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Professor Ian Goldin
Professor of Globalisation and Development and director of the Oxford Martin School, University of Oxford
Chaired by Fabian Hamilton MP
Wednesday 9th July
House of Commons, London
(Co-written by Quentin Wight)
Fabian Hamilton MP
Good evening, ladies and gentlemen. My name is Fabian Hamilton; I’m a member of parliament for Leeds North-East. It’s my pleasure and privilege to chair our meeting this evening and I thank the Henry Jackson Society very much for organising it, as you can see they’re advertising themselves behind me here [points at the event banner].
This evening, we are very fortunate to have Ian Goldin with us. He’s the director of the Oxford Martin School and Professor of Globalisation and Development at the University of Oxford. He has served as vice president of the World Bank and as an advisor to President Nelson Mandela. His many books include: ‘Divided nations: Why global governance is failing and what we can do about it’; ‘Globalisation for development: Meeting new challenges’ and ‘Exceptional people: How migration shaped our world and will define our future’ – and let’s hope Nigel Farage reads that one. Professor Goldin will speak for about 20 minutes and then we’ll take questions and answers. Professor Goldin?
Thank you very much; it’s very good of you to chair this, and also to the Henry Jackson Society and to everyone for coming. Let me spend a brief time talking about this new book, ‘The Butterfly Defect’, which Princeton University Press published a few weeks ago, to give you a sense of why I wrote it, what it’s about and where I think it will take us.
The reason I wrote this book is because I believe passionately in globalisation. I believe it’s been the most progressive force that humanity has had in its history. By globalisation I mean integration, openness and connectivity. People define globalisation in numerous ways, but that is how I define it. I am interested in preserving and advancing the openness of societies, the way in which ideas travel across national borders, the way that products, goods and services travel across national borders, and of course ensuring that we are able to harvest the gains more widely in the world. The reason I believe that this is the most progressive force is because the evidence shows pretty closely that it has led to more rapid human development than any other type of force in history. By this I mean, on virtually any indicator you look at, the progress achieved since the Berlin Wall came down has been more rapid than any other period in history. The Berlin Wall that came down almost 25 years ago now, to me, symbolises walls coming down everywhere. And of course since that time and the end of the Cold War, about 60 countries have become democratic around the world – across Latin America, Africa and Asia democracy has blossomed.
I’m a South African. I’d left South Africa in 1979 to come to the UK in exile after fighting apartheid. I thought I would never go home in my lifetime, yet I’ve had this remarkable experience of being able to go back and work in the government of President Mandela in 1994. What I didn’t realise at the time was that that was the result of a global systemic change. It would not have happened, I believe, if the wall had not come down. It was part of a global process of openness, connectivity, and principally the flow of ideas, but also the reduction in barriers to movements of people, capital, goods and services. Even societies which are not democratic have opened up over this period as well. Of course we think principally of China in that respect which has had a more rapid opening in many respects than many of the democracies. Certainly, if you look at trade for example as a share of GDP, it has opened more rapidly than India.
When you look at the data and look at things that matter, like poverty, which is the number of desperately poor people living under $1 per day, the global number has gone down by about 300 million people over this period of time despite the world’s population increasing by about 2 billion. This has never happened before. One of the reasons population has increased so rapidly is also good news, which is longer life expectancy. The spread of things like vaccines, good ideas like washing your hands prevents disease – complex ideas embodied in vaccines, but as well as ideas that shape societies and allow them to grow much more rapidly. Average life expectancy has increased by over 20 years in the world over the last 30 years or so. Again, this sort of pace of improvement is unprecedented. The number of illiterate people in the world has gone down from about 50% to about 20%.
Remarkable changes in our lifetime caused because we are sharing ideas more broadly, and I believe this will continue, indeed I believe we are living in a new renaissance where innovation and improvement potentially increases if we are able to maintain this integration. This has been the subject of my three previous books: ‘Divided nations: Why globalisation is failing and what we can do about it’; ‘Globalisation for development: Meeting new challenges’ and ‘Exceptional people: How migration shaped our world and will define our future’.
