The anti-globalisation movement is more interested in achieving equality than in generating wealth for the poor

A new book by Brink Lindsey, Against the Dead Hand (John Wiley, £22.50), is distinguished from the proliferation of works on global capitalism in that it refutes one key assumption held by both supporters and opponents. This that it is an almost irresistible force, leading one side to cheer and the other to gnash its teeth.

Lindsey admits that the friends of globalisation started all the hype about the powerlessness of government in the new world economy. One of them wrote of a golden straight-jacket that forces governments to pursue market friendly policies or else face the wrath of the electronic herd of international investors. Both sides regard the computer revolution as chiefly responsible and both are wrong.

If Third World countries still spurned foreign investment today, as they did a generation ago, these technical advances would make no difference. Lindsey asks, rhetorically but reasonably: how computerised was China when Deng Xiaophing decollectivised agriculture? Or what did the microchip have to do with Thatcher’s victory over the miners union? Or with New Zealand’s Labour government ending protectionism and establishing an operationally independent central bank in the 1980s?

The author brings back politics and argues that partial liberalisation is a deliberately chosen response to the worldwide failures of central control. In fact the triumph of the markets is nowhere in sight. Market competition continues to be hindered by top down controls and state favoritism, and is at the same time undermined by a lack of supporting institutions. Throughout much of western Europe government spending is around 50 per cent of national income. Chinese state enterprises still employ 80m people. Government subsidies in India amount to 14 per cent of gross domestic product. He should have also mentioned the severe immigration restrictions applied by most countries, which are the most illiberal aspect of all.

Opponents of globalisation take advantage of the triumphalist rhetoric and talk about market fundamentalism. Lindsey asks: where are the governments today, or even the opposition parties, that tow a strictly laisser-faire line? Ideologists not now in office, such as Reagan, Thatcher and Vaclav Klaus in the Czech Republic, have been the exceptions.

Brinkley is by background an international trade lawyer who now works for the free market Cato Institute in Washington. He is in fact a journalist in the best sense of the word. He is highly readable and backs up his assertions with a mixture of first hand anecdotes, historical observations and carefully-digested figures. He avoids tables and charts.

He makes however a tactical error in moving straight from his introduction to a history of what he sometimes calls the industrial counter revolution and sometimes the dead hand (the latter is obviously preferred by his publisher). He is referring to the strong interventionist intellectual current which prevailed for nearly a century after 1880 and was supported by an unholy coalition of nationalists, romantics and technocrats on the right and socialists on the left. Globalisation is the fitful, haunted awakening from that dream.

But I fear that none of this history would cut much ice with any anti-market protester who happened to come across the book. It is not until nearly half-way through that Brinkley comes back to the persistence of illiberalism and its contribution to the crises of the last few decades. He puts a lot of blame on the banks for lending so much to politically favoured enterprises, who in turn reckoned on local or international bail-out. In East Asia a combination of artificially pegged exchange rates and politicised financial sectors proved catastrophic. The author much prefers borrowing on securities. This has less chance of bringing down the financial system: and the perceived risk is quantified by the security prices which are published every day.

The author is too sensible to suppose that governments should do nothing. He ascribes many problems in emerging economies to the failure to provide reliable security for property and contract rights. Indeed he has a whole chapter on the rule of lawlessness. He is in favour of social safety nets, which richer countries can better afford. But much of what passes for social policy is nothing more than the old illiberalism - e.g. subsidies for loss-making state enterprises, the protectionism symbolised by the EU common agriculture policy and limitations on labour mobility - all of which he describes as a cruel fraud. The struggle today is -- he uses a Blairism -- between what is and what works.

Unfortunately most of the participants in the globalisation debate talk past each other. The free market school are talking about advances in absolute living standards; and the more sincere globalisation sceptics are concerned with income differences between rich and poor.

One of the most serious studies purporting to provide ammunition for the latter school comes in a an article on True World Income Distribution by B Milanovic published in the January 2002 Economic Journal. His main achievement consists in estimating income disparities between households rather than countries. This is a step in the right direction. It is individual human beings who suffer and benefit from income changes and not abstractions known as countries.

But, believe it or not the Royal Economic Society - like a growing number of other learned societies - now has its own spin doctors who delight in any study which can be used to rebut the charge that economists are pro-free market. They regard as sensational the increase in inequality discerned by Milanovic when he moves from comparisons within single countries to comparisons of households; and they add for good measure some tub-thumping rhetoric about the rich living in gated communities while the poor roam the world outside. Surprise, surprise. If you put together different countries with different income ranges it is indeed likely that the world as a whole will show a larger range than if you look just at individual countries. Nevertheless, if these differences are decomposed into those between countries, and those between households in each country, the inter-country differences still dominate the picture.

The author himself emphasises that the biggest contributor to these widening differentials is the relatively slow growth of income in the rural China and rural India; and future trends in world income distribution will largely depend on how successful these areas are in catching up. It is difficult to believe that a clampdown on overseas investment by international corporations would do much to help the poor in either of these heavily populated countries.

What is basically an interesting analysis is spoilt at the end a series of emotive comparisons so beloved by the anti-globalisation protesters. For instance, the total income of the richest 25 million Americans is equal to the income of almost 2 billion of the poorest people.
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These comparisons should make western citizens feel guilty only if it can be plausibly shown that the plight of the poor is in some sense due to their own comparative wealth. And they are only helpful for policy purposes if there were a government-to-government way of transferring incomes from the richer to the poor countries, which actually made the poor better off instead of disappearing into prestige projects, inflated arms expenditure and Swiss bank accounts.

There is a long established hypothesis that economic development comes in phases: income disparities first increase as development occurs and the pioneering sectors move ahead but then narrow as the mass of the population begins to catch up. This hypothesis is strongly supported by an article in the January issue of Foreign Affairs by two World Bank economists with a similar background to Milanovic who take a much broader historical approach rather than concentrating on changes in the short period between 1988 and 1993 on which Milanovic concentrates.

Supporters of competitive liberalised markets are, however, selling themselves short if they rest their case on controversial and changing inequality measures. Inequality can increase because the rich are getting richer or because the poor are getting poorer. Only the last is a valid ground for concern. The acid test of whether or not those who protest about inequality are moved by jealousy and envy is whether their main concern is with the plight of the poor or the wealth of the rich. Even the statistics in the Milanovic article show that the vast majority of the worlds population are becoming richer - which should not reduce our concern for the minority that have become poorer and who are, as the Blair tour has reminded us, are largely resident in Africa.

Ultimately, however, Winston Churchill’s ideal of a ladder and a safety net is more inspiring, both within nations and between them, than the goal of equal opportunity to compete for equal prizes. True equality is to be found only in the grave, if there.