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OU Lecture 2008: Enough of global integration?

Updated Thursday 29th May 2008

In the final part of his lecture, Professor Kaplinsky wonders if the world is integrated enough, already.

Professor Kaplinsky looks to where Africa's future lies - should it go back to exporting minerals and primary commodities, or concentrate on manufacturing? Either way, Africa's regional integration is growing more rapidly than trade with the outside world, and its exports to itself are getting more technology intensive.

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So in principle Africa should go back to minerals and primary commodities. In reality that’s a very, very difficult path to tread successfully. Canada does it well; Australia does it well; the US does it well; Dubai does it brilliantly. But most countries in the world do commodities very, very badly indeed. And this is an agenda which Africa is having to cope with, whether it wants to or not. That the price of commodities is going up, it’s becoming a magnet for all sorts of unsavoury parties; it’s becoming a magnet for forces which are prepared to operate with very low levels of due diligence. And the unfolding scenario I see, is in this respect, not very comforting.

Well – let’s go at manufacturing exports. You know what’s going to happen? China is going to run out of cheap labour. And when China runs out of cheap labour, Africa – which, incidentally, today has wages the same level as China, Africa’s problems are not high wages. If you look at the clothing sector for example, wages in Africa are slightly cheaper than China. The rich countries are losing. These are the largest 14 countries’ employment. You can see they fell between 1995 and 2002. The 14 largest countries see a decline in manufacturing employment from 86 to 79, well it’s obvious isn’t it? Because all the jobs are going to China.

You know what? Manufacturing employment is falling in China as well. By a greater percentage, 15 per cent, than the fall in manufacturing employment in the rich countries. There are a total of about 85/90, be generous, 100 million people in China, employed in formal sector manufacturing. By most counts there are something like 150 million unemployed people in China. Hidden unemployed. And bear in mind that by 2030 India will have a larger population than China, and for those of us who thought India would just export services and software, forget it! India is now becoming a significant exporter of manufacturing products. So if you have a view of the world which says, just hold on there, bite your hand long enough for China to run out of labour, I don’t think you’ve got much choice.

So if Africa wants to participate in this world by pushing its manufacturing exports, it’s in difficulty. And what Africa does not need in the world is a level playing field. This idea that developing countries as a whole should go to the World Trade Organisation and request a level playing field is disaster for Africa. Because a level playing field means that Asia in general and China in particular will gobble everything up. We don’t need an open global economy for Africa to succeed. We need a very, very skewed global economy which at the external level doesn’t treat all developing countries as the same and gives very, very significant privileges to Africa and the poorer parts of the world and the poorer producers of the world. And that is not the way the World Trade Organisation and Peter Mandelson wants us to go.

So. That’s one conclusion. We need a skewed world out there. Is it time to selectively disengage from the world? Is it time to say, you know what, we’ve had enough of global integration? It’s not that we’re going to turn our back on the wall, we’re not going to become more autarchic, you know what autarchic means? To be completely self-sufficient. And we know that the previous decades of import substituting industrialisation, producing domestically everything you need, is a problem because it often is monopoly and a lack of competition. A lot of corruption with import subsidy and industrialisation. And the market’s not large enough to enable you to work efficiently.

So the old route of the 1960s which was import substituting industrialisation in countries won’t work. And I believe we now need to think about greater regional integration in Africa and in elsewhere.

Now, one of the points is that in the world regional integration is growing more rapidly than trade with the outside world and that’s true for Africa as well. Africa’s trade with itself is growing more rapidly than the rest of the world, but here’s the good point. If you look at Africa’s trade with itself compared to Africa’s exports to the world, Africa’s trade with itself is much more intensive in technology than it is with the outside world. African countries export raw materials to which nothing is done to the rest of the world. When Africa exports to itself it adds value. And moreover its exports to the rest of the world are getting less technology intensive and it’s exports to itself are getting more technology intensive. So I’ve come to an end. I’ve got one more bit of wisdom to leave you with.

Let me summarise. We’ve had enough of global integration as unfettered openness. It does help, it helps those who are most efficient. China, if you look at the world number of poor, and our progress towards the primary millennium development goal which is reducing the number of people in absolute poverty, the world has indeed made major progress in reducing the number of absolutely poor in the world. Which has fallen from about 1.3 billion in 1998 to about 970 million in the last year. All of that, is due to growth in China. The number of people living in absolute poverty has risen in Africa, it’s risen in Latin America, it’s risen in Eastern Europe, Central Asia and it’s stable in India. Globalisation does reduce poverty but it reduces poverty for only those who are most efficient. And this is a world where, because of this large reserve army of labour, remember the numbers I showed you on China, there’s not scope for everybody to have a productive role. And we have to think about disengagement.

So, the key issue which I want to draw to our common attention, I mean Department of Policy and Practice, our specialities, we’re in the Faculty of Technology, we’re concerned with innovation and my key message is around the significance and importance of that and I want to go into a rather complex bit of theory in just ending off with the theory of innovation. And I want to draw on the work written in two volumes in the 1930s of a very, very distinguished social scientist. And I’m not thinking of Karl Polanyi, I’m thinking of Lewis Carroll. ‘Alice in Wonderland’ or ‘Alice and the Red Queen Go Running’ – I want to read this to you if you don’t mind.

"Nearly there, the Queen repeated. Well we passed it 10 minutes ago, faster. And they ran on for a time in silence with the wind whistling in Alice’s ears and almost blowing her hair off, she fancied."

You know what? This is opening to the global economy. And they’re running pretty fast and innovating.

 

"No, no, cried the Queen. Faster, Faster. And they went so fast" – innovating very rapidly – "that at last they seemed to skim through the air, hardly touching the ground with their feet, till suddenly just as Alice was getting quite exhausted they stopped and she found herself sitting on the ground breathless and giddy."

You know if you’re not used to international competition and you start innovating, it’s a bit tiring! You need to take a break.

"The Queen propped her up against a tree and said kindly, you can rest a little now you know," you guys have improved a lot. Take a break.

"Alice looked round in great surprise. Why? I do believe we [need industry?] all the time. Everything just has a buzz. I’ve been innovating so fast and look where I am, nothing’s changed. Of course it is, said the Queen, what would you have it?

"Well, in our country, before globalisation, said Alice panting a little, you generally get somewhere else if you ran for a very fast time, for a long time as we’ve been doing. Ahhh, slow sort of country said the Queen. Now here you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you’ll have to run at least twice as fast as that."

Thank you.

(APPLAUSE)

 

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The Open University Lecture 2008

 

 

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