South China Morning Post

  Tuesday  November 24  1998
Hands across the world

Ever since the outbreak of the supposed crisis in the global economy there has been a related outbreak of "sovereignitis" the mistaken belief that sovereignty disallows intervention in a country's domestic affairs.

Consider the range of recent cases: Malaysia is upset at the United States Vice-President Al Gore's support for the jailed former Deputy Prime Minister Anwar Ibrahim; Turkey complains about Italy's failure to extradite Kurdish rebel leader Abdullah Ocalan; Chile is furious that the British detain their former president, Augusto Pinochet.

This recent outbreak of sovereignitis is in fact merely a natural reaction when the opponents of globalisation believe they have found a fatal flaw in the system. But the reality is that globalisation is as alive and as patchy as it has ever been, and the defenders of the supposed sovereign right to non-interference in internal affairs are fighting a losing battle.

Stand back a moment from the daily news and we see a far clearer picture in the three major features of globalisation. In political terms, Mr Gore's criticism of Malaysia is merely a particularly rude example of an increasing trend of making human rights a natural feature of foreign policy. Remember that the leaders of Indonesia and the Philippines had already criticised Malaysia's treatment of Anwar.

Italy's refusal to extradite Mr Ocalan is a little more unusual but derives from the same motives that led Spanish, Swiss and British judicial officials in the Pinochet case to believe that foreigners can make their own judgments about human rights in other countries. The tentative steps towards the creation of an International Criminal Court are merely the cutting edge of this process.

In the second, economic dimension of globalisation, the outbreak of sovereignitis is most severe precisely because even the current crisis in emerging markets has failed to fundamentally weaken the forces of global capital or seriously damage the rich Western world that created globalisation in the first place.

Capital controls and greater state intervention in Malaysia or Hong Kong are little more than quaint rearguard actions by frightened leaders. Far more far-sighted is the nimble Singapore that moves swiftly to reform its economy in order to take business from Hong Kong.

The most curious version of economic sovereignitis is the belief that regional financial arrangements offer a defence against globalisation. The imminent arrival of a single currency in Europe has encouraged some Asians to believe that an Asian Monetary Fund could protect them from the fury of global currency markets. In fact, as the Euro demonstrates, far more sovereignty needs to be surrendered when abandoning control of one's currency.

It is far from obvious why an Italian or an Indonesian is better off with their economic policy being set by faceless bureaucrats in Frankfurt or Tokyo instead of by a free market.

The third, military dimension of globalisation is in some ways the most peculiar. Having lived for 45 years with globalised security in the Cold War, the recent era of mostly regionalised security seems unsettling. Now that we have disposed of the myth that a United Nations-centred world of peacekeeping would emerge, we find few security issues of a global nature.

An important exception appears to be the struggle to prevent the spread of weapons of mass destruction. The world's sole superpower leads the effort to have an effective UNSCOM de-fang Iraq's weapons and keep North Korea from developing nuclear weapons and selling its ballistic missiles.

But in a world of less globalised security, those who are not America's allies are hard to persuade that pursuing the control of weapons of mass destruction and risking war is worth the effort.

Hence the support outside the Western network for ending UNSCOM and UN sanctions and hence also the basis of Saddam Hussein's claim that "Western spies" are using UNSCOM to violate Iraq's sovereignty.

But in the end the concern with weapons of mass destruction remains an important reason for seeing important aspects of security as global. Even without UN support, the US and its allies will use their power to impose their version of international security, and when NATO is finished revising its "strategic doctrine" in 1999, the emergence of a more globalised Western security structure will gradually become apparent.

Taking these three dimensions together, it is obvious that globalisation is not in retreat - it is merely as uneven as it has always been. Resistance is mostly futile. There will be no sweeping reform of the global economic architecture, merely minor reforms. Remember that the much-maligned hedge funds are mostly a sign of the conservative instincts of the market - the desire to minimise risk by hedging against currency changes.

If resistance is futile, the prize will go to those who make themselves less vulnerable. One can be a small society open to global winds and still prosper so long as you are clean, competitive, with few bad loans and a useful contributor to global order. Singapore, Switzerland or even Finland or Canada come to mind.

However, one can be large but corrupt and essentially closed to foreign-fed reforms, and therefore failure will be guaranteed. Russia is a prime case. India and China claim that their current ambivalence about reform and openness is a viable strategy, but it has all the benefits and pains of fence-sitting. In the medium term, let alone the long term, growth will be limited by such limited vision. China may well be heading for a Confucian version of the much-derided "Hindu rate of growth".

For those who wish to attain wealthy post-industrial nation status, the reality is even starker. Success in an information economy, in a biotech century, or indeed in any aspect of an innovation economy, will be based on far more integration and globalisation.

As decision makers in emerging markets fret about how to emerge from their industrial-age crisis, the new rules for a very different innovation and information world are being written right now in the board rooms and government offices of the developed world.

The chastened and even frightened people of the developing world are right to believe that the rules of the new game, as with the old one, may be called globalisation, but in reality they look far more like Westernisation.

Gerald Segal is the Director of Studies at the International Institute for Strategic Studies in London

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