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Globalisation: a force for good. Speech at Bond University, Gold Coast: 4 February 2006.\n



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Speech by

The Hon Alexander Downer MP

Minister for Foreign Affairs

At Bond University

Globalisation: a force for good

Gold Coast, 4 February 2006

(Check Against Delivery)

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Introduction

Thank you for inviting me to speak at the Bond University

graduation ceremony today.

It is a great honour to be the guest speaker at such an important

occasion: an occasion which marks both the completion of one

chapter in your life and the beginning of numerous others.

Congratulations on attaining your degree.

All of you have worked hard to reach this point - many have worked

exceptionally hard.

Graduating from a university such as this is a tremendous

achievement and you should be justifiably proud.

You should savour this moment and celebrate.

Today I would like to discuss globalisation and its effects.

It is a topic that is very relevant for a graduating class for many of

you will benefit from it in the careers you pursue, the salaries that

you will command and the opportunities that will be open to you

right around the world.

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It is also relevant because despite the fact that many, or all of you,

will directly benefit from it, I would be surprised if a proportion of

you did not feel some unease about the inexorable march towards

globalisation.

You may be concerned about what it does to poor countries, what it

means for the environment, for human rights, what it means for

democracy.

Indeed I would predict that, while Bond is not the most radical of

campuses, some of you have nevertheless been part of a protest or

organisation campaigning against globalisation.

And you would not be alone.

Anti-globalisation protests have been occurring around the world for

years.

Indeed just last week while several thousand business and

government leaders were attending the World Economic Forum in

Davos (in part to promote greater economic integration), 60,000

people were gathering in Caracas, Venezuela, for the World Social

Forum - a Forum which strongly opposes globalisation.

The Forum was billed as the “antidote” to the World Economic

Forum.

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Globalisation has been a controversial subject and will no doubt

continue to be so.

My view, however, and this is what I want to discuss today, is that

globalisation is an overwhelming force for good and hence we

should not only defend it, but promote it.

My views are based on what globalisation means in terms of

freedom and based on the cold hard facts of its effects particularly in

terms of poverty alleviation.

Let me explain.

Globalisation is the result of free choices

But first, what do we mean by globalisation?

The World Bank describes it as “the growing integration of

economies and societies around the world.”

Essentially, people and countries are more interconnected.

What happens in one country can influence another. Wall Street

sneezes and the rest of the world catches a cold.

Technology advancements, in the form of rapidly reduced

transportation and communication costs, combined with policy

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decisions to reduce trade and investment barriers have been

important factors behind this rapid global integration in recent

decades.

But they have not caused globalisation to occur.

What has caused greater economic integration between nations - and

this is often forgotten or deliberately overlooked by the critics of

globalisation - is individuals taking decision in pursuit of their own

interests and being given the liberty to so.

A McDonalds restaurant for example - enemy number one to the

anti-globalisation forces - only exists because there are people who

freely choose to open the restaurant and because there are people

who freely choose to purchase meals at the restaurant.

Australia imports clothing from Bangladesh because there are

Bangladeshis who freely choose to sell their products abroad and

because there are Australians who freely choose to purchase them.

Lower transportation costs and lower tariffs on imported goods into

Australia allow this to occur more easily, but no trade would occur

without the free choice of individuals on both sides.

Likewise, Australia’s exports of wine to Britain don’t occur because

of any government mandate, but, again, because of the free choices

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of thousands of people both producing the wine and consuming it

and being given the freedom by governments to do so.

Opening a McDonalds, importing clothes from Bangladesh,

exporting wine to Britain.

All of these things result in greater global economic integration, or

globalisation.

And they are all caused by people being given the freedom to pursue

their own interests.

This alone is a very powerful argument in support of globalisation.

To limit the freedom of individuals to pursue their own interests

requires very convincing evidence that such freedom has very

negative consequences on the broader society.

Many critics will claim exactly this, citing poorer people as having

particularly suffered.

An impassionate view of the evidence, however, suggests otherwise.

