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Inserting a new dialectic


Kevin Rudd

'The question today is not whether or not we want to have globalisation,' observed the former Socialist Prime Minister of France, Lionel Jospin, during an official visit to Japan in December 1999. 'Globalisation', said Jospin, 'is a fact'. He continued: 'But we are faced with a choice: to allow the laws of economics to guide the evolution of our society, and, as a consequence, abdicate our political responsibilities; or on the contrary to try and govern these forces which are at work in the globalisation of the economy'.1 According to the French press, Jospin's discussions with Japan's then Prime Minister, Keizo Obuchi, did not focus on the usual list of bilateral trade and investment initiatives that accompany such visits, but on the common threat globalisation posed to both leaders' societies and the international order. Le Monde's magisterial summation of the visit concluded that the Jospin-Obuchi meeting symbolised a new 'front commun Paris-Tokyo face à la mondialisation'.2 In contrast, across the Channel, the UK Prime Minister, Tony Blair, was considerably more upbeat. Where Jospin and the late Obuchi saw threat, Blair saw opportunity:

Politics is going global. All of us are seeking to make sense of change ... The key to the management of change is reform. The pace of reform has to match the pace of change. Societies that are open, flexible ... will prosper. Those that move too slowly or are in hock to vested interests, or what I have called elsewhere forces of conservatism, reacting negatively to change, will fall behind.3

Of significance is the fact that debate over globalisation is so near the top of the prime ministerial intray at the beginning of the new century. As Britain's leading globalisation guru, Anthony Giddens, noticed in 1999: 'I haven't been to a single country recently where globalisation isn't being intensively discussed. In France, the word is mondialisation, in Spain and Latin America, it is globalizacion. The Germans say Globalisierung ... No political speech is complete without it'.4 Of greater significance is the fact that governments - even like-minded governments - do not appear to be able to agree precisely on either what globalisation is or what, if anything, should be done about it. In part, this is because the phenomenon of globalisation contains multiple realities affecting different interests at different times and to different degrees. Robert Samuelson has noted:

At the edge of a new century, globalisation is a double-edged sword: a powerful vehicle that raises economic growth, spreads new technology and increases living standards in rich and poor countries alike, but also an immensely controversial process that assaults national sovereignty, erodes local culture and tradition and threatens economic and social stability. A daunting question of the 21st century is whether nations will control this great upheaval or whether it will come to control them.5

Athough this debate, as with the globalisation phenomenon itself, is a global one, much of the literature that has been produced on the consequences for the world's regional organisations, the nation-state and social justice has tended to be Eurocentric in its focus. Yet at present, the globalisation debate - in a real as opposed to a theoretical sense - is arguably more relevant to the Asia-Pacific region than to anywhere else, given the devastating and continuing impact of the 1997 Asian Crisis. To Giddens' list of European translations of the term, to be globally credible we should add the Chinese quanqiuhua and the Japanese kokusaika.

So what can social democrats, and Australian social democrats in particular, productively add to a debate that has already raged for over a decade and generated a considerable international literature? Two areas stand out. The first is the political and policy experience of the Australian Labor Party as an incumbent centre-left party during the 'first wave' of globalisation in the 1980s and early 1990s, when most European centre-left parties (and the US Democrats) were in the political wilderness. In a counter-cyclical pattern, and in contrast to most of its European fraternal parties, Australian Labor experienced 13 years of continued and undiluted incumbency - compared with 18 years of opposition for British Labour and 16 years for the German Social-democrats. Mitterand's France, with a series of conservative Prime Ministers, only represents a partial exception. The tables have now turned. Australian Labor has returned to opposition, while both Britain and Germany have elected centre-left governments headed by self-declared modernisers and globophiles in Blair and Gerhard Schroeder. New Labour, the Third Way and, in Germany's case, Die Neue Mitte ('the new centre') have taken centre stage on behalf of their respective social democratic parties (also see Chapter 9). The new leaders in both countries have enthusiastically embraced pro-market policies domestically and internationally, although the French continue to be considerably more sceptical under their revised 'cohabitation' arrangements.6 Australian social-democrats therefore find themselves responding to the raft of new policy issues thrown up by globalisation's 'second wave' after having been hardened by their policy and political experiences of the first wave. Unlike their British and German counterparts, after more than a decade of modernising, internationalising and 'globalising' their national economy, Australian social democrats are equally conscious of the policy implications of market failure and market success.

