This session tracks the development of this globalising world, focusing especially upon developments within the 20th and 21st centuries, from an economic perspective. It highlights the role of trade expansion, especially since World War 2, and key economic actors, in accelerating the move from internationalisation to globalisation, and considers the implications of this, especially with respect to health and health policy ## Learning Outcomes By the end of this session you should be able to: - Identify the core differences between an international and global economy - Detail the key changes and developments in the global economy since 1900 - Understand the role and impact of key actors within the global economy - Explain the relevance of key economic developments for global health policy ## 1. Defining economic globalisation ### 1.1 Key Concepts **Internationalisation** (opening broders) – involves increased cross-border movements between countries, specifically between nation states **Liberalisation** (increased cross-border movement) – the process by which border controls between countries are removed, in order to facilitate and ease this cross-border movements of goods and services **Globalisation** (transcendence of borders) – the process and impact of advances in travel and telecommunications which facilitate mixing of people, customs and cultures, and cross-border flows of goods and services, people and capital, ideas and information. It is about the transcendence of the global economy beyond just national political border. ### 1.2 Internationalisation [[Interesting Phrase]] Cross-broder trade was expanded by the creation of the sovereign states system as an organising principle for Europe during the 17th century, and the colonisation of other parts of the world by European powers, particularly countries in Africa and Asia. This led to complex trading routes, with European manufactured goods being exported to the colonies in exchange for raw materials. We see a booming of trade during this period, including, of course, the trading of human beings (slavery). An example of this, and one that reflects Britain’s significant part in this history, is the [[Triangular Trade]]. Slave ships left from Britain carrying manufactured goods, such as cloth, ironware and alcohol, which was traded for men, women and children who had been kidnapped on the west coast of Africa. From this brutal trade, prisoners were then shipped to the West Indies where they were sold to plantation owners and kept as slaves, with no rights or freedoms, to work on the plantations. Slaves were traded for produce such as sugar, coffee and tobacco, which was shipped back to Britain. This particular trade continued from the mid-1600s until the abolition of slavery in 1807 (The Abolition Project, 2009) The end of the 19th century and into the early 20th century we had the protectionist policies: governments erected barriers to trade to "protect" their domestic industrial developments. Some writers argued that protectionist policies were the underlying cause of the Great Depression and World War 2. Following the victorious parties in North America and Europe, they tried to redress this and break down barriers to trade. Hence, the effort was institutionalized through the [[Bretton Woods]] agreement of 1945 and ultimately [[World Bank (WB)]] and [[International Monetary Fund (IMF)]]. This renewed effort to increase cross-border trade was successful for the high-income countries advantaged by increased trade liberalisation. ### 1.3 Liberalisation Liberalisation, in short, is the opening of borders. The first wave of liberalisation was from the immediate post-war period to around 1970. An important facilitator for increased global trade in this period was the creation of the [[General Agreement on Tariffs and Trade (GATT)]] in 1948. Reductions in tariff levels which resulted from the GATT negotiations can be seen as a proxy for increased trade liberalisation (at least in trade in goods). Another wave of trade liberalisation occured from 1970-1990s as many more countries adopted free market liberal economies. This culminated in the formation of the [[World Trade Organization (WTO)]] in 1995, which incorporated [[General Agreement on Tariffs and Trade (GATT)]] in a much-expanded international trade reigime, which included the creation of a [[General Agreement on Trade in Services (GATS)]], an Agreement on Trade Related Aspects on Intellectual Property and a strengthened Dispute Resolution Mechanism. [[Insights]] This fact shed the light as why India has been successful in their timing of pharmaceutical industries. Their "protectionist regime" during 1970s where more countries adopted free market liberal economies allowed their domestic companies to develop and blossomed when they adopted more liberal strategies, i.e. [[World Trade Organization (WTO)]] and TRIPS agreement in 2005. Since the early 2000s, developments in the multi-lateral (i.e. between multiple countries) trade architecture have been more limited with negotiations on subsequent WTO agreements stalling. Consequently, this period has seen an increase in the number of bilateral agreements (i.e. between two countries) and regional agreements (i.e. between countries within a specific geographical region such as North America, Europe, South America, and South East Asia). These comprise bilateral agreements, where two countries agree to reduce trade tariffs and other barriers to trade between them, such as Canada and the USA, but also increasingly comprise regional trade agreements which reduce trade barriers within a geographical region. It is arguable whether we are still living in a period of increasing trade liberalisation today or if this period has now come to an end. For example, during Donald Trump’s term of office as President of the