Mark Rix

Keith Suter, In Defence of Globalisation [Frontline Series]. Sydney: University of New South Wales Press, 2000. Pp. 61. Paperback $12.95

Gregory W. Noble and John Ravenhill (eds.), The Asian Financial Crisis and the Architecture of Global Finance [Cambridge Asia-Pacific Studies]. Cambridge: Cambridge University Press, 2000. Pp. xvi + 310. Hardback $99; Paperback $39.95

Clear, straightforward introductions to, and cogent defences of, globalisation are few and far between. It would be even more unusual to find both these attributes in the one book. However, a work possessing just one of these would do, and on this score, therefore, Keith Suter’s new book held considerable promise.

In the Introduction to In Defence of Globalisation Suter reassures his readers that "globalisation is more beneficial for humankind than is commonly assumed", the main argument which runs through the book. However, having offered this reassurance, he goes on to state the obvious (which is not so reassuring): ensuring that "globalisation as a whole works for the benefit of ordinary people and not just the wealthy few" does present something of a challenge. Indeed the challenge is a formidable one, for, says Suter, "We need to find ways of making lemonade out of this lemon [i.e., globalisation]." If Suter’s unstated intention in framing the challenge in this manner was to present compelling evidence to back up his claim that "This is the era of the survival of the glibbest" (p. 46) then he has certainly succeeded. His book is very much a product of its age.

There is a glaring weakness in Suter’s overall argument and analysis which becomes obvious in the Introduction where he presents the outlines of his case against globalisation, at least the economic dimension of it. For Suter, we are now entering a new era in which the "key factor in world politics" is globalisation, "which means that national boundaries and national governments are losing their significance." Thus,

The new era is ‘global, rather than ‘international’. The word ‘international’ regards the country (or ‘nation-state’) as the basic building block of world affairs so that ‘international cooperation’ means governments working together. However, the new global era recognises that there are other actors on the world stage and that nation-states and their national governments no longer have a monopoly of power.

So far so good. Few could take exception to Suter’s contention that, under the influence of globalisation, the policy and regulatory power of national governments is being to some extent eroded, particularly in important areas of economic policy. But, in this respect globalisation continues, probably accelerates and deepens, a trend that has been evident for some time.

The erosion or constraint of the power of national governments is hardly a new phenomenon. At times, even Suter has to acknowledge this. It makes little sense, therefore, for him to assert (p. 20) that "national governments no longer have much control over their economies’, citing as an example the "inability of governments to guarantee full employment". According to Suter, this inability is the result of "transnational corporations moving industries to places with the cheapest labour". Certainly, the rise of transnational corporations and expansion of their activities has had a corrosive effect on the ability of many governments to be effective policy makers and regulators in important areas of the domestic economy, employment being only one of them. However, this has only hastened trends that were evident throughout most of the Twentieth Century. Moreover, national governments have long been unable to guarantee full employment, as the world economic crises of 1897 and the 1930s, to pick only two of the most glaring examples, demonstrated long ago, well before the era of globalisation dawned (even if its origins can be traced back to these and earlier times).

According to Suter, globalisation has three main aspects or dimensions. These are: economic globalisation, which concerns "transnational corporations and the creation of a consumption-dominated middle class"; ‘public order globalisation’ which deals with the way in which governments work together through organisations like the United Nations in seeking solutions to common problems such as environmental degradation and the spread of treatable diseases; ‘popular globalisation’, dealing with "campaigns by people power organisations, such as Amnesty International and Greenpeace." (p. 9) Suter believes that public order and popular globalisation "are helping to create a better world", for it is through these that peoples, governments and NGOs are able to impose constraints on the activities of transnational corporations and to guide economic globalisation in more constructive and beneficial directions. Suter is not very fond of national governments, political parties and politicians, for he regards them as being irrelevant, interested only in advancing their own power and privilege, and too narrowly focused on what it takes to win elections, but this does not sit well with his support and enthusiasm for public order globalisation. For without national governments, and the structures, institutions, and actors which constitute them, there would be no public order globalisation to speak of.