A second perspective that Australian Labor can bring to the globalisation debate is an Asia-Pacific perspective. This perspective bears not only on the regional impact of globalisation, but also on the effectiveness of regional organisations in managing this impact. Australia has been a longstanding analyst and critic of the effects of the 'closed regionalism' of the European Union (EU) on both global markets and the global economic order. It has been similarly critical of the competitive regionalism to which the EU has given rise - most particularly the rise of the North American Free Trade Area (NAFTA). Beyond its critique of both the EU and NAFTA, Australia has also experimented with its own form of 'open regionalism' in the Asia-Pacific Economic Co-operation (APEC) forum. The question for this chapter is to what extent these various forms of regional architecture act to accelerate, regulate or arrest the overall process of globalisation - and the extent to which such regional 'interventions' may be desirable. Following a brief analysis of the definition of globalisation, the chapter will survey the generally agreed 'positive' and ' negative' impacts of globalisation. It will then examine some of the theoretical literature on regionalism, before looking at the particular impact of European and Asia-Pacific regionalism on globalisation. The European Union is the archetypal example, and will serve as the framework within which regionalism as a corrective on globalisation will be discussed. This will in part be contrasted with APEC, which to date has been largely constructed as a globalisation accelerator.

Globalisation's multi-dimensions

Any normative analysis of globalisation, including analysis of appropriate national, regional and international policy responses, turns in part on the definition of the term. The breadth of the globalisation phenomenon and the dimensions of the multi-disciplinary literature to which it has given rise makes this a difficult task. Definitions range from a minimalist economism, through broad political economy, and on to an expansive and, at times, undisciplined sociology. The problem of conceptual borders is a real one.

A meaningful definition of globalisation must begin with the generally conceded ascendancy of neo-liberalism ideology or philosophy among both academic and policy elites during the last two decades of the 20th century. The core logic of the neo-liberal approach to economics - the neo-classical propositions that free markets at home and abroad are the most effective means of maximising allocative efficiency and private wealth - now dominates the treasuries and finance ministries of most of the OECD and much of the developing world. The result is a contemporary policy orthodoxy that is usually expressed in terms of de-regulated labour and product markets, competitive neutrality, free trade, free capital flows and floating exchange rates.7 The global dimension of neo-liberalism gathered momentum during the 1990s. The implementation of free market reforms in domestic policy regimes was complimented by an emerging fabric of multilateral arrangements that has further entrenched the orthodoxy. The real multiplier of the economic globalisation phenomenon, however, has been the revolution in transport, communications and, particularly, information technology (see Chapters 3 and 4). The global compression of transaction time and space is acting to create a genuinely global market, arguably for the first time in economic history. The total value of transnational economic activity relative to domestic activity is increasing more rapidly than in any past period (also see Chapter 2). As a consequence, the total value of activity no longer subject to national regulatory regimes has similarly increased, and the jurisdictional competence of existing international regulatory regimes is being challenged.8

Does all this add up to the impending collapse of the Westphalian international system, based on the undisputed sovereignty of individual national-states, and the emergence of a new international order? A large body of the literature has certainly concluded so, although it is also argued that such conclusions are premature and that the classical nation-state still has a lease on life yet.9 What can be agreed is that a new process is underway that is challenging existing, commonly accepted precepts of sovereignty, and the national, regional and international institutions that derive their legitimacy from these precepts. The central challenge is the globalising dynamic of neo-liberalism and what has been described as the consequential triumph of market utility over territorial integrity as a defining element in the emerging order. One recent theoretical analysis elegantly summarised the issue:

Globalism ... can thus be defined as programmatic globalisation, the vision of a borderless world, in which territory has lost all importance and functionalism is predominant. More precisely, it indicates a qualitative change in the internationalisation process, thus further strengthening the functional and weakening the territorial dimension.10

From these developments and lines of analysis, some of the more apocalyptic prognoses infer that the globalisation process is almost definitionally incompatible with social democratic parties, policies and values. Such conclusions are superficial, just as their resulting call to somehow 'stop' globalisation is simplistic. They ignore the positive contribution that economic globalisation is delivering to global security, development and society. The internationalisation of the Australian economy over the last 15 years - primarily under centre-left administrations - has resulted in considerable growth in national and average personal incomes. Consumer price movements have been disciplined by greater domestic and international competition. Consumer choice has improved. Small manufacturing enterprises generally have greater market power through competition policy, through the reduction in international trade barriers and the more recent explosion in electronic commerce. Globalisation has also unleashed vast quantities of investment capital into capital-hungry emerging markets, has been a factor (in some cases the dominant factor) in bringing about the democratisation of a number of states in East Asia and Latin America, and has created a general mechanism of political enmeshment - which in some cases has ameliorated and in others overriden a number of the more traditional, often territorial, national security concerns of states with a history of adversarial neighbourhood relations.