However the reason I wrote this book [The Butterfly Defect] is because I believe that all of this gain is at risk. We are at severe risk of not understanding the emergent properties of globalisation; that it is assumed to be benign but in fact it embodies some very worrying and destabilising tendencies. Unless we are better able to manage what I call ‘the Butterfly Defect’, the systemic risks inherent in the system threaten to overwhelm us and put back many of these achievements in a number of ways. We see in the politics of today, which is increasingly fractious politics, a far cry from people feeling more globalised, and that globalisation brings benefits but instead [there is] a great mistrust of it. People wanting to put back up the walls in many respects – protectionism, nationalism and xenophobia are on the rise. So we have this increasing tension between a system that I believe requires increasing coordination to be sustained and a politics which is increasingly fractious within countries and between countries, highlighted by the fact that the amount of investment in our societies towards international coordination is going down not up.
The book looks at a number of reasons why systemic risk is rising, but in addition to that it has an overlay which is about complexity and the concept of systemic risk. More and more openness and connectivity bring with them more complexity, attribution gets more difficult, cause and effect, and it’s not surprising that politicians here in Westminster and elsewhere find it increasingly difficult to be able to honestly say to their populous “I can shape your future”. This is because the forces that shape our future will not come from Westminster; they will come from other places, from across our borders, both in terms of the opportunities, the jobs, investment, new inventions and vaccines that will give us better lives etcetera, but also the risks. So cause and effect, attribution, the power of relationships change dramatically. I believe that the political response to pull back is the wrong one.
Complexity has to be managed and the question of course is how to do it? I look at a number of case studies in the book – each chapter is a case study – and it draws very heavily on the academics in the Oxford Martin School. The Oxford Martin School is the most remarkable place for those of you that don’t know it. It’s about 300 academics in Oxford working in teams to address the great challenges of climate change, unemployment, pandemics, cyber-threats etcetera. So we have academics working across the board and the question I ask them is ‘How will these challenges be managed?’ And the answer uniformly is that it will not be managed out of Westminster alone, or out of the UK business alone, but instead it requires a coordinated effort.
The first chapter [of the book] is about these broad principals, the second chapter is about the financial crisis. I think that we urgently need to learn lessons of the financial crisis that have not yet been learnt or appreciated. What’s remarkable about finance is that it is at the frontier of globalisation. It is the most globalised of the systems but it’s also actually, in many respects, the most sophisticated of the global systems. If you just think about the UK for a minute, the Treasury and the Bank of England are the strongest of the government institutions, at least in the public world. The same is true in all countries; in the US the Federal Reserve, the Treasury etcetera. At the global level the IMF, the World Bank, the Bank of International Settlements – their counterparts at the global level – are the strongest by far of the global institutions compared to the UN institutions and many others.
They are extremely well skilled: you will not be aware of how difficult it is to get a job within the Bank of England, say, or the IMF. Thousands of young professionals apply for every young professional’s job. These are smart people – these people have all the data. As you will be aware as well, the data requirements in finance are greater than in many other sectors. They have the resources; after all, the banks print the money and the IMF prints the SDRs. It’s well paid.
This is a good elite at the national and at the global level of people. They are also extremely joined up. All the central bankers of the world know each other – the key ones and finance ministers – and they play golf once a year at Jackson Hole together, they have annual meetings and quarterly meetings etcetera. They speak on the phone regularly.
So this is a global community of likeminded people who know each other, who are very sophisticated with all of the data in their hands. They also have a great attribute, which is that they have clarity of mission. Their mission is national financial stability and global financial stability unlike many other institutions which have all sorts of confusion into what they are meant to be doing.
One has to ask the question of how is it that 20,000 PhDs with all these smart people, with all the data etcetera, managed to get it so wrong. If you read the evidence of someone like the US Treasury Secretary to the US Congressional Committee on why they let Lehman go he says quite frankly that “we did not know what was happening”.
So what is going here? You have this wonderfully sophisticated group of people that don’t know what’s going on. I believe there are a number of attributes that we can learn lessons from, that we need to think across to other systems on. The first is about technological change and old men like me and others trying to manage young kids developing, in this case, what Warren Buffet called “the weapons of mass destruction” and new instruments, using computer algorithms that the elderly order committees and others do not fully understand. So technical change, and the pace of technological change, in this case exponential with computing power.