The practical effects of globalisation

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Consider what has occurred over the last century and particularly the

last 20 to 40 years, which coincides with the acceleration of greater

global integration.

The past century has seen more people lifted out of poverty than in

all of human history.

In 1820, about 85% of the world’s population were living in absolute

poverty - usually defined as living on less than one dollar a day.

By 1950 that figure had fallen to 50%. Today it is about 20%.

Swedish economist, Johan Norberg, notes that in the last 20 years,

for the first time in history, both the proportion and the absolute

number of people living in absolute poverty has declined.

The population grew by 1.5 billion while the number living in

absolute poverty fell by 200 million.

The average global income per capita has almost doubled over the

last 35 years with the poorest fifth of the population increasing their

income faster than the wealthiest fifth.

Life expectancies show a similar pattern.

At the start of the 20th century, life expectancy in developing

countries was 35 years. By the end of the century it was 65.

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While this is still below that of the richest countries today (the

average for the OECD countries is 78 years), it is 15 years longer

than the average for the richest country 100 years ago.

Infant mortality rates are half what they were in 1970. Adult

illiteracy has almost halved.

This is phenomenal, unprecedented progress and it did not happen

by accident or in despite of globalisation.

Rather it occurred as a result of increased economic growth due to

the opening up of economies and the spreading of global capitalism.

Studies have shown that the more open economies and those that

have most successfully integrated with the global economy have

produced the best growth results, while those that have remained

closed have produced the worst.

For example, a 2002 World Banks study of 72 developing countries

found that since 1980, the “globalisers” - those that increased their

ratio of trade to GDP - grew almost four times faster than non-globalisers.

A further study estimated that an increase in the ratio of trade to

GDP by one percent raises the level of income by one-half to two

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percent. (Frankel & Romer, 1999 as cited in World Bank report on

Poverty in the Age of Globalisation, 2000).

Our regional neighbours have been some of the big gainers from

globalisation.

From the 1960s onwards, most East Asian economies became

increasingly export oriented and globalised, lowering tariffs and

expanding their trade.

They also provided their populations education and infrastructure

and generally sound governance.

As a result, per capita income grew most strongly in East Asian

economies over the last 20 years.

In the 1990s, with the exception of Japan, East Asia grew by

between 6-8 per cent per annum, and the share of regional

populations living in poverty fell rapidly.

Furthermore, the growth in these countries didn’t just benefit a small

few with the poor lagging behind as some people suggest.

Rather, evidence shows that economic growth is on average

associated one-for-one with higher incomes of the poor.

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That is, when an economy grows 1%, the incomes of the poor rise

on average by one percent.

There are exceptions to this, but statistical evidence shows that, on

average, the poor have benefited at roughly the same speed as the

rich. (World Bank, 2000)

In contrast to the rapidly growing East Asian countries, countries

that have failed to grow and still suffer desperate poverty - most

notably many countries in sub-Saharan Africa - have failed to

integrate into the world economy.

This failure to integrate is caused by domestic conditions including

war and internal governance, but it is sometimes made worse by rich

countries putting up barriers to their products, particularly farm

products.

As UN Secretary General Kofi Annan has said: “The main losers in

today’s very unequal world are not those that are too much exposed

to globalisation. They are those that have been left out.”

For those who are still in doubt, it worth reflecting on what happens

when a country closes its doors having been opened to the world for

some time.

Zimbabwe is probably the best illustration of this.

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According to Norberg, Zimbabwe has “undertaken the world’s

fastest and most consistent retreat from the alleged evils of

globalisation and liberalisation.”

Under Robert Mugable, trade has been limited, government

spending has increased, price controls installed, freedom of

expression limited, and property appropriated.

The result? Within 5 years, Zimbabwe went from being an exporter

of foodstuffs to a country where more than 6 million people were

facing starvation. (Norberg, 2003).

Australia, of course, has been both at the fore-front of, and a

beneficiary of globalisation.

Over the last 20 years, the Australian Government has cut tariffs,

opened itself up to global capital markets and implemented

significant micro-economic reform.

