SMALL COUNTRIES AND CHALLENGES OF ECONOMIC GLOBALISATION
THE CONFERENCE COMMITTEE OF RECOMMENDATION
H.E.Stjepan Mesić, President of the Republic of Croatia
President of the Choiseul Institute for International Policy and Geoeconomics and editor of the quarterly journal 'Géoéconomie'
Ministry of Science, Education and Sport, Zagreb
Croatian Chamber of Economy- Zagreb Chamber
The Conference goal has been to promote to the public that the national states, no matter of their size, can influence the economic globalisation, if they have the national strategy for the regionalization, harmonization, and governance of the global processes.
The conference has had aim to stimulate medium-term predictions on the process of regionalization, and discussion about policies, which would increase the potential of South East European economies, which are now below their possibilities and potentials.
The Conference has been set to present an approach to the understanding and analysing national, regional and international affairs with the emphasis on the policy of interconnecting economy, diplomacy and security issues.
EXCERPTS FROM INTRODUCTIONAL SPEECH OF H.E. Stjepan Mesić, President of the Republic of Croatia
Croatia requires a post-neoliberal model of development
It is my pleasure to attend the opening session of this conference. Especially I would like to give my regards to Dr. Mahathir Mohammad, a life-long president of the Malaysian government. Dr. Mahathir is the creator of the economic success of contemporary Malaysia. Under his leadership, this country became a modern industrial nation. He was a prime minister with a vision and with the ideas of how to make this vision a reality.If somebody would ask me what was impressive about my official visits to the countries within and outside Europe, and if I had to answer the question which country was especially impressive with its remarkable success, without a doubt I would have to say: Malaysia. Malaysia is an example of the fastest-growing and most efficiently developed nation. It was developing its own potentials in spite of many obstacles.
How adapt to the globalization and uphold key national interests?
The way of globalization works today is in the direction of the weakening of the role of the nation states. At the same time it induces the widening of the gap between the rich and the poor. These are some of the reasons for its critical reexamination. Croatia takes part in the process of the economic globalization through the process of the economic convergence towards Europe. Currently this economic convergence with the EU nations represents the most important aspect of the economic globalization for Croatia.
Socially based market economy was a very successful concept of development in democratic European countries as an attempt to connect market economy and social equality. Yet, due to the globalization's influence this model is currently in crisis, e.g., a welfare-state model of Netherlands, Germany, etc. Under the pressure of the economic globalization such models are being transformed for a better competitiveness of the national economies. On the other hand, small countries like Finland and Sweden managed to meet the requirements of the economic globalization with increased competitiveness, a modification of the welfare-state model. Finland is the only country of the Euro region that managed to meet all Maastricht criteria, and is considered to be the most competitive world economy according to the World Economic Forum's report. The globalization processes introduced a change in the relations between the capital and the work in the direction of a redistribution of resources that weakened the rights of the work-dependent population. Neoconservative political philosophy in conjunction with the neoliberal economical-political model require the reduction in the state's expenditure on the back of the poor to deconstruct the welfare-state in order to increase the international economic competitiveness.
Croatia requires a market-social capitalism
Croatia requires gradual transition from neoliberal to post-neoliberal model that is a model of economic development based on European standards, which each one of the new EU member states must fulfill. The European model of development prefers the social, the social stability, unity and long-term formation of the work force. Such market-social capitalism is in opposition to the ultraliberal model that is driven mainly by profit, deregulation, quick privatization, and the spreading of the social inequalities.
The market-social model exhibits higher level of social solidarity; the ultimate goal of the developmental politics in the circumstances of the economic globalization should be the achievement of the higher life standard of the citizens of Croatia.
The reduction of the economic and social inequalities
Within the realm of such model there are two key goals of the politics that I've been endorsing throughout my presidential term: high economic growth based on export, and the reduction of the economic and social inequalities in the Croatian society.
Nevertheless, Croatia hasn't adequately tackled the challenges of the economic globalization. For example, liberalization of the foreign trade was not in-line with the monetary and the foreign-exchange politics. The significant decrease of the customs' protection of the domestic economy (manufacturing) at the beginning of the memberships in WTO and CEFTA was not accompanied with the accelerated, real depreciation of the Kuna currency in order to protect the domestic economy and the Croatian jobs from the foreign competition. The result of such misbalance of the custom's and monetary politics was enormous import, the stagnation of the export, the trade deficit, and the causally caused increase of unemployment.