Equally, social democrats must recognise the negative dimensions of globalisation. Whereas globalisation has contributed to enormous economic growth in many nations, it has also generated greater income disparities within and between the developed and developing world. While neo-liberal policy regimes have worked for some developing economies, it is sobering to note that real per capita income for the poorest fifth of the world's economies is now considerably lower than it was 30 years ago. Within developed economies, inequality has taken many forms, including enormous labour market volatility and employment insecurity, most particularly for older men. This has, in turn, generated social instability and political reaction that has presented challenges to the prevailing postwar political consensus in many OECD countries, including Australia. More broadly, social democrats are legitimately concerned about any 'race to the bottom' on labour standards, environmental standards and taxation levels. The literature is divided on the severity of the impact of the 'disciplines' of global capital markets in each of these areas.11 But none of the literature and very few political practitioners would dispute the proposition that this discipline exists, and that it already imposes constraints on what reformist governments, whether social democratic or otherwise, can do (also see Chapters 2 and 7). The 1999 debate in the Australian parliament on the desirable future rate of capital gains tax, forexample, was driven in large part by the stated need to achieve an 'internationally competitive headline rate'.

These considerations lead to the wider debate on the future sovereignty of the nation-state - a debate as old as the 1648 Treaty of Westphalia itself. There is a convincing body of argument that nation-states have never enjoyed anything approaching the absolute sovereignty that some claim to be the normative condition to which the modern state should aspire. The entire history of customary and statutory international law suggests otherwise, though, since states elect to surrender or share their sovereignty with each international instrument to which they accede.12 With globalisation, however, there is something qualitatively new to the argument, in that sovereignty is no longer being shared with other states but with non-political, unelected entities called 'markets'. In this argument, the 'invisible hand', rather than treaty law, becomes the more effective arbiter of the 'competing' sovereignties of nation-states - some winning, others losing. The counter-argument - that ultimate sovereignty is retained because individual states can still choose to opt out of the current global economic system - is not persuasive. The exit costs for such a decision would be so punishing as to make it impractical. The North Korean model is not as attractive as it once was.

Finally, there is the immediate, real-world concern of the overall impact of globalisation on world and regional economic stability. This is the flip-side to the growth dividend that globalisation has yielded thus far to the international economy. The 1997 Asian financial crisis, and the associated crises in Russia and Latin America, represented a wake-up call to the international community about the adequacy of the current forms of governing global capital markets. Post-facto rationalisations that the crisis simply represented a necessary market correction to endemic nepotism, corruption and poor economic governance across developing Asia no longer offer a sufficiently complete explanation of what actually occurred, however appealing these arguments were to some at the time (see Chapter 2). The stakes are still high. As Robert Samuelson has warned, it was only the extraordinary resilience of the US economy that prevented the 1997 crisis from becoming something much worse, and 'it remains possible that abrupt surges of global capital, first moving into Asia and then out, will have caused, with some delay, a larger instability'.13

Globalisation is therefore a multi-dimensional phenomenon which should not be the subject of either genuflection or demonisation. In considering how best to respond, a useful, textured analysis of the phenomenon needs to recognise both its positive and negative impacts on the emerging global order. There is nothing determinist about the onward march of globalisation. It is not necessarily destined, in some linear fashion, to further, uninterrupted conquest. It is constructed on the premise of an intellectual consensus achieved over the last 20 years - some 200 years after Adam Smith gave coherent expression to its basic propositions. It could just as easily blow up as a consequence of another Asian economic contagion - only next time a contagion unable to be contained and therefore with potentially devastating global consequences. Catastrophes aside, the future of globalisation is more likely to be shaped by ideas that challenge aspects of the prevailing policy orthodoxy. We must also examine credible policy responses and the adequacy of the existing institutional machinery for the delivery of these responses. This brings us to the important question of regionalism and its capacity to shape, or simply to be shaped by, the imperatives of the globalisation dynamic.

Regionalism: Stepping-stones or stumbling-blocks to globalisation?

The central argument is that globalisation is gathering momentum and generating both positive and negative impacts. In its crudest form, the critical question is which policy machinery is most competent to maximise the former and minimise the latter: individual nation-states, the existing global institutional architecture (both political and economic), or the aggregation of nation-states in the form of regional organisations?