While this has resulted in some significant disruption to some

industries, Australia overall has benefited profoundly with

productivity growth in the second half of the 1990s 40 percent

higher than in the 1970s and 80s. (DFAT, 2003)

This has lead to higher incomes and the lowest unemployment levels

in decades.

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It is worth remembering that lowering trade and investment barriers

is necessary, but not sufficient, to ensure that communities keep and

spread the gains from globalisation.

Governments must also ensure domestic goods, labour and financial

markets work and legal systems and infrastructure function

efficiently.

They must operate stable macroeconomic policies to keep inflation

low and employment full.

And they must ensure that their populations have access to good

quality education and health care and adequate social safety nets.

While Australia has done these well, other countries have not and

their gains have been less.

Australia’s role in spreading the gains of globalisation

Australia has a direct interest in seeing other countries integrate into

the global economy or globalise.

Not only is there a humanitarian interest in seeing enhanced

economic growth and poverty alleviation in poorer countries, but

globally integrated economies are more politically stable and can be

a market for Australian goods.

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Australia can do a number of things to spread the gains of

globalisation.

Assisting with governance reform and institution-building is

possibly the most important.

With stronger institutions, countries are better placed to introduce

the policies and reforms vital to securing the opportunities of

globalisation.

The strength of Australia’s own institutions means we are well

placed to help others improve their institutions and their approaches

to key policies.

Through our aid program we are investing in the prosperity, the

health and the freedom of the poorest, particularly in our own region.

With more than a third of our aid program focused on promoting

good governance, we are helping create environments where

creativity, enterprise and effort can reap rewards …

… and where resources are allocated to productive purposes rather

than squandered through corruption or mismanagement.

Reducing trade barriers is also critical.

This applies to both developing and developed countries.

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Removing barriers to agricultural trading is particularly important

and Australia is working hard to achieve this through the current

Doha Round of WTO negotiations.

It is in agriculture that many developing countries have a

competitive advantage and it is in rural communities where many of

the world’s poorest live.

But it is also in agriculture that the world trading system is most

distorted.

Primary producers in the world's developed countries receive about

US$280 billion a year in government support.

In the European Union, farmers receive a third of their income from

government subsidies.

A typical cow in the European Union receives a government subsidy

of US$2.20 a day.

This is more than what 1.2 billion people earn!

The World Bank estimates that an ambitious conclusion to the

current WTO negotiations could lift an additional 140 million people

out of poverty by 2015 and boost global welfare by up to US$269

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billion, with up to 40 per cent of these gains flowing to developing

countries.

Developing countries face their own, unique difficulties in adjusting

to the trade liberalisation process, and they need support to help

them adjust.

With this in mind, WTO members recently agreed to an Aid for

Trade initiative to help developing countries build their capacity and

take advantage of the opportunities provided by trade liberalisation.

The Australian Government contributed an extra $4 million for Aid

for Trade activities, adding to the $32 million we provided in the

previous year.

It would be remiss of me, particularly in this setting, to not mention

education. Education, is of course, a significant export for Australia.

But it is also a means of assisting countries develop their economies

and societies through training their people.

Over the past 55 years, about 700,000 people from Asia have been

educated in Australia.

The contribution that these graduates are making to their home

countries is enormous.

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Many, of course, are in leadership positions in government or in

business.

The international students graduating today who are returning to

their home countries will no doubt make a similarly impressive

contribution.

Conclusion

While I overwhelmingly believe that globalisation is a force for

good, I also believe it is unstoppable.

To protest against globalisation is like protesting against the sun

rising.

We share a planet…and with modern transport and communication

we share it more easily.

The enterprise, curiosity and enthusiasm of human beings will

always ensure that opportunities are sought in every corner of the

globe.

So our challenge is not to prevent globalisation but to manage it in

such a way as to maximise the benefits for all.

The former World Bank head, James Wolfensohn said that “for me,

the argument about globalisation is a non-argument.”

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I couldn’t agree with him more.

I congratulate you once again on what you have been able to achieve,

and wish you well as you take up the many opportunities available to

you.