The protests at the meeting of the World Economic Forum are symbolic of a wider conflict that world political and economic leaders will have to consider very seriously. The protesters represent widely held views in the world, whether one agrees with them or not. They argue that globalisation is causing environmental damage, more inequality both within and between nations and more poverty. Economic leaders at the forum have championed free trade, globalisation and the economic growth its creates as the means to reduce poverty, improve the environment and reduce inequality. The protesters represent a range of people with quite diverse views – from unionists who support forestry and mining and the jobs they create to radical environmentalists who see forestry and mining as destructive industries. Inside the forum, there is probably as much diversity of views, but not so obvious – from rampant free-traders who see virtually all government as enemy to more moderate voices.
But however much dialogue is going on within the two sides, very little is going on across the battle lines. This is of critical importance. Australian Treasurer Peter Costello appears to understand the point. Economic reforms, free trade, globalisation, deregulation and privatisation cannot be achieved without significant public support. Obviously, much more work has to be done to get that support. If necessary, the pace of reform will have to slow if public opinion cannot be carried. If public opinion is not carried and people feel alienated, cheated or poverty-stricken they will react. In democracies it will result in demonstrations and votes for governments that pledge (insofar as they can) tariffs, subsidies and government ownership. In less democratic regimes it will result in demonstrations and outright revolt.
Either way, the proponents of economic reform face a challenge to explain how the benefits will flow broadly to the community and how they will help those individuals who will be adversely affected – as there have been and will be continue to be some. If they fail that challenge, the benefits of economic reform will be lost in a maelstrom many times more powerful that the protest in Melbourne. Proponents of reform cannot assume that just because the evidence tips their way and tends to favour their arguments, their policies will ultimately triumph. Sadly, humans often take the irrational option or the short-term solution which offers some comfort now but a worse future.
Education is a critical part of the challenge. Tariffs, subsidies and huge government bureaucracies mis-running businesses are not the way to innovation and wealth creation. Nor do they help poor countries who need free access to the markets of the developed world. Further, the wealth generated by freer trade and economic growth is the very weapon to attack environmental degradation. The environment is better protected in rich countries.
There are some other challenges, too. In Australia, the Howard Government has taken some important steps that have improved economic growth and living standards. Our telecommunications industry is much better with Telstra not in full government ownership. Our labour markets are freer. More could be done if the Senate were co-operative. But the Government has made two hopelessly hypocritical policy directions in health and broadcasting. The health-insurance industry has been handed a bloated subsidy that will result in inefficiency and lower health standards. The blatant favouritism given to the existing free-to-air broadcasters flies in the face of the free-trade rhetoric and will hamstring Australia’s growth in a critical area of the economy for the very reasons stated by free-traders.
And then we have the hypocrisy on the world scale. The big industrial countries (excluding Australia and Canada) preach free trade, but only when it suits them. Any talk of agriculture – the very area to help the third world – and we are greeted with excuse, delay and chicanery and the US and Japan props up inefficient farmers for political reasons.
While these hypocritical exceptions continue, free traders can only expect dissent in Australia and in the rest of the world.