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By Philippe Legrain ADD COMMENTS

Globalisation is not perfect, but it is overwhelmingly a force for good. The rapid growth of trade and investment across national borders is spreading greater prosperity and opening up new opportunities to billions of people around the globe. China has recorded the fastest fall in poverty the world has ever seen. Global inequality is now declining for the first time since the Industrial Revolution, as China, India and others begin to catch up with the West. Those countries that are still floundering  notably in Africa  are largely victims not of globalisation, but of a lack of it.

Yet economic globalisation poses important challenges for a political order that remains anchored around nation states. States have unique powers to tax and regulate, as well as the unrivalled legitimacy that national allegiance and democratic accountability confer. Unfortunately, though, some states are incapable of enforcing their own laws, let alone providing the good governance and sound policies required for sustained economic development.

Some critics go further. They claim that globalisation is stripping governments everywhere of their powers. Huge global companies increasingly rule the roost, exploiting the poor and the environment for their own profitability, with little or no restraint. To stave off a devastating "race to the bottom" of labour and environmental standards, the global clout of multinational companies must be co-opted to achieve what critics believe to be desirable social change. In short, global companies must be compelled to be "socially responsible".

pressure groups pushing pet schemes, consultants peddling money-spinning advice, companies seeking to protect their profits from attacks on their reputation, and international organisations keen to be seen to be doing good. One of the many corporate social responsibility (CSR) schemes is the United Nations’ Global Compact, a voluntary charter whose signatories pledge to uphold nine broad principles of human rights, labour standards and environmental protection throughout the world.

Hong Kong show.

Even where governments can’t  or won’t  regulate appropriately, companies (especially foreign ones) are ill-suited to setting and enforcing social norms. Companies’ social responsibility is to make profits within the constraints of the law, not to decide how, or how much, the environment should be protected. And people generally prefer domestic misrule  even by autocrats  to foreign intervention, however well-meaning.

The UN Global Compact, according to a seemingly innocuous statement on its website, "utilises the power of transparency and dialogue to identify and disseminate good practices based on universal principles". But who decides what those "good practices" and "universal principles" are? If everyone agreed on the solution to the world’s problems, there would be no need for politics. But in fact, people disagree on just about everything.

It is not only undemocratic for self-interested foreign companies blackmailed by self-selected anti-capitalist campaigners to be setting social standards in developing countries. It is also inefficient and unfair. There is no single right way to regulate: preferences and circumstances differ. Moreover, relying on a small group of big foreign companies to enforce rules ensures that any efforts will be patchy and limited. Global CSR not only has echoes of imperialism. It can also harm the people it purports to help if, for instance, imposing too costly environmental standards causes workers to lose their jobs.

The world needs more globalisation and better government. It does not need more CSR.

Posted 01 Jun 2004 in Published articles

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