“benign neglect” vs “ironic reversal”

Prof Jagdish Bhagwati on Globalisation marches on 

• The fear of globalisation, however, began historically in the East, not the West. After World War II, the West dismantled barriers to trade and investment flows, and worked to eliminate exchange controls and move to currency convertibility. What was sometimes called the liberal international economic order was the order of the day, and it was embraced by public opinion as well. 

• By contrast, the East generally embraced the fearful view that, as the Chilean sociologist Oswaldo Sunkel put it, integration into the international economy would lead to disintegration of the national economy. Many intellectuals shared this dark anti-globalisation vision, and policymakers in much of the East were not far behind. 

• Indeed, the West accepted the view that globalisation would result (as with trade) in mutual gain, embracing what I called in 1997 the notion of “benign neglect”. In the case of foreign investment and aid flows, the West went further, viewing them as being motivated by altruism, or “benign intent”, whereas the East regarded globalisation in a world of poor and rich nations as implying “malign impact”. In some analyses, malign impact turned into a more sinister “malign intent”. Thus, foreign aid was regarded as a plot to trap poor nations in a neo-colonial embrace. 

• What happened next was what I have called an “ironic reversal”. As the benefits of globalisation became manifest, and the damage wrought by autarkic policies also became evident, policymakers in the East began to appreciate that their anti-globalisation stance had been a mistake. 

• But then fear of globalisation moved to the West. The East had feared that it could not gain from trade with the West, which had superior infrastructure and human capital; now, the West had come to fear that it would lose from trade with the East, which had abundant, cheap labour. The longstanding stagnation in wages for unskilled labour was attributed to low-cost, labour-intensive imports, ignoring the corollary that western workers’ consumption of labour-intensive Asian goods offset the effect on real wages. 

• To take another example, the East worried about a “brain drain” of professionals to the West, where opportunities seemed to be more plentiful. Today, the West is witnessing anti-globalisation opposition from members of professional groups, who fear the loss of their jobs to foreign counterparts. 

• Rudyard Kipling famously wrote in The Ballad of East and West: “Oh, East is East, and West is West, and never the twain shall meet.” Given the ironic reversal of globalisation fears, Kipling is still right: convergence has continued to elude East and West. 

• The current crisis did not create the debate about globalisation now heard in the West; it only made it slightly more salient. Yet the crisis may be tilting western policy outcomes in favour of globalisation. For example, on trade, therehasbeenaremarkablecommitmenttoefforts—largelysuccessful—to avoid significant backsliding into protectionism. Moreover, the G20 leaders have continued to express the need to conclude the Doha Round of multilateral trade liberalisation negotiations.