Growth based on export
When I speak about export, my focus is on the production, since there is no export without the production. The globalization of the world economy forces Croatia as a small and open economy to formulate a new model of development based on export. This the only way we can decrease the unemployment. This is the key economic and social problem of Croatia. And again, when I speak about the decrease in unemployment I always tend to focus on the increase of the number of the employed, since various methods are insufficient to show the decrease of unemployment, but our success can be measured with the increases of the number of the employed.
The globalization can be thought of in Croatia as the process of the europaization of the society and the state, i.e., the integration of Croatia as a full member of the EU.
My presence at the conference of the Geoeconomic Forum should be interpreted as my wish to give your Forum the support for future reexamination of the globalization and the position of Croatia in the globalized economy.
EXCERPTS FROM INTRODUCTIONAL SPEECH OF ZVONIMIR BALETIĆ
"GEOFO doesn't look at the globalization as an doctrinaire ideal and happy end of history"
The task we assigned to the Geoeconomic Forum is complex and enduring, because the common awareness of conditions of life, cooperation and progress in the contemporary world, instead of improving, is withering, being exposed to contradictory interpretations and pressure and opposed interests. That what we call globalisation is an ambiguous process is difficult to define and describe, but the understanding of which is vital for our attitudes and action.
Usually, the globalization is understood and presented as an increasing interconnectedness of the world on the basis of the new productive, organizational and informational technologies, with decreasing power of public authorities to intervene in order to improve their functioning for the common good. Those aspects of globalisation are boasted as great achievements, and their critical examination is almost regarded as a question of bad taste.
Yet, when we look to those achievements, we must not forget, that, despite them, contemporary world is less secure, ravaged by increasing competition and power struggles, and that objectives of common values, more equal distribution of wealth and power are now more distant than they were. We are witnessing a strong differentiation of the world between rich and poor, with the rapid degradation of the condition of common people and poor countries.
Competition is the ruling principle of globalization
We in the Geoeconomic Forum want to look at the globalization not as
an ideological, doctrinaire ideal, an happy end of history, but as real historical
process, facts and tendencies of real life. The competition is the ruling principle of globalization, and it will stay so. It activates subjects of unequal power and under unequal conditions in struggle for more power and domination. Forces shaping the new face of the world are nowadays disturbing all concerned about justice, solidarity and human dignity. An open world market is not the sufficient guaranty for an more humane world community.
The issues of attraction and development of economic activities among nations (and regions within nations), of distribution of income and social power, of old and new spatial and other dimensions of global action, of structure of global agents, of roles of national states and different international groupings are those issues which will first attract our interests for enquirer and presentation. It should help an elaboration of our own national strategy of faster development and integration into different forms of international cooperation. With these aims in mind we founded the present association, GEOFO, and invite all interested to join efforts with us.
Malaysia has an important role
We are especially pleased to having with us Dr. Mohamad Mahathir, former prime minister of Malaysia for over two decades. Malaysia has played an important role in solving and understanding complex problems of international relations, especially in overcoming the crisis in South-East Asia in 1997, and its consequences. Her experience in handling this crisis and in stabilizing and putting again her economy on the path of fast growth can be a model for other countries in similar circumstances.
Jože Mencinger's merits widely recognized
We are equally pleased to have with us Prof. Dr. Jože Mencinger, rector of the University of Ljubljana, a known expert in development economics whose merits for the Slovenian successful transition strategy are widely recognized. Transition problems are very complex, and Slovenia showed a way how to cope with them, maintaining her stability and growth within a framework of accessing to The European Union. Her experience might be highly valuable to Croatia.
Globalization poses new problems to regionalization. Processes of regionalization show, in spite of fact that it was not at first fully understood, that it is impossible to run the world after a single standard model, that interests are so variable, and that development potential of different regions is highly dependent of changing matrix of forces shaping modern world. Croatia, as all other countries should be a global player, but our potential and constraints will depend on modes and efficiency of our regional cooperation in using all resources, which are closer to us.
EXCERPTS FROM INTRODUCTIONAL SPEECH OF JASNA PLEVNIK
"GEOFO strives for an active national globalization strategy"
The concept of geoeconomy implies that the government uses economy strategically, not literally, in achieving national interests on both global and regional levels.
