Globalisation is good for developing countries

Globalisation is good for developing countries

MOST developing countries are both integrating with the world economy and devolving power to local governments and communities. This combination of globalisation and localisation is best called glocalisation. The centralised nation-state is giving way to both supra-national and sub-national institutions.

Underlying both trends is a single force: the empowerment of individuals and communities at the expense of the monolithic nation state. Glocalisation improves the voice, participation and prosperity of individuals and communities. It is an idea whose time has come.This reverses decades of centralized rule and autarkic economic policies in developing countries. Colonial experience led them to believe that globalisation meant imperial enslavement. And many claimed that political decentralisation could spark secession, endangering their new-found nationhood. Alas, too often centralisation and autarky proved to be excuses for concentrating all political and economic power in the hands of ruling cliques, thus disempowering citizens.

A few countries like India genuinely sought to use autarkic centralization for the public good, and made some modest gains. But most developing countries suffered economic stagnation and political oppression. Self-sufficiency and centralization did not produce prosperous, united countries. Instead they produced more than 100 weak, misgoverned countries which, by the 1990s, needed to be rescued by the IMF. The collapse of the Soviet Union and rise of Deng's China showed that more socialism was not the solution. And so developing countries began moving in two new directions, globalisation and localisation.Why did post-independence leaders in developing countries go so badly wrong? Mainly because they equated globalisation with 19th century colonialism. They failed to see that, in the late 20th century, globalisation was not political conquest but economic partnership, creating unprecedented opportunities for the poor to rise.

This faulty interpretation led to faulty policies aimed at de-globalisation.Indian socialists cheered as India's share of world trade fell from 2.5 per cent at independence to 0.4 per cent by 1985. They thought such self-sufficiency was a passport to prosperity, and derided outward-looking countries like Singapore and Taiwan as neo-colonial puppets. Alas, the supposed puppets rapidly became rich while India remained poor. All colonial masters extracted large sums from their colonies. The net transfer of capital from India to Britain averaged 1.5 per cent of GDP. The drain from Indonesia to Holland was as high as 10 per cent of GNP. To make these payments, the colonies had to chalk up large trade surpluses, and so were very export-oriented. India's export-import ratio ranged from 172.5 per cent in 1840-69 to 133.4 per cent in 1913-38.

Socialists like Nehru interpreted this to mean that export-orientation was a tool of colonial exploitation, and free trade a ploy to help Britain dump its manufactures on a de-industrialised India. He and other Third World leaders knew that globalisation in the 19th century had produced alien rule, poverty and transfer of wealth to colonial powers. They assumed that 20th century globalisation would do the same. They were wrong in several ways:u19th century globalisation represented colonialism. 20th century globalisation has been the era of decolonisation.uIn the 19th century, wealth flowed from colonies to their imperial masters. In the 20th century capital has flowed the other way, through aid and FDI.19th century globalisation yielded GDP growth rates of no more than 3 per cent annually in the fastest-growing countries like the USA. But 20th century globalisation has yielded GDP growth rates of up to 10 per cent in many developing countries, creating huge opportunities for the poor. Indians moan today their GDP growth rate is only 5.4 per cent, but this is double the British rate a century ago.In the 19th century, the rich imperial powers grew fastest.