United States (2017-2021) the USA withdrew from so-called ‘mega-regional’ trade and investment agreements in the Asian-Pacific regions – the Comprehensive and Progressive Trans-Pacific Partnership Agreement – and the failure of negotiations on a similar agreement with the EU – the Trans-Atlantic Trade and Investment Agreement in favour of bilateral trade agreements. Meanwhile the [[United Kingdom’s departure from the EU single market in January 2021 as a result of Brexit further suggests we may now be experiencing a reversal, or at least a deceleration, of the previously unidirectional process toward greater trade liberalisation]]. ### 1.4 Globalisation [[Globalisation can be understood as a transcendence of borders]]. In some sectors they are more intense, such as textile and clothing, automobiles, and high technology sectors. But in other areas it might be moderate, such as food, publishing, and minor in healthcare. It is more accurate to say that the world economy is *globalising* instead of *globalised*. [[Open Question]] Are we still categorising health care as minor after the [[Pandemic Fund]] is established? Or does the lecture note is strictly limited to health care and not health in general? ## 2. Aspects of economic globalisation ### 2.1 Transnational corporations (TNC) TNC is basically the same with MNC. The development of the world economy is based more and more on companies with structures of this type (MNC). Not only that, but the clear trend is toward larger companies controlling larger resources, larger even than those of many countries. This is due to large scale rationalisation of sectors such as electronics, mass media, automobiles and pharmaceuticals into larger and larger businesses. Today, many sectors are dominated by only a few very large companies. ### 2.2 Global supply chains Raw materials, processing, manufacturing, transport, and marketing may be located in different countries. The sale of pharmaceuticals over the internet is one example of how markets can be de-territorialised. For example, you can buy many drugs over the internet that are not available readily, or even legally, in your country. Tobacco is another example. ### 2.3 Global finance Basically, our money also transcend borders. ### [[Think it through]] Activity 3.1 1. Take a few minutes to reflect on what the term globalisation means to you. What images does it conjure up in your mind when you read the following terms? - International travel? Flights. Airplanes. Ships. Borders. Harbours/airports. Security. - McDonalds and Starbucks? Everywhere. Similarity. - Climate change? One big environment where everyone shares the same air, water, and land. Natural disasters. - Immigration? Movement of people. Displacement. War. Colonisation. - Pandemic disease? Infectious disease. Airborne. 2. How might the aspects of globalisation you have thought of affect health? How might they affect the ability of governments to develop effective health policies? Post your answers to the following three questions on the Activity 3.1 discussion forum on Moodle: - What is globalisation? - Removal of national borders where we basically now literally are "global citizens" and countries no longer can isolate themselves from each other, be it between two countries, regional, or multilateral. - How does globalisation affect health? - With the increased movement of goods and services, including people, everything/everyone got a potential to be a carrier of pathogens. Also, more goods liberated means also unhealthy products and how globalisation affected social determinants of health, as noted by WHO Commission on Social Determinants of Health. [[Trade liberalisation boosts adoption of behaviours such as smoking and unhealthy diets]] - How does globalisation affect health policy? - [[Health policymakers must see, that liberalisation that may resulted in aggregated increase in GDP, but it doesn't guarantee the distribution outcomes of trade]] - Liberalisation will result in change, and if it happens suddenly, it will pose the country to economic insecurity due to [[Trade reforms create winners and losers. Some sectors of the economy might not be able to compete with new imported goods whereas others get access to new markets and opportunities]]. The government, then, must provide supportive policies and emphasize social safety nets for its citizens to protect them from the turmoil, including but not limited to, distribution of incomes, healthcare, and supporting them in the development of new capabilities. When you have done this comment on the answers of two other students. How do they compare to and contrast from your own thoughts? ### 2.4 The role of economic power > Economic power refer not only about the possession of material assets or wealth, but also the ability to use and distribute those assets in order to generate control. The above quote means [[MNCs]] wields more power today than before in history. Information also bears power, hence the role of media in portraying information also confers ideological power. [[There's a disjuncture between the capacity of national governments to operate within a global economy given the increasing economic power of MNCs]]. Even economic power has moved away from state control, political power remains state-based. This change has implications for global health policy. We are now witnessing global convergence of governance rules and norms arising from increased interconnectivity of those involved in the global economy and its regulation, eg, G7/8, G20. ### 2.4.1 Bretton Woods institutions One of the major factors contributing to the outbreak of war in 1939 was a major financial crisis. The period following the great stock market crash in the late 1920s, followed by a world recession (the great depression of the 1930s), saw country after country trying to