On the one hand, then, Suter seeks to convince his readers that the era of the nation-state is coming to an end, but on the other hopes to persuade them that closer cooperation between states and governments, which he regards as a positive aspect of globalisation, is helping to create a better world. Unfortunately for the cogency and consistency of Suter’s argument, the claim that the nation state is becoming obsolete and irrelevant is completely at odds with the assertion that a new era of positive and constructive international cooperation is dawning. Obviously, an isolated, individual government is relatively powerless in the face of the demands and pressures able to be exerted by transnational corporations. It makes sense, then, that governments seek to enhance their power and influence by working together across a range of specific issue areas. But it is perhaps a too obvious a point that there can be no international cooperation if there are no national governments. Moreover, evidence of even a modicum of international cooperation would suggest that governments and the states they administer are far from becoming obsolete and irrelevant, particularly if, as is often the case, such cooperation is beneficial to the nations and peoples they represent. Put simply, if international cooperation is generally worthwhile and beneficial, then so are the governments which make international cooperation possible in the first place.

There is an important link here which has been overlooked by Suter. Governments have shown an increasing tendency to cooperate with one another, across a rapidly expanding range of policy areas, because they are aware of the benefits of doing so. International cooperation is at its most effective and beneficial when the governments involved are effective policy makers and regulators in the domestic sphere and see the benefits which accrue to their constituent populations from having worthwhile policies in place in any number of different areas. In turn, cooperation can improve the policy making and regulatory performance of governments. Indeed, for states which lack or have only minimal policy making and regulatory compliance and enforcement capacities, international cooperation is often the surest way of building capacity. Governments have long recognised this, but the evidence for it has become even more compelling as the era of globalisation has opened up.

If Suter has no fondness for, and doubts the continued relevance of, the nation-state, political parties and so on, then he is positively glowing about NGOs and their role in the era of globalisation. Suter, as noted above, regards NGOs as being important agents of change towards a better world. Evidently, he believes that NGOs have far more to offer in this regard than national states and governments, and the international organisations they constitute. According to Suter,

NGOs are the most important way of mobilising public opinion and, in focusing attention on a problem, they are a growing force in global politics. They are adept at attracting media coverage, appeal to people who are disenchanted with the usual party political process, and provide a sense of vision and continuity that outlasts the short-term perspective of governments. (p. 35)

There is no doubt that all of these are important and endearing qualities, that help to explain why "Hundreds of thousands of people contribute to NGOs in this way [through voluntary service and donations of money and gifts-in-kind]—this is in stark contrast to the lack of involvement most individuals have in the processes of governments." (p. 36) However, it should perhaps be pointed out that this is a stark contrast only if it is forgotten that most people are voters, taxpayers and law-abiding citizens.

There is of course no denying that NGOs do play a very important role, in national politics and internationally, but it is not an autonomous one. Whether or not their leaders and members are prepared to admit it, the activities of NGOs are always designed to influence the behaviour of national states and governments or international organisations. This is so even when the ostensible targets of NGO protests and publicity campaigns are large, transnational corporations. For, the point of such actions is to convince or compel governments to enforce compliance with their laws and regulations, to prosecute offenders for their transgessions, or in other ways to punish and penalise law-breakers. The mere threat of such sanctions can have a deterrent effect, but more often requires much more concerted action. Suter is surely correct in suggesting that NGOs can play a role in curbing the influence of transnational corporations. (p. 54) But he misses the point when he asserts that "NGOs provide those people who disagree with their government’s policy with an alternative—whether on environmental issues, anti-nuclear sentiments, or a range of others." (p. 41) NGOs are not an alternative to governments, rather they are an avenue by which citizens can openly express and demonstrate their opposition to the decisions and behaviour of the policy makers and regulators who claim to act on their behalf. In other circumstances, NGOs fill the gaps in welfare and service provision left by negligent governments, but even here usually also attempt to have the authorities live up to their obligations. In the end, NGOs seek to make national and international law-makers and regulators more accountable to the people they represent. They provide no real alternative. As for accountability, many NGOs themselves still have some distance to travel down this road. And, just who are NGOs accountable to anyway?

There is now an abundance of books purporting to explain why the Asian financial crisis occurred, laying out the lessons that are to be learnt from it, and recommending measures that should be taken at both the national and international level by public and private agencies to prevent a recurrence of this sort of calamity in the future. However, few of them are at once readable, informative and thought-provoking. It is refreshing, therefore, to review a book that succeeds on each of these counts.

