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Uncertainties about the Course of Globalisation and the Weaknesses of the State

Uncertainties about the Course of Globalisation and the Weaknesses of the State

  • Salim Cripton Valá • Chairman of the Mozambique Stock Exchange

After the first two decades of the 21st century, we are witnessing the ever-present debate on the new contours of the globalisation process. The multiplicity of visions, perceptions and dilemmas about the direction of capitalist development overlaps with orthodox neoliberal thinking and the role that the state has played in the economic order. The current moment is appropriate for the emergence of new perspectives and paradigms that can provide answers to the challenges and problems of asymmetrical globalisation, which is in the process of being reconfigured, and to the always timely discussion of the role of the state in development.

States are now challenged to build development strategies and specific policies that take into account both domestic needs and their insertion into the international market, stimulating a resurgence of discussions around classic development theories. There is no doubt that a new trajectory is being drawn for the world economy in the “post-Washington Consensus period”, in which the gears and solutions of the past no longer respond to a new global economic, political and geostrategic context (Valá, 2021).

The debate around the role of the state is central to the case of Mozambique, since it is capable of promoting a break with negative trajectories and complementarities, and stimulating new and positive ones towards human development, inclusive economic growth and sustainable development.

The realisation that states can take on new and differentiated roles in their relations with the market and society is particularly important in low-income countries like Mozambique, which face the challenge of catching up in a politico-economic scenario of growing complexity and interdependence.

Throughout the 1990s and the first half of the 2000s, academics, multilateral agency officials and national policymakers were lulled into the assumption that the paths to solving the socio-economic problems of developing countries had been identified, and the basis for action had been built. It was almost inexorable that economic progress and poverty alleviation had to rely on institutional attributes such as the defence of private property, state reform, the boosting of markets, the rule of law and the establishment of liberal democracy. This intellectual matrix approached economic development as a phenomenon subservient to a kind of “endowment of institutional factors”. Mozambique experienced this reality with “flagship programmes” such as PRE / PRES, PARPA / PARP, and implemented privatisation initiatives, a market economy and the establishment of the democratic rule of law and a multi-party system. The fulfilment of these prescriptions has not ended poverty, brought stability, reduced social inequalities or even generated shared prosperity (Valá, 2019).

In opposition to this line of thinking, there are alternative perspectives that argue that successful experiences of economic growth result not from a pre-moulded set of legal-institutional arrangements, but from the ability to experiment with the arrangements, i.e. finding satisfactory solutions for the vicissitudes and particularities of the respective countries. The idea of development based on its own foundations assumes that the organisation of the economy and society is not a “closed book”, and that experimenting with new formulas can guarantee the flourishing of new paths and innovative solutions.

Experimentalism, adaptability, gradualism, acceptance of past successful experiences and international best practices, the definition of focus areas and imagination must be seen as real possibilities for building customised solutions to national and local needs, and the state must be at the forefront of this paradigm. For example, as Schapiro (2009) rightly advocates, a well-managed development bank can be seen not as a distortion, but as a national circumstance, set up to offer appropriate responses to the particularities of the country, the challenge of which is to overcome the tension between the desire for development and the lack of funding for SMEs and the promotion of local economic development. Concrete and adaptable instruments need to be created to solve specific problems faced by the country’s entrepreneurs in activities such as agriculture, fisheries, industry, tourism, mining, transport and logistics, communications, technology and construction, among others.

As the state, institutions and development are intertwined, societies need to seek and find their own paths, which requires the construction of a national development vision and project capable of guiding the adoption of a “Consensualised National Development Strategy” and the public policies that will support it. Changes to the political system, the institutional framework and the state apparatus must also be geared towards democratisation, decentralisation and subsidiarity, good governance, flexibility and entrepreneurial public management, as well as regional economic integration.

It should be borne in mind that a country’s degree of freedom depends on whether it produces and appropriates a certain amount of added value, made available through trade with other countries, with technology and innovation determining each nation’s share of power. For this reason, growth that is not linked to endogenous transformations will always depend on circumstances that favour commodity prices on the international market.

