Estaremos a entrar numa fase de predomínio do nacionalismo protecionista e do bilateralismo em vez da concertação global e do multilateralismo? Estará o capitalismo clientelar a alimentar este rumo e a contornar e substituir as regras do mercado livre? Onde se enquadram a China e as outras economias emergentes e em
desenvolvimento nestas tendências?
Are we entering a new phase of protectionism and bilateralism and leaving behind multilateral, global understandings? Is crony capitalism feeding this course, circumventing the rules of the free market? How are China and other emerging and
developing countries coping and dealing with these trends?
Former Vice-President of the India Planning Commission, New Delhi
Antigo Vice-Presidente da Comissão de Planeamento da Índia, Nova Deli
Montek Ahluwalia
S P E A K E R
his session is supposed to address three questions: Firstly, are we entering a new age of protectionism? Secondly, is this being caused by Crony Capitalism, which is wiping out the operations of free markets? Thirdly, how will China and India react to all this?
This is the first time that the developing countries enter the discussion.
But before addressing these ques- tions, I want to come back to the brilliant presentation that Prof. George Friedman made this morning. The answers to the questions I just mentioned depend on whether he is right in his assumptions or whether there is another explanation to what is happening. His view is clearly that the underlying mo- mentum of the global economy has reached a major breaking point. There will be traumas, we might not be lost forever, but this model has run out of steam and it will take a decade for it to be reset. The other understanding is a more convention- al one, admitting that there has been some unbalancing, and because of it, there is an imbalance in policies. If all countries were to realize that, for their own self-interest, they should make some changes and then everything would be set right again, and we would be back to a world of prosperity. This is what the International Monetary Fund (IMF) and to some ex-
deny there is a problem, but they don't believe it is a funda- mental problem.
You must keep these two views in mind when you look at the answers that we put forward. I think that perhaps there is more truth in the idea that there are some fundamental chang- es happening, but I don't entirely agree with what George Friedman said about the nature of those changes.
With that background, let me try to give some answers to the questions I first mentioned. Are we entering a new age of protectionism? Let us be clear: things are different, and suddenly governments are saying things that they didn't said earlier. But even if, for example, the President of the United States (US) is far more outspoken on these things that its pre- decessors were, it doesn’t mean that we are seeing a surge in anti-trade ideas. The anti-trade movement predates President Donald Trump. The Doha Round, in December 2015, was neatly barred, not only by the United States but by many other devel- oped countries. The basic fact that we encountered a difficulty on trade is not to be attributed to anything that happened on the course of the last year. There were problems building up to it and we need to keep that in mind.
However, even if I don't believe we are in a fundamental 10-year disruption period, I do think it will not be easy to get out this difficult period. If anybody was hoping to see a quick
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pointed, but we maybe witness less rolling back that what it looks like now. This is something yet to be sorted out and a lot depends on the tactics that different groups adopt. Certainly, the US Administration is the first one to “fire the shots” and we will have to see what China does, what Europe does, etc. When people see the cost of what they do, they are usually nimble enough to change their position slightly. The assumption that trade liberalization will proceed in an easy way is not valid, but there is a chance that we may be able to stop a major reversal.
Regarding the second question: is all this the result of Cro- nyism? Cronyism really means the use of politically well-con- nected people to extract policies that clearly benefit them. I think that, although there's no doubt that there is some crony- ism in place, what we are seeing is not just the result of it. It
is the result of underlying factors, some of which probably re- flect social weaknesses and others reflect the way the econo- my works. If you believe, for example, Thomas Piketty (French economist), he's not saying that problems arise because of cro- nyism; he's saying that there's something fundamental in the way a liberal market economy works that is going to lead to an increasing concentration of power and inequality.
I want to mention that there is a lot of work done on weather globalization and democracy can actually survive to- gether. The assumption is: they can if the system is run in a way which ensures a broad base of prosperity. Earlier today Mary Kaldor implied this point, saying that in the post-world war II European expansion, a very import reason why rapid growth took place and was accepted was that the social security net- work that would support the broad base of prosperity had been laid. And that was certainly true in most of Europe (not in the United States, but in Europe yes). So, the question really is, even if there are inherent tendencies of rising inequalities, (in- herent in the neoliberal classical model) another view is that globalization encourages a "winner takes all" approach, which leads to a huge concentration of incomes and inequalities.
We were discussing earlier that the second best football player in the world is probably not that much worse than Ron- aldo (and I know that I am treading dangerous ground because he is a Portuguese star) but even a nationalist Portuguese would accept that there must me a second best player, and I don't see a single t-shirt anywhere other than a red one with the number 7. That really shows that “the winner takes all” is a real phenomenon in many sectors and issues.