The second is not too little data but too much data. Blinded by the blizzard – the inability of policy makers to drink from the fire hydrant; to discern what is important. The third is ideological capture and groupthink. The fact that these people were so likeminded in the end wasn’t an asset, it was a problem, and their economics profession was fuelling their misperception. This allowed people to think that asset bubbles were somehow rational when clearly they were not.
There was political short-termism. The famous “you cannot take away the punch bowl while the party was still going”. It was hoped by the politicians that the consumer bubble would continue until at least the next election and after it – the ability to kick things down the road in democracies particularly [is] a source of problem rather than opportunity. And I believe there was a complete misperception, which was related to some of these issues in regulation, national regulation for a system which was global and pulling back not only deregulation but not wishing others to involve themselves and of course the race to the bottom, UK competing with the US, Frankfurt and other places.
Why this matters is because if one believes that these things are happening in other areas, the question is, “will there be another financial crisis?”, “where will it come from?”, “are what’s being put in place now the right measures to stop the next financial crisis?” – I argue in the book that I don’t think so – and the second is “so what does this mean for other risks and what are these risks?”.
The next chapter of the book looks at business practices and in particular global supply chains. Part of what’s happened, and this is a short-termism on the business dimension, is how market to market accounting and quarterly reporting, the other drivers of valuation, make it increasingly difficult for businesses to set aside resources to build resilience. In other words, working capital tied up is working capital wasted. Lean and mean is the way to go, you need to show your profits and your bonuses, particularly in banking, but not only banking depends on short term success. What this means is that you cannot have spare people, capacity, supply range, etcetera and increasingly these are fragmented. Outsourcing of responsibility for what is effectively a public good which is an infrastructure of supply; be it logistic systems, be it road, rail etcetera but also in many other dimensions.
So we have very brittle, long supply lines and we also have increasing vulnerability to rippling and amplifying shock. So in Oxford, our local Mini factory which is a wonderful factory is hyper-dependant on supplies from many places which can be affected very quickly by disruption. Similarly, our local hospital which in a sense has been corporatised in the way they manage finances requires daily deliveries of multiple things.
The next chapter of the book is about pandemics and health. Pandemics are the most serious of all the systemic risks created by globalisation because the more connected and open we are, the more concentrated we are and the more we live in urban areas, the more vulnerable we become. Our pandemics group has modelled the swine flu that emanated from Mexico City and demonstrated that it exactly replicated airline traffic, with great spreaders of global assets and people like JFK and Heathrow becoming the super-spreaders of disease. We have also modelled that anything can be effectively anywhere in under 45 hours. So this is an enormous challenge in the way that one thinks about risk, opportunity and coordination.
The next chapter of the book is about infrastructure. Cyber is probably the most important dimension of this and has become the new nervous system of the world. Some things have heavy management systems like finance, very sophisticated although I’m not saying that they are the right ones, other things have none and cyber is an example of none. There is no global management system for cyber; it’s virtually an anarchic system with naming but no-one responsible for the world’s cyber infrastructure. The coordination around things is very difficult, so if someone takes money out of your bank account from some foreign country, this is highly problematic for finding who it is and how etcetera. There are a series of issues around cyber which urgently need resolution because we are becoming more interdependent with it. Cyber is not the only system though, of course airport systems, transport systems, all of these are very important.
The penultimate chapter is on social risks and inequality. I argue in the book, and I believe this is the case, that globalisation is increasing inequalities within countries. This is one of the reasons that social cohesion is becoming more and more difficult. In other words, people do not feel they have a vested interest in the outcome which is shared across society. Certainly if you are one of the 60% youth unemployed in the south of Europe you wouldn’t feel, rightly, that globalisation had done much good for you.
Why is globalisation increasing inequality? Because the train is moving so fast that if you do not get on at the station then it races away from you. In other words, if you do not have the skills, geography, location and the ability to benefit from globalisation and harvest the opportunity, if you are too elderly to be connected to the internet or you are in a location which has not benefitted from many other the things which lets say London has benefited from, you are left further and further behind. This is not about absolute poverty this is about relative poverty. This is a very big issue for society because if you believe you need a common project around why globalisation works, if it’s clear it’s not working for big swathes of society, then convincing them that more openness is good is highly problematic.