The Asian Financial Crisis and the Architecture of Global Finance resulted from an international conference held in Melbourne towards the end of 1998. Organised jointly by the Department of International Relations of the Research School of Pacific and Asian Studies at the Australian National University and the Monash Asia Institute, the conference brought together economists and political scientists who were experts on the crisis economies or in the field of the political economy of the global financial system. The book retains this blend of economic and political expertise, and it is certainly one of its strong points. Too often in debates and analyses of the Asian financial crisis and its aftermath the economists have been given centre stage, leaving little room for informed analysis of the political dimensions of the catastrophe. The inclusion of political factors in explanations of the crisis typically involve off-hand references to such ill-defined diseases as "crony capitalism" and "weak leadership". There is usually a lot of misplaced Western triumphalism and self-righteousness in all this, which not only does not cast much light on why the Asian economies had gone belly-up but also blinds those who chuck the biggest stones to the fragility of the glass houses in which they themselves live. This is not for one moment to deny that cronyism, weak leadership, corruption and the like did play their part in the crisis. It is to suggest, however, that if these factors are to be used in accounting for the crisis, then they have to be understood in the context of the individual Asian political economies and the separate (if related) histories of their development.

It is one of the great merits of the The Asian Financial Crisis and the Architecture of Global Finance that none of the articles included in it goes in for one-size-fits-all accounts of the problems of the Asian economies which led to crisis. All also show an awareness that some of the weaknesses and problems in systems of prudential regulation, policy frameworks and bureaucratic capacities which characterised the crisis economies in Asia are not confined to that part of the world but can also be found in Western economies. The book offers a combination of: general overviews of the crisis (Gregory W. Noble and John Ravenhill, Chapter 1 and Stephen Grenville, Chapter 2); comparative studies of a number of the Asian economies, that include Korea and Thailand (Stephen Haggard and Andrew MacIntyre, Chapter 3), Korea and Taiwan (Gregory W. Noble and John Ravenhill, Chapter 4) and Indonesia and Korea (Thomas M. Callaghy, Chapter 10); and, analyses of the regional giants, Indonesia (Natasha Hamilton-Hart, Chapter 5), Japan (Jennifer A. Amyx, Chapter 6) and China (Hongying Wang, Chapter 7). The chapter on the International Monetary Fund in the wake of the crisis (Barry Eichengreen, Chapter 8) is especially interesting.

The role and performance of the IMF came under intense scrutiny during and after the Asian crisis. Much criticism focused on the conditions that the IMF required a country in crisis to meet before it agreed to a ‘bail out’. Were the conditions unnecessarily harsh, and did they in fact have the effect of deepening and prolonging the crisis rather than helping countries to work their way out of severe economic recession without causing too much social turmoil and distress? In the light of the experience of the Asian crisis what can be done to improve the IMF’s performance and enhance its accountability? As Eichengreen observes in the conclusion to this chapter, one of the required changes in the international financial architecture is "repositioning the IMF as adviser on prudent regulation of the capital account and guardian against avoidable financial crises, not as rigid advocate of capital account liberalisation." (p. 191)

The chapters dealing with monetary governance and the new international financial architecture after the crisis (Benjamin J. Cohen, Chapter 9 and Miles Kahler, Chapter 11) are also very worthwhile. It should come as no surprise that the vexed issue of capital controls figures prominently in both chapters. For, the mobility of capital is one of the factors which accounts for "contagion"—the rapid spread of crisis conditions throughout the countries of East and South East Asia following the dramatic devaluation of the Thai baht in July 1997. These chapters take up some of the issues raised in Stephen Grenville’s earlier chapter on capital flows and crises. How should banking and financial systems be strengthened? How can capital controls be effectively applied? What can be done to improve the performance, accountability and transparency of international financial institutions like the IMF? What can be done to ensure that the lending policies of private financial institutions do not in the future contribute to crisis as they did in Asia, but rather help to prevent it? As elsewhere in the book, the discussion of such questions is not conducted in a political vacuum. Rather, there is an honest, and sympathetic, appreciation of the political realities and constraints which would hamper the introduction in the short term of more effective controls and regulatory systems in the Asian economies—and the global economy.

After reading The Asian Financial Crisis and the Architecture of Global Finance it becomes clear that, contrary to Keith Suter’s pronouncement, this is not the era of the survival of the glibbest after all. Precisely for this reason, In Defence of Globalisation will quickly join the ever-expanding ranks of ephemeral, and soon forgotten, works on the subject of globalisation.

Mark Rix teaches at the University of Wollongong