘Berlin Wall’ of high subsidies and other forms of protection erected for the benefit of domestic producers.

The Mozambican would be at a loss to understand why governments of developed countries would wish to subsidise his competitors in their own countries rather than allow fair competition between them. Governments of developed countries should consider the consequences for Mozambican and other developing country farmers when they introduce such measures as subsidies on agricultural products or tariffs on imports.

Agricultural price subsidies impose unnecessary burdens on developed country taxpayers and reduce competition from foreign competitors. Tariffs on imports, on the other hand, increase prices to domestic consumers and protect uneconomic local producers. In both cases a bias is introduced against developing country farmers. The effects of this bias cannot be corrected or reduced by foreign aid because the efficient developing country farmer is not likely to be a foreign aid recipient.

In the global economic arena, globalisation is simply a manifestation of entrepreneurial ingenuity, the spirit of enterprise that knows no political or geographic boundaries. It is the economic logic of entrepreneurship that prompts people to seek markets that can result in profit maximisation. Globalisation is not a capitalist plot hatched in Washington, Tokyo, or Brussels.

What role should governments then play in order to enhance trans-national trading? Domestically governments have to decide what policies or legislation to introduce, or perhaps more aptly, what policies should be abandoned or legislation repealed in order to ensure that the global competitiveness of businesses is not compromised.

An actual instance where globalisation resulted in good value for money for consumers provides an insight into its possibilities.

The Economist of 18 February reported that Elattuvalapil Steedharan, the managing director of the Indian Delhi Metro Rail Corporation was confronted with the daunting task of establishing an efficient state of the art metro service in the shortest possible time, a task he accomplished with flying colours. How did he do it? He engaged a consortium from Japan as consultants, obtained the rolling stock from Korea, the signalling and collection systems from France and a loan for two-thirds of the finance from the Japanese government. The result is a sophisticated and efficient metro that boasts a three-stage escalator, ticket barriers that use tokens, and a smart card payment system that compares with the best in the world. The result? Very happy commuters.

Trans-national trading enables entrepreneurs to deliver good-value-for-money goods and services to consumers. Such entrepreneurially driven endeavours translate into improvements in the socio-economic conditions of people across the globe. They are driven by the profit motive, without any altruistic motivations whatsoever, and the result is the phenomenon that Adam Smith described as ‘the invisible hand’.

What, then, ought to be the role of governments? Governments must desist from policies that encumber private enterprise; entrepreneurs are the wealth creators and job creators. Governments must not sacrifice the broader socio-economic interests on the altar of politically correct policies that pander to vested interests; such actions ultimately have a negative impact on the economic performance of the country.

It takes statesmanship to reverse policies that have demonstrably negative socio-economic consequences. Politicians are generally oriented towards the short-term, pursue policies that they believe will maintain their support base, and tend to avoid actions they believe may alienate their voters. A statesman acts in the longer term for the good of all. Alexander Pope, almost three centuries ago, described the qualities required when he wrote: ‘Statesman, yet friend to truth, of soul sincere, in action faithful and in honour clear; who broke no promise, served no private end, who gained no title and who lost no friend’.

The Mozambican producer with his hoe in his hand, knocks on the door of his government and pleads for his economic freedom. He also knocks on the doors of the leaders of the developed world pleading for the right to compete on equal terms with his competitors in developed countries. He knows that the consumers in those countries want his farm products. He knows this, because he is an entrepreneur. All he needs is for the negotiating governments to act in a statesman-like manner.

Author: Temba A Nolutshungu is a director of the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author's and are not necessarily shared by the members of the Free Market Foundation.

FMF Feature Article/ 08 August 2006