A related dimension of this which I discuss in the book as well is the relationship to the environment and climate change. We impact on climate change because of globalisation because of our very rapid economic growth. The environment in turn impacts on us, through floods and through other affects which increase systemic risk as in Hurricane Sandy or the floods in Thailand. What’s also very important in this is to understand that the sum of individual rational actions does not lead to collectively good outcomes.
One of the things that globalisation has highlighted is this [inaudible] problem. In other words, it makes a lot of sense for the whole world to climb the energy curve, people have to escape poverty, they have to get energy, they have to start cooking their food and get transport and all these things are good. But if everyone does it, it doesn’t add up because of the resource constraints. So you get a tuna auctioned in Tokyo for £1 million in January this year, you get rhino horn costing more than precious metals, and you get other spill-over effects which will possibly affect us all negatively as well. For example, it’s rational for us each to take antibiotics, but if everyone in the world does that none of them are effective anymore. This tension between individual choice, freedom, and collective outcomes gets grossly amplified when more and more people consume things – particularly if driven by market prices. So the role of regulation becomes stronger and stronger the more connected and the richer we are. We have no impact on others if we are poor peasants in Africa, we affect each other’s lives dramatically the further we go up the curve of income and connectivity.
That applies dramatically in the case of climate change, of course. The sum of individual rational actions – to get a microwave, to get a fridge, to get transport – can lead to collective disaster.
So the role of government becomes more important, the strategy of how one and what one regulates, the role of prices, pricing externalities, understanding the system and the fragility of it. So what the book is about, is trying to highlight the rather best hidden – if you want to sleep at night – underbelly, as it were, of globalisation and its success. And I write this as a passionate believer in it, not because I’m anti-globalisation. On the contrary, I do believe in it, but I believe it’s very fragile and has emerging properties which are not yet understood, and these threaten to be its undoing. I hope you find it of interest.
Fabian Hamilton MP
Thank you very much. [Applause]
Well ladies and gentlemen we have limited time for some questions and discussion. I will make sure Professor Goldin is able to leave to get his train to Paris. Who would like to kick off? We can take three questions at a time.
Question 1- Euan Grant, formerly a strategic intelligence analyst for HM Customs and Excise
Thank you very much. Who’s listening to you and who isn’t? Particularly in relation to the point you made about central bankers and financial institutions that they’re joined up and talking to each other; I’ve seen a number of international bodies where that isn’t the case.
Professor Ian Goldin
The point about who’s listening is absolutely the right one. I am also interested in your customs background because part of the story which has been written states that, let’s say, 10%-20% of all flows are illicit. The more flows you have, the more illicit flows you have. This is true wherever you are. I think it’s actually higher in finance than in trades, goods, services and people. It’s part of the same story that the underbelly is risk. This book has only just come out so I’m glad you were all listening, thank you for coming. I hope it resonates widely.
It’s allied to another project which relates closer to your point [points at Lord Philips] that the Oxford Martin School has done which is the Oxford Martin Commission for Future Generations which has been chaired by Pascal Lamy and two Lords, Rees and Stern were members of. It is trying to think of new ways of governance, it has had over a million downloads. We had a fantastic session with the joint intelligence community in Washington recently. There has been a lot of interest on that aspect of it, this [points at The Butterfly Defect] has only just come out and I shall wait to see who is listening.
Question 2- Lord Andrew Philips, Liberal Democrat member of the House of Lords
One word that you didn’t mention was ethics, or morality. Having been living in the city of London as a lawyer for 54 years, it’s not a pretty sight, and what strikes me very strongly indeed is the communities; loyalties and values beyond the self; no organisation however complex and full of smart elite characters can survive. This is because the absence of ethics in the financial markets of London isn’t half as bad as most of the other markets in the world which are not sustainable. You talk of more and more regulation, well regulation is ineffectual unless it is upheld and sustained consistently and with integrity. The more you have, and I say this as a legislator, the less it is implemented and the less it is enforced.