GEOFO strives that the government create an active national globalization strategy. Myths of globalization being a process in which national governments are helpless were popular in the nineties. However, in the last few years demands for the management of global processes have increased. A professionally competent and moral government has to direct the ways of its country's globalization primarily to the benefit of its citizens, and then companies.
Geoeconomically active countries are, for instance, Malaysia, Japan and Switzerland. There are, of course, many others. In our neighbourhood it is Slovenia. It is a geo-economical winner of this region, and it is the reason for its economical success.
Croatia marginalization as own choice
GEOFO is sensitive to mistakes Croatia has been making for years by getting involved in global economical flows, relying on the myths of neo-liberal propagandists, rather than the facts of globalization. Croatia is presently marginalized in important areas by its own choice, and from some areas, such as banking and telecommunications it has totally withdrawn. If the citizens of Croatia continue to be included in the global space only through shopping or through their access to the global entertainment market, they will feel very few advantages of globalization.
It is a fact that many dangers of globalization sometimes cannot be prevented, being new processes hard to recognize as real dangers. Dr. Mahathir fought a geo-economical war with currency traders in 1997. And he won! Such examples give hope that globalization is not "the game" of the largest countries only.
EXCERPTS FROM LECTURE OF TUN DR MAHATHIR BIN MOHAMAD
World-known regionalist former Prime Minister of Malaysia Mohamad Mahathir , who has had great practical experience in managing negative and positive consequences of globalization held a presentation of the Malaysian globalization adaptation strategy, which Dr. Mahathir shaped based on the principle that it should be as painless for the people as possible.
"Malaysian Model as Alternative Model of Globalisation Governance"
Our past experience of trading with ethnic Europeans is not very assuring. We fear that free trade will not be fair trade. Frankly we fear our commerce being monopolised again, and maybe we will again be colonised.
Is this fear justified? Yes, I think it is. Already we are seeing moves towards monopolies or at least oligopolies in many businesses. Mergers and acquisitions are creating giants of the corporations of the US and Europe, against whom few can compete.
Big banks dont care for small businesses
The big banks of the rich countries are merging and acquiring each other so rapidly that most of them now have more money than most national Governments or even countries. If they can operate in any country unrestricted, the chances are the small national banks will be eliminated, swallowed up. The international banks can afford to lose in any country because they would be making a lot in the other countries. The national banks cannot afford to lose because they operate only in their own country. Two or three years of losses by a national bank, then it is ready to beg for a takeover by the international giants. Once the local competitor is eliminated there would be no need for the big banks to make losses. They can now raise interest rates etc and deal only with big business. Big banks don't care for the small man, small businesses. The result will be a decline in medium and small businesses following the disappearance of the local banks.
What is free trade?
Free trade is touted as the best way to increase trade and enrich everyone. But what is free trade? Is it just uncontrolled trade in which anyone can do what he likes? Or is it just tax-free trade? Or is it equitable trade in which imported goods receive the same tax treatment as domestically produced goods?
The British were the first to practice free trade. They prospered. Is it because of free trade per se or is it because others were not free traders, that Britain had the comparative advantage? Would Britain become attractive if all the other countries of Europe practise free trade?
Malaysia welcomes globalisation - does not welcome the interpretation of globalisation
So what is Malaysia's model of globalisation? Actually Malaysia is quite happy with things as they are. Our trade and our economy have been growing even without any changes in the world trade regime. We provide protection for some of our industries but otherwise goods and services can enter Malaysia quite freely, i.e. if they pay the same import duties. No one is disadvantaged, except perhaps against a few local products, which are protected.
Malaysia welcomes globalisation. What it does not welcome is the interpretation of globalisation. In the first place the objective of globalisation seems to be only free trade, free movement of capital, and free access of businesses into every country. The world is going to be borderless i.e. the whole world will be treated for the purpose of trade as one country. Businesses irrespective of their countries of origin will operate in every country as if they are in their own country. There will be free and open competition. No discrimination against anyone on any ground.
Competition is good. The best man will win. So the best products will sell. But we know that in sports for example contestants must be in the same class or category. Children do not compete with adults. Men do not compete with women. In golf even when the players are the same age and size, handicaps are given in order to have fair competitions.
The competition must be between entities of the same category
So if we are going to have free trade, the competition must also be between entities of the same category. Giant corporations must not compete with dwarfs, midgets. And giant developed countries should not compete with little developing countries.