protect their own domestic economies by invoking higher and higher trade barriers. Such beggar thy neighbour policies effectively worsened the economic situation across the world, including that of the German economy, which was already paying significant war reparations after World War 1. Toward the end of the war, world leaders recognised a need to restore economic stability and a system of governance that would prevent future financial crises. It was in this context that a conference was held in Bretton Woods, New Hampshire in 1944 to construct this new economic order. This resulted in the creation of the World Bank, IMF and ultimately the GATT. [[Insights]] During G20 Indonesia, Minister of Health Indonesia mentioned [[Pandemic Fund]] as Bretton Woods 2.0, signifying a major financial crises brought upon the world by the pandemic from health sector rather than banking sector. ### 2.4.2 The [[World Bank (WB)]] The World Bank is a specialised agency of the United Nations and is financed and governed by its member-states. It is unique because as it is a bank and therefore profit-making. The main purpose of the bank is to provide loans (with interest) to government and to offer advice and assistance to support economic development. The Bank is funded through contributions or subscriptions from its member-states, with the richest countries making the largest contributions. However, the bank can also raise funds by going to the international capital markets (i.e. borrowing from commercial banks). The Bank then relends it to member-states, at a rate of interest just a little higher than the rate of interest it borrowed at, thus earning the Bank a profit, while giving national governments loans at lower interest rates than they themselves would have been able to borrow on the open market. The [[Bretton Woods]] conference also saw the creation of the [[International Monetary Fund (IMF)]], which was tasked with improving stability in the world economy after World War 2. Its role focused on the flow of finance among countries, facilitating the flow of goods and services by acting as a kind of foreign exchange facility, and discouraging countries from seeking to gain a trade advantage by competitive devaluations of their currencies. The Bretton Woods system was intended to be stable and predictable. As with the World Bank, ==the critical feature of the IMF is its ability to assign conditions on loans to debtor countries, such as the introduction of liberalisation measures==. Funding for the IMF, like the World Bank, is via member subscriptions or quotas based on the relative size of national economies, which is also used to determine voting rights in the organisation. Membership of the IMF is a pre-requisite for membership of the World Bank (and vice versa) meaning their memberships are identical. ## 3. The impact of economic globalisation [[Interesting Phrase]] Globalisation in its current form has come to be associated with a set of policy ideas known as the ‘[[Washington Consensus]]’ because the main global economic institutions which have promoted them, the World Bank and the IMF, are based in Washington, DC (see Session 4). The core set of ideas behind this “consensus” concern: - Fiscal discipline (balanced budget, no deficit) - Redirection of public expenditure - Tax reform - Financial liberalisation - Single competitive exchange rate - [[Trade liberalisation]] - Elimination of barriers to [foreign direct investment]([[Foreign Direct Investment (FDI)]]) - Privatisation of state-owned enterprises - Deregulation of market entry and competition - Assurance of secure [property rights]([[Intellectual Property Rights (IPR)]]) However, current processes of economic globalisation have been widely criticised by many economists and civil society actors. In many cases, it is perhaps more accurate to describe much of this group as “anti-[Washington consensus]([[Washington Consensus]])” rather than anti-globalisation per se. While there are some groups within this larger movement that oppose globalisation in its entirety or as a matter of principle, others would argue that it is the particular form that current processes of economic globalisation are taking, that is objectionable. ==This particular form of globalisation based around the types of policy identified above, they argue, is widening inequalities both within and between countries, increasing employment insecurity, weakening workers’ rights, and undermining social welfare and environmental protection. At the same time it increases the economic and political power of a narrow global ruling class, and the governance mechanisms of global economic institutions lack transparency and accountability== (see Session 4). ### 3.1 Inequality: The richest and the poorest The [[Global inequality (Gini) index]] (also called Gini coefficient) expresses the deviation of income or consumption expenditure among individuals/households from a perfectly equal distribution. A coefficient of 0 represents perfect equality and 1 represents perfect inequality. However, despite progress, two-thirds of global inequality is still due to differences in average incomes between countries rather than within countries. One of the issues with this scale of data is its aggregate nature. We cannot tell the level to which specific population groups within countries are impacted by poverty. For example, in many of the newly industrialising economies (little tigers) of Asia, there are substantial numbers of people being left behind. And even in the USA, currently the richest country in the world, inequality is among the highest in the world. ### 3.2 Understanding the statistics [[Insights]] As an economists working in global health to attempt to tease apart aggregated data and find out more specifically who are the winners and losers from economic