The ebb and flow of globalisation

With the failure of the Doha round, the European Union struggling to negotiate an acceptable "reform treaty" and United States politicians trying to outdo each other in slowing the trend of American jobs going overseas, one could be forgiven for concluding the forces of globalisation are finally waning. Common sense would indicate otherwise.

One of Newton's laws of physics says every action creates an equal and opposite reaction. Ideas and philosophies have similar effects but inevitably the strength and value of ideas and innovations ultimately win out. That doesn't mean that the ideas and innovations that ultimately emerge haven't changed shape as a result of a robust process for debate and experiment.

It took a long time before the inherent weaknesses of planned economies caused the widespread collapse of communist societies.

Over two centuries ago Adam Smith identified the economic ideas behind what is required to create a modern competitive economy and why globalisation made sense. Brought up overlooking the North Sea, he could see how trade was the engine of wealth creation. He saw that an increasingly specialised division of labour would drive not only British cities and regions but also nations to seek their comparative advantage through innovation and trade, and he recorded those ideas in his book The Wealth of Nations.

Today, ironically, it was Nicolas Sarkozy, the new French president from the Right of politics, who succeeded in removing "free and undistorted competition" from a list of the EU's core objectives in its new reform treaty.

It was another new leader, British Prime Minister Gordon Brown, from the Left of politics, who apparently had to make a hasty call to Tony Blair to get the phrase reintroduced in a protocol to the deal. So, the tide of political ideas like globalisation will ebb and flow.

Common sense and the desire by poorer nations for development will lead to the continued advance of a more integrated global economy for several sound reasons. Bill Gates, speaking at an international conference supported by his foundation, said: "Your salary, historically mostly determined by what country you were in, in future will not be determined by that, but . . . by what education you've had."

His contribution to an electronic world has been increasing all countries' sense of connectedness. Advances in technology and communications act as an integrating force for globalisation. They also help deliver the benefits of education to more people.

Health is another driving force for globalisation. The prime minister of India has called for an "inclusive globalisation". By this he means a partnership between rich and poor countries that addresses the health and educational needs of the poor as well as the growth of their economies.

Though he is calling for greater interdependence for the benefit of poorer countries, the threat of avian flu illustrates there are potential benefits for developed economies in global public goods on which we all depend, such as health.

This same argument applies to other global issues, such as access to energy or other natural resources and the fight against terrorism. You could include action against the potential effects from climate change, provided we avoid the alarmists and focus on the evidence and cost/benefit analysis.

Common sense dictates that we should oppose those wanting to try again to isolate New Zealand. Most of the current damage to the productive capacities of our economy is because we want the benefits of some aspects of globalisation – cheap finance for our housing and consumption binge – but are not willing to tune our fiscal policies to recognise the realities of trading in a global economy.

If we did we would ensure policies favoured private sector investment rather than less productive government expenditure. It is fitting to finish with words from Britain's new PM – "I happen to believe that there is a commonsense world view of an inclusive globalisation founded on free trade, open markets, flexibility an matched with investment in equipping all people to master change – including environmental change – in both developed and developing countries."