The Social Side of Globalisation

In a recent speech in South Korea, a country hard hit by the recent turmoil in world financial markets, UN Secretary-General Kofi Annan observed the following;

“Globalisation is seen by a growing number of people not as a friend of prosperity, but as its enemy; not as a vehicle for development, but as an ever-tightening vise increasing the demands on states to provide safety-nets while limiting their ability to do so.”

The many sessions here in Davos devoted to the social effect of globalisation reflect a deepening understanding of the challenge now confronting world leaders. Unless we improve our capability to manage this challenge, there is a serious risk of a backlash that will inevitably also threaten the positive gains which world trade and financial liberalisation have brought us.

The list of positive and negative sides of globalisation is well known to this audience. Let me, almost for the record, mention Norway’s support for some of the instruments that have made globalisation possible;

• our commitment to world trade liberalisation for more than half a century;
• our firm belief that a free world economy is beneficial also to the efforts of political confidence building, regionally and globally;
• our consistent support of the UN, the Bretton Woods system, the WTO and other international organisations. This support has helped us negotiate rights and responsibilites that regulate international behaviour for individuals and goverments.

It is generally accepted that globalisation can enhance economic growth and prosperity. It also benefits important social issues such as job creation and poverty alleviation.

But we also know that these positive results are achieved at a cost. These costs are not equitably shared. The negative sides of globalisation are too often found among the less privileged in society.

Globalisation will - unless it takes place within a democratic system of political checks and balances - increase inequalities within nations and between nations. It creates wealth among those who have the ability to profit from the new opportunities. But it also punishes those who do not have access to the resources necessary to become competitive.

It would be dishonest to blame all social ills on globalisation. But there is a strong body of evidence that globalisation may deepen some of negative sides of modern society. There are in all societies today signs of social breakdowns, often spurred by the spread of drugs and international crime. We see disintegration of families, higher unemployment, widening gaps in incomes and capabilities. In large parts of the South, there is a strong perception that globalisation serves the rich to become richer. Others, particularly the least developed countries, fall further behind.

How do we handle this challenge? How “can we help those least prepared to find their way in the new global landscape,” as the theme of this session asks us?

Firstly, we have to put our own house in order. The social agenda - respect for family values, health, social security and education - is at the core of the domestic platform for my government.

But this social responsibility does not stop at our own borders. I believe official development aid programmes, rightly used, can be indispensable tools in helping the South adapt to the challenges posed by globalisation. ODA-financed development co-operation is today reaching peoples which are not yet attractive to private investment.

I am deeply worried about the fall of overall ODA assistance. The needs are greater than ever. We are committed to keeping Norwegian ODA at very high levels.

In my government´s development co-operation programmes, we put increasing emphasis on social issues - poverty alleviation, health, education, and gender. Together with some other donors and with countries in the South, we have initiated the so-called 20/20 principle.

This is based on a contract. Donors commit themselves to allocating 20% of their development aid to social sector programmes. The recipient countries agree to do the same in their use of national assets.

Many developing countries are still unable to meet basic social needs because of heavy debt burdens. My government presented a comprehensive debt relief package for developing countries last year. I warmly welcome the signal given by vice president Al Gore here in Davos about a new American initiative on debt relief. Somebody has said that at the turn of the millenium there could not be any better handshake to the developing countries than doing something radical to the persistent debt burden. I fully agree with that.

Responsible, accountable governance is indispensable. It is often the factor that will determine whether globalisation will serve the interests of the people instead of benefitting the rich. Democracy and respect for human rights is a central part of the package. Good governance must also include policies that will discourage large income disparities.

The tendency of capital flows to seek countries with low wages and weak social safeguards is a threat to employment in countries where social safeguards are higher. This undermines political support for globalisation. It may ultimately increase pressures for protectionist measures.

The declaration adopted by the ILO last year on core labour standards was an important step to consolidate global norms in this field. We strongly support it and have pledged our support for follow-up mechanisms.

The private sector must also accept a higher public responsibility in areas such as human rights and core labour standards. My government has created a special government – private industry joint forum where we have a wide-ranging dialogue on how these issues and ethical standards can be safeguarded in the industry´s activities abroad. We are of course not the only ones to do so. I have been encouraged by what I have heard in Davos about the importance major international corporations attach to such ethical guidelines.

Over the last year, we have seen how the turmoil in financial markets - almost from one month to the next - can wipe out many years of hard-won achievements.

In July this year, I will arrange a symposium in Oslo to which I have invited a select group of prominent personalities, leaders of governments from all regions, of multilateral organizations, of international industry and finance as well as academics. We will discuss how a strengthened financial architecture could enhance stability and predictability and address social and environmental needs.

To sum it up, gover’nments and the private sector have a common challenge; to maximise opportunities and minimize the negative impact of globalization. This annual meeting shows that we are still searching for the right mixture of political rwesponse to this challenge.

Are the problems now confronting us due to a failure of institutions or a failure of policy ? In other words - is the road or the driver to blame? I believe it is a bit of both. We clearly need better policies to manage financial flows, to address social issues etc. But I strongly believe we also need to reform and to strengthen international institutions that can help government to navigate better in a changing world economy. Many interesting ideas have been put forward at this Annual meeting, but this is one of the issues that need to be addressed more extensively in the coming months, beyond Davos.

Thank you.