‘In Defence of Globalization’: https://www.chathamhouse.org/event/defence-globalization
John C Whitehead lecture delivered by Tony Blair at Chatham House, London, 27 June 2018.
Mr Blair’s thesis appears to be that there is no ‘co-ordination equilibrium’. Therefore, if the UK is not part of a tectonic ‘trading’ block, that like a small island caught somewhere between two mighty continents, we will end up being crushed between ‘giants’ when they collide.
Is it that simple?
The international monetary and financial system plays a central role in the global political economy.
Economists have pointed out that national governments face an inevitable trade-off between the three policy goals of: (i) exchange rate stability; (ii) national monetary policy autonomy; and (iii) capital mobility.
In theory, it is only ever possible for governments to realize two of these goals at the same time.
Judge for yourself whether in the following analysis Mr Blair provides the answer to the impossible trinity of open macroeconomics?
In other words if tribalism is the disease, is globalisation the cure?
To view the lecture please visit the World Order page of the Diplomatic Law Guide (www.diplomaticlawguide.com)
Text of the lecture
‘John C Whitehead was a great man, a brilliant entrepreneur, a true public servant and dedicated advocate for Western values and the Transatlantic Alliance. It is an honour to give this lecture in his name.
Globalisation and its advocates are on the back foot. Populism of left and right meet at a certain point in denunciation of free trade arrangements, migration and international alliances. All are portrayed as contrary to putting individual national interest first.
The populist wave upending Western politics shows no sign of abating. Italy proves that. It is difficult to predict whether we are at the crest of the wave which will soon subside, or whether it is still building its momentum. But I fear it is the latter.
Much will depend on the state of the global economy and here, reasonable people differ. Some think it is growing strongly and interest rates should rise in acknowledgement. Others think fundamental weaknesses remain and the world could tip back into recession.
Immigration is the most obvious political game-changer, certainly in Europe. Stagnant incomes for a significant part of the population reinforce the sense of political alienation. Technology has suddenly become perceived as a threat as much as a benefit. We live in a world of accelerating change where people feel their lives are being changed by forces and interests beyond their control. The politics of pessimism are the fashion.
Once it is clear the populism isn’t working because, ultimately, it offers only expressions of anger and not effective answers, the populists may double down, alleging that failure is the result of half-heartedness and that only more of the same will work. Who knows where the dynamic of that scenario takes us. Then the comparisons with the 1930s no longer seem so far-fetched.
This is a moment in time when we must re-make the case for reason based politics, with a correct analysis of why the world is changing and how we can navigate our way through the change to the advancement of our people and the reignition of the politics of optimism.
Things we take for granted must be re-argued from first principles – why protectionism is bad, why properly managed migration is good, why the technological revolution can bring enormous gains and its displacement impact surmounted, why the Transatlantic Alliance is as relevant today as ever, and why globalisation is a force driven primarily not by Governments but by people and resisting it is dangerous.
But this must be accompanied by a stark commitment to deal effectively with the grievances driving the discontent.
There is an absurd parody – both far left and right – that globalisation is a project of the political elite. Dictionary definitions of globalisation are strangely unsatisfactory but in a colloquial sense it stands for the coming down of barriers of nation, race, trade and culture, a world coming together, mixing more, integrating more in experience and lifestyle.
The forces driving this process are cheap travel, interconnectedness through technology which allows us to see how others are living and thinking, which in turn makes migration attractive, and the desire on the part of people for quality but inexpensive consumer goods.
Government can in varying degrees enable or hinder this process but the idea Government created it or can stop it, is fantasy.
Moreover, there is no doubt what decades of ‘opening up’ have done for the world. The world has become more prosperous. You don’t have to agree with all the commentary in the books by Rosling and Pinker to accept that the facts are clear.
Another parody is that those who believe Governments should enable and not hinder this process of globalisation, somehow also believe that globalisation should not only be unhindered but unmanaged. This is to confuse globalisation with laissez-faire. It is a charge often repeated about my Government. The unprecedented investment we made in public services and the poorest communities – all whilst keeping borrowing levels below that of the previous Conservative Government, the Minimum Wage, and a host of other Labour rights, major reforms in the tax and benefit system, and the development of the University sector as critical to future industrial policy bear ample testament to how fatuous this is. And if in Government today, and post the financial crisis, I would be doing much more and doing it differently in areas like infrastructure, education and skills, welfare and preparation for our future particularly in respect of technology.
The inter-dependence of the world is not a policy. It is reality. But it has consequences which need to be managed not by market forces but a by a reformed Government structure which is strategic and empowering.