In fact, the importance of industrialisation has been a recurring theme in discussions on development over the last few decades and is clearly evident in the empirical evidence that shows that the countries that have developed have been those that have industrialised, adopting selective industrial policies. Carlos Lopes’ (2020: 107-108) view is assertive with regard to industrialisation as the epicentre of African countries’ development strategies, in the following terms:

“As African countries prepare to take their place in the future global economy, there is a real opportunity to promote economic transformation through a renewed process of industrialisation, more adapted to the realities of the continent. This happens by capitalising on abundant natural resources, adding value to them and, at the same time, introducing measures that mimic what other regions have done in terms of protecting fledgling industry.

[…]

The manufacturing sector has been the engine of economic development in most developed countries, and very few have achieved this development without a solid industrial base, to such an extent that the terms ‘industrialised’ and ‘developed’ are used synonymously when referring to a particular country.”

In the same vein, Ha-Joon Chang (2014) debunks the idea that we are living in a post-industrial era and points out that it is utopian for developing countries to think of bypassing industrialisation and prospering on the basis of services, as this sector has slow productivity growth and most services with high productivity growth cannot be developed without the presence of a strong industrial sector. Facing the turbulent waves of globalisation requires an unequivocal commitment to structural transformation through industrialisation, economic and market diversification, export promotion, with a focus on strengthening human capital and the intensive use of science, technology and innovation in the productive sector.

One of the limitations of many poor countries is making the selection of economic areas to prioritise in certain periods of time and being consistent with the choices made in terms of resource allocation and targeting. The choices to be made must be judicious and rational, preceded by in-depth studies, based on economic potential, business opportunities at home and abroad, the capacity and experience of entrepreneurs, the nation’s concrete comparative and competitive advantages and the identification of areas/sectors of productive specialisation. By way of example, I recently argued that Mozambique should prioritise certain “driving sectors of the economy”, such as Agribusiness, Tourism, Manufacturing, Energy and transport logistics corridors, and assume that the country’s industrialisation, in its start-up phase, will be supported by Agribusiness and the Extractive Industry. Concessional financing mechanisms or long repayment periods could generate new dynamism in Agriculture and Manufacturing, led by SMEs (Valá, 2023b).

Stiglitz (2002) has argued that globalisation has been contested since the end of the 20th century, making a strong critique of the “Washington Consensus” and the neo-liberal paradigm, while acknowledging the benefits it has brought in terms of the democratic ideal, the strengthening of civil society, debt forgiveness, environmental protection and the expansion of ICT use, to name a few examples. We can’t turn a blind eye to the fact that globalisation has helped hundreds of millions of people improve their living conditions and lift themselves out of poverty, particularly in “emerging economies” such as China, India, Brazil, Indonesia, Mexico, Turkey and others. However, globalisation has benefited those countries that have been able to take advantage of it, identifying new and promising markets for their exports and attracting foreign investment. The successful countries, broadly speaking, have been those that have been better able to control their destiny and have recognised the vital role of the state in economic development, rather than blindly entrusting a self-regulating market with solving problems that it itself has generated (Collier, 2010; Sharma, 2013; Acemoglu & Robinson, 2020; Valá, 2017; Valá, 2021).

Kissinger’s (2017: 417-418)) vision of globalisation and the world order is worrying, even contradictory, and he expresses it in the following terms:

“In various regions of the world, movements are emerging in favour of creating bulwarks against what they call the crisis-inducing policies of the developed West, namely against some facets of globalisation. […]. In fact, universal principles such as human rights, the rule of law or female equality are beginning to be considered by certain sectors as typically North-Atlantic propensities, and their contempt is seen as a positive factor for the affirmation of a new system of values.”

In reality, any international order is bound to suffer, sooner or later, from trends that affect or jeopardise its cohesion, such as a redefinition of legitimacy or a significant change in the balance of power. No one doubts today that the international economic system has become global. However, the political structure of the world is still based on the nation state and, faced with this paradox, prosperity depends on the success of globalisation, but the process triggers a political reaction that often runs counter to the ambitions of globalisation itself.

See Also

Some authors argue that economic globalisation has been losing steam or reconfiguring itself in the first decades of the 21st century, just like the capitalist system, requiring a rethink of the state and its role in a new international economic context where geostrategic conflicts in Eastern Europe and the Middle East show major cracks in the current International Order, a tendency to divide the world into blocs and the main stage of international chess moving from the West to the East. According to Dalio (2022), for the first time in the post-World War II era, the USA is facing a real rival power, China, taking into account that the USSR was only a military rival, and is becoming one in multiple domains and very rapidly, including Trade, Industry, Technologies, Geopolitics and Education.

