The term ‘globalisation’ comes quick to the lips these days, 50 years or so after its entry into the economic lexicon. But as with the word ‘culture’, discussed by Melvyn Bragg and panellists on Radio 4 last week, its meaning slips into obscurity as soon as people start to look at it. Physicists might (until recently) have likened globalisation to dark matter, something that gives shape and movement to the universe but whose defining element is yet to be discovered.

Whatever globalisation consists of, its causes are clear enough: liberation of capital flows across the global economy and the fungal growth of multi-state, multi-line financial institutions to service them; revolution in telecom and media technologies; global dispersal of industrial production sites; surging production of cheap(er) consumer products from developing nations; and insatiable global consumer demand stimulated by the offer of virtually unlimited credit.

For over 2000 years, colonists of empire served the strategic priorities of the imperial power – national security and economic advantage chief among them. This new globalisation however, represents the outworking of no national strategy and its subjects owe allegiance to no sovereign power, only to the shareholders of private companies. Global business has created a para-state without boundaries, accountable to nobody and shaped solely by commercial transactions.

Certainly, globalisation brings big benefits. Consumers across the world gain access to a wider range of more competitively priced goods; over the past 30 years, wages and living standards have risen sharply for most of the world’s people; we are better connected, human rights more widely acknowledged and perhaps better protected; easier travel and freedom of movement across frontiers has afforded new job opportunities and more wealth for migrants with the requisite skills. Migration has also kept a lid on wage inflation in the developed world. 12 years ago US wages were 22 times those in China. By 2015 they may be a mere 4 times.

There are double-edged impacts too: the establishment of relatively cheap, high-quality schools in India and the Far East, where squeezed parents in northern Europe can send children, even as British schools and universities become dependent on overseas students to top up their income; English remains the language of choice for global commerce, so anglophone London and New York have gained disproportionately.

But big problems are beginning to bite. Many are attributable to the fact that leading nations have failed to develop any international framework within which to order the exercise of the new freedoms. Without effective trans-national control over trans-national business, local tax-payers have been left to pick up the bill for global systemic failure in the financial sector. Similarly, absence of trans-national jurisdiction bedevils efforts to contain abuse within the World Wide Web.

Private companies wield the new imperium and few sovereign governments still control their own destiny. Globalisation respects no national boundaries, which is why the British chancellor bows so deferentially to ‘the bond markets’. Britain’s fate lies with global financial institutions. Budgets must be framed for an electorate domiciled in tax havens.

Liberalised markets and floating exchange rates cleared the ground for globalisation’s advance. Their flip side is that the hurt from problems surfacing in one region get transmitted to another. A slump in Europe may provoke social unrest in China if its exports collapse. A big fall in the US dollar impoverishes America’s creditors in Japan and Saudi Arabia.

Security problems are looming up too, when global communications networks contain vital elements supplied by Chinese companies.

Globalisation’s most profound impact, perhaps, is on national identity and culture. Local language, eating habits, modes of communication, are being re-shaped in ways that were never imagined. Some are manifestly hurtful. Plastic packaging, the baleful companion of multi-national product, is spreading epoxy resin as far as the Antarctic and poisoning the life of its ocean.

Local identity has been swamped by America's power and prosperity which has spawned more hefty multi-national companies than any other nation. American products permeate the global market-place and promoting them has inevitably relied on inculcating the consumer habits of their home market. The result is a world peopled less by a community of sovereign nations with distinctive cultures, more by a homogenised mass of colourless trolley-pushers. Mass consumerism does not concern itself with taste. 

So what of all this? If social and economic trends in the global community are to be shaped by nothing but raw appetite and commercial priorities, the only result can be unbridled individualism, as Pope Benedict’s recent encyclical points out. Globalisation gives individuals the freedom to make wider choices, but weakens their collective power to restrict its abuse.

Little can be done to roll back changes in global consumer habits and lifestyle choices, even were that desirable. Rather the nations must address themselves to the problem of global financial management. Signs that they may do so are beginning to appear, not least in a return of confidence to equity markets.

The European crisis alone directs attention to the need for a body capable of re-shaping and over-seeing a global monetary system. History since we last discussed that need in September 1993 points ever more clearly in the same direction. It is for Europeans to steady their own ship. But the euro’s difficulties are part of a global problem and can be met only by a global solution.

Encouragingly, savers worldwide have shifted their focus from feckless ‘bankers’ to what lay at the heart of the crisis – a blinkered vision that set personal and corporate aggrandisement before security and service for the customer. Savers of the western world are traumatized by the consequences and will not tolerate the culture that gave rise to them. Politicians cannot escape their resentment nor continue to bicker over parochial interests. Popular consent for the very free enterprise system is at stake.

During the current breathing space America should convene discussions about how to redesign the global financial structure. Participants must include China and most of the world’s newly developing creditor nations. Without their involvement, the fragility of the euro and the declining credibility of the US dollar as the world’s reserve currency will only resurface in more acute form.

Sixty-eight years ago, representatives of the world’s most powerful nations gathered at Bretton Woods in New England at the close of WWII to reframe the global monetary system. J M Keynes was a prime mover at the meeting. Out of it, 44 weary, war-torn nations forged an agreement that ordered the global monetary system for over 30 years. The agreement endured not simply because it created effective technical solutions but because the institutions it helped establish, including the World Bank and the IMF, as well as a global trade agreement (GATT), embodied a noble aspiration based on a willingness to cooperate for the benefit of all the world’s peoples.

An American poet, Emma Lazarus, had captured that aspiration in words written in 1883. ‘ “Give me your tired, your poor, Your huddled masses yearning to breathe free, The wretched refuse of your teeming shore. Send these, the homeless, the tempest-tost to me, I lift my lamp beside the golden door!” ’ They are inscribed beneath the outstretched arm of a greening copper statue, 5 miles over the water from Wall Street. They declare to the world what liberty of choice means for a generous nation.

Let us hope that the richest nations across the globe embrace the same spirit of generosity in applying their powers towards the recovery of long-term stability for the world’s citizens, savers and investors. Success would enable us all to share more of the benefits and less of the hurts delivered by the most powerful agent of change since Thomas Jefferson first steered his people down freedom’s path, over two centuries ago.

21 January 2013