globalisation. ==We can begin by looking at each individual country differently and recognising that they start at different points in their engagement with globalisation==. [[To understand the effects of globalisation, we need to separate out the impacts of globalisation on different individuals and population groups within and across countries]]. Economic globalisation may be beneficial for those groups that are educated, use computers, work in professional careers, and are able to travel, but for many others, none of these benefits are available. How do we begin to identify these disadvantaged groups? Some groups of analysts remain committed to the so-called [[Washington Consensus]] and would argue that ==we have not given it enough time, that there will eventually be a trickledown effect for the poor, and that we are moving in the right direction==. That what is needed is simply to accelerate the measures used in the past and get the rest of the world (effectively low-income countries) joining in. This is becoming a minority view even on the political right. In large part, the growing body of evidence shows that economic globalisation, as defined by [[neoliberalism]], is not working for the majority of people. This appears to be the case no matter how much time it (neoliberalist globalisation) is given, and it has become apparent that this is not because it has not been embraced warmly enough, but because there is something inherently wrong with the prescription. [[Economic globalisation, without moral compass, no matter how long we give it time, will not trickledown for the poor. Therefore, most analysts are moving towards some degree of protection from globalisation (safety net) and how to distribute the wealth to most people]] [[Interesting Phrase]] Most analysts are moving toward a position of what we might describe as “[[economic globalisation with a human face]]”. The purpose here would be to retain the material benefits of globalisation without paying excessive social costs. The subject of debate has shifted, from a rather polarised “globalisation good, globalisation bad” debate, to “how can we make globalisation benefit the most people”. Naturally, there remain lots of different views on how to achieve this. Global economics is about negotiation, usually behind closed doors. What needs questioning, however, from the point of view of social welfare, and particularly that of global health governance, is the extent to which the public health community has been able to participate effectively in these negotiations. ## [[Think it through]] 4. Integrating activity 1. Pick a country context with which you are familiar. Try to identify one way or issue by which that country has generally benefitted from globalisation and one way in which globalisation has had a generally negative effect. 2. a Think a little more about that benefit you identified, are there those within the population or in other countries who were disadvantaged? b. Similarly, for the negative impact, who gained by that issue (domestically or elsewhere)? Because I'm Indonesian, I'll pick my country with the issue tobacco control. Indonesia has benefitted from globalisation in terms of the issue raised by the [[World Health Organization (WHO)]], especially through the Framework Convention on Tobacco Control (FCTC). Indonesia, I believe history will testify, actively participated in the negotiations but pulled out in the last minute. While we positively benefitted from the free flows of information, updates on the harmful effects of smoking, we were also negatively affected by the lobbying of industries and the growing power of multinational corporations in economic power. I heard the argument that "tobacco companies helped elevate the economy of the tobacco farmer and overall Indonesia's GDP" almost like a broken record, every year on World No Tobacco Day. So, beneath that aggregated GDP number, there are vulnerable groups that were targeted by the tobacco industry, such as children and the poor. In fact, plenty of research shows that even those who were categorised as poor, their household spending for cigarettes are higher than basic household necessities. In other words, the poor chose cigarettes over bringing food to the table. The "contribution to the economy" is basically only widens the inequality because it only benefitted the tycoons and harm the health of the vulnerable groups. ## 5. Summary This session has provided an overview of the global economy, and a brief modern history of its development. We have seen that there are key differences, and linkages between, concepts of liberalisation (opening borders), internationalisation (increased cross-border movement) and globalisation (transcendence of borders). We learned how various barriers are erected to limit trade under protectionist policies (e.g. tariffs, quotas), and how the GATT was very successful in reducing tariffs, and since 1995 its successor, the WTO, in reducing non-tariff barriers. In recent years, a key aspect of globalisation has been the emergence of TNCs, and the increasing role of economic power within wider aspects of global governance, resulting in impacts in controlling production and dissemination of goods and services, and information. This effect, together with the role and influence of the Bretton Woods Institutions comprising the IMF, World Bank and WTO, have led to increasing debate on the role of nature versus nurture in the development of the system of economic relationships and global governance that currently exists. ## 6. References ### 6.1 [[Essential readings]] [[@smithRoleEconomicPower]] [[@smithGlobalizationTradeHealth2018a]] ### 6.2 [[Recommended reading]] [[@labonteGlobalizationSocialDeterminants2007]] [[@labonteGlobalizationSocialDeterminants2007a]] [[@martensGlobalizationHealthyStatistical2010]]