Making Globalization Work

1. Globalization's Potential vs. Its Discontents

The current process of globalization is generating unbalanced outcomes, both between and within countries.

Uneven distribution. Globalization, while promising prosperity, has led to unbalanced outcomes, with wealth concentrated in a few nations and individuals, leaving many behind. This disparity fuels discontent and questions the fairness of the current system.

Economic vs. Social Goals:

• Economic globalization focuses on integrating markets through trade and capital flows.
• Social globalization encompasses the flow of ideas, knowledge, and cultural exchange.
• The book primarily addresses economic globalization, highlighting its failures to meet social aspirations.

Need for Change. The motto "Another world is possible" encapsulates the desire for a more equitable and just globalization, one that prioritizes the well-being of all people, not just the privileged few.

2. The Complexities of Development

A developing country that simply opens itself up to the outside world does not necessarily reap the fruits of globalization.

No Magic Solutions. Development is a multifaceted process with no simple prescriptions. Strategies must be tailored to specific contexts, recognizing the interplay of markets, governments, and social institutions.

Beyond Economic Growth:

• Development encompasses improved living standards, health, education, and security.
• It requires a balance between private and public sectors, promoting equality and full employment.
• A narrow focus on GDP growth can mask underlying issues of inequality and environmental degradation.

Government's Role. Government plays a crucial role in creating a supportive environment for business, building infrastructure, and ensuring social justice. Successful development requires finding the right balance between government intervention and market forces.

3. East Asia's Managed Globalization Success

These countries simultaneously achieved growth and stability: some had not a single year of negative growth over a span of almost a quarter century.

Export-Led Growth. East Asian countries achieved remarkable economic growth by strategically engaging with globalization through export-led strategies. They carefully managed their integration into the global economy, prioritizing stability and equity.

Key Policies:

• High savings rates to fund investments
• Government planning and promotion of specific industries
• Investment in education and infrastructure
• Gradual liberalization to manage economic capacity

Rejecting Market Fundamentalism. East Asia's success demonstrates that rapid development is possible without fully embracing the Washington Consensus. Their experience highlights the importance of government intervention and careful management of globalization.

4. Latin America's Disappointment with the Washington Consensus

Latin America embraced the Washington Consensus policies more wholeheartedly than any other region...

Embracing Liberalization. In contrast to East Asia, Latin America adopted Washington Consensus policies, emphasizing privatization, deregulation, and trade liberalization. This approach led to short-term gains but ultimately failed to deliver sustainable growth and poverty reduction.

Unsustainable Growth:

• Growth was based on heavy borrowing and privatization of national assets.
• It did not address underlying issues of inequality and social justice.
• The region experienced a "lost decade" of stagnation and economic instability.

Rejection of the Consensus. Disillusionment with the Washington Consensus has led to the election of leftist governments in Latin America, signaling a shift towards policies that prioritize equity and social well-being.

5. The Nation-State Squeeze: Economic vs. Political Globalization

In effect, economic globalization has outpaced political globalization.

Erosion of Sovereignty. Economic globalization has weakened the nation-state, limiting its ability to control market forces and address social and economic challenges. International agreements and institutions impose constraints on sovereign decision-making.

Need for Collective Action:

• Globalization requires more collective action to address shared problems like trade, capital flows, and the environment.
• However, democratic global institutions have not kept pace with economic integration.
• This creates a "democratic deficit" in global governance, undermining legitimacy and effectiveness.

Global Community. As globalization proceeds, individuals must develop a sense of global identity and responsibility, recognizing the interconnectedness of nations and the need for fair and ethical global governance.

6. Reforming Trade for Development

The poorest countries had actually been made worse off by the last trade agreement.

Unfair Rules of the Game. Existing trade agreements are often designed to benefit advanced industrial countries, with developing countries facing higher tariffs and limited access to markets. This creates an unlevel playing field that hinders development.

Need for a Development Round:

• The Doha Round aimed to address the needs of developing countries, but progress has been limited.
• A true development round would prioritize fairer trade arrangements, eliminate agricultural subsidies, and provide assistance to help developing countries compete.
• Trade liberalization must be accompanied by policies that promote equity and social justice.

Beyond Trade Liberalization. Trade liberalization alone is insufficient for development. Countries need to invest in infrastructure, education, and technology to take advantage of new opportunities.

