Winner takes all

Open World: the truth about globalisation

Philippe Legrain <em>Abacus, 367pp, £12.99</em>


Philippe Legrain regards himself as partly a product of globalisation. He has a French father and an Estonian-American mother, but was brought up in England and now speaks a fistful of languages. Yet there is no question about the language that he speaks most fluently: it is the market economics that he studied at the London School of Economics and subsequently honed while a staff writer at the Economist.

Legrain has pitched his book perfectly for a popular audience. He writes with infectious enthusiasm and has put many technical arguments in favour of globalisation into simple prose, without patronising the general reader. If you have misgivings about global capitalism, if you have been convinced, say, by the arguments of Naomi Klein or Noreena Hertz, you owe it to yourself to hear Legrain's persuasive defence.

His fundamental argument is the one that most economists stress: the removal of barriers to trade and investment, supported by advances in communications, offers large economic benefits, not least for the poorest countries. At the same time, the alleged costs of globalisation - for instance, in terms of job losses, reduced political autonomy, corporate domination of our lives and cultural homogenisation - are mostly illusory. We can, in short, have the economic benefits without giving up anything that we cherish. Globalisation is thus a win-win proposition.

The economic case for globalisation is strong, at least for those who accept the advantages of market exchange within domestic economies. If the residents of London and Manchester gain from their freedom to trade with each other (and to invest in each other's regions), the same surely ought to be true of the residents of London and Chicago, or of London and Bangkok. Trade and investment are just names for ordinary economic activity: this surely cannot be a good thing only within the narrow confines of the nation state.

Yet Legrain overstates his case when he claims that there are virtually no costs associated with globalisation. He thinks that entirely open markets impose few real constraints on governments. Countries can have high or low taxes, regulate a lot or a little, and have generous or miserly welfare states, just as they please. The likes of Germany and Sweden can happily coexist with the United States.

I doubt that this is true, at least in the long run. When Legrain travels, he sees nothing but diversity. I have to say that I do see signs of a creeping Americanisation. When I returned to Britain after living overseas for most of the 1990s, I was shocked by what I found. American chains such as Starbucks were far more dominant. But worse: something seemed to have altered in the British psyche. We had become more individualistic, less caring, and less aware that market forces can destroy valuable forms of life that don't happen to turn a profit.

Legrain is right to argue that many varieties of globalisation are possible. He distances himself from the Republicans who want Texas replicated everywhere. In fact, he advocates much that they would abhor: a World Environmental Organisation, more foreign aid and debt relief, better public infrastructure and schools, and more support for the casualties of global competition, such as redundant steelworkers.

But there is a catch. Although we can, in principle, choose whether we want an open world to look more like Sweden or more like the US, this choice has to be made collectively if it is to be effective. Yet because the world is more fragmented politically than economically, the institutions through which such a choice could be made do not exist. In any single nation, the market is rightly regarded as a subdivision of civil society, something that is desirable but only on the terms agreed through the political process. The problem when markets spill over political boundaries is that it becomes difficult to exercise this oversight effectively.

On the question of corporate dominance, Legrain points out that globalisation can sometimes reduce the effective power of big companies - because national champions face competition from foreign rivals. When Honda gained market share in the US, the quasi-monopoly powers of General Motors were eroded. He also doubts that consumers are as helpless in the face of aggressive branding as critics have suggested. Isn't Naomi Klein a little arrogant to assume that only she is immune from the brainwashing?

The weakness of Legrain's book is that it is written from too narrow a perspective. The validity of nearly every argument depends ultimately on the validity of the premises underlying market economics. Does the economic model of sovereign individuals striving to maximise their personal "utility" capture the complexity either of human nature or of social interaction? Is freedom just a matter of being able to pursue the desires that one contingently happens to have? Legrain's problem is not that he gives the wrong answers to such questions, but that he doesn't realise they need discussing.

Michael Prowse writes a column for the Weekend Financial Times