Professor Ian Goldin
In response to Lord Philips question I am certainly not arguing for more regulation, I’m arguing for better regulation. You cannot fight complexity with complexity. The big question is therefore what sort of regulation do you develop? Part of my answer is that it needs to be more valued-based, more ethical-based and more judgement-based so that intuition and rules become more important. Everyone knew that there was a housing bubble, but no one could prove it because the models weren’t showing it, but the models may have been wrong. If people would rely more on intuition, that would be important. Ethics does become absolutely central, what is right and what feels right for society.
That raises a bigger question which is probably in your values bucket which is “can we agree global coordination rules if we don’t share the same values?” This is something that Pascal Lamy of the World Trade Organisation felt very strongly about so now a new rising topic is the discussion on values. He feels, for example, after trying to get the Doha trade talks going for 12 years and didn’t succeed that the primary reason for the talks failing was because we do not share the same values. My own take on this is that values are so complicated and so big that if we start there we won’t be able to do the low-hanging fruits, but I focus more on operation issues in this book.
Question 3- Sir Thomas Harris, Vice-Chairman at Standard Chartered Capital Markets
First of all, thank you very much for your comments and I was delighted that you preferenced your [inaudible] with the benefits of globalisation. There is one risk that you perhaps deliberately didn’t touch on which is the risk that globalisation itself will fail. This is the second wave of globalisation – the first was at the end of the 19th century and beginning of the 20th century. In this institution there was a Battle Royale played out over Joseph Chamberlain’s proposals to tariff reform. It was a massive political issue and the anti-globalisers were defeated. For the liberal government of 1910, one of the great issues was free trade and in 20 years the whole system as we know it collapsed. Given that list of specific risks that you touched on how confident can we be that this second wave of globalisation will survive or will we face in 20 years a similar reaction?
Professor Ian Goldin
Globalisation has certainly had waves. I wouldn’t say this is the second wave, I would say this is the fourth depending on how you define it, but it doesn’t really matter. But yes, big waves and then great retreats, the purpose of the book is to say how this thing could come unstuck and we could de-globalise. There is historical evidence of de-globalisation and I think there is evidence from the present time. The politics of the UK can hardly be described as politics of globalisation at the moment. Scotland is not trying to be more integrated with the rest of the UK so I think we are at a crossroads with globalisation and if we are unable to manage systemic risk, voters will turn their back on globalisation because they will see it as a threat, not an opportunity. They will want higher walls around them. I believe this is highly counterproductive because they will be less effective at managing the thing around them which can harm them in our societies. But I think it’s a possible political response so we might see a period of de-globalisation.
I agree with you on pretty much all you say and about the value-based stance on it, and forgive me if I’m being [inaudible], but I see there as being an [inaudible] at the government level [inaudible] dilemma. For example climate change, if all seven countries agree to reduce emissions including China, not only is the effect cancelled out by all those countries that participate, but they would actually lose out from participating. How would you go about making baby steps towards overcoming that political unwillingness to cooperate? And perhaps something on whether a global legislation would be enforceable.
Professor Ian Goldin
This is where you want the Oxford Martin Commission for Future Generations and I encourage you to look at that. Coalitions of the working or creative coalitions are the way to go about it. These do not necessarily have to be governments; these could be cities or big corporates etcetera. We don’t need 202 countries in the UN system to agree to everything, we certainly don’t need them to agree to climate change agreements where 12 countries account for over 85% of emissions. You need the people in the room that are going to effect change, and it doesn’t have to be all of them. If you have a conflict of agreement let say between the US and China where China refuses an agreement, you still have the major states and major cities in the US to step up to meet the targets. Would that be a step towards a solution? I believe it would be. I think we need to get more innovative about these coalitions.
Now on some things like finance trading you need one group, on tax evasion you need a completely different group. You would need multiple countries to be part of a tax evasion group, but you wouldn’t need those same countries to be part of a trading agreement where you are trying to manage derivative trades for example. Some things do need global agreement like pandemic management; you really have to have to capability to go to any country at any time but that doesn’t mean that all countries have to have the capacity or the willingness. So I think there is much that can be done, and I do believe that if one is going to have free [inaudible] that doesn’t mean one can’t have the first movers. There are various other ways to bring free riders to the table; through their citizens, through their cities, through [inaudible] and through allowing them entry and that’s often the way trade negotiating takes place for example.