Tony Blair “The people must make the final decision because only they have the right to decide what version of Brexit they want or whether in the light of all they now know they prefer to remain.” Click to Tweet
Even regarding the financial crisis, I would urge caution in learning the right lessons not the wrong ones. This was a failure of understanding about the modern global economy and its new financial instruments, combined with an irresponsibility on the part of some of the players in it. So, we learn and adjust the regulatory framework accordingly. But it neither invalidates the overall importance of markets, nor free flowing global finance as a necessary part of them.
Likewise, there is little doubt that protectionism harms prosperity. That is the one unequivocal lesson of the 1930s. The tariff measures of the USA aimed at China have an origin which is understandable. It is true China needs to open its markets and abide by the rules on technology transfer. There may well be reforms of NAFTA, and issues to do with USA/Europe trade which are legitimate.
However, the manner, in which these concerns are pursued, affect crucially the climate for international trade. Pursued as part of a dialogue about how the international trading system can be reformed, they can lead to trade which is fairer and still free. Pursued unilaterally as a straightforward assertion of national interest, they can trigger a chain reaction which can do profound harm to the international order of trade.
This is where the Transatlantic Alliance has never been more needed. The uni-polar world of the late 20th C is giving way to a multi-polar one. The emergence of China is the new geo-political fact, the ramifications of which we are only beginning to comprehend. Russia’s economy may be 60% the size of the UK, but it has shown remarkable resilience in reinventing its military and security capability. All around the world, there is a new model of Government competing with our notion of Western Democracy. This ‘Strongman’ model claims to be more effective, more productive, less decadent, less paralysed than ours. And it has its admirers and imitators in the West.
It treats democracy not as a cause but as a game where the smart people flout the rules rather than play by them.
America is described traditionally as the ‘Leader of the Free World’, Europe its partner. This is an alliance different from any other because it is explicitly an alliance of values, as well as in our own self-interest. It has created the societies we now live in, which for all their faults are still those most people round the world aspire to. It is a great test of any country: are people trying to get into it or out of it? We know the answer in our own case.
Rule of Law, free speech, an independent media, the right to elect those who govern you, basic elements of social solidarity and decency and a rules-based international order: we don’t always fulfil these goals, but we have always accepted we should try to.
These are contested positions in the multi-polar world.
The Transatlantic Alliance is the bedrock of our values system and way of life. Yet the right wing relegation of it as secondary to national interest rather than part of it and the kneejerk left wing reaction against anything American led, is leaving this Alliance in danger of fracture.
This will damage both of us.
Of course, there can be disputes whether over trade, commitment to NATO spending, how to tackle the Middle East or Climate Change. Friends can disagree.
But we need to know from the current American Administration and its President that our Alliance matters, that it is regarded, historically and contemporaneously, as a vital American strategic interest; and the leading European Governments, given that visible and clear re-assurance, need to respond in kind.
We need Leaders both sides of the water explaining its importance and seeking ways of strengthening it.
Inevitably we then come to Brexit. I am afraid I get bored with people telling me they’re bored of it. If it is by consensus the most important decision we have taken as a country since World War 2, then our preoccupation with it must continue until one way or another it is finally decided.
The debate on Brexit has naturally focused on the economic fall-out. But the political effect of Britain leaving the European Union may be worse. At a stroke, Britain loses its position in the world’s largest commercial market and biggest political union. America loses its foremost ally which has often been a bridge between the two sides of the Alliance.
Of course, the Brexiteers will argue that Britain can still be the USA’s greatest ally outside the EU. But examine the reality. Since the referendum, is Britain closer to the USA? Is the relationship stronger? On a global issue, who is the American President calling first on the continent of Europe – the British Prime Minister?
As for the USA, the reason why any American President should be strongly supporting the EU is absolutely topical, the here and now, not old fashioned sentiment. In a world where population and GDP and therefore global power become re-aligned, where by the middle of the 21stC, India’s economy, never mind China’s, will be several times the size of Germany’s, America needs Europe united and standing with it, not isolated as individual nations, able to be picked off one by one by the emergent new powers.
The only people who gain from a fracturing of the Transatlantic Alliance are America’s rivals or adversaries. I do not believe this is the desire of the present Administration but too many Europeans do. This feeling needs to be countered with vigour and urgency.
Some in America think Brexit will boost the American alliance.
This exposes the contradiction at the core of the Brexit coalition which is the reason for the mess we find ourselves in and its important our allies understand it.
The intellectual driving force behind Brexit is a mix of nationalism and ultra-liberalism. These are people on the right of politics who think Thatcherism is incomplete. They want out of Europe because they think it bureaucratic and overly regulated. They want a Brexit where we sell ourselves to the world as ‘not Europe’, changing our economy so that it becomes attractive for investment despite our exit from our main market – with economic re-structuring, de-regulation, lower tax and therefore lower spending and probably deep reform of public services including the NHS.
