Some 400 people turned up at the Penang Story Lectures on ‘Globalisation and Penang’ held at the main campus.
Speaking at the talk organised by Think City Sdn Bhd and Penang Heritage Trust, Prof K S Jomo spoke of increased inequalities in the world because the international terms of trade are deteriorating against developing economies. He cited examples of the price of tropical agricultural products coming down compared to temperate agricultural products, and the price of manufactured goods from developing countries coming down relative to the price of manufactured goods from rich countries.
He said globalisation has increased financial transactions across borders much more than trade or commercial transactions across borders. He shared that liberalised capital flow or financial globalisation initially creates a stock market bubble but when the bubble bursts, foreign money goes out along with local money. And while the stock market is booming, there is often unnecessary consumer binges.
He informed that the world is now seeing a reversible of some elements of globalisation, or reverse globalisation. He expects more and more developing countries to impose greater restrictions or controls, adding that the increasing protectionism by many countries led China to become less externally-oriented and to generate a domestic market.
“You cannot develop an economy on the basis of impoverishing your own people, and simply producing for exports. You need a domestic market. It becomes worse for us because Malaysia has been so externally oriented in terms of economic policy that you don’t even know how to think about the future in any other terms,” said Jomo.
He suggested that Penang – which used to be a pioneer in manufactured goods – must not only draw on its resources but also anticipate options like reversible globalisation. “It cannot and should not compete with the lower-end producers,” he said.
Replying to questions on the major international financial institutions like IMF, WTO, and World Bank, he said these are dominated by the powerful. It is therefore important for developing countries to cooperate to advance their interests or form alliances with other countries facing the same problems.
On the prospects of world economy, he said the current global recession would likely be followed likely by a two-track recovery, that is, relatively slow growth in the West and North (including Japan) and more rapid growth in the developing countries. He expects the developing country growth to be shackled however as in the last three decades they have been so externally oriented and not able to switch to nationally-oriented economy.
He predicts countries to react by depressing social wages and conditions of life to deteriorate. “There will be less money for aid, climate change, and food security. So the prospects are quite grim. The situation would create a great deal of resentment against immigrants, racism, and reduction of social provisions.”
Jomo is the Assistant Secretary General for Economic Development in the United Nations’ Department of Economic and Social Affairs (DESA) since January 2005.