Question 5- Oscar Isham, Henry Jackson Society
[Inaudible] Stats show that if you live within London and you are well educated, you are more likely to support EU integration then otherwise. My question is how do we fix the problem of people who have been left behind or have ‘missed the train’ as it were? How do we pick them up so they can get back on the train and take them towards globalisation as everyone else has done?
Professor Ian Goldin
I think you [points at Fabian Hamilton] serve on the development committee and I work at CDC as a non-executive director, and that is part of what these institutions are about; how do you focus investment on these types of people around the world that are left behind? Within the UK it clearly needs to be part of the regional policy, part of the skills policy and part of the housing policy; if people can’t migrate to where the jobs are that’s a big issue.
But one also has to accept there needs to be social protection. There are vulnerable people, for example the miners in the UK lost their jobs as they did in Europe, and the steel workers lost their jobs etcetera; society has to care. It’s in the benefits of society for us to be no longer producing coal in the UK in the way it was produced in the 1970’s and before and society has to pay for the adjustment costs. This is typical in trade theory; that there will be losers. What hasn’t happened is the benefits of globalisation have not been used to bring the losers into it and that partly goes back to the tax issue that revenue is derived from globalisation or not in the same place as the costs. This is one of the reasons you need coordinated policies on the revenue side; you do need the money to spend.
I would be interested in your definition of democratic. Clearly it shouldn’t be just because a country calls itself democratic and unfortunately these days religion seems to have become an overriding influence on certain so-called democracies.
Professor Ian Goldin
This question that, far being from me, sitting in the Houses of Parliament and having to answer a question of: “what is democracy?” Clearly the term is severely undermined when you look at countries like Russia or Egypt and other places that call themselves democratic. I think I will just pass on that question, it’s a good question but I do not think I am the one to answer it at the time.
Question 6 continued
What about the effect of religion on government policies?
Professor Ian Goldin
Religion is also immensely complicated and there are all sorts of evidence of where it has been extremely beneficial and there are all sorts of places where it has been negative. I think it is difficult to generalise about it.
I am concerned about how we protect the environment? The preservation of bees and seed alternatives etcetera; how do we deal with that?
Professor Ian Goldin
The interaction of globalisation with the environment is a complex one. What we do to the environment, because we are becoming much more effecting in that we are much wealthier and there are many more of us, is very great and there are lots of examples of this like biodiversity loss. Climate change is another, pollution and destruction of the oceans, the forests another, etcetera. Then in turn the question of what the environment will increasingly do to us because of it being destroyed and then these feedback loops in it. There are as well problems related to genetically modified organisms and biodiversity; this is absolutely the case.
Now the question is: “what are the trade-offs and where does one start around this?” And what is a global resource compared to a national resource? Is the Amazon the Brazilians’ responsibility or is it a global responsibility? Who’s responsible for the oceans, the atmosphere, for biodiversity? Then you get into these very complicated issues around, for example, genetically modified organisms. The US and Europe have two totally different approaches. How does one manage that in a globalised world? I discuss these issues in the chapter, and I think these issues are manageable but they require an understanding of completely what’s going on and that the politics and the science are, in many dimensions, completely divorced.
Do you look at how political centres of power interact with the global monetary system? One of my thoughts has been that the political centre, the Westminster village, doesn’t really understand the city of London, or Washington DC doesn’t really understand New York as an example. To add on to that, if we had someone like JP Morgan here he probably wouldn’t understand his own bank never mind the complexities of how his bank interacts with other banks. So I was just wondering how you have this cross-fertilisation of knowledge in a globalised world even when the money world and the political world don’t really understand each other.
Professor Ian Goldin
I think the big issue is that, not only do people operate in different roles, but that the skills mismatch is enormous. How do people in Parliament understand derivative trades or cyber or pandemic threats? There are specialists, particularly in the House of Lords like Lord Krebs for example who understands some dimensions of this, but this is very difficult. And of course you are responding to very different people; business people responding to shareholders and politicians to the constituents. These are different audiences with different information and cares. Often of course shareholders are also constituents but they are wearing different hats. So I think skills; who makes decisions, who are the regulators, the renewal of skills – I think we need to think very deeply about civil servants.