Individual nation-states are suffering a diminution in their effective sovereignty. Giddens has put the proposition at its starkest, arguing that the 'era of the nation-state is over ... Nations have lost most of the sovereignty they once had, and politicians have lost most of their capacity to influence events. It isn't surprising that no one respects political leaders any more, or has much interest in what they have to say'.14 From a different intellectual tradition, James Mittelman has argued that the erosion of the sovereignty of individual states has occurred both from above and below, or as a consquence of what he calls 'a dialectic of subnationalism and supra-nationalism' - subnational autonomism, separatism and literal Balkanisation at one level; international markets and negotiated multilateral arrangements at another:

The nation-state reflects a seventeenth century Westphalian concept, a territorial mode of political organisation, which according to democratic theory, is supposed to provide accountability to the governed. Yet by condensing the time space aspects of social relations, economic globalisation transcends territorial states and is unaccountable to elected political officials, or is accountable to unelected market forces. The tensions between the territorial based system of political organisation and economic globalisation creates a disjuncture in governance at both the regional and world levels.15

At the supra-national level, both the professional literature and the policy commentary of practitioners suggest the emergence of a similar crisis of confidence in the principal existing mechanisms of multi-lateral governance - the United Nations, the World Trade Organisation (WTO), the International Monetary Fund (IMF) and the World Bank. Historically, the United Nations has mainly been seen as a political-security-humanitarian organisation with a limited mandate for global economic governance, which has in large part devolved from the Bretton Woods machinery (the WTO, the IMF and the World Bank) to an institution without any pretence of being internationally representative - the G7. More recently, the credibility of the four pillars of the postwar international system have been damaged further: following Bosnia and Kosovo, the continued capacity of the United Nations as an effective instrument of international security policy has been brought into question; following the Asian Crisis, the analytical and policy capacity of the World Bank and the IMF have been challenged; the implosion of the 1999 Seattle Trade Ministerial Meeting has cast new doubts over the future for the WTO.

While it would be incorrect to argue that the principal elements of the current international order have either collapsed or are incapable of reform, the process of globalisation has made them appear less robust and relevant. Responses to this perceived crisis in the international system have ranged from various reform proposals for the individual international financial institutions, through to quixotic calls for a return to Westphalia, and on to advocating the expansion of the G7. Other responses, primarily by theoreticians but also by some practitioners, have focussed on the role of regional aggregations of nation-states acting as some sort of political brake on the impacts of the globalisation process, although not all proponents would regard regionalism as necessarily an impediment to globalisation.16

Bjorne Hettne identified five degrees of 'regionness' in his 1999 study of the inter-relationship between globalism and what he terms 'the new regionalism'. From minimalist to maximalist, these degrees define 'the region' as: a geographical unit; a social system; organised co-operation in specific areas; a civil society promoting social co-operation and shared values; and, finally, at its optimal stage of development, an acting subject with a distinct identity, actor capability, legitimacy and structure of decision making.17 Hettne distinguishes his new regionalism from 'old regionalism' - the latter representing top-down constructs of the Cold War era, the former being bottom-up creations of participating states themselves. Hettne also argues that new regionalism is a phenomenon of the post-bipolar international order, in large part in response to the homogenising dynamics of globalisation:

Regionalisation is ... a more varied phenomenon than globalisation, which implies a homogenisation of the global space. As a response, regionalisation takes various forms both over time and between different cultures ... However, it homogenises regional space and reduces the sovereignty and changes the role of nation-states. The crucial issue in relating the two processes is the development logic which is subsumed under a territorial as distinct to (sic) a functional interest. Regionalism implies a return to 'the political' in one form or another.18

What Hettne and others appear to be arguing is that the region has more political grunt and therefore a greater capacity and predisposition to assert its political identity than the individual nation-state. Indeed, Hettne has contended that 'the process of regionalisation from within can be compared with the historical formation of nation-states', virtually arguing that the region now offers the expanded nation-state a fresh opportunity to pursue its historical interests:

A regionalised world order implies that the territorial logic of the old nation-state (mercantilism) is applied to the emerging regional systems (neomercantilism), albeit in a post-Westphalian context. Real developments depend on the dialectical relationship between the two logics, the forces of market expansion generated by globalisation and the need for political control. The one constitutes a reaction to the other, but neither of them can be seen as a 'final' solution or 'the end of history'.19

The implied conclusion in Hettne's new regionalism project - that is, that the EU, for example, represents the triumph of 'neo-mercantilism' - may well confirm the long-held suspicions of Australian practitioners. Hettne's broader and more significant conclusion, however, is that the intrinsic rationale and internal dynamic of 'the region' is the political assertion of territory, identity and local values as a dialectical reaction against the otherwise overwhelming functional logic of economic globalisation. The former Hettne sees as defensive, conservative and positive; the latter he sees as offensive, revolutionary and, at least according to his own normative logic, primarily negative. Unfortunately, despite the theoretical elegance of Hettne's descriptive system and its central finding on the dialectical relationship between location and function, he has, at best, offerred only a partial explanation of the normative behaviour of real-world regions, such as the EU.

