Select Committee on Economic Affairs First Report


18 NOVEMBER 2002

By the Select Committee on Economic Affairs





1. The Select Committee on Economic Affairs was appointed by the House of Lords on 7 March 2001. It was given the following terms of reference: "to consider economic affairs".

2. The membership of the Committee, together with their declarations of interest, is set out in Appendix 1.

Purpose and scope of the Committee's inquiry into globalisation

3. Meeting the challenge set by its wide-ranging terms of reference, the Committee announced on 22 March 2001 that it would undertake an inquiry into economic globalisation.

4. In undertaking this inquiry, the Committee recognises that it should not replicate the work done elsewhere by academic, governmental or other institutions which have the resources to conduct original research. The purpose of the Committee's inquiry is more general. It is to take forward the debate on globalisation - a debate described in the White Paper published by the Department for International Development Eliminating Poverty: Making Globalisation Work for the Poor as "a serious political debate about the equitable management of globalisation".[1]

5. Mike Moore, then Director-General of the World Trade Organisation (WTO), described "globalisation" in evidence to us as "a sort of slogan" which - unlike "internationalism" - has a "menacing ring" (Ev I, Q 1122). The prevalence of the popular belief that globalisation is a harmful phenomenon is illustrated by the recent and dramatic emergence of groups protesting against globalisation. The Committee, sensitive to this anxiety, seeks to examine and to clarify the diversity of opinion on the extent to which economic globalisation should be perceived as a threat or an opportunity, and to make recommendations for change where it seems to the Committee that the costs of globalisation can be ameliorated.

6. Globalisation is an elusive concept. Many of those giving evidence made this point. Dr Supachai Panitchpakdi, the present Director-General of the WTO, for example, advised that it was sometimes "best to avoid using the word 'globalisation' as a catch-all word and to be as explicit as possible" (Ev I, Q 562); and Gerry Rodgers of the International Labour Organisation (ILO) said: "When it comes to globalisation more generally I think we have to acknowledge that we are dealing with something which is rather fuzzy." (Ev II, Q 1238). The Committee is aware that globalisation is used to describe developments within a variety of different fields of human activity and interests - social, political, cultural, environmental as well as economic - and that these different manifestations of globalisation are inextricably interconnected. Although our remit is largely to do with economic matters, we do not take this to mean solely a concern with the economy as narrowly interpreted. In judging the effects of globalisation, we have no hesitation, for example, in bringing health, life expectancy, law and order, and education into the picture. We recognise that these issues are both indicators of, and precursors to, successful development.[2]

Evidence gathering

7. Following the 2001 General Election, the Committee was reappointed on 28 June 2001 and on 24 July 2001 the Committee issued a Call for Evidence. The text of the Call for Evidence is given in Appendix 3.

8. The Committee received over 50 written submissions in response to the Call for Evidence and, between 17 July 2001 and 10 October 2002 took oral evidence from 56 organisations and individuals. A list of witnesses is given in Appendix 2. We also met Stanley Fischer, former First Deputy Managing Director of the International Monetary Fund (from 1994 to 2001) and Mervyn King, Deputy Governor of the Bank of England, who assisted us by providing informal background briefing.

9. During the course of taking evidence, the Committee visited a number of international organisations in Geneva (the World Health Organisation, the World Trade Organisation, the International Labour Organisation and the United Nations Conference on Trade and Development) and the European Commission in Brussels.


10. The Committee is grateful to those who gave evidence, written and oral, and recognises that the contribution which it is able to make to the globalisation debate depends critically on the quality and range of evidence which it has had the privilege to receive. The Committee regrets very much that the United States Government declined to provide evidence. Their reasons are set out in a letter dated 16 October 2002 which is reproduced in Appendix 4.

11. The Committee is also grateful to its Specialist Advisers: Professor Anthony Venables, Professor of International Economics, the London School of Economics, and Professor Michael Wickens, Professor of Economics, University of York. It would also like to record its thanks to Mr Martin Stewart who, with Professor Venables, provided a briefing document for the Committee at the outset of the inquiry (see Appendix 5), to Mr Adrian Lewis who assisted in summarising the evidence and to those who contributed to the organisation of the Committee's visits abroad.

Structure of the Report

12. The next chapter of the report (Chapter 2) sets out the range of definitions of globalisation - both globalisation generally and economic globalisation specifically - which have been given to the Committee in evidence. This is to set the scene of the globalisation debate. Chapter 2 also considers the question whether the current period of globalisation differs (and, if so, how) from previous periods of significant international economic integration and, as part of that examination, attempts to identify the driving forces behind current globalisation.

