This was a speech given to the West Australian Mining Club in Perth on August 30, 2001.
What is globalisation, anyway?
It all gets down to definitions, and more importantly whose definition? Globalisation is like planning. We are all in favour of planning if we think of it as being our plan for ourselves, but we are not so keen on someone else imposing their planning onto us. Similarly, those of us against globalisation are really against someone else’s inflicted version, imposed on us simply to serve their own ends. This is often the case with world trade organizations and governments. I am in favour of globalisation for lots of reasons that I’ll outline. I am so much in favour of it that I am actually doing something about it.
The globalisation that I am in favour of is defined by Professor Wolfgang Kasper in pages 84 to 85 of The Fortune Encyclopaedia of Economics published by Warner Books in 1993.
“…the phenomenon of globalisation, which makes it imperative for the immobile production factors to become internationally competitive. High labour costs, adversarial industrial relations, productivity-inhibiting work practices, a costly legal system, and a high tax burden are conditions that make countries unattractive to globally mobile factors of production. By contrast, low labour-unit costs and efficient administration are market signals with which the new industrial countries (especially in East Asia) have made themselves highly attractive to mobile resources. The influx of mobile Western firms has raised their productivity, which further enhances the attractiveness of these locations even if hourly wage rates are gradually rising there. Producers who are losing their locational advantage of being near the central markets can react in one or two ways. They can be defensive by, for example, “Korea-bashing” in order to obtain political patronage, tariff protection, or “voluntary” import restraints. Or they can be proactive and competitive, raising the productivity in the centre and specialising on those goods and services that still incur high transport costs and therefore still enjoy a degree of spatial monopoly. The mature high-income economies at the centre of the world economic system tend to have the best innovative potential, and they can use this to remain attractive in the era of globalisation. They are more likely to succeed if they abandon political and social regulations that impede innovation, such as a legal system that raises the costs of innovation. In time, competitive producers in central locations of the global economy will also discover that the competitive new industrial countries will develop high import demand for many specialties produced by the advanced central economies.
Economic theory suggests, and history confirms, that defensive responses are very rarely sustainable over the long term. Indeed, economic openness to trade and factor mobility has been the most powerful antidote to “rent-seeking” (the use of restrictive political influence to secure artificial market niches). In open economies political and bureaucratic power has been channelled in support of mobile producers and to create an investment climate in which footloose production factors can thrive. This explains why modern industrialisation took off in Europe, where small, open states were compelled by their citizens to develop institutions of limited government, the rule of law, property rights, and support for commercial competitors, whereas the closed economy of Imperial China stagnated under arbitrary despotism, despite the much more advanced state of Chinese technical know-how. Openness to trade and factor movements (with the help of the transport and communications industries that have made such movements increasingly feasible) have indeed been among the prime movers of economic progress.”
Economic freedom
What am I doing to promote the cause of economic freedom?
- I am encouraging people to attend the Walk for Capitalism. This is an event being staged in major capital cities throughout the world. Fifty-five cities are involved so far with an aim for 100. This walk is the free enterprise equivalent of the anti-globalisation protestors, whose bad behaviour has thrilled the world’s media. The free enterprise march will be so well behaved and civilized that you probably won’t hear about it at all, unless you participate.
- My other positive action is in regards to Mannkal Foundation bringing Prof Mark Skousen to Australia for a lecture tour of Australian capital cities this coming September. As one of the world’s leading free-market thinkers, he is also the keynote speaker of this year’s Australian Conference of Economists. Mark will additionally be speaking at a Mannkal lunch – “The Global Battle for Economic Freedom: Who’s Winning? Who’s Losing?”.
Now, why am I in favour of globalisation?
John Stuart Mill once said; “The only freedom which deserves the name is that of pursuing our own good in our own way, so long as we do not attempt to deprive others of theirs, or impede their efforts to obtain it.”
That’s the sort of freedom that true globalisation encourages. However, the disgusting behaviour of the anti-globalisation protestors which I confronted in Melbourne last year is despicable in that it deprives others of their freedom to associate and trade with each other. One billionaire meat producer is behind the carefully stage-managed protest movement and it’s all in the interests of protecting their meat cartel. When I queried one of the American-accented protestors last year on why he was part of all this, his simple comment was; “If someone offers you a paid holiday like this, wouldn’t you accept it too?”
His incentive was to see Australia at someone else’s expense and I admired his honesty. Incentives explain so many of life events. Incentives explain why higher prices generate greater supply and lower prices do not; why racism is overcome in a free-market where profit-seeking businessmen search for the best labour at the lowest cost; why students work harder in a class where excellence is rewarded and failure is penalised; why capitalist economies do better than socialist economies; why some people quit working to go on welfare and so on…
Incentive, which is simply the interest one has in one’s own improvement, will mould the future just as surely as it shaped the past. Dr Lawrence Reed of the Mackinac Centre for Public Policy has written extensively on the subject of incentive.
I’m also in favour of globalisation because I’m old enough to remember the rigidities and paralysis of the alternative that we endured over so many years. I am also aware of the tremendous cost to Australia if we fail to complete the reforms we have commenced.
The relevance of globalisation
Now, why is globalisation such a relevance to the distinguished Western Australian Mining Club? Our technological talents of exploration, mining and management skills have the ability to create wealth and benefits to all members of society in all countries. Our talents are among the most mobile skills and when the rocks of the world speak to us, they speak an international language.
Unfortunately, many of our members are suffering economic hardships as Australia’s mineral exploration industry declines due largely to the absurd and misdirected politically-inspired land access difficulties. Not enough is being done by our industry to explain to the Australian public at large the true cost of these and other political impediments. At the same time, many of the international opportunities screaming out for our technical expertise are turning sour through political greed, endemic corruption and economic illiteracy where so many newly emerging governments have not grasped the significance of appropriate land tenure and property rights.
Enhancing the economic literacy of our political rulers is a huge challenge but it is a challenge we should not abandon in the interests of all Australians. There exists a huge database of countless submissions to the Federal and State Governments from each of the State Chambers of Minerals, the Minerals Council of Australia and Association of Mining and Exploration Companies.
This information can be used again and again by us as individuals. Just think of these submissions as intellectual bullets ready to be fired. I may not live long enough to see a new enlightened political climate in Australia, but I am certain that amongst the other mineral-rich nations of the world, at least several will recognise the benefits to them of establishing mining legislation which will feature clear titles and property rights coupled with matching responsible regulation and appropriate incentives. Both of which we don’t have.
Those nations that get the formula right will receive such an influx of talented mining people that the living standards of those countries will, in a short while, be the envy of the world. Let us benefit from such globalisation and encourage such countries to emerge and lead by example. It is all about comparative advantage. Whichever country adjusts their settings just a little better than the next best, will receive the major benefits. Congratulations to whichever country gets it right, because I’ll see you all there!