By contrast, James Mittelman has offered a broader conceptual framework for the range of regionalisms that have operated within the international system. These range from the autarchic or auto-centric regionalism of the post-Depression, Soviet Bloc and Lagos Plan periods; through to the more recent advent of neo-liberal regionalism - unapologetically advocated by, among others, the proponents of the APEC project - and on to what he terms 'degenerate regionalism', which he has defined as 'like the neo-liberal project' but seeking to 'optimise the collectivity's position in the globalisation matrix', citing the Commonwealth of Independent States as the classic example. Mittelman also refers to a 'development integration' model which, as applied in Southern Africa, seeks a higher degree of political co-operation, state intervention and re-distributive policy than plain neo-liberalism. This model, Mittelman implies, is compatible with the normative virtue of Hettne's new regionalism.

The European Union: new regionalism or old realism?

The weakness in both Hettne's and Mittelman's analyses is their treatment of the European Union. Neither appears formally to categorise the EU as either within or without the overall neo-liberal paradigm; that is, it is neither a 'stepping stone' nor a 'stumbling block' to the globalisation process. By contrast, both come surprisingly close to incorporating Europe into the new regionalism paradigm; that is, as a political corrective on 'globalisation gone mad'. Hettne claimed in a 1994 study that Europe represented a more advanced regional grouping than those attempted elsewhere, and constituted 'a paradigm for the new regionalism in the sense that its [the new regionalism's] conceptualisation eagerly draws on observations of the European process'.20 These conclusions reflect the Eurocentrism of the new regionalism. Perhaps the European model from which the idea derives has focussed more on what has been achieved within the European project than the impact of the closed regionalism of the EU on the rest of global economic order. New regionalism reflects more the social tempering of free markets within the geographical parameters of the union through policy instruments such as the Social Charter, not a coherent policy initiative for a parallel reform of the economic system beyond the union.

The realpolitik view from Brussels appears to see social justice and the new regionalism within Europe, but free markets and neo-liberal globalisation for the rest. For Brussels, neo-liberalism is also the strongly preferred philosophical framework and policy architecture for regulating transactions from Europe to the rest of the world. It is doubtful, for example, that London, Zurich or Frankfurt, either as financial communities or as politicial communities, would emerge as initiators or supporters of policy proposals that embrace 'new regionalist' values to assist the developing economies in East Asia recently decimated by the untrammelled operation of global currency markets. As a capital exporter, Europe has little national-regional interest in any substantive evaluation of the adequacy of existing capital market regulation, irrespective of the impact of these markets on non-European regions.

So is there a formal European perspective on the relationship between regionalisation and globalisation? Leon Brittan, the European Commissioner for External Affairs, offered an important insight into this question in a 1997 paper, in which he argued that the central virtue of the European Union is that of a diplomatic force multiplier, capable of exercising greater influence than individual member states over the future shape of the global economic order.21 In other words, the Union is to provide Europeans with negotiating leverage with the United States in shaping the emerging international order in a manner which maximises European interests. What that order might be, and how it might differ from the current one, appears to be an open question. If it is to be a kinder, gentler globalisation, the blueprint has not been drafted, or not yet released. If it is to articulate on a global scale the social and political values of European new regionalism - that is, some sort of globalisation of the EU's Social Charter - this vision of post-globalist arcadia has been kept well under wraps.

Leon Brittan's articulated policy, by contrast, is a realism writ large, where states are seeking to maximise their power, albeit through an aggregation of regional power. In international relations theory, this is a realism approaching the Edward Carr and Hans Morgenthau tradition. Anticipating this critique, in defence of European new regionalism, Hettne has differentiated his model from realist 'aberrations' (of both the Orwellian and Huntingtonian varieties) by arguing that such realists are wrong because they 'apply a Westphalian logic to a post-Westphalian context'.22 Such a proposition sits uncomfortably with the clarity of Brittan's statements concerning the future mission of Europe, from which Hettne draws his new regionalist inspiration. At its centre, Leon Brittan's argument is about whether the world should have a European or United States-controlled globalisation, rather than about the intrinsic merits of globalisation itself. As such, its principal point of intersection with the normative dimensions of the overall globalisation debate is as an articulation of the continuing, but undeclared, Kulturkamf between Europeans and Americans over the future of world and Western culture. This emotional aspect of the debate - that globalisation is in fact a synonym for Americanisation - is particularly acute in France, but it also resonates elsewhere in Europe, and accentuates the broader debate over political control.