7. Intellectual Property: Balancing Innovation and Access

The current process of globalization is generating unbalanced outcomes, both between and within countries.

TRIPs and Corporate Interests. The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) has been criticized for prioritizing corporate interests over the needs of developing countries, particularly in access to essential medicines.

Need for a Balanced Regime:

• Intellectual property rights should promote innovation while ensuring access to knowledge and affordable medicines.
• Developing countries need flexibility to tailor intellectual property laws to their specific circumstances.
• The international community should support research and development for diseases prevalent in developing countries.

Protecting Traditional Knowledge. The intellectual property regime should protect traditional knowledge and prevent bio-piracy, ensuring that developing countries are compensated for their contributions to global knowledge.

8. Lifting the Resource Curse: From Paradox to Plenty

The challenge is whether Azerbaijan can make the most of its windfall before the oil runs out.

The Paradox of Plenty. Resource-rich countries often experience lower growth and higher poverty rates than countries with fewer natural resources. This "resource curse" is driven by corruption, political instability, and poor governance.

Breaking the Curse:

• Resource-rich countries need to ensure they receive full value for their resources through transparent contracts and competitive bidding.
• They must invest wisely in education, infrastructure, and diversification to promote sustainable development.
• Strong institutions and democratic governance are essential for managing resource wealth effectively.

International Support. The international community can help by promoting transparency, combating bribery, and providing technical assistance to resource-rich countries.

9. Global Warming: A Shared Responsibility

Globalization is the field on which some of our major societal conflicts—including those over basic values—play out.

A Global Threat. Global warming poses a significant threat to both developed and developing countries, requiring collective action to reduce greenhouse gas emissions. The current system of global governance is inadequate to address this challenge.

The Kyoto Protocol:

• The Kyoto Protocol set targets for developed countries to reduce emissions, but the United States has refused to participate.
• A more effective approach would involve a global carbon tax or a system of tradable emission permits.
• Developed countries must provide financial and technical assistance to help developing countries reduce emissions.

Protecting Rainforests. Protecting rainforests is crucial for mitigating global warming. The international community should compensate developing countries for maintaining their forests and preventing deforestation.

10. The Democratic Deficit in Global Governance

Colonialism is dead, yet the developing countries do not have the representation that they should.

Lack of Representation. International institutions like the IMF and WTO suffer from a "democratic deficit," with developing countries lacking adequate representation and voice in decision-making. This undermines the legitimacy and effectiveness of these institutions.

Need for Institutional Reform:

• Voting structures must be reformed to give developing countries more power.
• Decision-making processes must be more transparent and accountable.
• The international community must promote ethical behavior and curtail corruption.

Strengthening Democracy. Globalization should not undermine democratic processes within countries. Conditionality and economic institutions that are not politically accountable should be avoided.

11. The Role of Corporations in a Globalized World

There are strong incentives—and enormous opportunities—to shape political processes and the economic system in ways that generate profits for some at the expense of the many.

Profit-Driven Behavior. Multinational corporations play a central role in globalization, driving economic growth and technological innovation. However, their pursuit of profits can lead to negative social and environmental consequences.

Need for Corporate Social Responsibility:

• Corporations must recognize their responsibility to all stakeholders, including employees, communities, and the environment.
• Strong regulations and enforcement mechanisms are needed to prevent corporate abuses.
• The international community must promote ethical business practices and transparency.

Reforming Corporate Governance. Corporate governance should recognize the rights of all stakeholders, not just shareholders. An engaged and educated citizenry can demand that corporations act responsibly.

12. A New Global Social Contract

We can restructure globalization so that those in both the developed and the developing world, the current generations and future generations, can all benefit.

Saving Globalization from Its Advocates. Globalization, like development, is not inevitable. Unless we recognize and deal with its problems, it will be difficult to sustain its current momentum.

Key Elements of the Contract:

• A fairer trade regime that promotes development
• A new approach to intellectual property that balances innovation and access
• Compensation for environmental services provided by developing countries
• Increased financial assistance to help developing countries achieve their goals

A Change in Mindset. Attitudes toward globalization must change. Those in the developed world must see more clearly the consequences of their governments' policies. We must all recognize that "another world is possible," one in which globalization benefits all.

Last updated: April 3, 2025