In the 1990s, and to some extent up to the present day, countries like China, India and Indonesia impressed the world with high growth rates, improved living conditions for the population and notable progress in terms of infrastructure and technological innovation, thanks to state intervention without, however, creating budget deficits and unsustainable public debt. These countries refused to accept the “good institutions” promoted by the developed countries and opted to adopt strongly protectionist industrial, commercial and technological policies. The existence of new paths and alternative development models has been cemented by the delegitimisation of the liberal model, disenchantment with the free market formula, more regular and more intense economic crises in the capitalist system, some economic success in countries that have maintained some level of state planning and the emergence of new theoretical approaches that revalue the role of the state in economic development.

When we talk about peace, stability, freedom, progress and well-being, it often leads us to think about the crucial role of the state in development. China has been one of the countries that has benefited greatly from economic globalisation, because the Chinese state has been able to position itself and act with a sense of opportunity and competence in the economic field. Its rise has resulted in fundamental changes in global power, but we must not lose sight of the fact that the health of many societies depends on sustaining a delicate balance between the economic and the political, the individual and the collective, the national and the global. In many countries, the economy has affected and destabilised politics and it is no longer possible to combine the operations of the market economy with stable liberal democracy. In Wolf’s view (2023), the economy is not providing the security and widely shared prosperity that large sections of societies expect, and one of the symptoms of this disappointment is the generalised loss of confidence in the elites who run states, the rising tide of populist movements and the expansion of authoritarianism. We can’t help but see that liberal democracy is in crisis, and open markets and free elections are under threat in many parts of the world. The positive correlation between liberal democracy, the capitalist system and economic development is no longer taken for granted, putting globalisation at risk and eroding the prestige of the state as a key player in promoting economic development.

For many citizens of rich and poor countries alike, the capitalist system is no longer working well and has shown up its cyclical and structural weaknesses, expressed in the lower quality of life of the younger generations compared to their parents, the serious problems of lack of opportunities and growing unemployment, and the rural populations who suffer from the growing gap between them and the metropolises, the fact that capitalism has lost its moral orientation and that many societies are becoming polarised in the face of a fragile and impotent state, which is witnessing the emergence of radical nationalism, an increase in xenophobia, authoritarianism and the emergence of new models for organising society and the economy that diverge from liberal democracy, the capitalist system and the market economy.

Poor countries like Mozambique must search within themselves and on the basis of their resources for their identity and values, and for a certain model (or models) of well-being and progress with which they can impose themselves with a certain independence, because the condition of dependency imposes clear limits on the actions of the state. Economic globalisation has eroded certain foundations of states, affecting their sovereignty in the economic field and making national elites very dependent on global high finance and transnational corporations. In many countries, there is a distancing between the majority of the population and their governments, because governments no longer have the capacity to respond to the economic and social demands of citizens, particularly young people.

Political agendas, strategies, programmes and plans that pursue, in a dogmatic and non-holistic way, high rates of economic growth, low inflation, exchange rate stability and increased investment, should not override the goal of the common good, as they can contribute to increasing poverty, generating unemployment, deepening income inequalities and sacrificing the majority of society for the benefit of restricted and minority groups. What is important is well-being, defined in terms of what the majority wants, the guarantee of people’s rights and quality of life, and this must be ensured by an enterprising, competent, ethical state that promotes social justice, but requires citizens and families to work and undertake so that they are responsible for their own well-being.

The argument is that high volatility, risks and uncertainties about the direction of globalisation contribute to further weakening the role of fragile states in economic development, unless development policies and strategies are implemented that are different from those currently in force, which fail to generate economic prosperity, social cohesion and political stability. In the future, we will have to take a closer look at the countries that, in the context of economic globalisation, have been efficient and effective in ending hunger, fighting poverty, reducing social and spatial inequalities and generating many jobs, trying to see what role states have played in promoting and inducing economic development.

Is it sensible to rethink the economic development paradigm to be followed in the future without profoundly altering the nature, role and scope of the current state? This is a question that I leave for reflection, above all because I recognise that it is more difficult to control the direction that globalisation will take in these years of great turbulence, uncertainty and risk, and bearing in mind that reforming the state to turn it into a driving force for development is an endogenous exercise under the control of the elites who run the nation state…

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