A final element of distinction between new regionalism and historical Euro-reality concerns the question of 'top-down' or 'bottom up'. If the former is a distinguishing feature of old regionalism, then the European Union by definition satisfies the criterion. The European Union was, and to a large extent remains, a top-down construct - a region born of a postwar determination by European political elites to avoid yet another conflagration between France and Germany after the disasters of 1870, 1914 and 1939. This was, and is, an entirely worthwhile project, but it cannot be considered as a movement from below. This fact persists today, with poor voter turn-out for Euro-elections, weak mandates for the European parliament and ineffective accountability procedures for the Commission itself. While less of a complete product of the elites than was the case half a century ago, the European Union is still a long way from being in any real way 'owned' by the peoples of Europe (also see Chapter 15).

APEC: open regionalism

As with the European Union, APEC is a construction of policy elites, albeit some 30 years after the Treaty of Rome, which established the European Community. Again, as with the European Union, part of APEC's original rationale lay in a security policy that aimed firstly to encourage long term US strategic engagement in the Western Pacific, and secondly to provide a 'soft' institutional vehicle through which to continue to enhance China's economic and political engagement with the rest of the region. At this point the similarities between APEC and the European Union cease.

APEC is explicitly committed to the doctrine of 'open regionalism', whereby trade liberalisation achieved within the region is not restricted to the region. In this sense, APEC is the antithesis of the European Union. In Mittelman's schema, APEC is a clear example of neo-liberal regionalism, though not without some qualification. Conceptually, APEC is also driven by a general theory of economic integration which derives from the explosion in intra-regional trade in the decade prior to the body's formal establishment.23 Nonetheless, although APEC has had an ambiguous institutional relationship with the WTO, both bodies share an unambiguous commitment to the objective of global free trade. APEC primarily contains within it policy machinery dedicated to the realisation of the 1994 Bogor Declaration to establish free trade among member states (by 2010 for developed economies, by 2020 for developing countries). During the period of APEC's existence, the share of total world trade involving the member states rose from 34 per cent to 45 per cent, and their share of world GDP rose from 48 per cent to 56 per cent.24

Beyond its formal trade liberalisation agenda, APEC has spawned a considerable network of trade facilitation working groups aimed at reducing or eliminating a range of non-tariff trade barriers. These working groups have been complimented by a number of technical co-operation programs between the region's developed and developing economies. All these initiatives have occurred within an overall paradigm of neo-liberalism, although following the 1992 Rio Summit on sustainable development the decision by APEC leaders to try to 'green' APEC created some challenges. Lyuba Zarsky has argued that the decision by ministers and officials to treat trade liberalisation and environmental protection separately as matters of principle ensured that the relevant APEC working group would produce a non-outcome on the environmental policy issues. Drawing on an analysis of APEC's disappointing performance on environmental matters, Lyuba has argued that East Asia economic development has been based on 'an economic paradigm which excludes environmental "externalities" and social concerns, especially equity'.25Furthermore, the implicit brief within APEC's environment reference was directed not to environmental management as a policy end in itself, but rather to environmental regulation as an artificial impediment to trade.

Analysis to date, and the methods employed by APEC to manage evironmental issues, may suggest policy impotence. Yet while social equity may continue to be ignored by participating governments as not being of significant trans-border interest, environmental degradation will not be able to be overlooked or managed away indefinitely, even within the policy parameters of a neo-liberal framework. The expansion of coal-fired power generation in China, attendant problems of acid rain across the rest of North-East Asia and beyond, and emerging data on the real economic cost of these environmental impacts, have re-focussed concern on APEC's failure to effectively address a common regional problem beyond a narrow trade liberalisation agenda (also see Chapter 10).

The Asian financial crisis created a further challenge for APEC's overall policy framework. APEC was slow to make a measurable response to the crisis. Its member states by and large rejected a Japanese proposal for the establishment of an Asian Fund to assist with financial restructuring tasks within the region, expressing instead a preference for the IMF and the World Bank. The fact that the recovery process proceeded patchily, at best, across the region did not assist the credibility of either of these institutions or APEC, which was widely regarded as irrelevant to the recovery. As for longer-term problems, including the adequacy of the existing regulatory regime governing global capital and currency markets and their ability to prevent a similar crisis occurring again, APEC belatedly generated the Manila Framework Agreement (MFA) whereby regional finance ministers and central bank governors would meet regularly to deliberate on the broader regional economic agenda. As of 2000, neither APEC nor the MFA had produced any substantial recommendations for consideration by its own political leadership or by other relevant international regulatory bodies. Three years after the crisis, this does not reflect a flexible capacity on the part of APEC to proceed beyond its own, narrow neo-liberal trade agenda.