13. Whilst the majority of the evidence we received favoured globalisation, no witness presented it as a process which had no harmful effects. In the following chapters of the report we give an account of the evidence received by the Committee of some of the concerns about the impact, both internationally and nationally, of economic globalisation and in each chapter we draw conclusions and make recommendations. Thus, in Chapters 3 to 7, we consider, within the context of opening up markets of all kinds, issues under the following headings:

·  Economic performance, poverty and inequality;

·  Labour market conditions;

·  The role of transnational corporations;[3]

·  Management of the international trading system; and

·  The international financial system.

14. We begin, however, by setting out an overview of concerns and a summary of conclusions and recommendations.

Overview of concerns

15. We have become accustomed to reading newspaper reports about protestors taking to the streets - in Seattle, Washington, Prague, Nice, Gothenburg and Genoa - to protest against globalisation. One of the principal motivations of the Committee in undertaking this inquiry is to examine and attempt to clarify the reasons which have given rise not only to the anti-globalisation movement in recent years but also to a more widespread sense of anxiety that globalisation is harmful.

General remarks

16. A range of witnesses were asked for their views about why they believed globalisation has given rise, at the very least, to public disquiet and, on occasions, violent protest. Two general remarks can be made about the evidence at the outset: first, the opinions of witnesses varied and those who were critical of globalisation cannot be regarded as an homogeneous group; and, secondly, although some strands of protest are literally anti-globalisation, in most cases critics of globalisation favour better globalisation rather than no globalisation.

17. Dr Noreena Hertz, of the Judge Institute, Cambridge University, for example, told us when asked about the concerns of the anti-globalisation movement:

"Most people are not anti-globalisation … In some senses it is hard to talk about it as a movement because it is a movement of movements; there are all these different groups who are aligned in it, but … by far the majority are not anti-globalisation … The way I would define it - and I am defining it in a very particular way - is as a continuum where, on the one extreme, you have people who go out on to the streets of Seattle, Genoa, Prague, Nice, Gothenburg, or the hundreds of thousands who go out and protest in Latin American countries or in Africa. Then you might have over here the students who do not want to buy Nike trainers because they are concerned about buying things from sweat shops. Then over here you might have the housewives and Women's Institute members who do not want to buy genetically modified food because they are concerned about the things they are giving their kids to eat. Then you have people like Joseph Stiglitz, the former Chief Economist of the World bank who resigned because he had come to believe that its programmes were exacerbating poverty, or even George Soros, who tells me that he sees himself as part of the anti-globalisation movement." (Ev II, Q 1651).

Dr Hertz continued: "it is a matter of making globalisation work in a much better way for many more people" (Ev II, Q 1652).

18. Professor Joseph Stiglitz of Columbia University, alluding to what is widely perceived to be "a real sense of hostility towards globalisation", suggested that "it is not hostility towards globalisation, but it is really hostility towards the way globalisation has been managed and to a particular set of economic doctrines that have accompanied globalisation on the part of some of the international economic institutions." (Ev I, Q 711).

19. George Monbiot of The Guardian said: "I feel the protest against what has been called globalisation … has brought together an extraordinary array of concerns, some of which are mutually contradictory … it is a very broad and very wobbly coalition indeed …" (Ev II, Q 1348). Mike Moore also commented this diversity when he described a protest march in Washington against the World Bank and the IMF, noting that he had seen "vegetarians … marching with meat farmers" (Ev II, Q 1122). Mr Moore also indicated his view that not only was there an absence of consensus amongst the protestors in developed countries, but that the generality of the protest against globalisation in the developed countries ran counter to the perception of globalisation in developing countries: "Half the rich world is protesting about globalisation and the poor world is protesting about marginalisation … It is hard not to get irritated by middle class indulgences." (Ev II, Q 1127).

The variety of concerns about globalisation

20. The Committee received a range of evidence about why people are critical of globalisation, some came from the critics themselves, some came from those who were the subject of criticism and some came from commentators. Given the complexity of the concept of globalisation, inevitably the criticisms were diverse (and, as George Monbiot noted, not wholly consistent). They included concerns about the economic consequences of globalisation (such as income inequality and global shifts in employment), about the way in which globalisation is managed at an international level and about broader issues such as cultural homogenisation or environmental degradation. We acknowledge that the evidence we received will not have included every criticism to be made of globalisation but we believe - or we hope - that we have identified the main objections.

Eliminating Poverty: Making Globalisation Work for the Poor, Cm 5006, December 2000, p 14, para 10. Back

2   Referring to the range of issues included in the United Nations' Millennium Development Goals (income, education, health, gender issues, governance and the environment), Nicholas Stern of the World Bank suggested that they were "not only outcomes that are desirable in themselves, they create means to higher incomes" (Ev II, Q 1832). Back

3   In our Call for Evidence we use the expression "multinational corporation". It was drawn to our attention that a more commonly used, and less confusing, term is "transnational corporation". Throughout the report, therefore, we refer to "transnational corporations" (or TNCs). We take it to mean the same as "multinational corporation" (MNC). Back

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