Globalisation and Inequality Overcoming the Progressive Challenge Olaf Cramme Policy Network Melbourne 12 April 2007

Debate about globalisation Impact of globalisation heavily contested on left and right Managed capitalism ( ) including Rhine capitalism and Japanese capitalism Washington consensus / (neo-)liberal economic integration since 1980 Disputes about (a) poverty reduction (b) growth (c) unemployment (d) inequality

Atlas of Global Inequality: Ratio of income in one country to the world mean Source: The UC Atlas of Global Inequality

Source: Wikimedia using IMF data of 2005 Map of countries by GDP (PPP) per capita, in international dollars

Distribution of people in the world according to GDP per capita n international dollars of country where they live (year 2000) India China W.Europe, Japan USA Source: Milanovic, 2005

World Map GINI coefficient Source: Wikimedia

Debate about globalisation and inequality AgreementDisagreement Global inequality is very highGlobal inequality has risen since 1970/80 International inequality increased after 1980 The effects of globalisation on inequality Inequality has risen in most high- income countries Causality between globalisation and inequality Inequality has risen in most developing countries of the “new globalisers” Trend in recent global and international inequality

International and global inequality Source: Milanovic, 2005 Global Inequality

Income inequalities YearGINI coefficient YearGINI coefficient Sources: Office for National Statistics US Australia (inequality among male adults) UK US Census Bureau Andrew Leigh, Australian National University

Average annual increases in GINI coefficient for equivalent disposable income since 1979 Sources: Burtless 2001, Saunders 2001 and Harding and Greenwell 2001

Why internal, international and global inequality matters Adverse effects of inequality: Higher poverty, lower economic growth to poverty reduction, lower average health, high crime rates, weaker property rights, poorer standard of public services, more fragile democracies, (Note that causality is not proven but empirical evidence suggests strong correlation between inequality and these variables – see e.g. WB World’s Development Report 2006; UNDP Human Development Report 2006; Wade 2007) Likelihood of increased migration Moral-ethical concerns / question of justice / global community Extreme inequality source for potential social and political tensions

New cleavages Globalisation seems to have reinforced the following two cleavages that structure political space in most OECD countries Socio-economic dimension (welfare, budget, economic liberalisation) Opposition between pro-state and pro market position given new meaning and emphasis Pro-state likely to become more defensive and more protectionist Pro-market likely to become more assertive of the enhancement of national competitiveness on world markets Cultural dimension (cultural liberalisation, immigration, Europe) Enhanced opposition to the cultural liberalisation of the new social movements Defence of tradition is expected to take on an increasingly ethnic or national character Central to this is the issue of immigration See Hanspeter Kriensi et al, 2006.

Dilemmas for modern social democracy (1) Often undifferentiated position to these cleavages because of uncertainty due to internal division with regard to economic and cultural integration Mainstream political parties tend to formulate a “winner’s programme” (Kriensi), i.e. a programme in favour of further economic and cultural integration  increasingly challenged by populist parties that formulate “loser’s programmes” Increased market integration is perceived as threatening national social achievements and causing rising inequalities  appears bigger dilemma for centre-left than centre-right

Dilemmas for modern social democracy (2) In developed countries policy-makers often claim that global economic integration benefits rich people proportionally more than poor people  In the developing economies policy-makers often view globalisation as providing good opportunity for their country and people Progressive left concerned with global social justice (through economic openness) and advancing social justice ‘at home’  complex relationship Historically, social democrats have framed the case for justice and security as pre-occupations of nation states alone  no longer viable in a globalising world

Overcoming the challenges (1) Global economy has to be managed to ensure a more equitable distribution of the costs and benefits of globalisation for every citizen  Agenda focusing almost exclusively on inclusion, opportunities and community obligations for citizens not good enough anymore  Yet policies relying predominately on redistribution not a solution If the triumph of shareholder capitalism over stakeholder capitalism is inevitable what is the social democratic answer? Recognising the complex inter-relationship between states and markets as well as the limits to both as models for organising the economy and the production of public goods Re-interpretation of social justice and equality in the 21 st century  Looking at life course dynamics and new social realities

Overcoming the challenges (2) Programme and agenda that include both winners and losers from globalisation A new social democratic narrative in a world of globalisation that disentangles today’s complexity in policy-making, bridges realism and idealism and spans the regional, national and international level Concept for Global Social Democracy including a strong focus on multilateral cooperation on issues such as environment, international development and security