In summary, APEC was founded on neo-liberal principles, and has so far seemed institutionally incapable of substantially addressing pressing policy challenges to its regional economic environment. As a ginger group on trade liberalisation, it has performed a useful function, but given that most substantial liberalisation measures are likely to be negotiated in the Millennium Round of the WTO, its main trade-related functions will consist of 'maintaining the faith' on the Bogor commitments and pressing the raft of practical trade facilitation programs currently underway. Still, APEC must formally address the critical, unresolved challenges from the 1997 crisis concerning the future regulatory regime for world currency markets, and the region's environmental issues are pressing. If and when APEC takes up these and other policy challenges in a substantive way, regionalism in the Asia-Pacific may have something new, positive and even dialectical to contribute to the globalisation debate.

Conclusion: a new dialectic

If social democrats are to be constructive rather than rhetorical participants in the globalisation debate, they must resist the psychological temptation to simply join the barricades that were erected in Seattle in December 1999 and Davos in January 2000 and Melbourne in September 2000. Globophobia may constitute a satisfying political response to the complex challenges of globalisation for some, but it does not constitute a credible policy response capable of shaping the actions of governments. Nor is it credible for social democrats to yield uncritically to the neo-liberal paradigm in the hope that Adam Smith's invisible hand will simply work its magic. Seattle, Davos and Melbourne presented timely reminders for centre-left parties around the world that the political consensus supporting the neo-liberal triumphalism of the late 20th century may be beginning to crack. The One Nation phenomenon in Australia and the rise of similar parties in Europe reflect the same development. The growth of free markets has resulted in enormously increased wealth for many national economies and for many social groups within these nations, but it has also generated enormous inequity. For social democrats, therefore, free markets must also be managed markets, and we must be mindful of both the effects of market failure and the fundamental and continuing importance of the social contract.

Within this framework, social democrats should unapologetically embrace the positive impact of globalisation on the political constituency they seek to represent, including, for example, the net impact of nearly two decades of trade liberalisation on the disposable incomes of working families. Economic efficiency and some social justice dividends from the trade liberalisation agenda are transparent - not just domestically but also for developing economies. Structural adjustment programs for firms and their employees undergoing changes in their international competitiveness may be necessary, but the cost of ameliorating progams should not be used as an argument to justify a retreat to protectionism, which is anathema to the interests of the broad constituency that social democrats represent.

Social democratic support for the globalisation of markets for products and services cannot extend to all other dimensions of globalisation. There are major areas of policy where social democrats may have a different message from neo-liberalism to deliver, and it is in these areas that our policy energies must be concentrated. The areas may be summarised as fivefold. Firstly, we must more fully redress the adverse impact of global capital markets on national taxation policies - where the owners of mobile capital punish higher taxing regimes and reward the reverse - and the consequential international 'race to the bottom' on tax, and in particular taxes on capital (see Chapter 2). Secondly, we must be concerned with the consequential impact of the capital markets on the continuing capacity of states to fund an effective social contract for their communities - particularly on their capacity to fund education and training, 'structural adjustment' and retirement income (see Chapters 11, 12 and 13). Thirdly, there are the consequential impacts of the capital markets on the regulatory standards imposed by states, particularly labour and environmental standards (see Chapters 6, 7, 9 and 10). Fourthly, we must be concerned with the failure of neo-liberal policy prescriptions to provide adequately for the development requirements of the poorest of the developing economies, and undertake more substantial analysis of alternative capacity-building policies and their funding. Fifthly, and most relevant to the recent crisis in our own region, we must focus on the adequacy of the current regulation of global currency markets, the likelihood of a repeat of the circumstances of 1997, and the development of superior alternative regulatory arrangements for the future (see Chapter 2).

The final and critical question is the institutional machinery which should be used to advance the debate in each of these policy areas. Whatever the prognosis for the sovereignty of the nation-state, with the exception of the sole remaining superpower, individual states have virtually no capacity to shape the future policy framework for globalisation, nor to act unilaterally. Regionalism provides a credible mechanism. European realism in this respect is right, but the challenge for social democrats operating in the Asia-Pacific region is to not just replicate competitive regionalism Brussels-style, with its underlying beggar thy neighbour logic. Fortunately, APEC represents a significant aggregation of both developed and developing economies - comprising winners, partial winners and losers from globalisation. APEC therefore has the capacity, to use Hettne's language, to assert a new dialectic into the globalisation debate, neither globophile nor globophobe, but one with credibility derived directly from the region's post-1997 experience. The challenge for Australia, and for Australian social democrats, is to demonstrate regional leadership by taking this policy agenda forward and making it the APEC agenda for the 21st century.