Civil servants were always the people that guarded the long term government, certainly in the UK, something that the UK was so proud of – justifiably so. But I believe this is being eroded, that the updating and renewal of skills is being eroded as well as the power of the civil servants since override [inaudible] is being eroded. This further increases the risks associated with the independence of these systems and skills of the Civil Service. Not only is this in the public world, but also true in the intelligence service even more so the case. So I think this is a very important area in how these things join up.
Question 9- Law management consultant
Over the last few years I have been doing a lot of pro-bono work across Sub-Saharan Africa helping law firms there become more competitive and manage themselves better. Speaking to those people and others in that region, one gets the feeling that this globalisation is a new form of colonialism and is extractive in nature. You hear the opinion that nationalisation and protectionism is exactly the right response. I would love to hear what you say if they put that to you.
Professor Ian Goldin
I wouldn’t say that developing countries as a whole don’t like globalisation. Indeed I have just come from a meeting with the Chinese and Brazilian central bankers listening to some of the Western central bankers and saying how this isn’t the conversation we understand; this has been the best news for us. When you look at their growth rates and poverty reduction, you can understand why they say that. Now, it’s different in different sectors with all sorts of colonial hangovers, but I think those people are the minority. I think most people in the emerging markets worry about the failure of the advanced economies and how they manage themselves.
It’s an irony for those of us who were in the World Bank in the 1990’s telling people how to get their economies into order and so on, wrongly, so the shoe is very much on the other foot now. Now they worry about us, the Chinese worry about the US economy, the European economy and the Japanese economy’s instability and the failure to manage. At that high level I don’t think people are blaming globalisation, I think they worry that it might be reversed. This would be disastrous for China, for Brazil, for Africa. But that’s not to say openness is good, in this book I make the point very strongly that that is crazy. One of the reasons these countries have succeeded is because they have not had open capital accounts that have policies in place that insulate themselves. Now governments need to decide how they engage with globalisation and certainly opening yourself up to anything, not least to allow people not to pay taxes for example, is a recipe, I believe, to make sure globalisation doesn’t work for your citizens.
Fabian Hamilton mp
We have time for one more question. Yes sir.
I was wondering if you could give a little personal perspective and colour around your time with Nelson Mandela. What was maybe the biggest lesson you learnt from that wonderful man? Can you tell us something about him?
Professor Ian Goldin
He did stand head and shoulders above anyone else. I had the huge fortune of spending a lot of time with him, including coming on a state visit to the UK, and it was lovely to see the statue across the square here of him which I attended the unveiling. There were a number of attributes: one, he was entirely non-hierarchical and I’ve seen this in many ways. He would treat a Queen or a King in the same way he would treat his lowest junior member of staff and he genuinely felt that, he respected everyone.
The second, he was hugely inquisitive. I was trying to explain to him why they shouldn’t nationalise things in South Africa and why the savings rate and foreign investment was important, and it was like being interrogated by a lawyer for days and days. He was also not afraid to display his ignorance or desire to get to the bottom of something; never pretending he understood something when he didn’t. Then of course he had this extraordinary capacity for attention. Once he was satisfied he had huge loyalty, also at times not a good thing when he kept people in the cabinet that should not be in the cabinet out of loyalty to them.
Finally, he was just amazingly human. One of the most remarkable things about him is that he always remembered and knew the names of my kids, my wife and so on. The first thing he would always ask me whenever we met was how they were and he would he would follow up on things I had previously told him. This wasn’t just some sort politician being nice to everyone, this was a genuine interest in people and the ability to resonate in the most extraordinary way.
Fabian Hamilton MP
There is no doubt, ladies and gentlemen, that the best politicians anywhere in the world are those that take a keen and strong interest in other people and genuinely have an affection for them. I only met Nelson Mandela twice at that privilege, but everything you say is echoed by those of us who read his writing or were privileged to meet him. I want to thank you very much indeed on what I thought has been an enlightening, an educational and an uplifting session here at the Henry Jackson Society. Thank you, Professor Ian Goldin.
As you leave us, let me just reflect that a few years ago we had the late Eric Hobsbawm, the Marxist historian, and he made a very similar point to you about the tide of poverty being reduced in our lifetimes, and that his own father born in the 19th century could not have imagined the progress humanity would have made. I think you very much reflected some of those points. Thank you very much indeed.