The system must be run in a way in which most people feel that there is something in it for them. If, for whatever rea- son, either due to bad policies or due to a crisis, the system begins to work in a way where most people feel that it doesn't deliver anything to them, you can expect a push back that will either damage democracy, lead to protectionism or both. If we
want the believe the assumption of a well-functioning market economy that has a lot of proficiency factors to it, we must make sure that the social outcomes that it generates are ac- ceptable. We need to think of it broadly, rather than narrowly, only in terms of Cronyism.
On the third question, regarding the role of China and other developing countries. China is the most spectacular example of a successful developing country, because since the mid-80's (the last 30 years or so) it has benefited of a growth rate around 10%
or plus. In more recent years other developing countries have also been doing that; it is not just China but also other emerg- ing market countries. The structure of the world economy has changed so that the share of GDP (Gross Domestic Product) ac- counted for by these countries is now close to 50%, and in anoth- er 10 years it will be more than 50% of the world GDP.
This is very relevant when you ask the question: what should China and India, and other developing countries do? If the underlying global model that you have in mind is that these countries only "piggyback" on the success of industrialized countries, then you come to the problem that Professor Fried- man raised in the morning: if that model is broken, everybody
If the system begins to work in a way where most people feel that
it doesn't deliver anything to them, you can expect a push back that will either
damage democracy, lead to protectionism or both.
lem and we agree that we are going to do something about it".
But while we were so busy celebrating that, we didn't make it plane that the agreement is about 1/3 of what needs to be done (and the withdrawal from the US will make it a little bit less than that).
Considering this, the real question must be “what are we going to do in terms of global governance to find some solu- tion?” We haven't seen much progress in that since 2015. One of the difficulties is, if there must be an agreement on glob- al governance, there must be a shared understanding of how to moderate your own actions. Clearly, people will come to a shared understanding if there's an agreement on what must be the “sharing of the burden”. The good news is that the devel- oping countries are no longer saying that "we don't have to do anything" - which they were, for a very long time.
From the recognition that something must be done, to a system where what we all agree upon makes some sense, it takes a very long time and means a very big leap that still hasn’t happened. If we don't get any progress about that (and unlike trade, where there won't be that much damage), we will have a bad outcome. All countries are supposed to be start- ing negotiations for the 2050 strategy and the present position is that every country, including all the industrialized ones and the developing ones, would have to agree to a very substantial reduction in emissions (higher than what they currently have incorporated into their targets). Frankly, I wouldn’t be negative about trade, GDP growth or the global financial system, but this is the thing to be negative about. I just don't see any good news there at all.
has had it. Nobody can run a model that is dependent on huge amounts of consumption fed by debt in the United States and in Europe. But if you believe that there are other models, you have a developing world quite capable of growing autonomous- ly at a reasonable rate, because its own supply factors have improved. What are they?
Economists, when they look at what determines growth, they look at things like human capital, physical capital, access to technology and some basic institutions that can bring about efficiency (particularly the financial sector abut also the regu- latory system). The proposition that I put forward is that, in all these dimensions, the developing countries have made remark- able progress. High growth rates and less people living under the poverty line reflect this success. When you think about it, if around 55% of world GDP is coming from these countries, there is no reason why they can't autonomously continue to grow and not be dependent of growing demand from other countries.
What can break this system is the pressure that this would put on the limited resources of the planet. That is a very serious problem and I think it is the biggest global failing right now. There is no way that GDP can grow without energy growing, and most energy today still comes from fossil fuels.
We are hoping there will be lots of technology and greener fuel sources, but from everything I know, the present path that the world is on, post Paris Agreement on Climate Change - and ir- respective of President Trump withdrawal from it - will not be enough. The Paris Agreement was a very inadequate response to the problems we face. It was wonderful because, for the first time, the whole world said: "we agree that there is a prob-
Founding Director, Center for Transatlantic Relations, Washington Fundador e Diretor
Executivo, Center for Transatlantic Relations, Washington
Daniel Hamilton
S P E A K E R
think the basic questions on this subject are: is globali- zation continuing? What is the backlash? How should who thing about it? The quick answer is: globalization is continuing and in fact, in some areas, it is accelerating and there is already some backlash and a great ques- tioning of its effects in many other areas.
I think about globalization in a much broader sense than only trade. We do get hang up by what do we mean by globalization. There are different narratives about it, and they have become problematic because they don't really help us to understand what we are talking about. Let me brief- ly talk about three of those.
One of the prevailing narratives, that the "apostles" of glo- balization use, is that it is global and seamless, and distance doesn't matter anymore (you can find books on the death of distance). But the reality is that distance still matters, and it is in fact one of the reasons why globalization is uneven in its effects. It can thicker, or it can be thin, depending on the connections that we are talking about. And that's were politics comes in because the unevenness of globalization means a lot of different things to different people and different societies.