If they want to compete then there must be handicaps. The giants must be cut down to size so to speak. They must pay penalties e.g. higher taxes. Developing countries must be given sufficient time to upgrade and to develop their industries, and their banks. Research and development in the poor countries must be subsidised or they be given easier and cheaper access to the so-called Intellectual Properties of the rich.
Grossly unfair: the rich countries pick and choose the best experts from poor countries
Talented personnel from poor countries should be regarded as Intellectual Properties too. Attracting them away from their countries should incur payment of royalty to the countries concerned. It is like paying for a football player from another club. Remember that the poor countries had spent a lot of money on the education of their people. It is grossly unfair that in the end the rich countries would pick and choose the best ones from among them. The poor countries after investing so much in education would get only the leftovers, the duds and the failures.
International Tribunal should confine unilateral action of big countries
Countries should not take unilateral action. There should be a proper International Tribunal to decide when a country has defaulted. No country may impose countervailing duties for example until the tribunal has decided that it is justified. Otherwise the big countries would be holding the sword of Damocles over the heads of small countries dependent on their limited number of exports.
Quality standards must be determined by an International Panel. Countries may raise their own standards higher but may not impose it on goods imported, if they meet International Standards.
No restrictions on the movements and settlements of people
Presently globalisation is confined to trade and capital flows. If the world is to be borderless, then there should be no restrictions on the movements and settlements of people. International law enforcement should be by international bodies. It is unethical for a country to be the policeman, the prosecutor, the judge and the executioner.
EXCERPTS FROM LECTURE OF JOŽE MECINGER
The end of national economy and the transfer of globalisation challenges to EU"
When one considers globalisation in Eastern Europe, in general, and in Slovenia, in particular, one cannot separate it from transition and accession to EU. Indeed, transition and accession can be considered steps towards globalisation. They both began with illusions of how they would transform former socialist countries instantly into welfare states and bring them "back to Europe". Thus, all former socialist countries declared uncompromising faith in a capitalist market mechanism; the firmer, the fewer market institutions they possessed, and every single government declared its firm commitment to full scale privatisation. Furthermore, the newly born capitalist countries were trying to replicate Anglo-Saxon rather than continental institutional arrangements. Transition has proven to be a painful process with many setbacks, and social and political tensions emerging from redistribution of income, wealth, and power. Enlargement proclaimed "a political necessity and historic opportunity" a decade ago became a reality for some but also turned to "petty" haggling over its costs and benefits.
Slovenia- extremely gradualist transition
Transition in Slovenia differed considerably from transition in other former socialist countries, and has been considered extremely gradualist. Slovenia more than shared the advantages of the Yugoslav type of socialism based on the ideas of social property and self-management; its legacies were at least partly used in all major components of transition: privatization, macroeconomic stabilization and microeconomic restructuring. Such transition was a kind of a natural legacy of previous systemic changes, it was enabled by favourable initial economic conditions, and it was consistent with soft political change. Many of the essentials for successful transition were namely, at least partly, met before 1989.
From the national to the EU level.
In the process of accepting "aquis" and EU regulations, Slovenia country was gradually losing control of WHAT, HOW and To WHOM to produce. By entering EU in May 2004 and ERM2 in July 2004, Slovenia formally lost its monetary policy and gave in fiscal policies. In the period of a decade the newly born national economy thus again turned to become a regional economy. The handling of the globalisation challenges has also been to a great extent shifted from the national to the EU level.
Is EU facing the Yugoslav syndrome?
It might. First, enlargement created a gap between the most developed and the least developed part of EU similar to one which existed in Yugoslavia which by itself creates tensions. Secondly, the EU debates on "two speed Europe" look a lot like Yugoslav debates on what should be the "speed of the fastest ship in a convoy". Thirdly, the haggling over share of GDP which should be paid to the budget of EU for cohesion resemble the debates on the loans for Yugoslav less developed regions. Finally, EU will for generations remain alliance of countries rather than alliance of people. Is the European identity any stronger than the Yugoslav identity was?
Economic globalization and stability in South East Europe
The Regional Geoeconomic Conference was hosted by GEOFO, Geoeconomic Forum, the Association for World Economic Development Studies that specializes in the issues of regional development. GEOFO has strong geoeconomic orientation on connecting economy, foreign policy and national security.