Geo-politically, they want an even tighter alliance with the USA.
However, the foot-soldiers of the Brexit campaign, those in Labour areas in the North of England critical to the Brexit vote, do not share the liberal part of this vision; on the contrary they were persuaded by promises of a crackdown on immigration and more money for the NHS.
Neither are they big supporters of even closer ties to America. The Official Opposition is opposed even to the American President visiting Britain.
The risk for Britain is that we leave Europe with a deep unresolved disagreement about what our future, political or economic, should be.
‘Clean Break’ Brexit is a 10-15 years project. Short and medium term, the pain will be significant. Presently, we have two service sectors – financial services and technology – where Britain is predominant in Europe. Exclusion from the Single Market will hit both. In time, maybe we can re-build by making ourselves super-attractive. But this will take years.
The statements from the car, pharma and aerospace industries, similarly are not threats; they’re warnings.
The essential disingenuousness of the Brexiteers is to pretend Leaving is an act of will. The comparison Boris Johnson gave of the Brexit negotiation to that of President Trump with Kim Jong-Un betrays a truly shocking misunderstanding of the relative bargaining power of the EU to Britain with the greatest world power and North Korea.
What we have learnt since 23rd June 2016, if we have learnt anything, is that after 45 years of intimate trading links with Europe, the disentanglement is complex, intricate and replete with hard choices.
The trouble is, the compromise position favoured by the Cabinet ‘moderates’ and Labour is also unsatisfactory. Suppose we stay in a Customs Union; or in the Single Market; or some version of them.
Suppose as apparently is one proposal, we end up in the Single Market for goods. Then we will have to abide by Europe’s rules adjudicated by the ECJ for the sector where we have a huge deficit for the EU but remain shut out of the services sector where we have a massive surplus.
This so-called, soft Brexit will leave us half in and half out, with no great increase in flexibility and without a say, a curious way of ‘taking back control’.
It is of course preferable to a Hard Brexit, but does it genuinely honour the Brexit mandate?
This disagreement is fundamental. It is why the Cabinet have not yet reached a negotiating position. Up to now, the negotiation with Europe has been conducted by civil servants in a state of despair overseen by politicians in a state of denial.
We cannot go on like this. I have never been more worried about the future of our country than now, with competing emotions of anxiety and rage. We have a Government whose every move is a calculation not about the interests of the nation, but the internal balance of advantage between the factions of the Conservative Party, with the Prime Minister more a hostage than a Leader. Meanwhile the Leader of the Labour Party neglects to lead the fight here at home over an issue which literally determines the future of Britain and where he could play a decisive role.
Parliament must assert itself because neither Government nor Opposition can or will.
Then the people must make the final decision because only they have the right to decide what version of Brexit they want or whether in the light of all they now know they prefer to remain.
The present impasse is imperilling our economy, our international standing and our alliances.
Crashing out with no agreement would deal Britain a devastating blow.
We should plan now for the possibility we need to extend the March 2019 deadline.
Presently, we are drifting towards March 2019 with no clear negotiating position, no resolution of the Northern Ireland question, still vaguely hoping Europe will allow us access to the Single Market without abiding by its rules which it will never do, and with senior Cabinet members openly debating the merits of a negotiating position which ‘threatens’ Europe with a no deal Brexit which is the equivalent of holding a negotiation on the top floor of a high rise building and ‘threatening’ to jump out of the window if our demands are not met.
The whole thing has become so protracted that it has numbed our outrage.
And because of the distractive impact of Brexit the challenges facing the country from the violence on our streets to the decline of the NHS receive not a fraction of the attention they need.
But the risk for our allies is also grave.
A weaker Britain means a weaker Europe which means a weaker Alliance with America and therefore a world in which the cause of Western Democracy is itself weakened.
Brexit has become a metaphor for the debate around globalisation. The only way out of the cul-de-sac of populism is to understand that the case for globalisation will not succeed unless we deal with the underlying grievances of that part of the population for whom globalisation holds more fear than hope.
Europe and Britain could strike a bargain which would see Europe reforming, which the European people plainly by their votes are demanding, and Britain staying in such a Europe.
For Europe as well as for Britain this means dealing with the issue of immigration decisively.
For all nations, it will require more active Government intervention helping people and communities ‘left behind’.
Those in the centre ground of politics must become again the change-makers, not the managers of the status quo.
But this challenge is urgent. We are losing sight of the values which brought the West together, saw it through the menace of fascism and communism and, for all the justifiable grievances, has wrought immense progress.
We are in danger of spoiling the gains of a world ‘opening up’ through globalisation and putting at risk our Democratic mission.
The fightback will require self-criticism, new thinking and muscularity in defence of reason.
But it better begin soon.’