This is chapter 8 from the Evatt Foundation's recent book, Globalisation Australian impacts. Kevin Rudd is the Member of the Commonwealth Parliament for the Brisbane electorate of Griffith. Formerly, he was an Australian diplomat, the Director-General of the Queensland Office of the Cabinet and a Senior China Consultant with KPMG Australia. He is the Chair of the Parliamentary Labor Party Policy Committee on National Security and Trade and a member of the Economics Policy Committee, the Parliamentary Standing Committee on Corporations, the Australian-US Leadership Dialogue and the Advisory Council of the AustralAsia Centre. A Mandarin speaker with a BA (Asian Studies) (Hons) from the Australian National University, he has written extensively for the Australian media on Chinese politics, China-Taiwan relations, China-US relations, Australia-Asia relations, globalisation and Australian public policy generally.



1. Pascale Robert-Diard, "M. Jospin s'explique sur le nouveau rôle de l'Etat", Le Monde 17 Decembre 1999.

2. Phillippe Pons & Pascale Robert-Diard, "Front commun Paris-Tokyo face à la mondialisation", Le Monde 22 Decembre 1999.

3. Tony Blair MP, "Address", World Economic Forum, Davos, Switzerland, 28 January 2000.

4. Anthony Giddens, Runaway World: How Globalisation is Reshaping Our Lives, Profile Books, London, 1999, p. 7.

5. Robert J Samuelson, "Globalization's Dual Power", International Herald Tribune, 4 January 2000.

6. 'Cohabitation' meaning the sustained periods in the 1990s when France elected President Chirac from the right while also electing a series of Socialist majorities in the National Assembly - requiring the appointment of Prime Ministers and Cabinets from the left.

7. For useful, succinct treatments of the trade, investment and capital market 'causations' of the globalisation phenomenon, see Bjorn Hettne, "Globalization and the New Regionalism: The Second Great Transformation," in Bjorn Hettne, Andras Inotai & Osvaldo Sunkel (eds.)Globalism and the New Regionalism, New Regionalism Series, Vol.1 Macmillan, London, 1999, pp 2-6, and Allen J Scott, Regions and the World Economy: The Coming Shape of Global Production, Competition, and Political Order, Oxford University Press, Oxford, 2000, pp 35-37.

8. A useful analysis of the impact of technology on the acceleration process is to be found in Ross Garnaut, "ASEAN and the Regionalization and Globalization of World Trade", ASEAN Economic Bulletin, Vol. 14, No. 3, 1998, pp 215-23.

9. For a strong defence of the continued survival and utility of the nation state, see Peter F. Drucker, "The Global Economy and the Nation State," Foreign Affairs, Vol. 76, No. 5, 1997, pp 159-71.

10. Hettne, p. 2.

11. See Ethan B. Kapstein, "A Global Third Way: Social Justice and the World Economy", World Policy Journal, Winter, 1998-99, pp 23-6, 30-3. On labour standards, see also "A Survey of Globalisation and Tax", The Economist, 29 January 2000.

12. The literature on shared sovereignty is considerable. See David Held, Democracy and the Global Order: From the Modern State to Cosmopolitan Governance, Polity Press, Cambridge, 1995. Also, Ulrich Beck, What is Globalization? trans. Patrick Camiller, Polity Press, Cambridge, 2000, p 124.

13. Samuelson, p 3.

14. Giddens, p 8.

15. James H. Mittelman, "Rethinking the 'New Regionalism' in the Context of Globalization", in Hettne et al (eds.), p 34.

16. Bjorne Hettne, 'Foreword', in Hettne et al. (eds.), p xiii.

17. Hettne, "Globalization" pp 10-11.

18. Ibid., p 20.

19. Ibid., p 20.

20. Hettne cited in Mittelman, p 30.

21. Sir Leon Brittan, "Globalization vs Sovereignty? The European Response", Rede Lecture, Cambridge University, 20 February 1997.

22. Hettne, "Globalization", p. 22. See Orwell's description of 'Europe' and the permanent state of war with the other mega-regions in 1984. See also Samuel Huntington's definition of the 'clash of civilizations' that outlines future mega-regional faultlines along the separation points between the major religions, cultures and civilizations of the world - and the source of long-term future conflict.

23. Peter Drysdale & Ross Garnaut, "The Pacific: An Application of a General Theory of Economics", in Fred Bergsten and Marcus Noland (eds.), Pacific Dynamism and the International Economic System,, Institute for International Economics, Washington DC, 1993.

24. Lyuba Zarsky, "APEC, Globalization and the Sustainable Development Agenda", Asian Perspectives, 22 (2), 1998.

25. For a succinct, elegant treatment of some of the policy challenges facing the centre-left from globalisation, particularly on capital mobility, tax and social insurance, see Kapstein.


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