Madeleine Wackernagel : Taking Stock
Everybody’s talking about it – globalisation, that is. And everyone, apparently, is part of the new economic paradigm. There are exceptions, of course, but apart from a few retrograde isolationists, the world is one great big, happy market.
We’ve been here before: globalisation is simply a new term for an old concept – the free flow of capital and goods between countries. World War I laid the last period of laissez-faire to rest; 50 years of significant cross-border movements of labour, money and produce were soon replaced by fierce protectionism.
There followed the Great Depression, exacerbated by high tariff barriers and capital controls. But post-World War II, the big economies placed their faith in breaking down those barriers to boost growth. The General Agreement on Tariffs and Trade was set up, and with it the first of many deals to cut tariffs worldwide. At the same time, countries gradually abolished exchange controls, freeing up the flow of capital.
The first time round, it was the drop in transport costs that oiled the wheels of free trade; this time, it is technology. The steady decline in the costs of computing and communication have made world markets easier to tap; at the same time, the benefits of liberalisation have come to outweigh the dangers.
The trend to greater integration is clear: from 1980 to 1996, world output has grown at a rate of 3%; trade at 6%. At the same time, foreign direct investment flows have expanded by about 9%, and trading in shares, by 25%.
Few economies can afford to ignore this phenomenon, and South Africa is no exception. Years of isolation and protectionism have left the country out of touch with global standards – of service, productivity and quality. As a result, the competition is stealing a march on us.
The time for talking is over, was the message of this week’s Globalisation South Africa conference. Speaker after speaker emphasised the need for action, not analysis.
The scene was set by Finance Minister Trevor Manuel: globalisation has the government’s blessing. Indeed, it has always been crucial to policy. South Africa must move away from the capital-intensive, jobless growth of the past, and internationalisation was an important part of this process.
Turning a sow’s ear into a silk purse is no easy matter, Manuel opined, but South Africa has made significant strides in the global arena.
Business leaders were of a different opinion: companies still have a long way to go before catching up with the rest of the world, as does the labour market.
Wage rises have outrun productivity increases; quality of goods and services is poor, and tariff barriers are dropping too fast for many companies to keep up. As a result, we’re left with a situation of ongoing retrenchment and slow economic growth.
Labour was not represented at the conference, which is a pity considering they came in for the most criticism: a 40- hour working week was unacceptable, as was persistently poor productivity at relatively (compared with India and Mexico, for instance) high wages. Only by working towards a common goal of improved flexibility and skills enhancement would the present impasse be overcome.
Until then, South Africa would remain a marginal player in the world economy. Foreign companies in search of a low-cost manufacturing base cannot afford to relocate here and our exports are more expensive than those produced in Latin America and South-East Asia.
Management, too, came under fire for being complacent: 40 years of protection have left many companies ill-equipped to cope with the rapid pace of change now being forced on them.
But those other favourite Nineties terms – downsizing, rightsizing and restructuring – are not the solution; instead, companies need to develop new strategies, in consultation with labour, to carry them forward into the 21st century. A company – and a country – is only as good as its people.
The alternative is to be left behind as the globalisation train proceeds apace.