This notion that the death of distance is what we refer to on addressing globalization is neither true nor helpful.
The second narrative is not quite the same, but it is talked
of what some call "the multipolar world". We must pause a minute to think about what this really means. It seems to im- ply that we have different centres of power (it was a reaction to the "unipolar moment" after the end of the Cold War) and that somehow these poles are similar or almost equal: United States (US), Europe, India, China, Russia. This really deserves a secondary reflection. First, that's a very state centric view of the world we're in, whereas globalization is much more than that. And we must wonder if this view really helps us to under- stand the current phenomenon of globalization. On the other hand, when we think about power in all its dimensions [soft power, hard power, sharp power - used when we refer to Chi- na], which countries have this full spectre of power resourc- es and the capability not only to have them but also to deploy them in a very agile way and combine them? I think we end up with only a couple of countries. Thus, I don't think the multipo- lar concept gets us too far.
The better way to approach this is to talk about the cur- rent diffusion of power. And we are in fact seeing a diffusion of power, away from the state centric world – this is the model that globalization is challenging us with. We see power leak- ing from states to non-state actors. We also see power leak- ing among states and, especially relevant for Europe, we see power leaking above the state to something like the European
I
We have two worlds coexisting: the State-centric world, that we are used to, and is about sovereignt
institutions and organizations; and the world of networks, that is about webs, hubs, data, value chains. They coexist uneasil
The idea that we can break the connection between the production of wealth and the consumption of resources, which would be truly revolutionary, has a real potential because of in- novation happening here in Europe. Around 80% of the bio-fuels of the world come from the Atlantic. The US are shifting away from the Persian Gulf, but as it becomes less an important en- ergy source for the US, it becomes much more important for Asia because this region doesn't have the energy resources; the Atlantic hemisphere will start to produce energy for the rise of Asia.
The second example is commerce. We talk about the rise of these big economies but there is still more commerce flowing within the Atlantic basin than in any other basin. If we include trade, investment and all these kinds of flows, the Atlantic is still the fulcrum of the global economy. However, it is a hemi- sphere of great wealth but also of great inequality, because all these flows do not occur evenly. And, again, that's where poli- tics come in. If you think about it, where is the greatest centre of German investment in the World? It's in São Paulo, Brazil.
US companies in the United Kingdom export more to the rest of Europe than US companies based in China export to the entire world. US assets in Poland, Hungary and the Czech Republic are greater than US assets in India. Thus, we're progressing with globalization but it's not an even process and, of course, we are starting from a very different point. Part of the rise of the Atlantic is because of the rise of the Pacific hemisphere.
We had to expand the Panama Canal; you're building all these tanker ports across the Atlantic basin: the Arctic is opening up.
This will become an interaction between the Asian and the At- lantic hemispheres (a sort of Hemispheric Globalization).
The last example refers to the negative side all of this.
What I would call the "Dark Networks" of the Atlantic basin, which are also about globalization (for example, Crony Capital- ism). We have drugs being produced in South America coming over, not only to North America and Europe, but also to Africa and into the Sahel, a vast region of the continent that is basical- longer have real competence for (for example on trade). We
must think harder about this diffusion of power and how it re- lates to globalization (linking this with the point about thick and thin connections). If we must use the “polar” term, I would say
“inter-polar” is better, because it brings in the interdependen- cies between those centres of power.
The third narrative that I often hear about as one of the prevailing narratives on globalization - certainly in the media - is that globalization is all about the rise of Asia. There are some famous books on this. For example, about ten years ago Kishore Mahbubani wrote "The New Asian Hemisphere: The Irresistible Shift of Global Power to the East”. Everyone is really caught up in this dynamic: China will save the world; India is changing the world. But, by definition, globalization is not about only one part of the world and if there is an Asian hemisphere, there must also be an Atlantic hemisphere. If we open that term, we see some interesting connections. Tom Friedman, columnist for The New York Times, wrote a book a long time ago (The World is Flat: A Brief Story of the Twenty-First Century, 2005) where
he had a very simple definition of globalization: it is how con- tinents connect. If we look on how continents are really con- necting and all sorts of flows we have between them (people, services, goods, investment, trade, data, technology, diseases) we see that the Atlantic hemisphere is also connected in many ways that seem to be escaping a lot of our attention.
This is particularly relevant for Portugal. Let me give you some brief examples. Energy was mentioned, and the Atlantic basin is becoming the world's energy reservoir for the next few decades, because of the tremendously diverse revolutionary developments that are happening all along the north and south of its basin. It's not only about the US fracking and energy rev- olution. If you go down trough to Brazil and all along the east- ern coast of South America, we see all sorts of developments happening there, back up to West Africa. And the centre of the global renewable innovation industry is in the Atlantic, and par- ticularly in Europe.